/raid1/www/Hosts/bankrupt/TCR_Public/101121.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Sunday, November 21, 2010, Vol. 14, No. 323
Headlines
ABACUS 2007-18: S&P Withdraws 'CCC-' Rating on Class A-2 Notes
ABSPOKE 2005-1C: Fitch Affirms 'Dsf' Rating on Notes
AES EASTERN: S&P Downgrades Ratings on $550 Mil. Certs. to 'B+'
AJAX TWO: Moody's Takes Rating Actions on Three Classes of Notes
ALM LOAN: S&P Assigns Ratings on Various Classes of Notes
ALPINE SECURITIZATION: DBRS Puts B Rating on $22,898,711 Facility
AMAC CDO: Moody's Downgrades Ratings on Eight Classes of Notes
AMERICAN HOME: Moody's Downgrades Ratings on Seven Tranches
ARCHSTONE SYNTHETIC: S&P Withdraws Ratings on Two Classes
ARES IX: Moody's Upgrades Ratings on Various Classes of Notes
ASSET SECURITIZATION: S&P Raises Ratings on 1997-D4 Securities
AUSTIN HOUSING: S&P Raises Ratings on Revenue Bonds From 'BB+'
BANC OF AMERICA: Moody's Reviews Ratings on 16 Classes of Certs.
BANC OF AMERICA: Moody's Downgrades Ratings on 17 Certificates
BANC OF AMERICA: S&P Downgrades Ratings on Four 2007-BMB1 Certs.
BCAP LLC: Moody's Downgrades Ratings on 34 Tranches
BEAR STEARNS: Moody's Downgrades Ratings on Eight 2004-PWR6 Certs.
BEAR STEARNS: Moody's Downgrades Ratings on 14 2005-PWR7 Certs.
BEAR STEARNS: Moody's Downgrades Ratings on 12 2005-PWR8 Certs.
BEAR STERNS: Moody's Reviews Ratings on 15 2005-PWR9 Certs.
BEAR STEARNS: Moody's Downgrades Ratings on 15 2006-TOP24 Certs.
BRASCAN STRUCTURED: Moody's Takes Rating Actions on Five Classes
C-BASS CBO: Fitch Affirms Ratings on Three Classes of Notes
C-BASS CBO: Fitch Affirms Ratings on Five Classes of Notes
C-BASS CBO: Fitch Downgrades Ratings on Four Classes of Notes
CALIFORNIA UNIVERSITY: Moody's Affirms 'B3' Rating on Bonds
CAMDEN COUNTY: S&P Downgrades Ratings on 1991A-1991D Bonds
CAPITAL TRUST: Fitch Affirms Ratings on All Classes of Notes
CAPITALSOURCE COMMERCIAL: Moody's Upgrades Ratings on Two Notes
CAPTEC FRANCHISE: Moody's Reviews Ratings on Various Classes
CD 2007-CD5: Moody's Downgrades Ratings on 13 2007-CD5 Certs.
CHEYNE HIGH: Moody's Downgrades Ratings on Class A-1 to 'Ca'
CITIGROUP COMMERCIAL: Moody's Affirms Ratings on 13 2004-C2 Notes
CITIGROUP COMMERCIAL: Moody's Cuts Ratings on 19 2008-C7 Certs.
CITIGROUP COMMERCIAL: S&P Downgrades Ratings 13 2004-C1 Notes
CONTINENTAL AIRLINES: Moody's Assigns 'Ba2' Rating on Certs.
CORPORATE BACKED: Moody's Confirms Ratings on Two Classes
CORPORATE BACKED: Moody's Reviews Ratings on 2002-17 Certs.
COSO GEOTHERMAL: Fitch Downgrades Ratings on Certs. to 'B+'
COSO GEOTHERMAL: Moody's Downgrades Ratings on Certs. to 'B1'
CREDIT SUISSE: Moody's Takes Rating Actions on 2005-TFL2 Certs.
CREDIT SUISSE: S&P Downgrades Ratings on Eight 2001-CK6 Notes
CREST 2000-1: Moody's Takes Rating Actions on Three Classes
CREST 2001-1: Moody's Takes Rating Actions on Various Classes
CREST 2002-1: Moody's Takes Rating Actions on Various Classes
CREST EXETER: Fitch Downgrades Ratings on 10 Classes of Notes
CWALT INC: Moody's Downgrades Ratings on 108 Tranches
DEUTSCHE BANK: Fitch Rates Various 2010-C1 Certificates
DLJ MORTGAGE: Moody's Upgrades Ratings on Series 2000-CKP1 Notes
EMPIRE FUNDING: S&P Downgrades Ratings on Seven Classes to 'D'
EMPIRE HOME: Fitch Downgrades Ratings on All Classes of Notes
FALCON AUTO: Moody's Reviews Ratings on Six 2003-1 Securities
FFCA SECURED: Moody's Downgrades Ratings on Class F to 'C'
FIRST UNION: Moody's Upgrades Ratings on Two 2001-C2 Certs.
FMAC LOAN: Moody's Reviews Ratings on Two Classes of Notes
GALAXY CLO: S&P Raises Ratings on Various Classes of Notes
GE COMMERCIAL: DBRS Downgrades Rating on Class K Certs. to 'B'
GE COMMERCIAL: Moody's Upgrades Ratings on 2004-C3 Certs.
GMAC COMMERCIAL: Moody's Upgrades Ratings on 2000-C3 Certs.
GMAC COMMERCIAL: Moody's Reviews Ratings on Nine 2003-C3 Certs.
GRAMERCY REAL: Moody's Downgrades Ratings on Two Classes of Notes
GRAMERCY REAL: Moody's Takes Rating Actions on Various Classes
GS MORTGAGE: Moody's Reviews Ratings on 13 2004-GG2 Certs.
GS MORTGAGE: Moody's Affirms Ratings on 2006-GSFL VIII Certs.
GSAA HOME: Moody's Downgrades Ratings on 123 Tranches
IMPERIAL CAPITAL: S&P Withdraws Ratings on 11 Classes of Notes
ISCHUS CAPITAL: Fitch Reviews Ratings on Various Classes
JP MORGAN: Moody's Downgrades Ratings on Nine 2003-LN1 Certs.
JP MORGAN: Moody's Downgrades Ratings on 14 2005-LDP1 Certs.
JP MORGAN: Moody's Downgrades Ratings on 15 2006-LDP7 Certs.
JP MORGAN: Moody's Downgrades Ratings on 13 2007-CIBC18 Certs.
JP MORGAN: Moody's Downgrades Ratings on 12 2007-CIBC20 Certs.
JPMORGAN CHASE: S&P Downgrades Ratings on 10 2003-CIBC7 Notes
JPMORGAN-CIBC COMMERCIAL: S&P Cuts Ratings on Four 2006-RR1 Notes
LB-UBS COMMERCIAL: Moody's Reviews Ratings on 13 2004-C2 Certs.
LB-UBS COMMERCIAL: Moody's Downgrades Ratings on 14 2006-C6 Notes
LEHMAN ABS: S&P Downgrades Rating on Class A-2 Certs. to 'D'
LEGG MASON: Moody's Takes Rating Actions on Various Classes
LNR CFL: S&P Raises Ratings on Four Classes of Notes
LONG GROVE: Moody's Upgrades Ratings on Various Classes of Notes
MAGNOLIA FINANCE: S&P Withdraws 'CCC+' Rating to 2006-6A1 Notes
MASTER SETTLEMENT: S&P Downgrades Ratings on 51 Classes
MERRILL LYNCH: Moody's Affirms Ratings on Nine 2005-CIP1 Certs.
MORGAN STANLEY: Moody's Reviews Ratings on 10 2007-XLF9 Notes
MORGAN STANLEY: Moody's Takes Rating Actions on Four Classes
MORNINGSIDE PARK: S&P Assigns Ratings on Various Floating Notes
N-STAR REAL: Fitch Downgrades Ratings on Five Classes of Notes
NORTEK INC: Moody's Assigns 'B3' Corporate Family Rating
PEACHTREE FRANCHISE: Moody's Reviews Ratings on Two 1999-A Notes
PEGASUS AVIATION: Moody's Downgrades Ratings on All Tranches
PRIME MORTGAGE: Moody's Downgrades Ratings on Three Tranches
PRUDENTIAL SECURITIES: Moody's Takes Actions on 1998-C1 Notes
RESIDENTIAL ASSET: Moody's Downgrades Ratings on 139 Tranches
RESIDENTIAL REINSURANCE: S&P Assigns 'BB' Rating on 2010-II Notes
RFC 2006-1: Fitch Takes Rating Actions on Various Classes
ROOSEVELT UNION: Moody's Lifts Rating on $1.5 Mil. Debt From 'Ba1'
SAGAMORE CLO: S&P Raises Ratings on Various Classes of Notes
SALOMON BROTHERS: S&P Downgrades Ratings on Nine 2001-C2 Notes
SASCO 2007-BHC1: S&P Downgrades Ratings on Seven Classes of Notes
SAXON ASSET: S&P Downgrades Ratings on Five Classes of Certs.
SORIN REAL: Moody's Takes Rating Actions on Various Classes
SOUNDVIEW HOME: S&P Corrects Rating on Class II-A-1 From 'CCC'
SOUTH COAST: Fitch Downgrades Ratings on Three Classes of Notes
SQUARED CDO: Moody's Downgrades Ratings on Four Classes of Notes
STRATA 2005-19: Moody's Takes Rating Actions on 2005-19 Notes
STRATS TRUST: S&P Downgrades Rating on Class A Certs. to 'D'
STRUCTURED ASSET: Moody's Reviews Ratings on Two Units
SUNTRUST ALTERNATIVE: Moody's Confirms Ratings on Nine Tranches
SYMPHONY CREDIT: S&P Withdraws Ratings on Three Classes of Notes
TIERS CORPORATE: Moody's Reviews 'Ba2' Rating on Amortizing Class
TRIBUNE LTD: S&P Downgrades Ratings on Various Notes to 'D'
VERMONT ECONOMIC: Moody's Affirms 'Ba2' Preferred Stock Rating
VERTICAL ABS: S&P Downgrades Ratings on Various Classes of Notes
WACHOVIA BANK: Moody's Takes Rating Actions on 2003-C5 Certs.
WACHOVIA BANK: Moody's Downgrades Ratings on Eight 2003-C7 Certs.
WACHOVIA BANK: Moody's Affirms Ratings on 12 2006-C28 Certs.
WACHOVIA BANK: Moody's Reviews Ratings on 16 2006-C29 Certs.
* Fitch Downgrades Ratings on 32 Bonds From 20 CMBS Deals to 'D'
* Moody's Cuts Ratings on Eight Securities from Seven NIM Deals
* S&P Downgrades Ratings on Nine Classes of Certs. to 'D'
* S&P Downgrades Ratings on 10 Classes From Three RMBS Deals
* S&P Downgrades Ratings on 16 Certs. From Three CMBS Transactions
*********
ABACUS 2007-18: S&P Withdraws 'CCC-' Rating on Class A-2 Notes
--------------------------------------------------------------
Standard & Poor's Ratings Services withdrew its 'CCC-(sf)' rating
on the class A-2 notes from ABACUS 2007-18 Ltd., a synthetic
collateralized debt obligation transaction backed by commercial
mortgage-backed securities.
S&P withdrew its rating following the redemption of the notes.
ABSPOKE 2005-1C: Fitch Affirms 'Dsf' Rating on Notes
----------------------------------------------------
Fitch Ratings has affirmed and withdrawn the rating on ABSpoke
2005-1C:
-- $11,818,946 notes affirmed at 'Dsf' and withdrawn.
The rating action is a result of the execution of the Optional
Termination Redemption on June 28, 2010. The notes were
downgraded to 'Dsf' in March 2010 due to credit events in the
reference portfolio exceeding the notes' subordination. The
original note balance of $25 million was written down to
$11.8 million as of the last trustee report dated June 17, 2010.
ABSpoke 2005-1C was a collateralized debt obligation that closed
on March 10, 2005. The transaction was a partially funded, static
synthetic CDO that allowed investors to achieve leveraged exposure
to a diversified portfolio of residential mortgage-backed
securities and asset-backed securities assets.
AES EASTERN: S&P Downgrades Ratings on $550 Mil. Certs. to 'B+'
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on AES
Eastern Energy L.P.'s $550 million pass-through certificates due
2029 and its $75 million revolving credit facility bank loan to
'B+' from 'BB'. In addition, S&P revised recovery rating on the
pass-through certificates to '2' from '1', indicating expectation
of high (70%-90%) recovery if the company defaults on a payment.
The lower recovery prospects reflect the declining value of AEE's
generation portfolio due to depressed power price prospects in the
medium term. The outlook is negative.
The downgrade follows S&P's review of AEE's financial performance
through September 2010. Negative pressures on AEE's credit
profile had escalated after a change in hedging policy that had
increased its merchant exposure. As a result of the decline in
market prices since the fourth quarter of 2009, AEE's DSCRs have
fallen in 2009 as dark spreads contracted.
Toward the end of 2009, AEE departed from its financial strategy
of hedging a significant portion of its capacity and energy on a
rolling three-year basis. AEE did so because of uncertainty about
the nature of carbon emissions regulation and reduced liquidity in
the power markets due to fewer participants. In the past, the
strategy muted the potential volatility in commodity prices. AEE
started 2010 with low hedged levels but sold natural gas forward
to hedge its 2010 production (imperfect hedges). That strategy
supported the coverage somewhat through first half 2010 as natural
gas prices declined. Still, as a result of the strategic shift
and declining DSCRs, S&P downgraded AEE to 'BB' earlier this year.
In 2011, S&P believes AEE will continue to struggle due to the low
level of hedges (5%-10%) and coverage levels may well decline
further. However, based on the current forward curve, S&P expects
cash flow available for debt service to exceed the $62 million
required to service debt. S&P will continue to monitor the
project's performance through 2011.
AJAX TWO: Moody's Takes Rating Actions on Three Classes of Notes
----------------------------------------------------------------
Moody's has upgraded two and affirmed one class of Notes issued by
Ajax Two Limited due to the rapid amortization of the senior Notes
and changes in the distribution of the collateral pool. The
rating action is the result of Moody's on-going surveillance of
commercial real estate collateralized debt obligation
transactions.
Moody's rating action is:
-- Class A-2A Floating Rate Notes Due 2032, Upgraded to Aaa
(sf); previously on Feb. 24, 2009 Downgraded to Aa1 (sf)
-- Class B Floating Rate Deferrable Interest Notes, Due 2032,
Upgraded to A1 (sf); previously on Feb. 24, 2009 Downgraded
to A2 (sf)
-- Class C Floating Rate Notes, Due 2032, Affirmed at B3 (sf);
previously on Feb. 24, 2009 Downgraded to B3 (sf)
Ratings Rationale
Ajax Two Limited is a CRE CDO transaction backed by a commercial
mortgage backed securities (57.3% of the pool balance), asset
backed securities consisting of home equity loans and other
residential mortgage-backed securities (ABS)(19.3%), real estate
investment trust debt securities (16.9%) and collateralized debt
obligation securities (6.5%). As of the September 30, 2010
Trustee report, the aggregate Note balance of the transaction has
decreased to $131.8 million from $374.2 million at issuance, with
the paydown directed to the Class A Notes.
There are four assets with par balance of $9.0 million (6.8% of
the current pool balance) that are considered Defaulted Securities
as of the September 30, 2010 Trustee report. All of these assets
(100.0% of the defaulted balance) are ABS collateral. While there
have been no realized losses to date, Moody's expects significant
losses to occur from the Defaulted Securities once they are
realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation . These parameters are typically modeled as actual
parameters for static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's have completed updated credit estimates for the non-
Moody's rated collateral. The bottom-dollar WARF is a measure of
the default probability within a collateral pool. Moody's modeled
a bottom-dollar WARF of 1,388 compared to 1,322 at last review.
The distribution of current ratings and credit estimates is: Aaa-
Aa3 (40.7% compared to 34.4% at last review), A1-A3 (10.3%
compared to 14.6% at last review), Baa1-Baa3 (20.7% compared to
24.1% at last review), Ba1-Ba3 (11.2% compared to 15.1% at last
review), B1-B3 (6.0% compared to 3.2% at last review), and Caa1-C
(11.0% compared to 8.7% at last review).
WAL acts to adjust the probability of default of the reference
obligations in the pool for time. Moody's modeled to a WAL of 2.7
years compared to 3.8 years at last review.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a fixed WARR
of 44.7% compared to 36.6% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity).
Moody's modeled a MAC of 18.0% compared to 2.8% at last review.
The low MAC is due to higher default probability collateral
concentrated within a small number of collateral names.
Moody's review incorporated CDOROM(R) v2.6, one of Moody's CDO
rating models, which was released on May 27, 2010.
The cash flow model, CDOEdge(R) v3.2, was used to analyze the cash
flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 44% to 24% or up to 64% would result in average rating
movement on the rated tranches of 1 to 3 notches downward and 1 to
4 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expect
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
ALM LOAN: S&P Assigns Ratings on Various Classes of Notes
---------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
ratings to ALM Loan Funding 2010-3 Ltd./ALM Loan Funding
2010-3 LLC's $332.25 million floating-rate notes.
The preliminary ratings are based on information as of Nov. 17,
2010. Subsequent information may result in the assignment of
final ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's assessment of:
* The credit enhancement provided to the preliminary rated notes
through the subordination of cash flows that are payable to the
subordinated notes;
* The transaction's cash flow structure, as assessed by Standard &
Poor's using the assumptions and methods outlined in S&P's
corporate collateralized debt obligation (CDO) criteria, which
can withstand the default rate projected by Standard & Poor's
CDO Evaluator model;
* The transaction's legal structure, which is expected to be
bankruptcy remote;
* The diversified collateral portfolio, which consists primarily
of speculative-grade senior-secured term loans;
* The collateral manager's experienced management team;
* S&P's expectation of the timely interest and ultimate principal
payments on the preliminary rated notes, assessed using S&P's
cash flow analysis and assumptions commensurate with the
assigned preliminary ratings under various interest rate
scenarios, including LIBORs ranging from 0.36%-12.84%; and
* The transaction's overcollateralization and interest coverage
tests, a failure of which will lead to the diversion of interest
and principal proceeds to reduce the balance of the rated notes
outstanding.
Preliminary Ratings Assigned
ALM Loan Funding 2010-3 Ltd./ALM Loan Funding 2010-3 LLC
Class Rating Amount (mil. $)
----- ------ ---------------
A-1 AAA (sf) 262.00
A-2 AA (sf) 20.50
B* A (sf) 25.75
C* BBB (sf) 14.00
D* BB (sf) 10.00
Subordinated NR 72.73
* Deferrable.
NR -- Not rated.
ALPINE SECURITIZATION: DBRS Puts B Rating on $22,898,711 Facility
-----------------------------------------------------------------
DBRS has confirmed the rating of R-1 (high) for the Commercial
Paper (CP) issued by Alpine Securitization Corp. (Alpine), an
asset-backed commercial paper (ABCP) vehicle administered by
Credit Suisse, New York branch. In addition, DBRS has confirmed
the ratings and revised the tranche sizes of the aggregate
liquidity facilities (the Liquidity) provided to Alpine by Credit
Suisse.
The $6,946,370,784 aggregate liquidity facilities are tranched as:
-- $6,562,358,041 rated AAA
-- $82,897,989 rated AA
-- $53,703,087 rated A
-- $76,787,267 rated BBB
-- $64,689,467 rated BB
-- $22,898,711 rated B
-- $83,036,222 unrated
The ratings are based on June 30, 2010 data.
The CP rating reflects the AAA credit quality of Alpine's asset
portfolio. The updated credit quality aspect of the CP rating is
based on both the portfolio of assets and the available program-
wide credit enhancement (PWCE). The rationale for the CP rating
is based on the updated AAA credit quality assessment as well as
DBRS' prior and ongoing review of legal, operational and liquidity
risks associated with Alpine's overall risk profile.
The ratings assigned to the Liquidity reflect the credit quality
of Alpine's asset portfolio based on an analysis that assesses
each transaction to a term standard. The tranching of the
Liquidity reflects the credit risk of the portfolio at each rating
level. The tranche sizes are expected to vary each month based on
changes in portfolio composition.
For Alpine, both the CP and the Liquidity ratings use DBRS'
simulation methodology, which was developed to analyze diverse
ABCP conduit portfolios. This analysis uses the DBRS CDO Toolbox
simulation model, with adjustments to reflect the unique structure
of an ABCP conduit and its underlying assets. DBRS determines
attachment points for risk based on an analysis of the portfolio
and models the portfolio based on key inputs such as asset
ratings, asset tenors and recovery rates. The attachment points
determine the portion of the exposure rated AAA, AA, A through B
as well as unrated.
DBRS models the portfolio on an ongoing basis to reflect changes
in Alpine's portfolio composition and credit quality. The rating
results are updated and posted on the DBRS website.
AMAC CDO: Moody's Downgrades Ratings on Eight Classes of Notes
--------------------------------------------------------------
Moody's has downgraded eight classes of Notes issued by AMAC
CDO Funding I due to the deterioration in the credit quality of
the underlying portfolio as evidenced by an increase in the
weighted average rating factor, an increase in defaulted assets
and negative migration in the overcollateralization ratios.
Additionally, the downgrades are partly the result of a correction
in inputs that Moody's used in its prior analysis with respect to
the in-place interest rate hedge. During the prior analysis,
Moody's did not consider the impact of the hedge agreement in the
rating action. The interest rate hedge acts as a fixed to
floating hedge where fixed rate collateral is swapped to a
floating basis in order to pay the floating rate Notes. Moody's
have corrected the input error and are incorporating the hedge in
this rating action. The rating action is the result of Moody's
on-going surveillance of commercial real estate collateralized
debt obligation transactions.
-- Cl. A-1, Downgraded to A2 (sf); previously on April 15, 2009
Downgraded to Aa1 (sf)
-- Cl. A-2, Downgraded to Ba3 (sf); previously on April 15, 2009
Downgraded to A3 (sf)
-- Cl. B, Downgraded to B3 (sf); previously on April 15, 2009
Downgraded to Baa3 (sf)
-- Cl. C, Downgraded to Caa3 (sf); previously on April 15, 2009
Downgraded to Ba3 (sf)
-- Cl. D-1, Downgraded to Ca (sf); previously on April 15, 2009
Downgraded to B2 (sf)
-- Cl. D-2, Downgraded to Ca (sf); previously on April 15, 2009
Downgraded to B2 (sf)
-- Cl. E, Downgraded to Ca (sf); previously on April 15, 2009
Downgraded to Caa1 (sf)
-- Cl. F, Downgraded to C (sf); previously on April 15, 2009
Downgraded to Caa2 (sf)
Ratings Rationale
AMAC CDO Funding I is a revolving CRE CDO transaction backed by a
portfolio whole loans (86.1% of the pool balance), B-Notes (5.9%),
and mezzanine loans (8.0%). As of the October 20, 2010 Trustee
report, the aggregate Note balance of the transaction has
decreased to $370.3 million from $400.0 million at issuance, with
the payment directed to the Class A-1 Notes. The payment is a
result of the failure of the Class A/B, Class C, and Class D/E
Overcollateralization Tests. Per the governing transaction
document, upon failure of any Overcollateralization Test result,
all scheduled interest and principal payments are directed to pay
down the most senior notes, until the failed Overcollateralization
Test is satisfied. Additionally, the investment mechanism is
suspended until the Overcollateralization Tests are satisfied.
The reinvestment period end date for AMAC CDO Funding I is April
2011.
There are four assets with par balance of $53.1 million (14.3% of
the current pool balance) that are considered Impaired Interests
as of the October 20, 2010 Trustee report. Two of these assets
(56.9% of the impaired balance) are whole loans, and two assets
are mezzanine loans (43.1%). Per the governing transaction
document, Impaired Interests are defined as assets that are in
default. While there have been no realized losses to date,
Moody's does expect significant losses to occur once they are
realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically modeled as actual
parameters for static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's have completed updated credit estimates for the non-
Moody's rated collateral. For non-CUSIP collateral, Moody's is
eliminating the additional default probability stress applied to
corporate debt in CDOROM(R) v2.6 as Moody's expect the underlying
non-CUSIP collateral to experience lower default rates and higher
recovery compared to corporate debt due to the nature of the
secured real estate collateral. The bottom-dollar WARF is a
measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF of 7,574 compared to 6,218 at
last review. The distribution of current ratings and credit
estimates is: Aaa-Aa3 (0.8% compared to 0.7% at last review),
Baa1-Baa3 (3.0% compared to 8.2% at last review), Ba1-Ba3 (3.6%
compared to 35.4% at last review), B1-B3 (17.6% compared to 35.4%
at last review), and Caa1-C (75.1% compared to 52.9% at last
review).
WAL acts to adjust the probability of default of the reference
obligations in the pool for time. Moody's modeled to a WAL of
5.0 years compared to 10.0 years at last review. The current
WAL is the remaining actual WAL without regard to any additional
reinvestment.
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 52.7% compared to 49.9% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity). For
non-CUSIP collateral, Moody's is reducing the maximum over
concentration stress applied to correlation factors due to the
diversity of tenants, property types, and geographic locations
inherent in the pooled transactions. Moody's modeled a MAC of
20.3% compared to 24.5% at last review. The low MAC is due to
higher default probability collateral concentrated within a small
number of collateral names.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 53% to 43% or up to 63% would result in average rating
movement on the rated tranches of 1 to 2 notches downward and 1 to
4 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expect
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
AMERICAN HOME: Moody's Downgrades Ratings on Seven Tranches
-----------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 7 tranches
from 2 RMBS transactions issued by American Home Mortgage
Securities. The collateral backing these deals primarily consists
of first-lien, fixed and adjustable-rate Alt-A residential
mortgages.
Ratings Rationale
The actions are a result of the continued performance
deterioration in Alt-A pools in conjunction with home price and
unemployment conditions that remain under duress. The actions
reflect Moody's updated loss expectations on Alt-A pools issued
from 2005 to 2007.
To assess the rating implications of the updated loss levels on
Alt-A RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
The above mentioned approach "Alt-A RMBS Loss Projection Update:
February 2010" is adjusted slightly when estimating losses on
pools left with a small number of loans. To project losses on
pools with fewer than 100 loans, Moody's first estimates a
"baseline" average rate of new delinquencies for the pool that is
dependent on the vintage of loan origination (10%, 19% and 21% for
the 2005, 2006 and 2007 vintage respectively). This baseline rate
is higher than the average rate of new delinquencies for the
vintage to account for the volatile nature of small pools. Even
if a few loans in a small pool become delinquent, there could be a
large increase in the overall pool delinquency level due to the
concentration risk. Once the baseline rate is set, further
adjustments are made based on 1) the number of loans remaining in
the pool and 2) the level of current delinquencies in the pool.
The fewer the number of loans remaining in the pool, the higher
the volatility and hence the stress applied. Once the loan count
in a pool falls below 75, the rate of delinquency is increased by
1% for every loan less than 75. For example, for a pool with 74
loans from the 2005 vintage, the adjusted rate of new delinquency
would be 10.10%. If current delinquency levels in a small pool is
low, future delinquencies are expected to reflect this trend. To
account for that, the rate calculated above is multiplied by a
factor ranging from 0.2 to 2.0 for current delinquencies ranging
from less than 2.5% to greater than 50% respectively.
Delinquencies for subsequent years and ultimate expected losses
are projected using the approach described in the methodology
publication.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Complete rating actions are:
Issuer: American Home Mortgage Assets Trust 2007-3
-- Cl. I-1A-1, Downgraded to Ca (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-2A-1, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1A-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1A-2, Downgraded to C (sf); previously on Jan. 14,
2010 Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-2A-1, Confirmed at Ca (sf); previously on Jan. 14,
2010 Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-2A-2, Downgraded to C (sf); previously on Jan. 14,
2010 Ca (sf) Placed Under Review for Possible Downgrade
Issuer: American Home Mortgage Investment Trust 2007-A
-- Cl. I-1A, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-2A, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-3A-1, Downgraded to C (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
ARCHSTONE SYNTHETIC: S&P Withdraws Ratings on Two Classes
---------------------------------------------------------
Standard & Poor's Ratings Services withdrew its ratings on the
class B-1 and B-3 notes issued by Archstone Synthetic CDO II SPC,
a synthetic corporate investment-grade collateralized debt
obligation transaction.
The rating withdrawals follow the noteholders' decision to
exercise the option to put the principal amount of the notes
outstanding to the issuer, pursuant to section 9.9 of the
indenture.
Ratings Withdrawn
Archstone Synthetic CDO II SPC
Rating
------
Class To From
----- -- ----
B-1 NR BB- (sf)/Watch Pos
B-3 NR BB- (sf)/Watch Pos
NR -- Not rated.
ARES IX: Moody's Upgrades Ratings on Various Classes of Notes
-------------------------------------------------------------
Moody's Investors Service announced that it has upgraded the
ratings of these notes issued by Ares IX CLO Ltd.:
-- $321,250,000 Class A-1-A Floating Rate Notes Due 2017
(current balance of $273,692,305), Upgraded to Aa3 (sf);
previously on August 4, 2009 Downgraded to A2 (sf);
-- $75,000,000 Class A-1-B Floating Rate Notes Due 2017 (current
balance of $61,121,295), Upgraded to Aaa (sf); previously on
August 4, 2009 Downgraded to Aa1 (sf);
-- $18,750,000 Class A-1-C Floating Rate Notes Due 2017,
Upgraded to A1 (sf); previously on August 4, 2009 Downgraded
to A3 (sf);
-- $50,000,000 Class A-2 Variable Funding Floating Rate Notes
Due 2017 (current balance of $42,598,024), Upgraded to Aa3
(sf); previously on August 4, 2009 Downgraded to A2 (sf);
-- $12,000,000 Class B Floating Rate Notes Due 2017, Upgraded to
A3 (sf); previously on August 4, 2009 Downgraded to Baa3
(sf);
-- $33,000,000 Class C Floating Rate Deferrable Notes Due 2017,
Upgraded to Ba1 (sf); previously on August 4, 2009 Downgraded
to B1 (sf);
-- $39,000,000 Class D-1 Floating Rate Deferrable Notes Due
2017, Upgraded to B3 (sf); previously on August 4, 2009
Downgraded to Caa3 (sf);
-- $3,000,000 Class D-2 Fixed Rate Deferrable Notes Due 2017,
Upgraded to B3 (sf); previously on August 4, 2009 Downgraded
to Caa3 (sf);
-- $5,000,000 Combination Securities Due 2017 (current Rated
Balance of $2,479,798), Upgraded to B1 (sf); previously on
August 4, 2009 Downgraded to Caa1 (sf);
Ratings Rationale
According to Moody's, the rating actions taken on the notes result
primarily from the delevering of the Class A Notes, which have
been paid down by approximately 15% or $67 million since the last
rating action in August 2009. Moody's expects delevering of the
Class A Notes to continue as a result of the end of the deal's
reinvestment period. As a result of the delevering, the
overcollateralization ratio has increased since the last rating
action in August 2009. As of the latest trustee report dated
October 12, 2010, the overcollateralization ratio is reported at
118.78% versus August 2009 level of 112.89%. The October 2010
overcollateralization level does not reflect the principal payment
of $63 million to the Class A Notes' holders on the October 20,
2010 payment date.
Moody's also notes that the deal has benefited from improvement in
the credit quality of the underlying portfolio since the last
rating action. Based on the October 2010 trustee report, the
weighted average rating factor is 2550 compared to 2963 in August
2009, and securities rated Caa1 or CCC+ and below make up
approximately 7.7% of the underlying portfolio versus 22.9% in
August 2009. The deal also experienced a decrease in defaults.
In particular, the dollar amount of defaulted securities has
decreased to about $8 million from approximately $33 million in
August 2009.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" and "Annual Sector Review (2009): Global CLOs," key
model inputs used by Moody's in its analysis, such as par,
weighted average rating factor, diversity score, and weighted
average recovery rate, may be different from the trustee's
reported numbers. In its base case, Moody's analyzed the
underlying collateral pool to have a performing par and principal
proceeds of $498 million, defaulted par of $10 million, weighted
average default probability of 22.55% (implying a WARF of 3370), a
weighted average recovery rate upon default of 41.14%, and a
diversity score of 56. 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 IX CLO Ltd. issued in March 2005, is a collateralized loan
obligation backed primarily by a portfolio of senior secured
loans.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in August 2009.
Moody's also performed a number of sensitivity analyses to test
the impact on all rated notes, including these:
1. Various default probabilities to capture potential defaults in
the underlying portfolio.
2. A range of recovery rate assumptions for all assets to capture
variability in recovery rates.
A summary of the impact of different default probabilities
(expressed in terms of WARF levels) on all rated notes (shown in
terms of the number of notches' difference versus the current
model output, where a positive difference corresponds to lower
expected losses), assuming that all other factors are held equal:
Moody's Adjusted WARF - 20% (2696)
-- Class A-1-A: +2
-- Class A-1-B: 0
-- Class A-1-C: +2
-- Class A-2: +2
-- Class B: +3
-- Class C: +3
-- Class D-1: +2
-- Class D-2: +3
Combination Securities: +2
Moody's Adjusted WARF + 20% (4044)
-- Class A-1-A: -2
-- Class A-1-B: 0
-- Class A-1-C: -2
-- Class A-2: -2
-- Class B: -2
-- Class C: -1
-- Class D-1: -3
-- Class D-2: -2
-- Combination Securities: -2
A summary of the impact of different recovery rate levels on all
rated notes (shown in terms of the number of notches' difference
versus the current model output, where a positive difference
corresponds to lower expected losses), assuming that all other
factors are held equal:
Moody's Adjusted WARR + 2% (43.14)
-- Class A-1-A: 0
-- Class A-1-B: 0
-- Class A-1-C: +1
-- Class A-2: 0
-- Class B: +1
-- Class C: 0
-- Class D-1: 0
-- Class D-2: +1
-- Combination Securities: +1
Moody's Adjusted WARR - 2% (39.14)
-- Class A-1-A: -1
-- Class A-1-B: 0
-- Class A-1-C: 0
-- Class A-2: -1
-- Class B: 0
-- Class C: 0
-- Class D-1: 0
-- Class D-2: 0
-- Combination Securities: -1
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2012 and
2014 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the managers'
investment strategies and behavior, 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities, and 3) potential additional
expected loss associated with swap agreements in CDOs as a result
of recent U.S. bankruptcy court ruling on Lehman swap termination
in the Dante case.
Sources of additional performance uncertainties are described
below:
1) Delevering: The main source of uncertainty in this transaction
is whether delevering from unscheduled principal proceeds will
continue and at what pace. Delevering may accelerate due to
high prepayment levels in the loan market and/or collateral
sales by the manager, which may have significant impact on the
notes' ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deals'
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus selling defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
3) 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, resulting in
larger cash payments to the hedge counterparty. 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.
ASSET SECURITIZATION: S&P Raises Ratings on 1997-D4 Securities
--------------------------------------------------------------
Standard & Poor's Ratings Services raised its rating on one class
of commercial mortgage-backed securities from Asset Securitization
Corp.'s series 1997-D4. In addition, S&P affirmed its ratings on
seven other classes from the same transaction.
The upgrade of the class A-8 certificates and the affirmations of
the ratings on the class A-6, B-1, B-2, B-3, B-4, and B-5
certificates reflect S&P's analysis of the remaining collateral in
the transaction, the transaction structure, and the liquidity
available to the certificates, as well as the increased credit
enhancement levels due to significant deleveraging of the pool.
S&P affirmed its 'D (sf)' rating on class B-6 due to recurring
interest shortfalls and principal losses. As noted in the October
2010 remittance report, $4.4 million of principal losses have been
applied to class B-6 to date.
S&P's analysis included a review of the credit characteristics of
all of the remaining assets in the transaction. Using servicer-
provided financial information, Standard & Poor's calculated an
adjusted debt service coverage of 1.17x and a loan-to-value ratio
of 69.1%. S&P further stressed the loans' cash flows under its
'AAA' scenario to yield a weighted average DSC of 0.96x and an
LTV of 140.7%. All of the DSC and LTV calculations S&P noted
above exclude 13 ($88.2 million, 44.0%) defeased loans and four
($9.8 million, 4.9%) specially serviced assets.
Credit Considerations
As of the October 2010 remittance report, four assets
($9.8 million, 4.9%) were with the special servicer, Berkadia
Commercial Mortgage LLC, including three of the top 10 loans.
One of these assets ($0.6 million, 0.3%) is real estate owned,
one is in foreclosure ($5.1 million, 2.5%), one ($1.2 million,
0.6%) is more than 90 days delinquent, and the remaining loan
($3.0 million, 1.5%) is 60 days delinquent.
The Lincoln Park Center loan ($5.1 million, 2.5%) is the largest
loan with the special servicer and the fourth-largest loan in the
pool. The loan is secured by a 175,679-sq.-ft. anchored retail
property in Lincoln Park, Ill. The loan was transferred to
Berkadia on July 10, 2010, due to payment default and is currently
in foreclosure. As of Dec. 31, 2009, the property had a DSC of
0.53x, and the property was 55.4% occupied as of July 20, 2010.
Standard & Poor's anticipates a significant loss upon the eventual
resolution of this asset.
The Residence Inn ? Gainesville loan ($3.0 million, 1.5%), the
seventh-largest loan in the pool, is secured by an 80-room
extended-stay hotel in Gainesville, Fla. The loan was transferred
to Berkadia on Sept. 10, 2010, due to payment default. The
property ran an operating deficit for the 12 months ended July 31,
2010. During this period, the property had an average daily rate
of $99.25, occupancy of 49.9%, and revenue per available room of
$49.54. The special servicer has retained counsel in anticipation
of foreclosure. Standard & Poor's anticipates a moderate loss
upon the eventual resolution of this asset.
The Knights Inn - Maumee loan ($1.2 million, 0.6%), the 10th-
largest loan in the pool, is secured by a 161-room limited-service
hotel in Toledo, Ohio. The loan was transferred to Berkadia on
June 26, 2009, due to imminent payment default. Overall economic
conditions have adversely affected the property, and the property
is in receivership. The receiver reports an ADR of $29.61,
occupancy of 40.7%, and RevPAR of $12.06. Standard & Poor's
anticipates a significant loss upon the eventual resolution of
this asset.
The Trainer Hill MHP ($0.6 million, 0.3%) asset is a 102-pad
mobile home park in Trainer, Pa. The associated mortgage loan was
transferred to Berkadia on Nov. 13, 2008, due to payment default
and is currently REO. Berkadia has hired a new property
management firm to ready the property for sale. Standard & Poor's
anticipates a moderate loss on the eventual resolution of this
asset.
Two loans totaling $10.0 million (0.7%) 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. Both of
these loans have been defeased and are scheduled to mature in late
2011.
Transaction Summary
As of the October 2010 remittance report, the collateral balance
was $200.5 million, which is 14.3% of the balance at issuance.
The collateral includes 29 loans, down from 122 loans at issuance.
Thirteen ($88.2 million, 44.0%) of the loans are defeased. The
master servicer, also Berkadia, has provided financial information
for 99.5% of the nondefeased loans in the pool, 98.6% of which was
interim- or full-year 2009 data. S&P calculated a weighted
average DSC of 1.16x for the pool based on the reported figures.
S&P's adjusted DSC and LTV were 1.17x and 69.1%, respectively.
These figures exclude the four specially serviced loans discussed
above. If S&P included these loans in S&P's calculation,
S&P's adjusted DSC would have been 1.11x.
Two loans ($10.1 million, 5.1%) are on the master servicer's
watchlist. Six loans ($52.0 million, 25.9%) have a reported DSC
below 1.0x. To date, the pool has experienced principal losses
totaling $25.4 million in connection with 18 loans.
Summary of Top 10 Loans
The top 10 nondefeased loans have an aggregate outstanding balance
of $91.0 million (68.7%). Using servicer-reported numbers, S&P
calculated a weighted average DSC of 1.05x for the top 10 loans.
S&P's adjusted DSC and LTV for the top 10 loans were 1.04x and
71.4%, respectively. These adjusted figures exclude the three top
10 loans currently with the special servicer, and discussed under
the "Credit Considerations" above. Two of the top 10 loans are on
the master servicer's watchlist.
The Tramz loan ($6.4 million, 3.2%) is the third-largest loan in
the pool and is secured by a two-property, 390-room hotel
portfolio in Syracuse, N.Y. The loan appears on the master
servicer's watchlist due to low DSC and the impending loss of one
of the properties' current franchise affiliation. On Dec. 1,
2010, the Holiday Inn franchise agreement will be terminated with
respect to one of the properties. The borrower is currently in
negotiations with another operator to rebrand the property. As of
the 12 months ended June 30, 2010, the portfolio had a DSC of
0.72x with 57.6% occupancy.
The Warwick Commons loan ($3.7 million, 1.9%) is the fifth-largest
loan in the pool and is secured by a 55,200-sq.-ft. anchored
retail center in Warwick, R.I. The loan appears on the master
servicer's watchlist due to low DSC and an occupancy decrease. In
March 2010 a severe storm caused widespread flooding and damage to
the property, and as a result, Bed Bath & Beyond terminated its
lease, vacating 56.0% of the property. The property is currently
undergoing renovations. As of Dec. 31, 2009, DSC for the property
was 1.34x. Occupancy was 40.05 as of Sept. 5, 2010.
Standard & Poor's analyzed the transaction according to its
current criteria. The rating actions are consistent with S&P's
analysis.
Rating Raised
Asset Securitization Corp.
Commercial mortgage pass-through certificates series 1997-D4
Rating
------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
A-8 AAA (sf) AA+ (sf) 64.29
Ratings Affirmed
Asset Securitization Corp.
Commercial mortgage pass-through certificates series 1997-D4
Class Rating Credit enhancement (%)
----- ------ ----------------------
A-6 AAA (sf) 85.29
B-1 A+ (sf) 46.79
B-2 BBB (sf) 29.29
B-3 BB+ (sf) 22.28
B-4 B+ (sf) 11.78
B-5 B- (sf) 4.78
B-6 D (sf) 0.00
AUSTIN HOUSING: S&P Raises Ratings on Revenue Bonds From 'BB+'
--------------------------------------------------------------
Standard & Poor's Ratings Services said it raised to 'AAA' from
'BB+' its rating on Austin Housing Finance Corp., Texas' series
2010 multifamily housing revenue bonds (Ginnie Mae collateralized
mortgage loan; Elm Ridge Apartments).
The upgrade is based on these factors:
* The sufficiency of cash flows to pay principal and interest on
the bonds until maturity assuming zero reinvestment of income;
* An asset/liability parity of 100.83% as of July 20, 2010; and
* The high quality of assets, including a Ginnie Mae mortgage-
backed security and 'AAAm' rated Federated Trust for U.S.
Treasury Obligations.
On May 12, 2010, the issue was included in a rating action where
S&P placed its ratings on certain housing issues on CreditWatch
with negative implications due to revised criteria for certain
federal government-enhanced housing transactions. S&P's revised
criteria affect government-enhanced housing transactions where
funds are invested in money market funds and other investments
with no guaranteed rate of return.
On Sept. 29, 2010, Standard & Poor's lowered the rating to 'BB+'
based on S&P's analysis of updated cash flow statements assuming
zero reinvestment of income for all scenarios as set forth in the
related criteria articles. The cash flow projections indicated
that assuming no reinvestment earnings there would be insufficient
revenues to pay regularly scheduled debt service starting on the
Jan. 20, 2038, interest payment date.
The obligor has entered into a rebate agreement whereby fees will
not be paid from the trustee estate but paid directly by the
obligor. Revised cash flows show full and timely payment of
principal and interest on the bonds plus all fees, except the
rebate fee. In addition, since the indenture provides for an open
flow of funds after a certain carryforward amount, that amount has
been adjusted according to the updated cash flows. There are
sufficient assets to cover the reinvestment risk based on the 15-
day minimum notice period required for special redemptions.
BANC OF AMERICA: Moody's Reviews Ratings on 16 Classes of Certs.
----------------------------------------------------------------
Moody's Investors Service placed 16 classes of Banc of America
Commercial Mortgage Inc., Commercial Mortgage Pass-Through
Certificates, Series 2005-6, on review for possible downgrade:
-- Cl. A-J, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 3, 2006 Definitive Rating Assigned Aaa
(sf)
-- Cl. B, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 3, 2006 Definitive Rating Assigned Aa1
(sf)
-- Cl. C, Aa2 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 3, 2006 Definitive Rating Assigned Aa2
(sf)
-- Cl. D, Aa3 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 3, 2006 Definitive Rating Assigned Aa3
(sf)
-- Cl. E, A1 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 3, 2006 Definitive Rating Assigned A1 (sf)
-- Cl. F, A2 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 3, 2006 Definitive Rating Assigned A2 (sf)
-- Cl. G, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 3, 2006 Definitive Rating Assigned A3 (sf)
-- Cl. H, Baa1 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 3, 2006 Definitive Rating Assigned Baa1
(sf)
-- Cl. J, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 3, 2006 Definitive Rating Assigned Baa2
(sf)
-- Cl. K, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 3, 2006 Definitive Rating Assigned Baa3
(sf)
-- Cl. L, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 3, 2006 Definitive Rating Assigned Ba1
(sf)
-- Cl. M, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 3, 2006 Definitive Rating Assigned Ba2
(sf)
-- Cl. N, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 3, 2006 Definitive Rating Assigned Ba3
(sf)
-- Cl. O, B1 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 3, 2006 Definitive Rating Assigned B1 (sf)
-- Cl. P, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 3, 2006 Definitive Rating Assigned B2 (sf)
-- Cl. Q, B3 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 3, 2006 Definitive Rating Assigned B3 (sf)
The classes were placed on review for possible downgrade due to
higher expected losses for the pool resulting from realized and
anticipated losses from specially serviced and troubled loans.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated August 7, 2008.
Deal And Performance Summary
As of the October 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 11% to $2.6 billion
from $2.9 billion at securitization. The Certificates are
collateralized by 155 mortgage loans ranging in size from less
than 1% to 11% of the pool.
Thirty-two loans, representing 18% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Five loans have been liquidated from the trust since
securitization, resulting in a $22.1 million loss (68% loss
severity). Currently 19 loans, representing 11% of the pool, are
in special servicing. The largest specially serviced loan is the
Paramus Park Mall loan ($101.2 million -- 4.2%), which was
transferred to special servicing in April 2009 as part of the GGP
bankruptcy. The loan is performing and should be returned to the
master servicer shortly. The master servicer has recognized an
aggregate $18.7 million in appraisal reductions for eight of the
specially serviced loans.
Moody's review will focus on potential losses from specially
serviced and troubled loans and the performance of the overall
pool.
BANC OF AMERICA: Moody's Downgrades Ratings on 17 Certificates
--------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 17 classes,
confirmed two classes and affirmed five classes of Banc of America
Commercial Mortgage Inc. Commercial Mortgage Pass-Through
Certificates, Series 2008-1:
-- Cl. A-1, Affirmed at Aaa (sf); previously on July 1, 2008
Definitive Rating Assigned Aaa (sf)
-- Cl. A-2, Affirmed at Aaa (sf); previously on July 1, 2008
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on July 1, 2008
Definitive Rating Assigned Aaa (sf)
-- Cl. A-SB, Affirmed at Aaa (sf); previously on July 1, 2008
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Confirmed at Aaa (sf); previously on Sept. 29, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-1A, Confirmed at Aaa (sf); previously on Sept. 29, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. XW, Affirmed at Aaa (sf); previously on July 1, 2008
Definitive Rating Assigned Aaa (sf)
-- Cl. A-M, Downgraded to Aa2 (sf); previously on Sept. 29, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-J, Downgraded to Baa1 (sf); previously on Sept. 29,
2010 A1 (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to Baa2 (sf); previously on Sept. 29, 2010
A2 (sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to Baa3 (sf); previously on Sept. 29, 2010
A3 (sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to Ba1 (sf); previously on Sept. 29, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Ba3 (sf); previously on Sept. 29, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to B2 (sf); previously on Sept. 29, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to Caa1 (sf); previously on Sept. 29, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to Caa3 (sf); previously on Sept. 29, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to Ca (sf); previously on Sept. 29, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to Ca (sf); previously on Sept. 29, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to C (sf); previously on Sept. 29, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to C (sf); previously on Sept. 29, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. N, Downgraded to C (sf); previously on Sept. 29, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. O, Downgraded to C (sf); previously on Sept. 29, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. P, Downgraded to C (sf); previously on Sept. 29, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. Q, Downgraded to C (sf); previously on Sept. 29, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans. The confirmations and affirmations
are due to key parameters, including Moody's loan to value ratio,
Moody's stressed debt service coverage ratio and the Herfindahl
Index , remaining within acceptable ranges. Based on Moody's
current base expected loss, the credit enhancement levels for the
affirmed classes are sufficient to maintain the current ratings.
On September 29, 2010, Moody's placed 19 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
6.1% of the current balance. At last review, Moody's cumulative
base expected loss was 5.3%. Moody's stressed scenario loss is
21.0% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated February 6, 2009.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the October 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 3% to $1.25 billion
from $1.29 billion at securitization. The Certificates are
collateralized by 107 mortgage loans ranging in size from less
than 1% to 9% of the pool, with the top ten loans representing 47%
of the pool.
Thirty loans, representing 33% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Two loans have been liquidated from the pool, resulting in an
aggregate realized loss of $5.3 million (71% loss severity
overall). Eleven loans, representing 9% of the pool, are
currently in special servicing. Moody's has estimated an
aggregate $49.1 million loss (44% expected loss on average) for
the specially serviced loans.
Moody's has assumed a high default probability for ten poorly
performing loans representing 7% of the pool and has estimated a
$20.2 million loss (24% expected loss based on a 40% probability
default) from these troubled loans.
Moody's was provided with full year 2009 operating results for
100% of the pool. Excluding specially serviced and troubled
loans, Moody's weighted average LTV is 116% compared to 137% 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. Moody's value reflects a weighted average
capitalization rate of 9.7%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.22X and 0.93X, respectively, compared to
1.07X and 0.82X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 28 compared to 31 at Moody's prior review.
The top three performing conduit loans represent 23% of the
pool balance. The largest loan is the Apple Hotel Portfolio
($109.3 million -- 8.7% of the pool), which is secured by 27
limited service and extended stay hotels located in 14 states.
The loan represents a 32% pari-passu interest in a $344.8 million
loan. Performance has declined since last review due to the
downturn in the hotel sector resulting from the economic
recession. The loan is on the watchlist due to DSCR dropping
below a 1.4X threshold. Moody's LTV and stressed DSCR are 135%
and 0.90X, respectively, compared to 121% and 1.04X at last
review.
The second largest loan is the 550 West Jackson Loan
($97.5 million -- 7.8% of the pool), which is secured by a
402,000 square foot office building located in Chicago, Illinois.
The property was 98% leased as of July 2010 compared to 91% at
securitization. Despite the increase in occupancy, the property's
performance has declined since securitization. Moody's LTV and
stressed DSCR are 123% and 0.77X, respectively, compared to 110%
and 0.86X at last review.
The third largest loan is the IBP Loan ($75.0 million -- 6.0% of
the pool), which is secured by 813,000 square foot multi-building
business park located in Plato and Carrollton, Texas. The loan
represents a 73% pari-passu interest in a $102.6 million loan.
The property was 75% leased as of June 2010 compared to 91% at
securitization and is on the watchlist due to decline in
occupancy. Moody's LTV and stressed DSCR are 122% and 0.88X,
respectively, compared to 149% and 0.72X at last review.
BANC OF AMERICA: S&P Downgrades Ratings on Four 2007-BMB1 Certs.
----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on four
classes of commercial mortgage pass-through certificates from Banc
of America Large Loan Trust 2007-BMB1, a U.S. commercial mortgage-
backed securities transaction. Concurrently, S&P affirmed its
ratings on 11 classes from the same transaction.
S&P based its downgrades and affirmations on its revised
valuations for the remaining 11 floating-rate assets in the
transaction, which have experienced a weighted averaged decline of
4% since S&P's last review. Six assets ($542.4 million, 35% of
the trust balance) experienced significant declines, which S&P
detail below. S&P based its revaluation analysis, in part, on a
review of servicer-operating statement analysis reports, the most
recent borrower-provided rent rolls, and master servicer-provided
site inspection reports. S&P's analysis also considered the
upcoming final maturities, as nine loans (79% of the pooled trust
balance) mature by 2012. Based on S&P's analysis of the hotel
collateral, the overall revenue per available room declined
substantially in 2008 but has been fairly stable since its last
review. Many of the office properties are experiencing higher
vacancies and lower rents than at issuance but have maintained
relatively stable performance since S&P's last review.
Standard & Poor's lowered its rating on the class RDI-1 raked
certificate, which derives 100% of its cash flow from a
subordinate nonpooled component of the Reader's Digest loan.
S&P affirmed its 'AAA (sf)' rating on the class X interest-only
certificate based on its current criteria.
Transaction Summary
According to the Oct. 15, 2010, remittance report, the pool
statistics are as follows:
There are 11 loans in the pool, including pari passu pieces of two
A/B loans, a pari passu piece of one whole loan, the senior
interest of seven participated whole loans, one whole loan, and
the subordinate unpooled interest of one of these loans.
All of the loans are indexed to one-month LIBOR.
The loans in the pool are secured by manufactured housing (29.6%),
office (24.5%), retail (23.2%), lodging (20.5%), and self-storage
(2.2%) properties.
Summary of Manufactured Housing Properties
The Farallon MHC Portfolio loan is the largest loan in the
pool and is secured by 259 manufactured housing properties
totaling 54,622 pads located throughout 23 states. The
$1.53 billion whole-loan balance includes a $370.7 million
senior pooled trust balance (29.6% of the trust balance) and
a $85.3 million nonpooled subordinate component that supports
the "FMH" raked certificates, which Standard & Poor's does
not rate. Approximately $44.1 million (3%) of the whole-loan
balance has paid down since issuance due to collateral releases
(15 properties totaling 2,555 pads). The loan was transferred
to the special servicer, LNR Partners Inc., on June 28, 2010, in
anticipation of the upcoming August 2010 maturity. The loan's
maturity was subsequently extended to August 2011, and it has one
12-month extension option remaining. The master servicer, KeyCorp
Real Estate Capital Markets Inc., reported a debt service coverage
of 1.96x for year-end 2009 and 79.6% occupancy as of August 2010.
Standard & Poor's stressed senior pooled trust and whole-loan
loan-to-value ratios are 59.4% and 101.0%, respectively. S&P's
valuation for this loan is comparable to its valuation at
issuance.
Summary of Office Properties
Office properties secure three loans totaling $377.0 million
(24.5% of the trust balance). S&P based its analysis on a review
of the borrowers' most recent rent rolls and operating statements.
Details of the significant office properties are as follows:
The Stamford Office Portfolio loan is the largest loan secured by
office properties and the second-largest loan in the pool. The
loan has a trust balance of $301.5 million (19.6% of the trust
balance) and a whole-loan balance of $400.0 million. The loan is
secured by seven office properties totaling 1.66 million sq. ft.
in Stamford, Conn. The loan was transferred to the special
servicer, Bank of America N.A., on July 29, 2009, in anticipation
of the upcoming August 2009 maturity. The loan was recently
modified and extended to August 2012 and has two additional 12-
month extension options remaining. The loan is expected to be
returned to the master servicer, also BofA, on Dec. 16, 2010. The
master servicer reported a DSC of 5.95x for year-end 2009 and 82%
occupancy as of September 2010. Standard & Poor's stressed in-
trust and whole-loan LTV ratios are 104.0% and 140.0%,
respectively. S&P's valuation for this loan has declined 35%
since issuance due to a decline in occupancy and rents and an
increase in expenses.
The Reader's Digest loan is the third-largest loan secured by
an office property and the smallest loan in the pool. The
$31.0 million whole loan includes a $16.0 million senior pooled
trust balance (1.2% of the trust balance) and a $2.9 million
nonpooled subordinate component that supports the class RDI-1
raked certificate. The loan is secured by three, three- and
four-story buildings that serve as the headquarters for Reader's
Digest in Chappaqua, N.Y. At issuance and S&P's last review,
the Reader's Digest lease reflected an expiration date of Jan. 1,
2025; however, the master servicer, BofA, confirmed that the
tenant is terminating its lease and will vacate its space by year
end. The master servicer reported a DSC of 8.21x for year-end
2009 and 100% occupancy as of June 2010. The loan matures April
2012 and has one 12-month extension option remaining. Standard &
Poor's stressed in-trust and whole-loan LTV ratios are 156.1% and
256.1%, respectively. S&P's valuation for this loan has declined
73% since issuance due to the early termination of the Reader's
Digest lease.
Summary of Retail Properties
Retail properties secure two loans totaling $356.9 million (23.2%
of the trust balance). S&P based its analysis on a review of the
borrowers' most recent rent rolls and operating statements.
Details of the two loans are as follows:
The OSI Restaurant Portfolio loan has a whole-loan balance
of $466.4 million that consists of two pari passu notes
($233.2 million), one of which (the A-1 note) is included in the
trust (15.2% of the trust balance). In addition, the borrower's
equity interests in the property secure a mezzanine loan totaling
$315.0 million. The loan is secured by 324 cross-collateralized
and cross-defaulted properties that total 336 restaurants in 35
states. The properties are subject to a 15-year, triple-net
master lease expiring in June 2022. The master servicer, BofA,
reported a DSC of 12.24x for year-end 2009 and 100% occupancy as
of June 2010. The loan matures June 2011 and has one 12-month
extension option remaining. Standard & Poor's stressed whole-loan
LTV ratio is 76.2%. S&P's valuation for this loan is comparable
to its valuation at issuance. The Smart & Final Portfolio loan
has a trust balance of $123.75 million (8.0% of the trust balance)
and a whole-loan balance of $154.7 million. In addition, the
borrower's equity interests in the property secure a mezzanine
loan totaling $65.0 million. The loan is secured by the cross-
collateralized and cross-defaulted fee interests in a portfolio of
57 retail properties, three warehouse/distribution properties, and
two land parcels totaling 1.4 million sq. ft. The properties are
subject to a 15-year, triple-net master lease expiring in May
2022. The master servicer, BofA, reported a DSC of 11.36x for
year-end 2009 and 100% occupancy as of June 2010. The loan
matures June 2011 and has one 12-month extension option remaining.
Standard & Poor's stressed in-trust and whole-loan LTV ratios are
71.7% and 89.6%, respectively. S&P's valuation for this loan has
increased 11% since issuance due to the scheduled rent steps.
Summary of Hotel Properties
Hotel properties secure four loans totaling $315.25 million (20.5%
of the trust balance). S&P based its hotel analysis on a review
of the borrowers' operating statements for the six months ended
June 30, 2010, and the year ended Dec. 31, 2009, as well as their
2010 budgets. The lodging collateral performance has been
significantly affected by the reduction in business and leisure
travel. Details on the significant hotel properties are as
follows:
The Blackstone Hawaii Portfolio loan has a trust balance of
$127.0 million (8.3% of the trust balance) and whole-loan balance
of $250.0. The loan is secured by two full-service hotels
totaling 1,101 rooms on Hawaii's Maui Island and the Big Island.
The master servicer, BofA, reported a DSC of 6.10x for year-end
2009 and an overall occupancy of 78.1% as of the trailing-12-
months through June 2010. Based on Standard & Poor's review of
the borrower's operating statements for year-end 2009, TTM ended
June 30, 2010, and its 2010 budget, S&P's stressed in-trust and
whole-loan LTV ratios are 100.3% and 197.5%, respectively. S&P's
adjusted valuation for this loan has declined by 44% since
issuance. The valuation decline is primarily due to a drop in
average daily rate and occupancy. The loan matures in June 2011
and has no extension options remaining.
The MSREF Portfolio loan has a whole-loan balance of
$729.9 million that consists of a $545.0 million senior
participation interest and two nontrust junior participation
interests totaling $184.9 million. The senior participation
interest is further divided into three pari passu pieces, of
which one piece totaling $81.5 million makes up 5.3% of the
trust balance. In addition, the equity interests in the
borrower of the whole loan secure four mezzanine loans totaling
$265.4 million. The loan is secured by three full-service
luxury resort hotels totaling 2,532 rooms in Orlando, Fla., and
Phoenix. The master servicer, Midland Loan Services Inc.,
reported a combined in-trust DSC of 7.01x for year-end 2009 and
68.2% occupancy for the 12 months ended June 30, 2010. S&P's
adjusted valuation, which yielded a stressed in-trust LTV ratio
of 98.7%, has fallen 33% since issuance. The valuation decline
is primarily due to a drop in ADR and occupancy. The loan matures
in May 2011 and has one 12-month extension option remaining.
Credit Considerations
Three loans in the pool are currently with the special servicers.
The Simply Self Storage Portfolio loan, the ninth-largest loan in
the pool, has a trust balance of $33.8 million (2.2% of the trust
balance) and whole-loan balance of $61.8 million. The loan is
secured by nine self-storage facilities totaling 586,000 sq. ft.
in Florida, New Jersey, Illinois, and Puerto Rico. The loan was
transferred to the special servicer, C-III Asset Management, on
March 4, 2010, in anticipation of the upcoming May 2010 maturity.
The borrower provided notice of its intent to exercise its current
extension option and recently purchased an interest rate cap for
the extension, which was the remaining unsatisfied condition to
closing. The special servicer is currently finalizing the
extension. The master servicer, BofA, reported a 5.42x DSC and
64.7% occupancy for year-end 2009. Standard & Poor's stressed
in-trust and whole-loan LTV ratios are 132.4% and 242.1%,
respectively. S&P's adjusted valuation for this loan has fallen
50% since issuance, mainly due to the properties low occupancy and
inability to stabilize.
Ratings Lowered (Pooled Certificates)
Banc of America Large Loan Trust 2007-BMB1
Commercial mortgage pass-through certificates
Class To From Credit enhancement (%)
----- -- ---- ----------------------
J B- (sf) B+ (sf) 4.76
K CCC (sf) B- (sf) 2.68
L CCC- (sf) CCC (sf) 0.00
Ratings Lowered (Nonpooled Certificates)
Banc of America Large Loan Trust 2007-BMB1
Commercial mortgage pass-through certificates
Class To From Credit enhancement (%)
----- -- ---- ----------------------
RDI-1 CCC- (sf) BB (sf) N/A
Ratings Affirmed (Pooled Certificates)
Banc of America Large Loan Trust 2007-BMB1
Commercial mortgage pass-through certificates
Class Rating Credit enhancement (%)
----- ------ ----------------------
A-1 AAA (sf) 49.06
A-2 AA (sf) 23.50
A-1A AA (sf) 23.50
B A+ (sf) 20.53
C A- (sf) 17.55
D BBB (sf) 15.17
E BBB- (sf) 13.09
F BB+ (sf) 11.01
G BB (sf) 8.93
H BB- (sf) 6.84
X AAA (sf) N/A
N/A -- Not applicable.
BCAP LLC: Moody's Downgrades Ratings on 34 Tranches
---------------------------------------------------
Moody's Investors Service has downgraded the ratings of 34
tranches, upgraded the rating of 1 tranche and confirmed the
ratings of 12 tranches from seven Alt-A RMBS transactions issued
by BCAP in 2006 and 2007.
Ratings Rationale
The collateral backing the transactions consists primarily of
first-lien, fixed and adjustable-rate, Alt-A residential mortgage
loans. The actions are a result of the rapidly deteriorating
performance of Alt-A pools in conjunction with macroeconomic
conditions that remain under duress. The actions reflect Moody's
updated loss expectations on Alt-A pools issued from 2005 to 2007.
The rating action also reflects a correction to the ratings of
classes 1-A-1, 1-A-2 and 1-A-3 issued by BCAP LLC Trust 2007-AA1.
Previous rating actions applied principal distribution rules as
set forth in the prospectus supplement, which states that when the
subordinate certificates are depleted, principal is distributed
pro rata to all senior certificates in group 1. However, the
Pooling and Servicing agreement is silent about any change in
principal distribution after the depletion of the subordinate
certificates. The Trustee has confirmed that they will be
following the PSA and will continue to distribute principal
sequentially to the above listed certificates. As such Moody's
ratings have been adjusted to reflect that principal will continue
to be distributed sequentially to the 1-A-1, 1-A-2 and 1-A-3
certificates, as described in the PSA.
To assess the rating implications of the updated loss levels on
Alt-A RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
The above mentioned approach "Alt-A RMBS Loss Projection Update:
February 2010" is adjusted slightly when estimating losses on
pools left with a small number of loans. To project losses on
pools with fewer than 100 loans, Moody's first estimates a
"baseline" average rate of new delinquencies for the pool that is
dependent on the vintage of loan origination (10%, 19% and 21% for
the 2005, 2006 and 2007 vintage respectively). This baseline rate
is higher than the average rate of new delinquencies for the
vintage to account for the volatile nature of small pools. Even
if a few loans in a small pool become delinquent, there could be a
large increase in the overall pool delinquency level due to the
concentration risk. Once the baseline rate is set, further
adjustments are made based on 1) the number of loans remaining in
the pool and 2) the level of current delinquencies in the pool.
The fewer the number of loans remaining in the pool, the higher
the volatility and hence the stress applied. Once the loan count
in a pool falls below 75, the rate of delinquency is increased by
1% for every loan less than 75. For example, for a pool with 74
loans from the 2005 vintage, the adjusted rate of new delinquency
would be 10.10%. If current delinquency levels in a small pool is
low, future delinquencies are expected to reflect this trend. To
account for that, the rate calculated above is multiplied by a
factor ranging from 0.2 to 2.0 for current delinquencies ranging
from less than 2.5% to greater than 50% respectively.
Delinquencies for subsequent years and ultimate expected losses
are projected using the approach described in the methodology
publication.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete Rating Actions are:
Issuer: BCAP LLC Trust 2006-AA1
-- Cl. A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: BCAP LLC Trust 2006-AA2
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: BCAP LLC Trust 2007-AA1
-- Cl. I-A-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-3, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-4, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-1, Upgraded to B2 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
Issuer: BCAP LLC Trust 2007-AA2
-- Cl. I-2-A-1, Downgraded to Ca (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-2-A-2, Downgraded to C (sf); previously on Jan. 14,
2010 Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1-A-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1-A-10, Downgraded to C (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1-A-11, Downgraded to Caa3 (sf); previously on
Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible
Downgrade
-- Cl. II-1-A-12, Downgraded to Caa3 (sf); previously on
Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible
Downgrade
-- Cl. II-1-A-13, Downgraded to C (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-2-A-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-2-PO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-2-IO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-1-A, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1-A-2, Confirmed at Caa3 (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1-A-3, Confirmed at Caa3 (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1-A-4, Confirmed at Caa3 (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1-A-5, Confirmed at Caa3 (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1-A-6, Confirmed at Caa3 (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1-A-7, Confirmed at Caa3 (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1-A-8, Confirmed at Caa3 (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1-A-9, Confirmed at Caa3 (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1-A-14, Confirmed at Caa3 (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1-A-15, Confirmed at Caa3 (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1-PO, Confirmed at Caa3 (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1-IO, Confirmed at Caa3 (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
Issuer: BCAP LLC Trust 2007-AA3
-- Cl. I-A-1A, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-1B, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1B, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: BCAP LLC Trust 2007-AA5
-- Cl. A-1, Downgraded to Caa2 (sf); previously on Jan. 14, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: BCAPB LLC Trust 2007-AB1
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-5, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
BEAR STEARNS: Moody's Downgrades Ratings on Eight 2004-PWR6 Certs.
------------------------------------------------------------------
Moody's Investors Service downgraded the ratings of eight classes
and affirmed 12 classes of Bear Stearns Commercial Mortgage
Corporation, Commercial Mortgage Pass-Through Certificates, Series
2004-PWR6:
-- Cl. A-3, Affirmed at Aaa (sf); previously on Jan. 14, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on Jan. 14, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-5, Affirmed at Aaa (sf); previously on Jan. 14, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-6, Affirmed at Aaa (sf); previously on Jan. 14, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-J, Affirmed at Aaa (sf); previously on Jan. 14, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. X-1, Affirmed at Aaa (sf); previously on Jan. 14, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. X-2, Affirmed at Aaa (sf); previously on Jan. 14, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. B, Affirmed at Aa2 (sf); previously on Jan. 14, 2005
Definitive Rating Assigned Aa2 (sf)
-- Cl. C, Affirmed at Aa3 (sf); previously on Jan. 14, 2005
Definitive Rating Assigned Aa3 (sf)
-- Cl. D, Affirmed at A2 (sf); previously on Jan. 14, 2005
Definitive Rating Assigned A2 (sf)
-- Cl. E, Affirmed at A3 (sf); previously on Jan. 14, 2005
Definitive Rating Assigned A3 (sf)
-- Cl. F, Affirmed at Baa1 (sf); previously on Jan. 14, 2005
Definitive Rating Assigned Baa1 (sf)
-- Cl. G, Downgraded to Baa3 (sf); previously on Jan. 14, 2005
Definitive Rating Assigned Baa2 (sf)
-- Cl. H, Downgraded to Ba2 (sf); previously on Jan. 14, 2005
Definitive Rating Assigned Baa3 (sf)
-- Cl. J, Downgraded to Ba3 (sf); previously on Jan. 14, 2005
Definitive Rating Assigned Ba1 (sf)
-- Cl. K, Downgraded to B2 (sf); previously on Jan. 14, 2005
Definitive Rating Assigned Ba2 (sf)
-- Cl. L, Downgraded to B3 (sf); previously on Jan. 14, 2005
Definitive Rating Assigned Ba3 (sf)
-- Cl. M, Downgraded to Caa1 (sf); previously on Jan. 14, 2005
Definitive Rating Assigned B1 (sf)
-- Cl. N, Downgraded to Caa3 (sf); previously on Jan. 14, 2005
Definitive Rating Assigned B2 (sf)
-- Cl. P, Downgraded to Ca (sf); previously on Jan. 14, 2005
Definitive Rating Assigned B3 (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from anticipated losses from specially serviced and
troubled loans. The affirmations are due to key parameters,
including Moody's loan to value ratio, Moody's stressed debt
service coverage ratio and the Herfindahl Index, remaining within
acceptable ranges. Based on Moody's current base expected loss,
the credit enhancement levels for the affirmed classes are
sufficient to maintain their current ratings.
Moody's rating action reflects a cumulative base expected loss of
3.1% of the current balance. At last review, Moody's cumulative
base expected loss was 1.1%. Moody's stressed scenario loss is
8.6% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
, a measure of loan level diversity, is a primary determinant of
pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated May 21, 2007.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the October 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 11% to $951.2
million from $1.07 billion at securitization. The Certificates
are collateralized by 91 mortgage loans ranging in size from less
than 1% to 12% of the pool, with the top ten loans representing
46% of the pool. The pool includes four loans with investment
grade credit estimates, totaling 13% of the pool. Four loans,
representing 9% of the pool, have defeased and are collateralized
with U.S. Government securities. There were no defeased loans at
last review.
Thirty loans, representing 22% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Three loans, representing 1% of the pool, are currently in special
servicing. The largest specially serviced loan is the Marketplace
West Phase I Loan ($3.7 million -- 0.4% of the pool), which is
secured by a 31,000 square foot retail center located in Otsego,
Minnesota. The loan was transferred to special servicing in April
2010 and is currently in the process of foreclosure. The servicer
has recognized a $925,000 appraisal reduction on the loan. The
remaining two specially serviced loans are secured by an
industrial park and a retail center. Moody's has estimated an
aggregate $5 million loss (54% expected loss on average) for the
specially serviced loans.
Moody's was provided with full year 2009 operating results for 98%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV for the conduit component is 89%
compared to 91% at Moody's prior review. Moody's net cash flow
reflects a weighted average haircut of 15.6% to the most recently
available net operating income. Moody's value reflects a weighted
average capitalization rate of 9.3%.
Moody's actual and stressed DSCRs for the performing conduit loans
are 1.18X and 1.42X, respectively, compared to 1.18X and 1.49X at
last review. Moody's actual DSCR is based on Moody's net cash
flow and the loan's actual debt service. Moody's stressed DSCR is
based on Moody's NCF and a 9.25% stressed rate applied to the loan
balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 24 compared to 28 at Moody's prior review.
The largest loan with a credit estimate is the Hilton Sandestin
Beach Golf Resort Loan ($47.3 million -- 5.0%), which is secured
by a 598-room, full service hotel located in Destin, Florida. The
hotel's performance has declined since last review due to the
downturn in the hotel sector caused by the economic recession.
Year-end 2009 revenue per participating room was $118.01 compared
to $132.36 at last review. The decline in NOI was largely offset
by amortization. The loan has amortized by 8% since last review.
Moody's credit estimate and stressed DSCR are A2 and 2.16X,
respectively, compared to A2 and 2.14X at last review.
The second largest loan with a credit estimate is the Pine Gate
Apartments Loan ($18.2 million -- 1.9%), which is secured by a
354-unit garden apartment complex located in Old Bridge, New
Jersey. Moody's credit estimate and stressed DSCR are Baa3 and
1.19X, respectively, compared to Baa3 and 1.01X at last review.
The third largest loan with a credit estimate is the Berry
Plastics Portfolio Loan ($17.2 million -- 1.8%), which is secured
by a portfolio of four industrial buildings containing a total of
862,866 square feet. The properties are located in Tolleson,
Arizona, Aslip, Illinois and Geddes, New York. The properties are
net leased to Berry Plastics (Moody's LT Corporate Family Rating
B3; stable outlook) through November 2023. The loan fully
amortizes on a 240-month schedule. Moody's credit estimate and
stressed DSCR are Baa2 and 1.45X, respectively, compared to Baa2
and 1.27X at last review.
The fourth largest loan with a credit estimate is the Shaklee
Corporation Loan ($15.2 million -- 1.6%), which is secured by a
123,750 square foot office building located in Pleasanton,
California. The property is net leased to the Shaklee Corporation
through May 2024. The loan fully amortizes on a 240-month
schedule. Moody's credit estimate and stressed DSCR are Baa3 and
1.46X, respectively, compared to Baa3 and 1.28X at last review.
The top three performing conduit loans represent 26% of the
pool balance. The largest loan is the 11 Penn Plaza Loan
($113.8 million -- 12.0%), which is secured by a 1 million
square foot office building located in the Penn Plaza submarket
of New York City. The property was 86% leased as of June 2010
compared to 94% at last review. The loan represents a 56.8%
pari-passu interest in a $200.3 million loan. The loan matures
on December 1, 2011. Moody's LTV and stressed DSCR are 81% and
1.21X, respectively, compared to 87% and 1.10X at last review.
The second largest loan is the Highland Village Loan
($81.8 million -- 8.6%), which is secured by a 331,000 square
foot retail center located in Houston Texas. The property was
85% leased as of June 2010, compared to 98% at last review.
Despite the decline in occupancy, performance has improved due
to increased rental revenues. Moody's LTV and stressed DSCR are
91% and 1.07X, respectively, compared to 93% and 1.00X at last
review.
The third largest loan is Eton Collection Loan ($52.0 million --
5.5%), which is secured by a 287,000 square foot retail center
located in Woodmere, Ohio. The property was 90% leased as of
December, 2009 compared to 83% at last review. The property is on
the watchlist due to low DSCR. Moody's LTV and stressed DSCR are
129% and 0.73X, respectively, compared to 109% and 0.87X at last
review.
BEAR STEARNS: Moody's Downgrades Ratings on 14 2005-PWR7 Certs.
---------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 14 classes and
affirmed five classes of Bear Stearns Commercial Mortgage Pass-
Through Certificates, Series 2005-PWR7:
-- Cl. A-2, Affirmed at Aaa (sf); previously on May 28, 2009
Affirmed at Aaa (sf)
-- Cl. A-AB, Affirmed at Aaa (sf); previously on May 28, 2009
Affirmed at Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on May 28, 2009
Affirmed at Aaa (sf)
-- Cl. X-1, Affirmed at Aaa (sf); previously on May 28, 2009
Affirmed at Aaa (sf)
-- Cl. X-2, Affirmed at Aaa (sf); previously on May 28, 2009
Affirmed at Aaa (sf)
-- Cl. A-J, Downgraded to A2 (sf); previously on Nov. 3, 2010
Aa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to Baa2 (sf); previously on Nov. 3, 2010 A1
(sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to Baa3 (sf); previously on Nov. 3, 2010 A2
(sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to B1 (sf); previously on Nov. 3, 2010 Baa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Caa2 (sf); previously on Nov. 3, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to Caa3 (sf); previously on Nov. 3, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to Ca (sf); previously on Nov. 3, 2010 Ba2
(sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to Ca (sf); previously on Nov. 3, 2010 B1
(sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to C (sf); previously on Nov. 3, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to C (sf); previously on Nov. 3, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to C (sf); previously on Nov. 3, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to C (sf); previously on Nov. 3, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. N, Downgraded to C (sf); previously on Nov. 3, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. P, Downgraded to C (sf); previously on Nov. 3, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans. The affirmations are due to key
parameters, including Moody's loan to value ratio, Moody's
stressed debt service coverage ratio and the Herfindahl Index,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain their existing ratings.
On November 3, 2010, Moody's placed 14 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
7.1% of the current balance. At last review, Moody's cumulative
base expected loss was 6.0%. Moody's stressed scenario loss is
11.7% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a pay down analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
, a measure of loan level diversity, is a primary determinant of
pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated May 28, 2009.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the October 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 10% to $1.0 billion
from $1.1 billion at securitization. The Certificates are
collateralized by 121 mortgage loans ranging in size from less
than 1% to 10% of the pool, with the top ten loans representing
41% of the pool. Three loans, representing 3% of the pool, have
defeased and are collateralized with U.S. Government securities.
The pool contains three loans, representing 4% of the pool, with
investment grade credit estimates.
Twenty-eight loans, representing 24% of the pool, are on the
master servicer's watchlist. The watchlist includes loans which
meet certain portfolio review guidelines established as part of
the CRE Finance Council monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, Moody's reviews the
watchlist to assess which loans have material issues that could
impact performance.
Three loans have been liquidated from the pool, resulting in an
aggregate realized loss of $1.5 million (41% loss severity). Four
loans, representing 9% of the pool, are currently in special
servicing. The largest specially serviced loan is the Shops at
Boca Park Loan ($54.9 million -- 5.4% of the pool). This loan is
secured by a 277,000 square foot retail center located in Las
Vegas, Nevada. The property was transferred to special servicing
in October 2009 and is 90+ days delinquent. Moody's has estimated
an aggregate $36.4 million loss (41% expected loss on average) for
all of the specially serviced loans.
Moody's has assumed a high default probability for nine poorly
performing loans representing 12% of the pool and has estimated a
$22.6 million loss (19% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full or partial year 2009 operating
results for 81% of the pool. Excluding specially serviced and
troubled loans, Moody's weighted average LTV is 85% compared to
98% at Moody's prior review. Moody's net cash flow reflects a
weighted average haircut of 12.1% to the most recently available
net operating income. Moody's value reflects a weighted average
capitalization rate of 9.22%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.71X and 1.25X, respectively, compared to
1.41X and 1.11X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 30 compared to 35 at Moody's prior review.
The largest loan with a credit estimate is the 405 Park Avenue
Loan ($25 million -- 2.5% of the pool), which is secured by a
157,000 square foot Class A office building located in The Plaza
District of New York City. The property was 90% leased as of June
2010 compared to 94% at last review and 100% at securitization.
Occupancy is expected to decline significantly by the end of the
year as Allied Irish Bank, which leases 37% of the net rentable
area through December 2010, has indicated that it will vacate upon
lease expiration. Moody's credit estimate and stressed DSCR are
A2 and 1.69X, respectively, the same as at last review.
The second loan with a credit estimate is the Sam Moon Center Loan
($8.5 million -- 0.8% of the pool), which is secured by a 126,000
square foot retail center located in Dallas, Texas. The property
was 93% leased as of April 2010 compared to 100% at last review
and 98% at securitization. The loan has amortized 10% since last
review due to the 15-year amortization schedule. Despite strong
occupancy, financial performance has declined due to increased
expenses. Moody's current credit estimate and stressed DSCR are
Baa3 and 1.50X, respectively, compared to A2 and 1.67X at last
review.
The third loan with a credit estimate is the Visalia Medical
Center Loan ($7.1 million -- 0.7% of the pool), which is secured
by a 95,590 square foot medical office building located in
Visalia, California. The property is 100% leased to Visalia
Medical Clinic through December 2019. Moody's credit estimate and
stressed DSCR are Baa1 and 1.63X, respectively, compared to Baa3
and 1.57X at last review.
The top three performing conduit loans represent 18.5% of the
pool balance. The largest loan is the 11 Penn Plaza Loan
($86.5 million -- 8.6% of the pool), which is secured by a
1,029,554 square foot Class A office building located in the
Penn Station office submarket of New York City. The loan
represents a 43% pari-passu interest in a $201 million loan.
Financial performance has improved since last review even
though occupancy has declined. The property was 85% occupied
as of June 2010 compared to 94% at last review and 97% at
securitization. Moody's LTV and stressed DSCR are 75% and
1.30X, respectively, compared to 77% and 1.26X at last review.
The second largest loan is the Campus at Marlborough Loan
($58.6 million -- 5.8% of the pool), which is secured by a 530,895
square foot Class A office building in the MetroWest office
submarket of Marlborough, Massachusetts. The property's financial
performance has declined since last review due to a major tenant
renewing its lease for less space at a lower rent. Despite
significant office vacancy in the MetroWest office submarket, the
property was 93% occupied as of June 2010 compared to 100% at last
review and at securitization. Moody's LTV and stressed DSCR are
88% and 1.17X, respectively, compared to 91% and 1.13X at last
review.
The third largest loan is the Plaza La Cienaga Loan ($41.1 million
-- 4.1% of the pool), which is secured by a 305,961 square foot
retail center located in Los Angeles, California. The property
has maintained a 98% occupancy rate since securitization. Moody's
LTV and stressed DSCR are 99% and 0.93X, respectively, compared to
113% and 0.94X at last review.
BEAR STEARNS: Moody's Downgrades Ratings on 12 2005-PWR8 Certs.
---------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 12 classes
and affirmed eight classes of Bear Stearns Commercial Mortgage
Securities Trust Commercial Mortgage Pass-Through Certificates,
Series 2005-PWR8:
-- Cl. A-3, Affirmed at Aaa (sf); previously on July 22, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-AB, Affirmed at Aaa (sf); previously on July 22, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on July 22, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4FL, Affirmed at Aaa (sf); previously on July 13, 2005
Assigned Aaa (sf)
-- Cl. X-1, Affirmed at Aaa (sf); previously on July 22, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. X-2, Affirmed at Aaa (sf); previously on July 22, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-J, Downgraded to A3 (sf); previously on Oct. 20, 2010
Aa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to Baa2 (sf); previously on Oct. 20, 2010
A2 (sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to Ba1 (sf); previously on Oct. 20, 2010 A3
(sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to B3 (sf); previously on Oct. 20, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Caa1 (sf); previously on Oct. 20, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to Ca (sf); previously on Oct. 20, 2010 Ba3
(sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to C (sf); previously on Oct. 20, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to C (sf); previously on Oct. 20, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to C (sf); previously on Oct. 20, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to C (sf); previously on Oct. 20, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to C (sf); previously on Oct. 20, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to C (sf); previously on Oct. 20, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. N, Affirmed at C (sf); previously on Oct. 8, 2009
Downgraded to C (sf)
-- Cl. P, Affirmed at C (sf); previously on Oct. 8, 2009
Downgraded to C (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans.
The affirmations are due to key parameters, including Moody's loan
to value ratio, Moody's stressed debt service coverage ratio and
the Herfindahl Index, remaining within acceptable ranges. Based
on Moody's current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their
current ratings.
On September 20, 2010, Moody's placed 12 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
5.6% of the current balance. At last review, Moody's cumulative
base expected loss was 4.8%. Moody's stressed scenario loss is
12.5% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated October 8, 2009.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the November 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 10% to $1.6 billion
from $1.8 billion at securitization. The Certificates are
collateralized by 187 mortgage loans ranging in size from less
than 1% to 11% of the pool, with the top ten loans representing
30% of the pool. The pool contains three loans with investment
grade credit estimates that represent 6% of the pool. Seven
loans, representing 8% of the pool, have defeased and are
collateralized with U.S. Government securities.
Sixty-seven loans, representing 29% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Four loans have been liquidated from the pool, resulting in
an aggregate realized loss of $19.9 million (44% loss severity
overall). Seven loans, representing 4% of the pool, are
currently in special servicing. Moody's has estimated an
aggregate $36.3 million loss (57% expected loss on average)
for the specially serviced loans.
Moody's has assumed a high default probability for 15 poorly
performing loans representing 8% of the pool and has estimated a
$25.5 million aggregate loss (20% expected loss based on a 40%
probability default) from these troubled loans.
Moody's was provided with full year 2009 operating results for
100% of the pool. Excluding specially serviced and troubled
loans, Moody's weighted average LTV is 94% compared to 102% at
Moody's prior review. Moody's net cash flow reflects a weighted
average haircut of 14% to the most recently available net
operating income. Moody's value reflects a weighted average
capitalization rate of 9.0%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.41X and 1.11X, respectively, compared to
1.39X and 1.07X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 35 compared to 38 at Moody's prior review.
The largest loan with a credit estimate is the Lock Up Storage
Centers Portfolio ($53.4 million -- 5.1%), which is secured by 14
self storage facilities located in Illinois (10 properties),
Florida (2) and New Jersey (2). The portfolio originally
contained 15 properties, but one property was released in February
2007. The loan is interest only for the first five years and
amortizes on a 30-year schedule thereafter. Performance has been
stable. Moody's current credit estimate and stressed DSCR are A2
and 1.81X, respectively, compared to A2 and 1.83X at last review.
The other two loans with credit estimate ratings represent less
than 3% of the pool. The JL Holdings - Burger King Portfolio A-
Note ($13.4 million -- 0.8%) is secured by 90 stand-alone Burger
King restaurants located in four states. Moody's current credit
estimate and stressed DSCR are A2 and 1.32X, respectively,
compared to A3 and 1.23X at last review. The Glendale Plaza Loan
($11.4 million -- 0.7%) is secured by a 121,400 square foot retail
center located in Wilmington, Delaware. Moody's current credit
estimate and stressed DSCR are Baa3 and 1.44 X, respectively,
compared to Baa3 and 1.47X at last review.
The top three performing conduit loans represent 17% of the pool
balance. The largest loan is the One MetroTech Center Loan
($172.5 million -- 10.9%), which is secured by a 933,000 square
foot Class A office building located in Brooklyn, New York. The
property was 87% leased as of April 2010 compared to 90% at last
review. Moody's LTV and stressed DSCR are 94% and 1.01X,
respectively, essentially the same as at last review.
The second largest loan is the Park Place Loan ($50.9 million --
3.2%), which is secured by a four building office complex totaling
352,000 square feet located in Florham Park, New Jersey. The
property was 94% leased as of June 2010, similar to last review.
This loan is interest only for its entire ten year term. Moody's
LTV and stressed DSCR are 84% and 1.22X, respectively, essentially
the same as at last review.
The third largest loan is the Ballston Office Center Loan
($45.7 million -- 2.9%), which is secured by a 178,000 square
foot office building located in Arlington, Virginia. The
property has been 100% leased since securitization to three
tenants: US Coast Guard (77% of the net rentable area, various
lease expirations through 2016); Better Business Bureau (12% of
the NRA, lease expiration in November 2013) and Global Knowledge
(9% of the NRA, lease expiration in August 2012). Moody's LTV
and stressed DSCR are 110% and 0.88X, respectively, compared to
133% and 0.77X at last review.
BEAR STERNS: Moody's Reviews Ratings on 15 2005-PWR9 Certs.
-----------------------------------------------------------
Moody's Investors Service placed 15 classes of Bear Sterns
Commercial Mortgage Corporation, Commercial Mortgage Pass-Through
Certificates, Series 2005-PWR9 on review for possible downgrade:
-- Cl. A-J, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Aug. 6, 2009 Downgraded to Aa1 (sf)
-- Cl. B, Aa2 (sf) Placed Under Review for Possible Downgrade;
previously on Aug. 6, 2009 Downgraded to Aa2 (sf)
-- Cl. C, A1 (sf) Placed Under Review for Possible Downgrade;
previously on Aug. 6, 2009 Downgraded to A1 (sf)
-- Cl. D, A2 (sf) Placed Under Review for Possible Downgrade;
previously on Aug. 6, 2009 Downgraded to A2 (sf)
-- Cl. E, Baa1 (sf) Placed Under Review for Possible Downgrade;
previously on Aug. 6, 2009 Downgraded to Baa1 (sf)
-- Cl. F, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on Aug. 6, 2009 Downgraded to Baa2 (sf)
-- Cl. G, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on Aug. 6, 2009 Downgraded to Ba1 (sf)
-- Cl. H, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Aug. 6, 2009 Downgraded to Ba2 (sf)
-- Cl. J, B1 (sf) Placed Under Review for Possible Downgrade;
previously on Aug. 6, 2009 Downgraded to B1 (sf)
-- Cl. K, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Aug. 6, 2009 Downgraded to B2 (sf)
-- Cl. L, B3 (sf) Placed Under Review for Possible Downgrade;
previously on Aug. 6, 2009 Downgraded to B3 (sf)
-- Cl. M, Caa1 (sf) Placed Under Review for Possible Downgrade;
previously on Aug. 6, 2009 Downgraded to Caa1 (sf)
-- Cl. N, Caa2 (sf) Placed Under Review for Possible Downgrade;
previously on Aug. 6, 2009 Downgraded to Caa2 (sf)
-- Cl. P, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on Aug. 6, 2009 Downgraded to Caa3 (sf)
-- Cl. Q, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on Aug. 6, 2009 Downgraded to Caa3 (sf)
The classes were placed on review due to higher expected losses
for the pool resulting from realized and anticipated losses from
specially serviced and troubled loans.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated August 6, 2009.
Deal And Performance Summary
As of the November 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 9% to $1.96 billion
from $2.15 billion at securitization. The Certificates are
collateralized by 191 mortgage loans ranging in size from less
than 1% to 7% of the pool, with the top ten loans representing 31%
of the pool.
Fifty-six loans, representing 29% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Three loans have been liquidated from the pool, resulting in an
aggregate realized loss of $14.9 million (46% loss severity
overall). Fourteen loans, representing 13% of the pool, are
currently in special servicing. The specially serviced loans are
secured by a mix of multifamily, office, retail, self storage,
hotel and industrial property types. The servicer has recognized
appraisal reductions totaling $60.1 million from eight of the
specially serviced loans.
Based on the most recent remittance statement, Classes J through
S have experienced cumulative interest shortfalls totaling
$2.7 million. Moody's anticipates that the pool will continue
to experience interest shortfalls because of the high exposure
to specially serviced loans. Interest shortfalls are caused by
special servicing fees, including workout and liquidation fees,
appraisal subordinate entitlement reductions and extraordinary
trust expenses.
Moody's review will focus on potential losses from specially
serviced and troubled loans and the performance of the overall
pool.
BEAR STEARNS: Moody's Downgrades Ratings on 15 2006-TOP24 Certs.
----------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 15 classes and
affirmed seven classes of Bear Stearns Commercial Mortgage
Securities Trust, Commercial Mortgage Pass-Through Certificates,
Series 2006-TOP24:
-- Cl. A-1, Affirmed at Aaa (sf); previously on Nov. 6, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-2, Affirmed at Aaa (sf); previously on Nov. 6, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on Nov. 6, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-AB, Affirmed at Aaa (sf); previously on Nov. 6, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on Nov. 6, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. X-1, Affirmed at Aaa (sf); previously on Nov. 6, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. X-2, Affirmed at Aaa (sf); previously on Nov. 6, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-M, Downgraded to A2 (sf); previously on Oct. 13, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-J, Downgraded to B1 (sf); previously on Oct. 13, 2010
A1 (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to B3 (sf); previously on Oct. 13, 2010 A3
(sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to Caa1 (sf); previously on Oct. 13, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to Ca (sf); previously on Oct. 13, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to C (sf); previously on Oct. 13, 2010 Ba1
(sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to C (sf); previously on Oct. 13, 2010 Ba3
(sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to C (sf); previously on Oct. 13, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to C (sf); previously on Oct. 13, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to C (sf); previously on Oct. 13, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to C (sf); previously on Oct. 13, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to C (sf); previously on Oct. 13, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to C (sf); previously on Oct. 13, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. N, Downgraded to C (sf); previously on Oct. 13, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. O, Downgraded to C (sf); previously on Oct. 13, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from anticipated losses from specially serviced and
troubled loans.
The affirmations are due to key parameters, including Moody's loan
to value ratio, Moody's stressed debt service coverage ratio and
the Herfindahl Index, remaining within acceptable ranges. Based
on Moody's current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their
current ratings.
On October 13, 2010, Moody's placed 15 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
9.7% of the current balance. At last review, Moody's cumulative
base expected loss was 3.8%. Moody's stressed scenario loss is
20.1% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply/demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated February 9, 2009.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the October 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 2% to $1.5 billion
from $1.53 billion at securitization. The Certificates are
collateralized by 159 mortgage loans ranging in size from less
than 1% to 12% of the pool, with the top ten loans representing
47% of the pool. The pool includes four loans with investment
grade credit estimates, representing 4% off the pool.
Thirty-six loans, representing 12% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Ten loans, representing 13% of the pool, are currently in special
servicing. The largest specially serviced loan is the W Hotel
San Diego Loan ($65.0 million -- 4.3% of the pool), which is
secured by a 258 key hotel located in San Diego, California. The
loan was transferred to special servicing in April 2009 due to
imminent default and is currently real estate owned. The master
servicer has recognized a $28.8 million appraisal reduction on the
loan. The remaining nine specially serviced loans are secured by
a mix of property types. Moody's has estimated an aggregate
$109 million loss (57% expected loss on average) for the specially
serviced loans.
Moody's has assumed a high default probability for five poorly
performing loans representing 1.6% of the pool and has estimated
an aggregate $4.9 million loss (20% expected loss based on a 50%
probability of default) from these troubled loans.
Based on the most recent remittance statement, Class E through
P have experienced cumulative interest shortfalls totaling
$3.2 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 and extraordinary
trust expenses.
Moody's was provided with full year 2009 operating results for 88%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV for the conduit component is 105%
compared to 133% at Moody's prior review. The previous review was
part of Moody's first quarter 2009 ratings sweep of 2006-2008
vintage CMBS transactions. Moody's net cash flow reflects a
weighted average haircut of 14.9% to the most recently available
net operating income (NOI). Moody's value reflects a weighted
average capitalization rate of 9.6%.
Moody's actual and stressed DSCRs for the performing conduit loans
are 1.39X and 1.04X, respectively, compared to 1.19X and 0.87X at
last review. Moody's actual DSCR is based on Moody's net cash
flow and the loan's actual debt service. Moody's stressed DSCR is
based on Moody's NCF and a 9.25% stressed rate applied to the loan
balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 27, essentially the same as Moody's prior
review.
The largest loan with an investment grade credit estimate is the
Lee Harrison Center Loan ($15.0 million -- 1.0%), which is secured
by a 110,000 square foot retail center located in Arlington,
Virginia. The center was 99% leased as of December 2009, the same
as at securitization. Performance has improved due to increased
rental revenues. Moody's credit estimate and stressed DSCR are
Baa1 and 1.82X, respectively, compared to Baa3 and 1.39X at
securitization. The remaining three loans with credit estimates,
the 461 Fifth Avenue Loan (1.0%), the City National Bank Building
Loan (0.7%), and the Lincroft Office Center Loan (0.6%), maintain
the same credit estimate as at securitization, Aaa, Baa2, and
Baa3, respectively.
The top three performing conduit loans represent 27% of the
pool balance. The largest loan is the US Bancorp Tower Loan
($186.6 million -- 12.4% of the pool), which is secured by a
1.1 million square foot office building located in Portland,
Oregon. The property was 93% leased as of June 2010, essentially
the same as securitization. Moody's LTV and stressed DSCR are
109% and 0.92X, respectively, compared to 117% and 0.88X at last
review.
The second largest loan is the 225 South Sixth Street Loan
($152.5 million -- 10% of the pool), which is secured by a
1.4 million square foot office building located in Minneapolis,
Minnesota. The property was 80% leased as of June 2010 compared
to 76% at securitization. The loan matures in September 2011.
Moody's LTV and stressed DSCR are 120% and 0.83X, respectively,
compared to 145% and 0.71X at last review.
The third largest loan is the Dulles Executive Plaza Loan
($68.8 million -- 4.6% of the pool), which is secured by a 380,000
square foot office building located in Herndon, Virginia. The
property was 100% leased as of March 2010, essentially the same as
securitization. Lockheed Martin Corporation (senior unsecured
rating Baa1, stable outlook) leases 75% of the net rentable area
with 50% of the space expiring in May 2011. Moody's analysis
incorporates a significant downward adjustment to the borrower's
reported NOI to reflect potential volatility due to near term
rollover risk. Moody's LTV and stressed DSCR are 93% and 1.11X,
respectively, compared to 100% and 1.03X at last review.
BRASCAN STRUCTURED: Moody's Takes Rating Actions on Five Classes
----------------------------------------------------------------
Moody's has affirmed two and downgraded three classes of Notes
issued by Brascan Structured Notes 2005-2, Ltd, due to the
deterioration in the credit quality of the underlying portfolio as
evidenced by an increase in the weighted average rating factor.
The rating action is the result of Moody's on-going surveillance
of commercial real estate collateralized debt obligation
transactions.
-- Cl. A, Affirmed at Aaa (sf); previously on April 22, 2009
Confirmed at Aaa (sf)
-- Cl. B, Affirmed at Aa2 (sf); previously on April 22, 2009
Confirmed at Aa2 (sf)
-- Cl. C, Downgraded to Baa2 (sf); previously on April 22, 2009
Downgraded to A3 (sf)
-- Cl. D, Downgraded to B3 (sf); previously on April 22, 2009
Downgraded to Ba1 (sf)
-- Cl. E, Downgraded to Caa3 (sf); previously on April 22, 2009
Downgraded to B2 (sf)
Ratings Rationale
Brascan Structured Notes 2005-2 is a CRE CDO transaction backed
by a portfolio of B-Notes (42.7%), commercial mortgage backed
securities (7.1%), and mezzanine debt (50.2%). As of the
October 29, 2010 Trustee report, the aggregate Note balance of the
transaction is $300.0 million, the same as at issuance.
There are two assets with a par balance of $25.0 million (7.9% of
the current pool balance) that are considered Defaulted Securities
as of the October 29, 2010 Trustee report. Both assets (100% of
the defaulted balance) are mezzanine debt. Defaulted Assets that
are not CMBS are defined as assets which are 30 or more days
delinquent in their debt service payment. While the slight
overcollateralization offset the small realized losses arising
from asset sale to date, Moody's does expect significant losses to
occur once they are realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically modeled as actual
parameters for static deals and as covenants for managed deals.
Per the legal documentation the transactions is about to end its
reinvestment period in December 2010.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's have completed updated credit estimates for the non-
Moody's rated reference obligations. For non-CUSIP collateral,
Moody's is eliminating the additional default probability stress
applied to corporate debt in CDOROM(R) v2.6 as Moody's expect the
underlying non-CUSIP collateral to experience lower default rates
and higher recovery compared to corporate debt due to the nature
of the secured real estate collateral. The bottom-dollar WARF is
a measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF of 6,762 compared to 4,163 at
last review. The distribution of current ratings and credit
estimates is: Aaa-Aa3 (8.1% compared to 5.4% at last review), A1-
A3 (0.0% compared to 0.0% at last review), Baa1-Baa3 (0.0%
compared to 0.0% at last review), Ba1-Ba3 (20.3% compared to 12.0%
at last review), B1-B3 (9.7% compared to 21.9% at last review),
and Caa1-C (61.9% compared to 60.6% at last review).
WAL acts to adjust the probability of default of the reference
obligations in the pool for time. Moody's modeled to a WAL of 3.2
years compared to 5.0 years at last review.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a fixed WARR
of 11.1% compared to 12.3% 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). For
non-CUSIP collateral, Moody's is reducing the maximum over
concentration stress applied to correlation factors due to the
diversity of tenants, property types, and geographic locations
inherent in pooled transactions. Moody's modeled a MAC of 99.9%
compared to 19.4% at last review. The high MAC is due to a small
number of high credit risk collateral.
Changes in any one or combination of key parameters may have have
rating implications on certain classes of rated notes. However,
in many instances, a change in assumptions of any one key
parameter 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 11.1% to
6.1% or up to 16.1% would result in average rating movement on the
rated tranches of 1 to 2 notches downward and 1 to 2 notches
upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expect
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
C-BASS CBO: Fitch Affirms Ratings on Three Classes of Notes
-----------------------------------------------------------
Fitch Ratings has affirmed three classes of C-BASS CBO IV,
Ltd./Corp. notes:
-- $5,120,263 class C notes at 'BBBsf/LS5', Outlook Negative;
-- $2,280,239 class D-1 notes at 'Csf';
-- $13,760,651 class D-2 notes at 'Csf'.
Fitch also maintains these classes on Rating Watch Negative:
-- $738,757 class B-1 notes rated 'Asf/LS5'; Rating Watch
Negative;
-- $410,421 class B-2 notes rated 'Asf/LS5'; Rating Watch
Negative.
The affirmations reflect stable performance in the portfolio since
the last rating action in June 2010. The class B-1 and B-2 notes
(together class B) remain on Rating Watch Negative due to the
potential for a missed interest payment.
Although Fitch believes that the class B notes are likely to be
paid in full, class B interest is non-deferrable and any missed
interest payment, even if eventually remedied, would constitute a
default. All interest and a portion of the interest rate swap
payment is being paid through the use of principal. The swap
notional steps down slowly. The ability to receive timely
interest depends on the steady, although at a relatively low
dollar value, flow of principal proceeds from the remaining
performing assets in the portfolio.
While the notes have amortized approximately 36.8% of the balance
at last review, the pace of the paydown has noticeably slowed,
reflecting a decrease in the levels of the principal proceeds.
The portfolio remains highly concentrated in a few performing
assets, with continued potential for uneven principal
amortization. As a result, Fitch believes that the risk of a
future interest shortfall to the class B remains and is
maintaining the Rating Watch Negative on the notes.
While accrued interest to the class C notes is currently being
paid-in-kind (PIK), whereby the class balance is written up by the
amount of deferred interest, Fitch expects the class to resume
regular and compensating payments once the class B notes are paid
in full. The Negative Outlook remains on the class C notes due to
the continuing erosion of principal and the highly concentrated
nature of the portfolio.
The Loss Severity rating of 'LS5' assigned to the class B and
class C notes indicates the tranche's potential loss severity
given default, as evidenced by the ratio of tranche size to the
base-case loss expectation for the collateral. The LS rating
should always be considered in conjunction with the notes' long-
term credit rating. Fitch does not assign LS ratings to classes
rated 'CCC' and below.
Fitch considers default inevitable for the class D-1 and D-2
notes, and therefore they have been affirmed at 'Csf'.
C-BASS IV is a structured finance collateralized debt obligation
that closed on June 27, 2002, and the portfolio is monitored by C-
BASS Investment Management LLC. The portfolio is composed of
residential mortgage-backed securities (77.9%) and SF CDOs (22.1%)
C-BASS CBO: Fitch Affirms Ratings on Five Classes of Notes
----------------------------------------------------------
Fitch Ratings has affirmed five classes of C-BASS CBO VI, Ltd.,
due to amortization in the capital structure offsetting
deterioration in the underlying portfolio. The ratings are
affirmed:
-- $11,572,007 class A notes affirmed at 'AA/LS5'; Outlook
revised to Stable from Negative;
-- $6,144,790 class B notes affirmed at 'A/LS5'; Outlook
Negative;
-- $5,000,000 class C notes affirmed at 'BBB/LS5'; Outlook
Negative;
-- $21,874,396 class D notes affirmed at 'CC';
-- $3,000,000 class E notes affirmed at 'C'.
This review was conducted under the framework described in the
report 'Global Rating Criteria for Structured Finance CDOs' using
the Structured Finance Portfolio Credit Model for projecting
future default levels for the underlying portfolio. These default
levels were then compared to the breakeven levels generated by
Fitch's cash flow model of the CDO under various default timing
and interest rate stress scenarios, as described in the report
'Global Criteria for Cash Flow Analysis in CDOs'. Based on this
analysis, the class A, class B, and class C notes' breakeven rates
are generally consistent with the rating assigned.
Since Fitch's last review in December 2009, the class A notes have
received approximately $18.9 million, leaving 4.7% of its original
balance outstanding, which has increased credit enhancement levels
for each of the classes. During this same period, approximately
40.5% of the portfolio has been downgraded a weighted average of
4.1 notches, and the percentage of the portfolio considered
defaulted by the transaction's governing documents has increased
to 34.4% from 23.6%, according to the October 2010 and 2009
trustee reports, respectively.
The Outlook on the class A notes is revised to Stable because the
class is likely to be redeemed in the next 12 to 18 months and has
sufficient credit enhancement to withstand some volatility within
that time. Additionally, the notes will start benefiting from
excess spread after the interest rate swap expires in May 2011.
The Negative Outlook is maintained on the class B and class C
notes because the Outlook for 12.6% of the portfolio is Negative
and 8% is on Rating Watch Negative, indicating there could be
further deterioration in the portfolio.
The class D notes are currently receiving partial interest
distributions, but are likely to resume full interest payments
after the interest rate swap expires, as the class A/B coverage
tests are passing with substantial cushion. Because the class D
overcollateralization test is failing, the class E notes are not
expected to benefit from the swap expiring and default remains
inevitable.
The LS ratings for the class A, class B and class C notes indicate
the tranche's potential loss severity given default as evidenced
by the ratio of tranche size to the base-case loss expectation for
the collateral, as explained in Fitch's 'Criteria for Structured
Finance Loss Severity Ratings'. The LS rating should always be
considered in conjunction with the notes' long-term credit rating
for ratings in the 'B' category and higher.
C-BASS VI is a cash structured finance (SF) collateralized debt
obligation that closed on April 15, 2003, and is monitored by C-
BASS Investment Management LLC. As of the Oct. 29, 2010 trustee
report, the portfolio is comprised of residential mortgage-backed
securities (88.8%), SF CDOs (9%) and commercial asset-backed
securities (2.2%).
C-BASS CBO: Fitch Downgrades Ratings on Four Classes of Notes
-------------------------------------------------------------
Fitch Ratings has downgraded four classes and affirmed two classes
of C-BASS CBO VIII, Ltd./Corp., due to continued deterioration in
the underlying portfolio effecting the portfolio's ability to
generate interest proceeds. The rating actions are:
-- $14,587,181 class A-1 notes downgraded to 'AAsf/LS5' from
'AAAsf/LS5', Outlook Negative;
-- $26,600,000 class A-2 notes downgraded to 'BBBsf/LS5' from
'Asf/LS5', Outlook Negative;
-- $18,350,000 class B notes downgraded to 'Bsf/LS5' from
'BBsf/LS5', Outlook Negative;
-- $20,700,000 class C notes downgraded to 'Csf' from 'CCsf';
-- $5,874,338 class D-1 notes affirmed at 'Csf';
-- $2,423,164 class D-2 notes affirmed at 'Csf'.
This review was conducted under the framework described in the
report 'Global Rating Criteria for Structured Finance CDOs' using
the Structured Finance Portfolio Credit Model for projecting
future default levels for the underlying portfolio. These default
levels were then compared to the breakeven levels generated by
Fitch's cash flow model of the CDO under various default timing
and interest rate stress scenarios, as described in the report
'Global Criteria for Cash Flow Analysis in CDOs'. Based on this
analysis, the class A-1, class A-2, and class B notes' breakeven
rates are generally consistent with the rating assigned.
The class A-1, class A-2 and class B notes are downgraded one
category each because the extent of deterioration in the portfolio
outweighs the benefit of increased credit enhancement levels from
class A-1 amortization. The class A-1 notes have received
approximately $11.5 million since Fitch's last review in December
2009, while the percentage of the portfolio considered defaulted
by the transaction's governing documents has increased to 37% from
17.1%, according to the October 2010 and 2009 trustee reports,
respectively. Interest collections from the portfolio have
declined significantly and principal proceeds have been needed to
cover interest shortfalls.
On the Nov. 2, 2010 payment date, proceeds from the interest
collection account were insufficient to pay the entire class A-2
accrued interest amount. Principal collections were used for the
remaining class A-2 distribution amount and all of class B's
accrued interest before class A-1 principal repayment. A
significant portion of interest proceeds are going towards paying
the interest rate swap, which is outstanding until February 2013.
Fitch expects principal proceeds to be needed for a portion of
interest distributions at least until the swap expires, which will
continue to erode credit enhancement to the notes.
The Outlook on the class A-1, class A-2 and class B notes remains
Negative due to the concern of enhancement erosion. Additionally,
16.1% of the portfolio has a Negative Outlook and 4.1% is on
Rating Watch Negative, indicating potential for further
deterioration in the collateral.
The 'LS5' rating on the class A-1, class A-2 and class B notes
indicates the tranche's potential loss severity given default as
evidenced by the ratio of tranche size to the base-case loss
expectation for the collateral, as explained in Fitch's 'Criteria
for Structured Finance Loss Severity Ratings'. The LS rating
should always be considered in conjunction with the notes' long-
term credit rating for ratings in the 'B' category and higher.
The class C notes are no longer receiving any distributions due to
the failing class A/B interest coverage test. Based on the credit
quality of the portfolio, it is unlikely they will recover full
principal and interest repayment and default now appears
inevitable. The class D-1 and class D-2 notes are not expected to
receive any distributions going forward.
C-BASS VIII is a cash structured finance collateralized debt
obligation that closed on Nov. 10, 2003, and is monitored by C-
BASS Investment Management LLC. As of the Oct. 26, 2010 trustee
report, the portfolio is comprised of residential mortgage-backed
securities (66.3%), consumer and commercial asset-backed
securities (23.1%), and SF CDOs (10.6%).
CALIFORNIA UNIVERSITY: Moody's Affirms 'B3' Rating on Bonds
-----------------------------------------------------------
Moody's Investors Service has affirmed the B3 rating on Southern
California University of Health Science's Series 1997 bonds issued
through the California Educational Facilities Authority. The
outlook remains negative, reflecting Moody's ongoing concern
regarding the financial health of the University due to improving
but continued poor operating performance through FY2009,
challenged student market position given limited program scope and
further declines in the University's limited financial resource
base.
Ratings Rationale
Legal Security: General obligation of University with a security
interest in gross tuition receipts; mortgage on certain real
estate; cash funded debt service reserve fund.
Interest Rate Derivatives: None.
Challenges
* Moody's remains concerned given that operating performance has
been very weak, with the average three-year operating margin
(FY2007-2009), measuring at negative 21.4%, historic reliance
on real estate sales to support operations and temporary
endowment draws to fund operating cash flow; preliminary FY2010
figures indicate improved but still very weak results; high
reliance on student charges (80% of revenue base in FY2009)
highlights the University's necessity for careful enrollment
management. The weak operations have resulted in declining
financial resources and borrowing from the endowment to fund
operations.
* Challenging market position with limited program scope as the
University offers programs in chiropractic medicine and
acupuncture and oriental medicine. While the market position
continued to weaken as represented by a 20% enrollment decline
from fall 2004 to fall 2008; there has been some recent
improvement in enrollment for fall 2009 and 2010 with growth in
their relatively new accelerated integrated science
undergraduate program.
* Continued substantial declining resource levels, with expendable
resources dropping by over 50% to $3.9 million in FY 2009,
providing a limited 0.38 times coverage of debt and 0.24 times
annual operations.; with preliminary FY2010 results indicating a
further weakened balance sheet with just $4.5 million of monthly
liquidity.
Strengths
* Non-core real estate holdings represent potential source for
near term liquidity boost while core real estate has material
value relative to debt.
* Improved monitoring of internal cash position and cash flow
projections representing a crucial management tool given the
thin level of working cash.
* No additional borrowing plans.
Recent Developments
The University remains reliant on real estate sales to fund
operations. Although the FY2011 budget is not contingent upon a
delayed property sale, Moody's remain concerned given that
operating cash flow is slim and the University expects to continue
drawing on the endowment to fund operating cash flow needs until
the land sale revenues ($2 million net revenues) expected in
February 2011. Should there be any unexpected challenges to
finalizing the sale, Moody's believe operating performance will
continue to be pressured. Moody's note this sale will be of the
University's only remaining property that is not subject to the
mortgage on the bonds. This creates even greater urgency for the
University to dramatically improve operating performance as future
deficits would be financed with limited remaining liquid financial
assets. At the same time, Moody's note management has made
several major expenditure reductions to the FY2010 and 2011
budgets based on a comprehensive strategic plan adopted this
fiscal year. The plan includes a substantial 20% budget reduction
in operations incorporating a reduction in workforce, outsourcing
certain administrative expenses and suspending pension
contributions. Should the University meet the adjusted operating
projections, management expects a return to positive operating
margins in fiscal 2012. For the FY2011, the University has
budgeted for balanced operations with the reinstatement of a 3%
pension contribution and a release of "frozen" staff positions
given improved enrollment.
In order to return to positive operating performance, a key
component of the University's strategic plan relies on revenue
enhancements through increased enrollment efforts and the success
of new academic programs. Moody's will monitor enrollment
progress closely as Moody's remained concerned about the
University's weakened student market position. Enrollment has
remained volatile and Moody's remain concerned about the
University's ability to maintain its accreditation over the long
term. In fall 2009, the University's enrollment increased by 25%
due to the start of its ISP program within the School of
Professional Studies, which brought in 86 new full-time
equivalents (FTE). The University's chiropractic and acupuncture
programs experienced a slight increase of 2%, following several
years of declining enrollment. In fall 2010, the University again
experienced another 21% increase due to strong growth in the ISP
program.
Financial resources continue to decline as the University has sold
real estate and continued to make extraordinary draws from the
endowment to fund operations. In FY2009, the University faced the
additional challenge of volatile investment markets and
experienced a substantial 56% decline in expendable resources to
$3.9 million. Expendable financial resources now provide a very
weak cushion for debt at 0.38 times and a limited 0.24 times
annual operations. Monthly liquidity remained limited with
$4.5 million of unrestricted monthly liquidity providing 108
monthly days cash on hand in FY2009.
Preliminary results indicate further declines in the resource base
and cash and investments. Despite this decline, the University
still maintains 40 acres of real estate that may carry significant
value and potential for sale, including 18 acres of farmland that
is surrounded by residential properties in an attractive area of
California. However, in the current market and real estate
environment, it is unclear what the ultimate value and liquidity
of these properties may be. This land is currently pledged to
bondholders. Although no appraisal for the value of the land is
available, it seems likely to be worth in excess of the par amount
of debt outstanding and Moody's has considered the potential
recovery value as a factor in Moody's rating.
In May 2010, the University appointed a new permanent president,
after a resignation of the former president of less than two years
of service. With a new president, new chief financial officer and
a realignment of the senior management team, Moody's believe there
will be more stability in management. In addition, the University
is also actively seeking individuals to join the Board of
Trustees, after significant turnover in 2009.
Outlook
The negative outlook is driven by Moody's concern that the
University may face challenges returning to break-even operating
performance given recent failures to meet operating goals and
historic enrollment levels. Failure to dramatically improve
operating performance or improve liquidity would likely lead to
additional rating pressure.
What Could Change The Rating -- Up
Dramatic turnaround in financial performance and sustained return
to at least break-even operating margin; demonstrated stability of
enrollment trends and growth in net tuition revenue.
What Could Change The Rating -- Down
Pressure on enrollment and weak operating performance; further
weakening of liquidity
Key Data And Ratios (FY 2009 financial data; fall 2010 enrollment
data):
* Total Enrollment: 576 Full-time Equivalent (755 headcount)
* Total Direct Debt: $10.4 million
* Expendable Resources: $3.9 million
* Expendable Resources to Debt: 0.38 times
* Expendable Resources to Operations: 0.24 times
* Three-Year Average Operating Margin: -21.4%
* Operating Cash Flow Margin: -9.6%
* Unrestricted Monthly Liquidity: $4.5 million
* Monthly Days Cash on Hand: 108 days
The last rating action with respect to Southern California
University of Health Sciences was on December 18, 2009, when the
University's rating was downgraded to B3 from B1, with a negative
outlook. That rating was subsequently recalibrated to B3 on
May 7, 2010.
CAMDEN COUNTY: S&P Downgrades Ratings on 1991A-1991D Bonds
----------------------------------------------------------
Standard & Poor's Ratings Services has lowered its long-term
rating on Camden County Pollution Control Financing Authority,
N.J.'s series 1991A-1991D solid waste and resource recovery system
bonds to 'CC' from 'CCC' and placed the rating on CreditWatch with
negative implications, reflecting the increased likelihood that
the authority will default on its last payment on Dec. 1, 2010, if
extraordinary measures are not taken to prevent a default.
The authority had exhausted its funds, including the debt service
reserve fund, with the payment of the Dec. 1, 1999, debt service.
However, since then, there has been no monetary default, as the
state of New Jersey has stepped in and provided the increment
necessary to ensure full and timely debt service payment through
Dec. 1, 2009. To date, the state has provided nearly $150 million
in subsidy money to keep the bonds from defaulting. The next full
principal and interest debt service payment date is Dec. 1, 2010.
In fiscal 2009, the state provided about $6 million to make the
December payment, about the same amount provided in fiscal 2008.
The bonds will fully mature in 2010, with debt service rising in
that year to $26.1 million from $14.2 million in fiscal 2009.
Absent continued debt service relief from the state, the authority
will default on a substantial part of the debt service then due.
Despite the lack of a monetary default, the authority's rating
reflects the authority's own inability to meet its pledges and
covenants, due to its fundamental lack of competitiveness and its
failure to achieve a workable plan to restore both operating
stability and financial balance.
New Jersey has appropriated funds to help solid waste systems that
are uncompetitive and under severe financial strain. The most
recent payment, however, should not be construed in any way as a
long-term commitment for these projects.
The authority continues to fail, as it has done in previous years,
to fully cover debt service costs from operations. At the current
$63.50 per ton, which is below the state average, the system's
tipping fee does not provide for the full cost of the system. The
estimated all-in cost is estimated at $88 per ton, which would
require more than a 39% increase in the tipping fee.
CAPITAL TRUST: Fitch Affirms Ratings on All Classes of Notes
------------------------------------------------------------
Fitch Ratings affirms all classes of Capital Trust RE CDO 2004-1
as Fitch's loss expectations have not changed materially from its
last review on Nov. 10, 2009. The current base case loss
expectation is 38.9%, compared with 38.5% from the last rating
action. Fitch's performance expectation incorporates prospective
views regarding commercial real estate market value and cash flow
declines.
CT 2004-1 is a CRE collateralized debt obligation managed by CT
Investment Management Co., LLC. The transaction had a five-year
reinvestment period which ended July 2008. As of the October 2010
trustee report, the CDO was invested: B-notes (62.3%), CRE
mezzanine loans (18.4%), commercial mortgage-backed securities
(CMBS; 10.6%), and a defeased CRE loan (8.6%). Since Fitch's last
review, the capital structure has paid down by $42.6 million
(13.2%). Realized losses total approximately $15.1 million
(4.7%).
The transaction is primarily collateralized by subordinate
commercial real estate debt (81% of total collateral is either B-
notes or mezzanine loans). Fitch expects significant losses upon
default for these assets, since they are generally highly
leveraged, thin debt classes. Further, four assets (17%) are
currently defaulted, all of which are B-notes or mezzanine loans.
Fitch expects nearly 100% loss on these defaulted assets.
Both the A/B and the C/D/E overcollateralization tests have
breached their respective covenants. As a result, classes C and
below are no longer receiving any proceeds, as of the October 2010
trustee report. All excess interest proceeds (after class B) and
any principal proceeds are currently being redirected to redeem
the class A-1 notes. Given its expectations of further defaults,
Fitch considers it unlikely that classes below the C/D/E OC test
will receive any further proceeds over the life of the
transaction. Additionally, Fitch expects that classes C through E
will receive minimal to no proceeds over the remaining life of the
transaction.
Under Fitch's updated methodology, approximately 46.9% 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% generally from year-end 2009 cash flows.
Fitch estimates that average recoveries will be low at 17%, due to
the highly leveraged and subordinate nature of the assets.
The largest component of Fitch's base case loss expectation is a
B-note (9.2%) that defaulted on its maturity date in October 2009.
The loan, which is in special servicing, is secured by a class 'B'
office park totaling 374,139 square feet located in Silicon Valley
in the city of Menlo Park, CA. The property has experienced a
significant decrease in occupancy. Fitch modeled a substantial
loss on this highly leveraged subordinate note in its base case
scenario.
The next largest component of Fitch's base case loss expectation
is a B-note (4%) that became delinquent in July 2009. The loan
is secured by three casino/hotel properties located in Atlantic
City, NJ; Robinsonville, MS; and Tunica, MS. The loan transferred
to special servicing on July 23, 2009 due to monetary default as
a result of a significant cash flow decline from the prior year.
The borrower reported EBITDA for year-end 2009 was approximately
$11 million for the portfolio, compared to approximately
$56 million for YE 2007. Fitch modeled a full loss on this
B-note in its base case scenario.
The third largest component of Fitch's base case loss expectation
is a B-note secured by a 1,310-key hotel located in Honolulu, HI.
The property is located along Kalakaua Avenue directly across from
Waikiki Beach. The YE 2009 net operating income has declined
12.2% from 2008. The property has not met stabilized projections
from issuance. Fitch modeled a significant loss in its base case
scenario.
This transaction was analyzed according to the 'U.S. CREL CDO
Surveillance Criteria', which applies stresses to property cash
flows and uses DSCR tests to project future default levels for the
underlying portfolio. Cash flow stresses have been updated to
reflect more recently available commercial real estate performance
and outlooks. Recoveries are based on stressed cash flows and
Fitch's long-term capitalization rates. The default levels were
then compared to the breakeven levels generated by Fitch's cash
flow model of the CDO under the various default timing and
interest rate stress scenarios, as described in the report 'Global
Criteria for Cash Flow Analysis in CDOs' (Sept. 17, 2010).
Class A-1's Rating Outlook is revised to Stable from Negative
reflecting the class's senior position in the capital stack, and
positive cushion in the cash flow modeling. Classes A-2 and B
maintain a Negative Rating Outlook reflecting Fitch's expectation
of further negative credit migration of the underlying collateral.
These classes were assigned Loss Severity ratings, which indicate
each tranche's potential loss severity given default, as evidenced
by the ratio of tranche size to the expected loss for the
collateral under the 'B' stress. LS ratings should always be
considered in conjunction with probability of default indicated by
a class' long-term credit rating. Fitch does not assign Rating
Outlooks or LS ratings to classes rated 'CCC' or lower.
The ratings for bonds rated 'CCC' or lower, which are based on a
deterministic analysis, were assigned Recovery Ratings in order to
provide a forward-looking estimate of recoveries on currently
distressed or defaulted structured finance securities.
The assignment of 'RR5' to class C reflects modeled recoveries of
20% of its outstanding balance. The expected recovery proceeds
are broken down:
-- Present value of expected principal recoveries
($716,045 million);
-- Present value of expected interest payments ($3.1 million);
-- Total present value of recoveries ($3.8 million);
-- Sum of undiscounted recoveries ($6.7 million).
Classes D through G are assigned a Recovery Rating of 'RR6' as the
present value of the recoveries is less than 10% of the class's
principal balance.
Fitch affirms these classes and updates the Rating Outlooks as
indicated:
-- $47,879,761 class A-1 at 'BBBsf/LS5' from 'BBBsf/LS4';
Outlook to Stable from Negative;
-- $79,398,000 class A-2 at 'BBsf/LS4'; Outlook Negative;
-- $29,167,000 class B at 'Bsf/LS5'; Outlook Negative;
-- $19,444,000 class C at 'CCsf/RR5' from 'CCsf/RR4';
-- $21,065,000 class D at 'Csf/RR6';
-- $3,241,000 class E at 'Csf/RR6';
-- $6,481,000 class F at 'Csf/RR6;
-- $16,204,000 class G at 'Csf/RR6'.
CAPITALSOURCE COMMERCIAL: Moody's Upgrades Ratings on Two Notes
---------------------------------------------------------------
Moody's Investors Service announced that it has upgraded the
ratings of these notes issued by CapitalSource Commercial Loan
Trust 2007-1:
-- US$586,000,000 Class A Floating Rate Asset Backed Notes
(current outstanding balance of $66,206,322), Upgraded to Aa2
(sf); previously on October 27, 2009 Downgraded to A3 (sf);
-- US$20,000,000 Class B Floating Rate Deferrable Asset Backed
Notes (current outstanding balance of $11,530,614), Upgraded
to Baa2 (sf); previously on October 27, 2009 Downgraded to
Ba1 (sf).
Ratings Rationale
According to Moody's, the rating actions taken on the notes result
primarily from the delevering of the Class A Notes, which have
been paid down by approximately 76% or $208 million since the last
rating action in October 2009. In addition to principal paydowns,
excess spread is being diverted to pay down the Class A Notes.
Moody's also notes that the substantial delevering of the notes
more than offsets the underlying pool's credit deterioration and
heightened concentration risk in a small number of industries and
issuers. Based on the servicer report dated October 10, 2010,
delinquent loans currently held in the portfolio total about
$6.6 million, accounting for roughly 3.9% of the collateral
balance, and cumulative charged-off loans total $57.2 million.
Since the previous rating action in October 2009, there has been
an additional $10 million of charged-off loans.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" and "Annual Sector Review (2009): Global CLOs," key
model inputs used by Moody's in its analysis, such as par,
weighted average rating factor, diversity score, and weighted
average recovery rate, may be different from the trustee's
reported numbers. In its base case, Moody's analyzed the
underlying collateral pool to have a performing par and principal
proceeds of $164 million, weighted average default probability of
51.03% (implying a WARF of 7867), a weighted average recovery rate
upon default of 33.98%, and a diversity score of 8. 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.
CapitalSource Commercial Loan Trust 2007-1, issued in April 2007,
is a collateralized loan obligation backed primarily by a
portfolio of senior secured loans from middle market obligors.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in August 2009. In addition, due to the low
diversity of the collateral pool, CDOROM 2.6 was used to simulate
a default distribution that was then applied as an input in the
cash flow model.
For securities whose default probabilities are assessed through
credit estimates, Moody's applied additional default probability
stresses by assuming an equivalent of Caa3 for CEs that were not
updated within the last 15 months, which currently account for
approximately 11% of the collateral balance. In addition, Moody's
applied a 1.5 notch-equivalent assumed downgrade for CEs last
updated between 12-15 months ago, and a 0.5 notch-equivalent
assumed downgrade for CEs last updated between 6-12 months ago.
For each CE where the related exposure constitutes more than 3% of
the collateral pool, Moody's applied a 2-notch equivalent assumed
downgrade (but only on the CEs representing in aggregate the
largest 30% of the pool) in lieu of the aforementioned stresses.
Notwithstanding the foregoing, in all cases the lowest assumed
rating equivalent is Caa3.
In addition to the base case analysis described above, Moody's
also performed a number of sensitivity analyses to test the impact
on all rated notes, including these:
1. Various default probabilities to capture potential defaults in
the underlying portfolio.
2. A range of recovery rate assumptions for all assets to capture
variability in recovery rates.
A summary of the impact of different default probabilities
(expressed in terms of WARF levels) on all rated notes (shown in
terms of the number of notches' difference versus the current
model output, where a positive difference corresponds to lower
expected loss), assuming that all other factors are held equal:
Moody's Adjusted WARF -- 20% (6294)
-- Class A: 0
-- Class B: +2
-- Class C: +4
-- Class D: +1
-- Class E: 0
Moody's Adjusted WARF + 20% (9440)
-- Class A: 0
-- Class B: 0
-- Class C: -3
-- Class D: -1
-- Class E: 0
A summary of the impact of different recovery rate levels on all
rated notes (shown in terms of the number of notches' difference
versus the current model output, where a positive difference
corresponds to lower expected loss), assuming that all other
factors are held equal:
Moody's Adjusted WARR + 2% (35.98%)
-- Class A: 0
-- Class B: +2
-- Class C: +1
-- Class D: 0
-- Class E: 0
Moody's Adjusted WARR - 2% (31.98%)
-- Class A: -3
-- Class B: -2
-- Class C: 0
-- Class D: 0
-- Class E: 0
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2012 and
2014 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the managers'
investment strategies and behavior, and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are described:
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: The timing and ultimate value of
recoveries from charged-off loans and delinquent loans create
additional uncertainties.
3) Exposure to credit estimates: The deal is exposed to a large
number of securities whose default probabilities are assessed
through credit estimates. In the event that Moody's is not
provided the necessary information to update the credit
estimates in a timely fashion, the transaction may be impacted
by any default probability stresses Moody's may assume in lieu
of updated credit estimates. Moody's also conducted stress
tests to assess the collateral pool's concentration risk in
obligors bearing a credit estimate that constitute more than 3%
of the collateral pool.
4) 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, 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 CDOROMTM software
and/or individual scenario analysis.
CAPTEC FRANCHISE: Moody's Reviews Ratings on Various Classes
------------------------------------------------------------
Moody's Investors Service has placed on review for possible
upgrade the Class A-2, Class A-IO, and Class B notes from Captec
Franchise Trust 1999-1. The notes are backed by franchise loans
made to fast-food and casual dining restaurants.
The complete rating action is:
Issuer: Captec Franchise Trust 1999-1
-- Class A-2, Ba1 (sf) Placed Under Review for Possible Upgrade;
previously on Aug. 18, 2004 Downgraded to Ba1 (sf)
-- Class A-IO, Ba1 (sf) Placed Under Review for Possible
Upgrade; previously on Aug. 18, 2004 Downgraded to Ba1 (sf)
-- Class B, B3 (sf) Placed Under Review for Possible Upgrade;
previously on Aug. 18, 2004 Downgraded to B3 (sf)
The securities listed above were placed on review for possible
upgrade due to the high levels of credit enhancement available to
them. The credit support for the notes consists solely of
subordination. As the deal amortizes, the sequential payment
waterfall allows the subordination percentage available to the
senior notes to increase over time. As of October 27th, 2010, the
total subordination percentages for the Class A-2 note and Class B
note are 98.9% and 71.6% respectively. The transaction has three
specially serviced loans which comprise 8% of the current pool
balance. There is minimal obligor concentrations risk in this
pool, relative to other franchise loan securitizations, with the
largest borrower representing 11% percent of the current pool.
During the review period, Moody's will estimate the recovery rates
of foreclosed properties and assess any future stresses on the
rest of the collateral pool. Moody's will also qualitatively
assess the business challenges currently faced by the restaurant
industry.
In order to estimate losses on the collateral pool, Moody's
calculates the expected loss given default of the obligors that
have become nonperforming, and also estimates future losses on
performing portion of the pool, all as a percentage of the
outstanding pool. In evaluating the nonperforming loans, key
factors include collateral valuations and expected recovery rates,
volatility around those recovery rates, historical obligor
performance, time until recovery or liquidation on defaulted
obligors, concessions due to restructuring which may negatively
impact the overall cash flow of the trust and/or the collateral,
and future industry expectations.
CD 2007-CD5: Moody's Downgrades Ratings on 13 2007-CD5 Certs.
-------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 13 classes and
affirmed eight classes of CD 2007-CD5 Mortgage Trust, Commercial
Mortgage Pass-Through Certificates, Series 2007-CD5:
-- CL. A-1, Affirmed at Aaa (sf); previously on April 3, 2008
Definitive Rating Assigned Aaa (sf)
-- CL. A-2, Affirmed at Aaa (sf); previously on April 3, 2008
Definitive Rating Assigned Aaa (sf)
-- CL. A-3, Affirmed at Aaa (sf); previously on April 3, 2008
Definitive Rating Assigned Aaa (sf)
-- CL. A-4, Affirmed at Aaa (sf); previously on April 3, 2008
Definitive Rating Assigned Aaa (sf)
-- CL. A-AB, Affirmed at Aaa (sf); previously on April 3, 2008
Definitive Rating Assigned Aaa (sf)
-- CL. A-1A, Affirmed at Aaa (sf); previously on April 3, 2008
Definitive Rating Assigned Aaa (sf)
-- CL. XP, Affirmed at Aaa (sf); previously on April 3, 2008
Definitive Rating Assigned Aaa (sf)
-- CL. XS, Affirmed at Aaa (sf); previously on April 3, 2008
Definitive Rating Assigned Aaa (sf)
-- CL. A-MA, Downgraded to Aa2 (sf); previously on Oct. 28, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- CL. AM, Downgraded to Aa2 (sf); previously on Oct. 28, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- CL. AJ, Downgraded to Baa2 (sf); previously on Oct. 28, 2010
Aa3 (sf) Placed Under Review for Possible Downgrade
-- CL. A-JA, Downgraded to Baa2 (sf); previously on Oct. 28,
2010 Aa3 (sf) Placed Under Review for Possible Downgrade
-- CL. B, Downgraded to Ba1 (sf); previously on Oct. 28, 2010 A1
(sf) Placed Under Review for Possible Downgrade
-- CL. C, Downgraded to Ba2 (sf); previously on Oct. 28, 2010 A2
(sf) Placed Under Review for Possible Downgrade
-- CL. D, Downgraded to Ba3 (sf); previously on Oct. 28, 2010 A3
(sf) Placed Under Review for Possible Downgrade
-- CL. E, Downgraded to B2 (sf); previously on Oct. 28, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- CL. F, Downgraded to Caa1 (sf); previously on Oct. 28, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- CL. G, Downgraded to Caa2 (sf); previously on Oct. 28, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- CL. H, Downgraded to Caa3 (sf); previously on Oct. 28, 2010
Ba2 (sf) Placed Under Review for Possible Downgrade
-- CL. J, Downgraded to C (sf); previously on Oct. 28, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- CL. K, Downgraded to C (sf); previously on Oct. 28, 2010 B3
(sf) Placed Under Review for Possible Downgrade
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from anticipated losses from specially serviced and
troubled loans.
The affirmations are due to key parameters, including Moody's loan
to value ratio, Moody's stressed debt service coverage ratio and
the Herfindahl Index , remaining within acceptable ranges. Based
on Moody's current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their
current ratings.
On October 28, 2010, Moody's placed 13 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
8.9% of the current balance. At last review, Moody's cumulative
base expected loss was 5.2%. Moody's stressed scenario loss is
27.0% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated February 6, 2009.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the October 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 1% to $2.07 billion
from $2.09 billion at securitization. The Certificates are
collateralized by 160 mortgage loans ranging in size from less
than 1% to 8% of the pool, with the top ten loans representing 40%
of the pool. The pool includes one loan with an investment grade
credit estimate, representing less than 1% off the pool.
Thirty-six loans, representing 17% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
One loan has been liquidated from the pool, resulting in an
aggregate realized loss of $1.7 million (5% loss severity on
average). Twenty-four loans, representing 12% of the pool, are
currently in special servicing. The largest specially serviced
loan is the Georgian Towers Loan ($58.0 million -- 2.8% of the
pool), which is secured by a 890 unit multifamily property located
in Silver Spring, Maryland. The loan was transferred to special
servicing in December 2009 and is currently 90+ days delinquent.
The loan represents a 46.4% pari-passu interest on a $125 million
loan. The remaining 23 specially serviced loans are secured by
a mix of property types. Moody's has estimated an aggregate
$115 million loss (45% expected loss on average) for the specially
serviced loans.
Based on the most recent remittance statement, Class L through
NR have experienced cumulative interest shortfalls totaling
$3.5 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.
Moody's was provided with full year 2009 operating results for 96%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV for the conduit component is 119%
compared to 143% at Moody's prior review. Moody's net cash flow
reflects a weighted average haircut of 10.7% to the most recently
available net operating income. Moody's value reflects a weighted
average capitalization rate of 9.5%.
Moody's actual and stressed DSCRs for the performing conduit loans
are 1.22X and 0.89X, respectively, compared to 1.03X and 0.76X at
last review. Moody's actual DSCR is based on Moody's net cash
flow and the loan's actual debt service. Moody's stressed DSCR is
based on Moody's NCF and a 9.25% stressed rate applied to the loan
balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 38, essentially the same as Moody's prior
review.
The loan with an investment grade credit estimate is the 14144
Ventura Office Building Loan ($4.5 million -- 0.2%), which is
secured a 48,000 office building located in Sherman Oaks,
California. Moody's credit estimate and stressed DSCR are Baa3
and 1.81X, respectively, compared to Baa3 and 1.71X at
securitization.
The top three performing conduit loans represent 22% of the
pool balance. The largest loan is the Lincoln Square Loan
($160 million -- 7.7% of the pool), which is secured by a 406,000
square foot office building located in Washington, DC. The
property was 100% leased as of June 2010, essentially the same as
last review. The loan represents a 72.7% pari-passu interest in a
$220 million loan. Moody's LTV and stressed DSCR are 128% and
0.74X, respectively, compared to 137% and 0.71X at last review.
The second largest loan is the USFS Industrial Distribution
Portfolio Loan ($157.5 million -- 7.6% of the pool), which is
secured by a 37 cross-collateralized and cross-defaulted warehouse
properties located in 25 states. The loan is 100% leased to the
US Foodservice (Moody's senior unsecured rating Caa2; stable
outlook) through July 2027. The loan represents a 33.3% pari-
passu interest in a $472.4 million loan. Moody's LTV and stressed
DSCR are 102% and 1.02X, respectively, compared to 104% and 1.02X
at last review.
The third largest loan is Charles River Plaza North Loan
($145 million -- 7.0% of the pool), which is secured by a 355,000
square foot office building located in Boston, Massachusetts. The
property is 100% leased to Massachusetts General Hospital through
May 2029. Moody's LTV and stressed DSCR are 123% and 0.77X,
respectively, compared to 146% and 0.67X at last review.
CHEYNE HIGH: Moody's Downgrades Ratings on Class A-1 to 'Ca'
------------------------------------------------------------
Moody's Investors Service announced that it has downgraded the
ratings of one class of notes issued by Cheyne High Grade ABS CDO,
Ltd. The notes affected by the rating action are:
-- US$0 Class A-1 LT Long Term Floating Rate Notes Due 2039
(current balance of $ 689,725,603), Downgraded to Ca (sf);
previously on March 24, 2009 Downgraded to Caa1 (sf).
Ratings Rationale
Cheyne High Grade ABS CDO, Ltd. is a collateralized debt
obligation (CDO) backed primarily by a portfolio of RMBS assets,
CLO tranches and other SF securities. Most of the assets were
originated prior to 2004.
According to Moody's, the rating downgrade action is the result of
deterioration in the credit quality of the underlying portfolio.
The credit deterioration is observed through numerous factors,
including a decline in the average credit rating of the portfolio
(as measured by an increase in the weighted average rating
factor), an increase in the dollar amount of defaulted securities
and a decline in the Overcollateralization Ratio. According to
the trustee, the WARF increased to 935 from 429 and defaulted
assets increased to 166 million from 128 million. Additionally,
the Class A/B Overcollateralization Ratio decreased from 83% to
73%.
Moody's notes that in arriving at its ratings of ABS CDOs, there
exist a number of sources of uncertainty, operating both on a
macro level and on a transaction-specific level. Among the
general macro uncertainties are those surrounding future housing
prices, pace of residential mortgage foreclosures, loan
modification and refinancing, unemployment rate and interest
rates. 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.
In deriving its ratings, Moody's uses the collateral instrument's
current rating-based expected loss, Moody's recovery rate table,
and the original rating of the instrument along with its average
life to infer an unadjusted default probability.
The approach Moody's takes to defining the default distribution
for the SF CDO collateral depends on the structure of the CDO
itself.
Moody's applied the Monte Carlo simulation framework within
CDOROMv2.6 to model the loss distribution for SF CDOs. Within
this framework, defaults are generated so that they occur with the
frequency indicated by the adjusted default probability pool (the
default probability associated with the current rating multiplied
by the Resecuritization Stress) for each credit in the reference.
Specifically, correlated defaults are simulated using a normal (or
"Gaussian") copula model that applies the asset correlation
framework. Recovery rates for defaulted credits are generated by
applying within the simulation the distributional assumptions,
including the 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 of: collateral cash
flows, the transaction covenants, the priority of payments
(waterfall) for interest and principal proceeds received from
portfolio assets, reinvestment assumptions, the timing of
defaults, interest-rate scenarios and foreign exchange risk (if
present). The Expected Loss for each tranche is the weighted
average of losses to each tranche across all the scenarios, where
the weight is the likelihood of the scenario occurring. Moody's
defines the loss as the shortfall in the present value of cash
flows to the tranche relative to the present value of the promised
cash flows. The present values are calculated using the promised
tranche coupon rate as the discount rate. For floating rate
tranches, the discount rate is based on the promised spread over
Libor and the assumed Libor scenario.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
CITIGROUP COMMERCIAL: Moody's Affirms Ratings on 13 2004-C2 Notes
-----------------------------------------------------------------
Moody's Investors Service affirmed the ratings of 13 classes and
downgraded five classes of Citigroup Commercial Mortgage Trust
2004-C2, Commercial Mortgage Pass-Through Certificates, Series
2004-C2,:
-- Cl. A-2, Affirmed at Aaa (sf); previously on Jan. 4, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on Jan. 4, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on Jan. 4, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-5, Affirmed at Aaa (sf); previously on Jan. 4, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1A, Affirmed at Aaa (sf); previously on Jan. 4, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. XC, Affirmed at Aaa (sf); previously on Jan. 4, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. XP, Affirmed at Aaa (sf); previously on Jan. 4, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-J, Affirmed at Aaa (sf); previously on Jan. 4, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. B, Affirmed at Aa2 (sf); previously on Jan. 4, 2005
Definitive Rating Assigned Aa2 (sf)
-- Cl. C, Affirmed at Aa3 (sf); previously on Jan. 4, 2005
Definitive Rating Assigned Aa3 (sf)
-- Cl. D, Affirmed at A2 (sf); previously on Jan. 4, 2005
Definitive Rating Assigned A2 (sf)
-- Cl. E, Affirmed at A3 (sf); previously on Jan. 4, 2005
Definitive Rating Assigned A3 (sf)
-- Cl. F, Affirmed at Baa1 (sf); previously on Jan. 4, 2005
Definitive Rating Assigned Baa1 (sf)
-- Cl. G, Downgraded to Baa3 (sf); previously on Jan. 4, 2005
Definitive Rating Assigned Baa2 (sf)
-- Cl. H, Downgraded to Ba3 (sf); previously on Jan. 4, 2005
Definitive Rating Assigned Baa3 (sf)
-- Cl. J, Downgraded to B3 (sf); previously on April 9, 2009
Downgraded to Ba2 (sf)
-- Cl. K, Downgraded to Caa2 (sf); previously on April 9, 2009
Downgraded to B1 (sf)
-- Cl. L, Downgraded to Caa3 (sf); previously on April 9, 2009
Downgraded to B3 (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans. The affirmations are due to key
parameters, including Moody's loan to value ratio, Moody's
stressed debt service coverage ratio and the Herfindahl Index,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain their current ratings.
Moody's rating action reflects a cumulative base expected loss of
4.3% of the current balance compared to 3.9% at Moody's prior
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.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the credit estimate of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the credit estimate level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated April 9, 2009.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the October 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 18% to $843.6
million from $1.0 billion at securitization. The Certificates are
collateralized by 93 mortgage loans ranging in size from less than
1% to 5.7% of the pool, with the top ten loans representing 33% of
the pool. Six loans, representing 11% of the pool, have defeased
and are collateralized by U.S. Government securities.
Nineteen loans, representing 15% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Four loans have been liquidated from the pool since
securitization, resulting in an aggregate $5.7 million loss (20%
loss severity on average). Currently, four loans, representing
5.3% of the pool, are in special servicing. The largest specially
serviced loan is the Bay Harbor Apartment Loan ($23.0 million --
2.7% of the pool), which is secured by a 339-unit multi-family
property in Fort Meyers, Florida. The loan was transferred to
special servicing in September 2009 due to the borrower's
inability to secure re-financing to pay off the loan at maturity.
As of June 2009, the property was 81% leased. The loan has a
$5.75 million appraisal reduction. The master servicer has
recognized an aggregate $12.1 million in appraisal reductions for
all the specially serviced loans. Moody's has estimated an
aggregate $14 million loss (31% expected loss on average) for the
specially serviced loans.
Moody's has also assumed a high default probability for two poorly
performing loans representing 3.2% of the pool. Moody's has
estimated a $5.45 million loss (20% expected loss based on a 50%
probability default) from the troubled loans.
Moody's was provided with full year 2009 operating results for 82%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 96% compared to 100% at Moody's
prior review. Moody's net cash flow reflects a weighted average
haircut of 11.3% to the most recently available net operating
income. Moody's value reflects a weighted average capitalization
rate of 9.1%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.39X and 1.11X, respectively, compared to
1.38X and 1.06X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 45 compared to 49 at last review.
The top three performing loans represent 13% of the pool. The
largest loan is the River Plaza Shopping Center Loan ($40.5
million -- 4.8% of the pool), which is secured by a 102,577 square
foot anchored community retail center located in the Bronx, New
York. As of December 2009, the property was 100% leased, the same
as at last review. The center is adjacent to a 129,000 square
foot Target and is anchored by Marshall's. Moody's LTV and
stressed DSCR are 94% and 1.01X , respectively, compared to 104%
and 0.91X at last review.
The second largest loan is the Nordahl Marketplace Loan
($39.2 million -- 4.5% of the pool), which is secured by the
borrower's interest in a 313,000 square foot retail center
located in San Marcos, California. The property is shadow
anchored by Costco and major tenants include Wal-Mart and Kohl's.
As of December 2009, the center was 96% leased compared to 99% at
last review. Moody's LTV and stressed DSCR are 99% and 0.93X,
respectively, compared to 96% and 0.96X at last review.
The third largest loan is the California Office Portfolio
($32.0 million -- 3.8% of the pool), which is secured by three
suburban office properties located in Orange County, California.
The portfolio contains 256,000 square feet in eight buildings.
The portfolio has experienced considerable lease rollover since
securitization. As of December 2009, the portfolio was 81% leased
compared to 77% at last review. Moody's value reflects a stressed
cash flow due to Moody's concerns about upcoming lease
expirations. Moody's LTV and stressed DSCR is 121% and 0.83X,
respectively, compared to104% compared to 100% and 0.96X at last
review.
CITIGROUP COMMERCIAL: Moody's Cuts Ratings on 19 2008-C7 Certs.
---------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 19 classes,
confirmed two classes and affirmed five classes of Citigroup
Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2008-C7:
-- Cl. A-2A, Affirmed at Aaa (sf); previously on April 29, 2008
Definitive Rating Assigned Aaa (sf)
-- Cl. A-2B, Affirmed at Aaa (sf); previously on April 29, 2008
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on April 29, 2008
Definitive Rating Assigned Aaa (sf)
-- Cl. A-SB, Affirmed at Aaa (sf); previously on April 29, 2008
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1A, Confirmed at Aaa (sf); previously on Sept. 29, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Confirmed at Aaa (sf); previously on Sept. 29, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. X, Affirmed at Aaa (sf); previously on April 29, 2008
Definitive Rating Assigned Aaa (sf)
-- Cl. A-M, Downgraded to A2 (sf); previously on Sept. 29, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-MA, Downgraded to A2 (sf); previously on Sept. 29, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-J, Downgraded to B2 (sf); previously on Sept. 29, 2010
A2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-JA, Downgraded to B2 (sf); previously on Sept. 29, 2010
A2 (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to B3 (sf); previously on Sept. 29, 2010 A3
(sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to Caa1 (sf); previously on Sept. 29, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to Caa2 (sf); previously on Sept. 29, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Caa3 (sf); previously on Sept. 29, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to Ca (sf); previously on Sept. 29, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to Ca (sf); previously on Sept. 29, 2010
Ba2 (sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to C (sf); previously on Sept. 29, 2010 B1
(sf) Placed Under Review for Possible Downgrade
-- Cl. Q, Downgraded to C (sf); previously on Sept. 29, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to C (sf); previously on Sept. 29, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to C (sf); previously on Sept. 29, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to C (sf); previously on Sept. 29, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to C (sf); previously on Sept. 29, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. N, Downgraded to C (sf); previously on Sept. 29, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. O, Downgraded to C (sf); previously on Sept. 29, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. P, Downgraded to C (sf); previously on Sept. 29, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans. The affirmations are due to key
parameters, including Moody's loan to value ratio, Moody's
stressed debt service coverage ratio and the Herfindahl Index ,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain their current ratings.
On September 29, 2010, Moody's placed 21 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
10.6% of the current balance. At last review, Moody's cumulative
base expected loss was 4.9%. Moody's stressed scenario loss is
26.6% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the Excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
, a measure of loan level diversity, is a primary determinant of
pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior review is
summarized in a press release dated February 6, 2009.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the October 13, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 2% to $1.81 billion
from $1.85 billion at securitization. The Certificates are
collateralized by 94 mortgage loans ranging in size from less than
1% to 14% of the pool, with the top ten loans representing 48% of
the pool. The pool does not contain any defeased loans or loans
with credit estimates.
Seventeen loans, representing 14% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Three loans have been liquidated from the pool since
securitization, resulting in an aggregate $12.0 million loss (61%
loss severity on average). Currently 14 loans, representing 14%
of the pool, are in special servicing. The largest specially
serviced loan is the CGM RRI Hotel Portfolio Loan ($58.0 million -
- 3.2% of the pool), which is secured by 52 hotels totaling 6,030
guestrooms located in 21 states and the District of Columbia. The
loan was transferred to special servicing in May 2009 due to
monetary default. The borrower has agreed to a deed in lieu of
foreclosure. The remaining 13 specially serviced loans are
secured by a mix of property types. The master servicer has
recognized an aggregate $77.5 million appraisal reduction for 12
of the specially serviced loans. Moody's has estimated an
aggregate loss of $112.7 million (44% expected loss on average)
for all of the specially serviced loans.
Moody's has assumed a high default probability for eight poorly
performing loans representing 6% of the pool and has estimated a
$35.5 million loss (34% expected loss based on a 62% probability
default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 88%
of the performing pool. Excluding specially serviced and troubled
loans, Moody's weighted average LTV is 109% compared to 132% at
last review. Moody's net cash flow reflects a weighted average
haircut of 8% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
9.3%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.27X and 0.95X, respectively, compared to
1.11X and 0.83X at last full review. Moody's actual DSCR is based
on Moody's net cash flow and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 20 compared to 23 at Moody's prior review.
The top three performing conduit loans represent 30% of the
pool balance. The largest loan is the One Liberty Plaza Loan
($250.0 million -- 13.8%), which is a pari-passu interest in a
$850.0 million first mortgage loan. The loan is secured by a
2.2 million square foot Class A office property located in lower
Manhattan, New York. The property was 99% leased as of year-end
2009, the same as at last review. Property performance has
improved since last review due to increased rental income. The
loan has nine months remaining in a 46-month interest only period
and will amortize on a 360-month schedule maturing in August 2017.
Moody's LTV and stressed DSCR are 87% and 1.09X, respectively,
compared to 89% and 1.09X at last review.
The second largest loan is the Scottsdale Fashion Square Loan
($225.0 million -- 12.4%), which is a pari-passu interest in a
$550.0 million first mortgage loan. The loan is secured by the
borrower's interest in a 1.7 million square foot upscale regional
mall located in Scottsdale, Arizona. The center is anchored by
Dillard's (not part of the collateral), Macy's, Nordstrom and
Neiman Marcus. The collateral also includes an office component
comprising approximately 120,000 square feet. The collateralized
property was 94% leased as of March 2010, essentially the same as
at last review. Property performance remains stable since last
review. The loan is interest-only for its entire six-year term
maturing in July 2013. Moody's LTV and stressed DSCR are 118% and
0.75X, respectively, compared to 116% and 0.77X at last review.
The third largest loan is the Lincoln Square Loan ($60.0 million -
- 3.3% of the pool), which is secured by a 406,000 square foot
office building located in Washington, D.C. The property was 100%
leased as of June 2010, essentially the same as at last review.
The loan represents a 27.3% pari-passu interest in a $220 million
loan. Moody's LTV and stressed DSCR are 128% and 0.74X,
respectively, compared to 137% and 0.71X at last review.
CITIGROUP COMMERCIAL: S&P Downgrades Ratings 13 2004-C1 Notes
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 13
pooled classes of commercial mortgage-backed securities from
Citigroup Commercial Mortgage Trust 2004-C1. In addition, S&P
affirmed its ratings on three other pooled classes from the same
transaction.
The downgrades follow S&P's analysis of the transaction using its
U.S. conduit and fusion CMBS criteria, and reflect anticipated
credit support erosion. S&P's analysis included a review of the
credit characteristics of all of the loans in the pool. Using
servicer-provided financial information, S&P calculated an
adjusted debt service coverage of 1.46x and a loan-to-value ratio
of 89.5%. S&P further stressed the loans' cash flows under S&P's
'AAA' scenario to yield a weighted average DSC of 1.03x and an LTV
ratio of 123.1%. The implied defaults and loss severity under the
'AAA' scenario were 43.5% and 31.3%, respectively. All of the DSC
and LTV calculations S&P noted above exclude 11 defeased loans
($162.9 million, 17.7%), one land loan that S&P analyzed
separately ($24.4 million, 2.7%), six specially serviced assets
($32.3 million, 3.5%), and five loans that S&P determined to be
credit-impaired ($58.3 million, 6.4%). S&P separately estimated
losses for the 11 specially serviced and credit-impaired loans,
and included them in the 'AAA' scenario implied default and loss
figures.
The affirmations of the ratings on the pooled principal and
interest certificates reflect subordination levels and liquidity
that are consistent with the outstanding ratings. S&P affirmed
its rating on the class X interest-only (IO) certificate based on
its current criteria.
Credit Considerations
As of the October 2010 remittance report, six assets
($32.3 million, 3.5%) in the pool were with the special
servicer, LNR Partners Inc. The payment status of the
specially serviced assets is: one asset ($13.1 million,
1.4%) is real estate owned (REO); one ($4.7 million, 0.5%)
is a matured balloon; two ($10.4 million, 1.1%) are 90-plus
days delinquent; and two ($4.1 million, 0.4%) are 60-days
delinquent. Three ($23.5 million, 2.6%) of the specially
serviced assets have appraisal reduction amounts in place,
totaling $5.8 million.
The Lakeside Technology Center REO asset ($13.7 million total
exposure, 1.5%) is the largest asset with the special servicer.
The exposure is secured by a 222,783-sq.-ft. office property in
Tampa, Fla. The loan was transferred to the special servicer in
March 2009. Reported DSC was 0.76x as of September 2009.
Standard & Poor's anticipates a moderate loss upon the eventual
disposition of the asset.
The remaining five specially serviced loans have exposures that
individually represent less than 1.0% of the transaction balance.
S&P estimated losses for all five loans, which resulted in a
weighted-average loss severity of 36.5%.
In addition to the specially serviced loans, S&P determined five
loans ($58.3 million; 6.4%) to be credit-impaired. These loans
all have reported DSC of less than 1.00x and are exhibiting poor
performance. S&P believes all of the loans are at increased risk
of defaults and losses. The largest of these is the Sheraton
Suites loan ($18.2 million, 2.0%), which is the ninth-largest loan
in the pool. The loan is secured by a 281-room lodging property
in Houston, Texas. The loan appears on the master servicer's
watchlist for low DSC. As of March 2010, reported DSC and
occupancy were 0.52x and 65.6%, respectively. These compare to
issuance DSC and occupancy of 1.44x and 59.5%, respectively.
The Airport Executive Towers I & II loan ($12.7 million, 1.4%) is
the second-largest credit-impaired loan. The loan is secured by a
161,069-sq.-ft. office property in Miami, Fla. The loan appears
on the master servicer's watchlist for low DSC. As of June 2010,
reported DSC was 0.70x, down from an issuance DSC of 1.31x.
Reported occupancy was 62.0% as of June 2010.
The Promenade Office Park loan ($10.8 million, 1.2%) is the third-
largest credit-impaired loan. The loan is secured by a 74,880-
sq.-ft. office property in Westlake Village, Calif. The loan
appears on the master servicer's watchlist for delinquent payments
and low DSC. As of October 2010, the loan was reported as 60 days
delinquent, and the March 2010 DSC was 0.88x. Reported occupancy
was 82.0% as of March 2010.
The remaining two credit-impaired loans have balances that
individually represent less than 1.0% of the transaction balance.
The loans appear on the master servicer's watchlist for low DSC.
As of June 2010, the weighted-average reported DSC was 0.22x.
Two loans totaling $71.4 million (7.8%) were previously with the
special servicer and have been returned to the master servicer.
Pursuant to the transaction documents, the special servicer is
entitled to a principal recovery fee equal to 1.00% of all amounts
received that are allocable as recoveries of principal.
Transaction Summary
As of the October 2010 remittance report, the collateral pool
had an aggregate trust balance of $919.2 million, down from
$1.19 billion at issuance. The pool includes 81 loans, down from
115 at issuance. The master servicer, Wachovia Bank N.A.,
provided interim 2010, full-year 2009, interim 2009, or full-year
2008 financial information for 98.2% of the nondefeased loans in
the pool. S&P calculated a weighted average DSC of 1.51x for the
pool based on the reported figures. S&P's adjusted DSC and LTV
ratio were 1.46x and 89.5%, respectively. S&P's adjusted DSC and
LTV figures exclude 11 defeased loans ($162.9 million, 17.7%), one
land loan that S&P analyzed separately ($24.4 million, 2.7%), six
specially serviced assets ($32.3 million, 3.5%), and five loans
that S&P determined to be credit-impaired ($58.3 million, 6.4%).
S&P separately estimated losses for the 11 specially serviced and
credit-impaired loans. The master servicer reported a watchlist
of 21 ($170.3 million, 18.5%) loans, including two loans that are
top 10 loan exposures. Eighteen loans ($152.6 million, 16.6%) in
the pool have a reported DSC of less than 1.10x, and 14 loans
($102.8 million, 11.2%) have a reported DSC of less than 1.00x.
Summary of Top 10 Loan Exposures
The top 10 exposures secured by real estate have an aggregate
outstanding trust balance of $362.9 million (39.5%). Using
servicer-reported numbers, S&P calculated a weighted average DSC
of 1.65x for the top 10 real estate loans. S&P's adjusted DSC and
LTV ratio for the top 10 exposures are 1.42x and 96.1%,
respectively. S&P's adjusted DSC and LTV figures exclude the DFS-
Guam land loan ($24.4 million, 2.7%), which S&P analyzed
separately, and the Sheraton Suites loan ($18.2 million, 2.0%),
which S&P determined to be credit-impaired and discussed above.
The Crossroads Center loan ($24.8 million, 2.7%) is part of the
fifth-largest exposure in the pool (the loan is cross-
collateralized and cross-defaulted with the Auburn Mile Shopping
Center loan) and is the largest loan on the master servicer's
watchlist. The loan is secured by a 238,145-sq.-ft. retail
property in Rossford, Ohio. The loan appears on the master
servicer's watchlist for low DSC, which was 1.02x as of December
2009.
Standard & Poor's analyzed the transaction according to its
current criteria, and the rating actions are consistent with S&P's
analysis.
Ratings Lowered
Citigroup Commercial Mortgage Trust 2004-C1
Commercial mortgage pass-through certificates series 2004-C1
Rating
------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
B AA+ (sf) AAA (sf) 16.23
C AA (sf) AA+ (sf) 14.79
D A (sf) A+ (sf) 11.89
E A- (sf) A (sf) 10.44
F BBB+ (sf) A- (sf) 8.84
G BBB- (sf) BBB (sf) 7.55
H BB- (sf) BBB- (sf) 5.46
J B+ (sf) BB+ (sf) 4.82
K B (sf) BB (sf) 4.17
L B- (sf) BB- (sf) 3.53
M CCC (sf) B+ (sf) 2.89
N CCC- (sf) B (sf) 2.57
P CCC- (sf) B- (sf) 2.08
Ratings Affirmed
Citigroup Commercial Mortgage Trust 2004-C1
Commercial mortgage pass-through certificates series 2004-C1
Class Rating Credit enhancement (%)
----- ------ ----------------------
A-3 AAA (sf) 19.61
A-4 AAA (sf) 19.61
X AAA (sf) N/A
N/A - Not applicable.
CONTINENTAL AIRLINES: Moody's Assigns 'Ba2' Rating on Certs.
------------------------------------------------------------
Moody's Investors Service assigned Baa2 and Ba2 ratings, to the
Class A and Class B Pass Through Certificates, Series 2010-1,
respectively, of the 2010-1 Pass Through Trusts to be issued by
Continental Airlines, Inc. The transaction documentation provides
for the possible issuance of one additional subordinated tranche
of certificates at a future date. The subordination provisions of
the inter-creditor agreement provide for the payment of interest
on the Preferred Pool Balance of the Class B Certificates before
payments of principal on the Class A Certificates. Amounts due
under the Certificates will, in any event, be subordinated to any
amounts due on either of the Class A or Class B Liquidity
facilities, each of which provides for three consecutive semi-
annual interest payments due the respective Certificate holders.
The Class A Equipment Notes and Class B Equipment Notes issued by
Continental and acquired with the proceeds of the Certificates
will be the primary assets of the Pass Through Trusts. Part of
the Certificates' proceeds will fund a portion of the upcoming
maturities in March and June 2011 of certain tranches of
Continental's outstanding Enhanced Equipment Trust Certificates,
Series 1999-2 and 2001-1, respectively. Twelve owned aircraft
including from these EETCs will secure the equipment notes for 12
of the 18 aircraft that will comprise the collateral pool of the
Certificates. Six new deliveries from Boeing scheduled for
between December 2010 and April 2011 will round out the aircraft
collateral that will secure the respective indentures of the
Notes.
Rating Rationale
The ratings of the Certificates consider the credit quality of
Continental (Corporate Family Rating of B2, stable outlook) as
obligor under the Notes, Moody's opinion of the collateral
protection of the Notes, the credit support provided by the
Liquidity Facilities, and certain structural characteristics of
the Notes such as the cross-collateralization and cross-default
provisions and the protections of Section 1110 of Title 11 of the
United States Code (the "Code"). The assigned ratings of Baa2 and
Ba2 on the Class A and Class B tranches, respectively, reflect
Moody's opinion of the ability of the Pass Through Trustees to
make timely payment of interest and the ultimate payment of
principal at a date no later than July 12, 2022, for the Class A
Certificates and July 12, 2020, for the Class B Certificates, each
the final maturity dates. "Moody's believes that the cross-
default feature increases the likelihood of affirmation by
Continental of its obligations under the Equipment Notes as each
of the aircraft types in this transaction are core to
Continental's mainline operations and fleet strategy," said
Moody's Analyst Jonathan Root. Additionally, the cross-
collateralization of the aircraft securing each note underlying
the transaction enhances the potential recovery for investors in
the event of a default by the Pass Through Trusts of their
respective Certificate obligations or of the rejection by
Continental of its obligations under the Notes' indentures in the
event of a bankruptcy event and pursuant to the provisions of the
Code.
Any combination of future changes in the underlying credit quality
or ratings of Continental, material unexpected changes in the
value of the aircraft pledged as collateral, and/or changes in the
status or terms of the liquidity facilities or the credit quality
of the liquidity provider could cause Moody's' to change its
ratings of the Certificates.
General Structure of the Series 2010-1 EETC's
The proceeds of the Certificates will initially be held in escrow
and deposited with the Depositary, JPMorgan Chase Bank, N.A.
(short-term rating of P-1), until the issuance of each of the
equipment notes. The interest on these funds will be sufficient
to pay accrued interest on the outstanding Certificates during the
Deposit Period which expires on or before July 31, 2011.
The collateral pool consists of these aircraft:
(i) two 1999, one 2001, one 2010 and two 2011 vintage B737-800s;
(ii) four 2001 vintage B737-900s;
(iii) two 2010 and one 2011 vintage B737-900ERs; and
(iv) five 2002 vintage B767-400ERs
The Certificates issued to finance the aircraft are not
obligations of, nor are they guaranteed by, Continental. However,
the amounts payable by Continental under the Notes will be
sufficient to pay in full all principal and interest on the
Certificates when due. The Notes will be secured by a perfected
security interest in the aircraft. It is the opinion of counsel
to Continental that the Notes will be entitled to benefits under
Section 1110 of the U.S. Bankruptcy Code. Under Section 1110 of
the U.S. Bankruptcy Code, if Continental fails to pay its
obligations under the Notes, the collateral trustee has the right
to repossess any aircraft which have been rejected by Continental.
Scheduled interest payments on the Certificates will be supported
by the A tranche and B tranche liquidity facilities sized to pay
up to three respective consecutive semi-annual interest payments
in the event Continental defaults on its obligations under the
Notes. The liquidity facilities do not provide for payments of
principal due, nor interest on the Certificate proceeds held in
escrow during the Delivery Period. The provider of each of the
liquidity facilities is Landesbank Hessen-Thuringen Girozentrale
(Moody's short term rating of P-1). The liquidity provider has a
priority claim on proceeds from liquidation of the Equipment Notes
and other Trust collateral ahead of any of the holders of the
Certificates and is also the controlling party following a
default.
Cross-Collateralization
The ratings of the 2010-1 Certificates benefit from the cross-
collateralization of the Notes, a feature which Moody's believes
can enhance recovery in the event of a default. The structure
provides that, in the event any or all aircraft are sold after a
default on one or more of the Notes, any surplus proceeds are made
available to cover shortfalls due under the Notes related to the
sale of any other aircraft. Importantly, all such surplus
proceeds are retained until maturity of the Equipment Notes
financing or the indentures are cancelled.
Moody's considers the number of aircraft and the number of
different aircraft models that comprise the collateral pool when
assessing the amount of LTV benefit of a cross-collateralized EETC
financing. At eighteen aircraft, the size of the collateral pool
of this transaction is modest, which results in Moody's applying a
modest reduction to its assessment of the peak LTV over the life
of the Certificates. Moody's believe that the aircraft models in
this transaction are core to Continental's current standalone
network, and will remain so as part of the expanded network of
United Continental Holdings, Inc. (B2 Corporate Family rating,
stable outlook). The inclusion of the six new aircraft and that
each of the models are integral to Continental's short- and long-
haul routes support the likelihood of affirmation by Continental
of its obligations under the Notes under a reorganization
scenario, thus minimizing the probability of the cross-
collateralization benefit being called upon by creditors over the
life of the transaction.
The last rating action was on September 29, 2010, when Moody's
affirmed the B2 corporate family rating and changed the outlook to
stable from negative.
Assignments:
Issuer: Continental Airlines, Inc.
-- Senior Secured Enhanced Equipment Trust, Class A, Assigned
Baa2
-- Senior Secured Enhanced Equipment Trust, Class B, Assigned
Ba2
Continental Airlines, Inc., based in Houston Texas, is the world's
fifth largest passenger airline as measured by the number of
scheduled miles flown by revenue passengers in 2009.
CORPORATE BACKED: Moody's Confirms Ratings on Two Classes
---------------------------------------------------------
Moody's Investors Service announced that it has confirmed the
ratings of these certificates issued by Corporate Backed Trust
Certificates, Toys "R" Us Debenture-Backed Series 2001-31:
-- US$13,090,000 Class A-1 Certificates due September 1, 2021,
Confirmed at B2; previously on August 25, 2010 Upgraded to B2
and Remained On Review for Possible Upgrade
-- US$13,090,000 Notional Amount of 1.00% Interest-Only Class A-
2 Certificates due September 1, 2021, Confirmed at B2;
previously on August 25, 2010 Upgraded to B2 and Remained On
Review for Possible Upgrade
The transaction is a structured note whose ratings are based on
the rating of the Underlying Securities and the legal structure of
the transaction. The rating actions are a result of the change of
the rating of the underlying securities which are the $13,090,000
8.75% Debentures due September 1, 2021 issued by Toys "R" Us, Inc.
which were confirmed to B2 by Moody's on November 8, 2010.
Moody's adopts all necessary measures so that the information it
uses in assigning a credit rating is of sufficient quality and
from sources Moody's considers to be reliable including, when
appropriate, independent third-party sources. However, Moody's is
not an auditor and cannot in every instance independently verify
or validate information received in the rating process.
CORPORATE BACKED: Moody's Reviews Ratings on 2002-17 Certs.
-----------------------------------------------------------
Moody's Investors Service announced that it has placed on review
for upgrade the ratings of these certificates issued by Corporate
Backed Trust Certificates, American General Institutional Capital
A Capital Securities-Backed Series 2002-17 Trust:
-- $73,991,000 aggregate certificate principal balance of
Corporate Backed Trust Certificates, American General
Institutional Capital A Capital Securities-Backed, Series
2002-17 Class A-1 Certificates; Ba2 Placed Under Review for
Possible Upgrade; previously on March 12, 2009 Downgraded to
Ba2
-- $73,991,000 aggregate notional amount of Corporate Backed
Trust Certificates, American General Institutional Capital A
Capital Securities-Backed, Series 2002-17 Class A-2
Certificates; Ba2 Placed Under Review for Possible Upgrade;
previously on March 12, 2009 Downgraded to Ba2
The transaction is a structured note whose ratings are based on
the rating of the Underlying Securities and the legal structure of
the transaction. The rating actions are a result of the change of
the rating of the underlying securities which are the $$73,991,000
aggregate principal amount of 7.57% Capital Securities Series A
issued American General Institutional Capital A which were placed
on review for upgrade by Moody's on November 5, 2010.
COSO GEOTHERMAL: Fitch Downgrades Ratings on Certs. to 'B+'
-----------------------------------------------------------
Fitch Ratings has downgraded the rating of Coso Geothermal Power
Holdings, LLC's pass-through trust certificates due 2026 to 'B+'
from 'BBB-', and placed it on Rating Watch Negative.
Fitch was notified recently that CGP has experienced significant
production declines due to a more accelerated rate of decline in
reservoir pressure since mid 2010 compared to original
expectations. The increase in the decline rate has more than
offset the gains expected from the Hay Ranch water injection
program and an extensive capital improvement program. In
aggregate, production in 2010 is forecasted to be 1,611 GWh which
is approximately 26% below original production estimates in 2007
of 2,184 GWh at the same time. The average net capacity of the
facility is now forecasted to be approximately 195 MW with the
benefit of the capital improvement program at the end of 2010
compared to the original capacity expectation in 2007 of 249 MW at
the same time which was without the benefit of the capital
improvement program. In addition, an eight-day transmission
related force majeure event in October 2010 has contributed to the
shortfall in production with a corresponding impact on the
revenues.
Fitch's analysis of the sponsor's updated projections indicates
that CGP's financial performance could fall below breakeven under
reasonable stress conditions, such as an increase in capital
expenditure requirements, or further acceleration in the rate of
geothermal resource decline. CGP's exposure to forced outages and
other event risks is heightened given the anticipated reduction in
cash flow. It is unclear whether the geothermal resource will
stabilize over the long term, and the prospects for potential
improvements in energy output are uncertain, reliant upon the
efficacy of budgeted capital expenditures.
The Rating Watch Negative reflects CGP's reliance on the sponsor
for capital expenditure funding in the near term, and Fitch's
expectation that operating cash flow will be insufficient to meet
the project's upcoming debt service payments absent sponsor
support or a draw on the debt service reserve. Resolution of the
Rating Watch Negative is linked to the continuation of and extent
of sponsor support, and the stabilization of energy output over
the short term. Fitch expects to receive additional information
from CPG in the coming months that will further clarify the
stability of the geothermal resource and the operational
performance of the project.
CGP recently provided Fitch with updated financial results that
indicate a continued decline in energy output despite the
operation of Hay Ranch and the ongoing execution of a $135 million
capital improvement program. To date, Terra-Gen Power, LLC, a
wholly owned affiliate of Arclight Capital Partners and Global
Infrastructure Partners (the sponsor), has contributed nearly
$90 million of equity support. CGP expects a cash shortfall of
approximately $6 million ahead of the January 2011 rent payment,
which would be funded with either a draw from the debt service
reserve or additional sponsor support. In 2011, CGP will rely
upon the sponsor for an additional $18 million to complete the
current capital expenditure program. Furthermore, Fitch believes
CPG will find it challenging to provide an additional $8 million
to meet its purchase power agreement collateral requirement in
late 2011 without support from the sponsor. Although the sponsor
has not made a firm commitment to provide additional equity, the
sponsor has indicated its intention to continue supporting the
project.
CGP's long-term financial projections indicate debt service
coverage ratios could remain at or below 1.1 times through 2014,
thereafter improving to the 1.1x-1.2x range as scheduled debt
service declines. The projections assume capital expenditures
budgeted for 2011 will be mostly funded with sponsor-provided
liquidity and sufficient to achieve expected production levels.
Fitch's stress analysis indicates that a 5%-10% reduction in
revenues or a 10%-15% increase in expenses could drive DSCRs below
1.0x in any given year.
Key Rating Drivers
CGP will rely upon the continued receipt of sponsor equity
contributions to fund capital expenditures and support projected
energy production levels. The prospects for future sponsor
support are uncertain, particularly if the sponsor does not
provide equity sufficient to meet the anticipated shortfall in the
upcoming debt service payment.
Financial performance will depend upon the stabilization of the
decline in the geothermal resource. If energy output falls at an
accelerated rate, cash flow may be inadequate to support the
payment of debt service.
Under current conditions, CGP is vulnerable to event risks.
Forced outages or other technical problems could jeopardize
payment of debt service while liquidity remains strained.
Credit Summary
CGP is a special-purpose company formed to lease and operate the
Coso project, which consists of three interlinked geothermal power
plants located in Inyo County, CA. Coso provides royalty payments
to the U.S. Navy and the Bureau of Land Management for use of the
geothermal resource. Under a series of power purchase agreements,
Coso's entire output will be sold to Southern California Edison
Company (Fitch IDR of 'A-', with a Stable Outlook) through January
2030. Cash flows from both Coso and Beowawe, an affiliated
geothermal project in Nevada, are available to service CGP's rent
payments under the CGP lease. Rent payments are the sole source
of cash available to pay debt service on the pass-through trust
certificates.
COSO GEOTHERMAL: Moody's Downgrades Ratings on Certs. to 'B1'
-------------------------------------------------------------
Moody's Investors Service downgraded Coso Geothermal Power
Holding's pass through trust certificates to B1 from Ba1. The
outlook remains negative.
Ratings Rationale
The rating action reflects the lack of improvement in total energy
production and increasing gap between originally forecasted power
production relative to actual power production. For last twelve
months ended September 2010, total generation was 26% below
original forecasts made in 2007 compared to approximately 20%
below forecast for the LTM ended September 2009. Higher than
anticipated decline in the geothermal resource negated the
benefits of the Project's expanded capital program including the
Hay Ranch water augmentation project resulting in a net decline in
energy production of around 4% for LTM ended September 2010 versus
September 2009.
The Project's expanded capital program is funded by the Project's
owner who has contributed approximately $90 million in additional
equity through October 2010. Approximately $18 million of the
expanded capital spending and associated equity contributions are
expected in 2011 and these amounts represent most of the remaining
expenditures. Moody's notes CGPH's sponsor is not legally
committed to make these equity contributions. At this time, a new
capital program is not in place though Coso is studying options to
improve power generation. Since the large equity funded capital
program did not result in the forecasted power generation and any
new capital spending program will entail major execution risk,
Moody's views increasing uncertainty as to whether the Project's
sponsor will fund another large equity funded capital program.
The rating action also reflects the project's poor debt service
coverage ratio of approximately 0.7 times according to Moody's
calculations for LTM ended September 2010 and the expectation that
CGPH will experience a shortfall of cash flow to service debt for
its January 2011 lease payment. Moody's understands the Project's
sponsor will make additional equity contributions of approximately
$6 million to prevent a draw on the debt service reserve letter of
credit. For 2011, CGPH's budget reflects DSCR around 1 times
according to Moody's calculations. The forecast assumes power
generation approximately 2% higher in 2011 than LTM ended
September 2010.
The negative outlook considers uncertainties with the Project's
ability to sustain its current levels of generation, uncertainties
regarding the Project's sponsor's continued willingness to
contribute additional capital and forecasted debt service coverage
marginally around 1 times in 2011.
The Project rating is likely to be downgraded by one or more
notches if the Project's sponsor is not willing to contribute
additional equity, if energy production declines further or if the
Project's DSCR remains around one times.
The CGPH's rating could stabilize if the Project is able to
stabilize energy production without significant new capital
expenditures and achieve DSCR of at least 1.1 times on a sustained
basis.
The last rating action on CPGH occurred on August 26, 2009, when
the rating on Project's pass through trust certificates were
downgraded to Ba1.
Coso Geothermal Power Holdings LLC is a special purpose company
formed to effectuate a sale-leaseback transaction of the Project.
The Project comprises of three linked geothermal plants with a
nameplate capacity of 302 MW located in California and a 17.7 MW
geothermal plant in Nevada. The California geothermal plants sell
all their power to Southern California Edison (A3 senior
unsecured) while the Nevada based plant sells its power to Sierra
Pacific Power (Ba3 senior unsecured). CGPH is owned indirectly by
Terra-Gen Power LLC (Terra-Gen).
CREDIT SUISSE: Moody's Takes Rating Actions on 2005-TFL2 Certs.
---------------------------------------------------------------
Moody's Investors Service downgraded one and affirmed the ratings
of three pooled classes of Credit Suisse First Boston Mortgage
Securities Corp., Commercial Mortgage Pass-Through Certificates
2005-TFL2. Moody's rating action is:
-- Cl. AX-1 Certificate, Affirmed at Aaa (sf); previously on
October 11, 2005 Definitive Rating Assigned Aaa (sf)
-- Cl. J Certificate, Affirmed at Aaa (sf); previously on
January 7, 2008 Upgraded to Aaa (sf)
-- Cl. K Certificate, Affirmed at Aa3 (sf); previously on
January 7, 2008 Upgraded to Aa3 (sf)
-- Cl. L Certificate, Downgraded to B3 (sf); previously on
March 19, 2009 Downgraded to Ba3 (sf)
Ratings Rationale
The downgrade is due to higher expected losses for the trust
resulting from one remaining loan that was transferred to
specially servicer on July 13, 2010 due to a balloon payment
default. The servicer has executed a pre-negotiation letter, and
is currently in discussions with the borrower and directing holder
regarding a modification an extension of the loan.
The affirmations are due to key parameters, including Moody's loan
to value ratio and Moody's stressed debt service coverage ratio
remaining within acceptable ranges for the senior classes due to
pay-down. The pool has paid down by 6% since Moody's last review.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the
previous review. Even so, deviation from the expected range will
not necessarily result in a rating action. There may be
mitigating or offsetting factors to an improvement or decline in
collateral performance, such as increased subordination levels due
to amortization and loan payoffs or a decline in subordination due
to realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "Hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based Large Loan
Model v 8.0. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated March 19, 2009. The
previous full review was part of Moody's first quarter 2009
ratings sweep and incorporated assumptions for capitalization
rates and stressed cash flows that were outlined in "Rating
Methodology Update: US CMBS Conduit and Fusion Review Prompted by
Declining Property Values and Rising Delinquencies" dated
February 5, 2009.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the October 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased to $36.3 million from
$38.7 million at last review. The Certificates are collateralized
by a senior participation interest in the Castleton Office Park
loan. In addition to trust debt, there is a $13.5 million B note
and a $7.2 million mezzanine debt outside of the trust. The loan
matured in July 2010, and is currently in special servicing. The
servicer has executed a pre-negotiation letter, and is currently
in discussions with the borrower and directing holder regarding a
modification an extension of the loan. The pool has not
experienced any losses since securitization and there are no
interest shortfalls outstanding.
The loan is secured by an approximately 1.0 million square foot
office park comprised of 32 separate buildings located in
Castleton, Indiana. The current occupancy for the portfolio is
71% based on a rent roll dated August 2010. The portfolio's
occupancy in 2009 was 70% compared to at securitization of 78%.
Net operating Income for the trailing twelve month period ending
August 2010 was $4.1 million, down from year-end 2009 NOI of
$5.4 million. The loan sponsor is Brookfield Asset Management,
Inc (Moody's senior unsecured rating Baa2, stable outlook).
Moody's trust loan to value ratio is 100% and Moody's stressed
debt service coverage ratio for trust debt is 1.06X. Moody's
first mortgage LTV is 137% and Moody's LTV including mezzanine
debt is 157%. Moody's stressed debt service coverage ratio for
first mortgage debt is 0.77X and Moody's stressed debt service
coverage ratio including mezzanine debt is 0.67X.
CREDIT SUISSE: S&P Downgrades Ratings on Eight 2001-CK6 Notes
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on eight
classes of commercial mortgage-backed securities from Credit
Suisse First Boston Mortgage Securities Corp.'s series 2001-CK6.
In addition, S&P affirmed its ratings on eight classes from the
same transaction.
The rating actions follow S&P's analysis of the transaction using
its U.S. conduit and fusion CMBS criteria. During S&P's review,
S&P considered the volume of loans with near-term maturities, as
well as loans subject to workout fees.
S&P's analysis included a review of the credit characteristics of
all of the loans in the transaction. Using servicer-provided
financial information, Standard & Poor's calculated an adjusted
debt service coverage of 1.37x and a loan-to-value ratio of 76.7%.
S&P further stressed the loans' cash flows under its 'AAA' stress
scenario to yield a weighted average DSC of 1.17x and an LTV of
96.6%. The implied defaults and loss severity under the 'AAA'
scenario were 27.6% and 28.6%, respectively. All of the adjusted
DSC and LTV calculations excluded seven of the eight specially
serviced assets ($29.0 million, 4.2%), two loans S&P determined to
be credit impaired ($12.4 million, 1.8%), and 22 defeased loans
($162.7 million, 23.3%). S&P separately estimated losses for the
excluded seven specially serviced assets and two credit-impaired
assets, which S&P included in its 'AAA' scenario implied default
and loss figures.
The affirmations on the class A-3, B, C, D, and E certificates
reflect the classes' credit enhancement levels and available
liquidity. S&P affirmed its ratings on classes O and P, which S&P
had lowered to 'D (sf)' in January 2010 due to interest shortfalls
that S&P determined were recurring at the time. S&P affirmed its
rating on the class A-X interest-only certificate based on its
current criteria.
Credit Considerations
As of the October 2010 remittance report, eight loans
($38.1 million, 5.5%) were with the special servicer, Midland
Loan Services Inc. One ($2.4 million, 0.4%) is real estate
owned, two ($2.4 million, 0.3%) are in foreclosure, and five
($33.3 million, 4.8%) are more than 90 days delinquent. S&P
estimated losses for seven of the eight assets ranging from 10%
to 94%. Appraisal reduction amounts totaling $19.3 million are in
effect against seven of the specially serviced assets.
The Riverwalk Apartments loan ($9.1 million, 1.3%) is the largest
loan with the special servicer. The loan is secured by a 192-unit
garden-style student housing property in West Lafayette, Ind., and
serves Purdue University. The loan was transferred to the special
servicer on July 21, 2009, due to imminent default. As of May 31,
2010, the loan reported a 0.51x DSC and is currently 90-plus days
delinquent. The borrower has received insurance proceeds to
repair flood damage and replace the roof on several units and has
requested a loan modification that the special servicer is
currently reviewing.
The Ogden Corporate Center loan ($8.7 million, 1.3%) is the
second-largest loan with the special servicer. The loan is
secured by an 86,356-sq.-ft. office property in Lisle, Ill. The
loan was transferred to the special servicer on May 14, 2010, due
to imminent default. On May 31, 2010, a tenant occupying 71.8% of
the net rentable area vacated the property, reducing occupancy to
18.2%. The loan is now 90-plus days delinquent. Standard &
Poor's expects a significant loss upon the eventual resolution of
this asset.
The Sierra Point Apartments loan ($7.3 million, 1.0%) is the
third-largest loan with the special servicer. The loan is
secured by a 212-unit apartment building in Irving, Texas. The
loan was transferred to the special servicer in October 2008 due
to imminent default. The loan was modified but subsequently
defaulted in August 2010. Standard & Poor's expects a moderate
loss upon the eventual resolution of this asset.
The five ($13.1 million, 1.9%) remaining specially serviced assets
have balances that individually represent less than 1.0% of the
total pool balance. S&P separately estimated losses for all five
loans. The weighted average loss severity is 49.0%.
In addition to the specially serviced assets, S&P determined two
other loans to be credit impaired. The Holiday Inn Ontario loan
($7.6 million, 1.1%) is secured by a 150-room lodging property
near the Ontario International Airport in Ontario, Canada. The
property has seen a decrease in occupancy and is less than 30 days
delinquent. The Trolley Industrial Park loan ($4.8 million, 0.7%)
is secured by a 242,678-sq.-ft. industrial park in Taylor, Mich.
A tenant occupying 17% of the NRA vacated in September 2010. The
reported DSC as of year-end 2009 was 0.68x. S&P considers both
loans to be at an increased risk of default and loss.
Excluding the transaction's defeased loans, as well as the
specially serviced and credit-impaired loans for which S&P
estimated losses, 65 loans ($430.4 million, 61.7%) have annual
repayment dates or final maturity dates through October 2011.
Standard & Poor's considered this large volume of loans with near-
term ARDs/maturities in its analysis.
Transaction Summary
As of the October 2010 remittance report, the aggregate pooled
trust balance was $697.5 million, which represents 70.7% of the
aggregate pooled trust balance at issuance. There are 108 loans
in the pool, down from 240 at issuance. The master servicer for
the transaction, Midland, provided financial information for 98.9%
of the pool, and all of the servicer-provided information was
full-year 2009 or interim-2010 data.
S&P calculated a weighted average DSC of 1.31x for the pool
based on the reported figures. S&P's adjusted DSC and LTV were
1.37x and 76.7%, respectively, which exclude seven specially
serviced loans ($29.0 million, 4.2%), two loans S&P determined
to be credit impaired ($12.4 million, 1.8%), and 22 defeased
loans ($162.7 million, 23.3%). Based on the servicer-reported
DSC figures, S&P calculated a weighted average DSC of 0.70x for
the excluded specially serviced assets and credit-impaired assets.
Twenty loans ($147.1 million, 21.1%) are on the master servicer's
watchlist, including two of the top 10 loans, which S&P discuss
below. Twenty-six loans ($173.3 million, 24.9%) have a reported
DSC of less than 1.10x, and 20 of these loans ($85.3 million,
12.2%) have a reported DSC of less than 1.0x. To date, the
transaction has realized nine principal losses totaling
$9.1 million.
Summary of Top 10 Loans
The top 10 loans secured by real estate have an aggregate
outstanding pooled balance of $255.2 million (36.6%). Using
servicer-reported numbers, S&P calculated a weighted average DSC
of 1.35x for the top 10 loans. S&P's adjusted DSC and LTV for the
top 10 loans were 1.36x and 78.0%, respectively. Standard &
Poor's analyzes the top 10 loans based on its property evaluation
criteria and utilizes the most recent rent roll for each asset.
In this case, S&P's adjusted DSC is slightly higher than the
servicer-reported figure due to higher cash flows for several top
10 assets, which resulted from the most recent rent rolls. Two of
the top 10 loans appear on the master servicer's watchlist.
The Avalon Pavilions loan ($64.4 million, 9.2%) is the largest
loan in the pool secured by real estate and the largest loan on
the watchlist. The loan is secured by a 932-unit multifamily
property in Manchester, Conn. The loan appears on the master
servicer's watchlist due to a low DSC. As of Dec. 31, 2009, the
reported DSC was 1.01x, and as of the June 30, 2010, rent roll,
overall property occupancy was 92%.
The Taco Hills Promenade Shopping Center loan ($12.4 million,
1.8%) is the 10th-largest loan in the pool and the second-largest
loan on the watchlist. The loan is secured by a 153,917-sq.-ft.
retail property in Atlanta. The loan appears on the master
servicer's watchlist due to a low DSC. As of Dec. 31, 2009,
reported DSC for the loan was 0.89x. Two new leases totaling 5%
of the NRA started in the third quarter of 2010.
Standard & Poor's stressed the loans in the pool according to its
U.S. conduit/fusion criteria. The resultant credit enhancement
levels support the lowered and affirmed ratings.
Ratings Lowered
Credit Suisse First Boston Mortgage Securities Corp.
Commercial mortgage pass-through certificates series 2001-CK6
Rating
------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
F AA- (sf) AA (sf) 14.21
G BBB+ (sf) A (sf) 12.11
H BBB- (sf) A- (sf) 10.01
J BB- (sf) BBB+ (sf) 7.71
K B (sf) BB+ (sf) 5.04
L B- (sf) BB- (sf) 4.04
M CCC (sf) B+ (sf) 3.04
N CCC- (sf) B (sf) 2.04
Ratings Affirmed
Credit Suisse First Boston Mortgage Securities Corp.
Commercial mortgage pass-through certificates series 2001-CK6
Class Rating Credit enhancement (%)
----- ------ ----------------------
A-3 AAA (sf) 29.62
B AAA (sf) 24.02
C AAA (sf) 21.91
D AAA (sf) 18.06
E AA+ (sf) 15.96
O D (sf) 1.38
P D (sf) 0.71
A-X AAA (sf) N/A
N/A - Not applicable.
CREST 2000-1: Moody's Takes Rating Actions on Three Classes
-----------------------------------------------------------
Moody's has upgraded two and affirmed one class of Notes issued by
Crest 2000-1, Ltd. due to the rapid pace of amortization of the
senior class of Notes and improvements in the loss distribution of
the collateral pool. The rating action is the result of Moody's
on-going surveillance of commercial real estate collateralized
debt obligation transactions.
Moody's rating action is:
-- Class B Second Priority Fixed Rate Term Notes, Upgraded to
Aaa (sf); previously on April 24, 2008 Confirmed at Aa1 (sf)
-- Class C Third Priority Fixed Rate Term Notes, Upgraded to Aaa
(sf); previously on March 10, 2009 Downgraded to Baa2 (sf)
-- Class D Fourth Priority Fixed Rate Term Notes, Affirmed at Ca
(sf); previously on March 10, 2009 Downgraded to Ca (sf)
Ratings Rationale
Crest 2000-1, Ltd. is a CRE CDO transaction backed by a portfolio
of commercial mortgage backed securities (92.5% of the pool
balance) and asset backed securities (7.5%). As of the
September 30, 2010 Trustee report, the aggregate Note balance of
the transaction has decreased to $75.8 million from $500.0 million
at issuance, with the paydown directed to the Class A Notes and
Class B Notes.
There are no assets that are considered Defaulted Securities as of
the September 30, 2010 Trustee report.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically modeled as actual
parameters for static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's have completed updated credit estimates for the non-
Moody's rated collateral. The bottom-dollar WARF is a measure of
the default probability within a collateral pool. Moody's modeled
a bottom-dollar WARF of 152 compared to 988 at last review. The
distribution of current ratings and credit estimates is: Aaa-Aa3
(92.5% compared to 31.7% at last review), A1-A3 (1.5% compared to
12.7% at last review), Baa1-Baa3 (.8% compared to 7.0% at last
review), Ba1-Ba3 (0.0% compared to 1.6% at last review), and Caa1-
C (1.2% compared to 7.0% at last review).
WAL acts to adjust the probability of default of the reference
obligations in the pool for time. Moody's modeled to a WAL of 3.0
years compared to 2.5 years at last review. The longer WAL in the
current review is due to amortization of certain collateral with
longer WAL profiles.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a variable
WARR with a mean of 67.4% compared to 44.3% at last review.
Moody's modeled a variable WARR due to the vintage distribution of
the underlying collateral.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity).
Moody's modeled a MAC of 0.3% compared to 43.2% at last review.
The low MAC is due to higher default probability collateral
concentrated within a small number of collateral names.
Moody's review incorporated CDOROM(R) v2.6, one of Moody's CDO
rating models, which was released on May 27, 2010.
The cash flow model, CDOEdge(R) v3.2, was used to analyze the cash
flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 67.4% to 57.4% or up to 77.4% would result in average
rating movement on the rated tranches of 0 to 1 notches downward
and no movement upward.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expect
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
CREST 2001-1: Moody's Takes Rating Actions on Various Classes
-------------------------------------------------------------
Moody's has upgraded one, affirmed two and downgraded one classes
of Notes issued by Crest 2001-1, Ltd. due to the deterioration in
the credit quality of the underlying portfolio as evidenced by an
increase in the weighted average rating factor. The two
affirmations and the one upgrade are due to the rapid pace of
amortization of the senior class of Notes and changes in theloss
distribution of the collateral. The rating action is the result
of Moody's on-going surveillance of commercial real estate
collateralized debt obligation transactionsMoody's rating action
is:
-- Class A Senior Secured Floating Rate Term Notes Due 2030,
Upgraded to Aaa (sf); previously on Feb. 26, 2009 Downgraded
to Aa2 (sf)
-- Class B-1 Second Priority Fixed Rate Term Notes, Due 2034,
Affirmed at A1 (sf); previously on Feb. 26, 2009 Downgraded
to A1 (sf)
-- Class B-2 Second Priority Floating Rate Term Notes, Due 2034,
Affirmed at A1 (sf); previously on Feb. 26, 2009 Downgraded
to A1 (sf)
-- Class C Third Priority Fixed Rate Term Notes, Due 2034,
Downgraded to Caa1 (sf); previously on Feb. 26, 2009
Downgraded to Ba2 (sf)
Ratings Rationale
Crest 2001-1, Ltd., is a CRE CDO transaction backed by a portfolio
of real estate investment trust debt (60.1% of the pool balance)
and commercial mortgage backed securities (39.9%). As of the
September 30, 2010 Trustee report, the aggregate Note balance
of the transaction has decreased to $259.3 million from
$500.0 million at issuance, with the paydown directed to the
Class A Notes.
There are two assets with a par balance of $20 million (8.3% of
the current pool balance) that are considered Defaulted Securities
as of the September 30, 2010 Trustee report. Moody's expects
significant losses to occur from the Defaulted Securities once
they are realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically modeled as actual
parameters for static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's have completed updated credit estimates for the non-
Moody's rated collateral. The bottom-dollar WARF is a measure of
the default probability within a collateral pool. Moody's modeled
a bottom-dollar WARF of 1590 compared to 792 at last review. The
distribution of current ratings and credit estimates is: Aaa-Aa3
(19.9% compared to 17.3% at last review), A1-A3 (0.0% compared to
3.6% at last review), Baa1-Baa3 (9.4% compared to 8.0% at last
review), Ba1-Ba3 (14.1% compared to 28.2% at last review), B1-B3
(5.5% compared to 1.2% at last review) and Caa1-C (11.1% compared
to1.8% at last review).
WAL acts to adjust the probability of default of the reference
obligations in the pool for time. Moody's modeled to a WAL of 3.6
years compared to 3.1 years at last review. The longer WAL in the
current review is due to amortization of certain collateral with
longer WAL profiles.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a variable
WARR with a mean of 35.6% compared to 37.7% at last review.
Moody's modeled a variable WARR due to the vintage distribution of
the underlying collateral.
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 10.1% compared to 26.2% at last review.
The low MAC is due to higher default probability collateral
concentrated within a small number of collateral names.
Moody's review incorporated CDOROM(R) v2.6, one of Moody's CDO
rating models, which was released on May 27, 2010.
The cash flow model, CDOEdge(R) v3.2, was used to analyze the cash
flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 35.6% to 25.6% or up to 45.6% would result in average
rating movement on the rated tranches of 0 to 1 notches downward
and 0 to 2 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expect
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
CREST 2002-1: Moody's Takes Rating Actions on Various Classes
-------------------------------------------------------------
Moody's has upgraded one and downgraded two classes of Notes
issued by Crest 2002-1, Ltd. due to the deterioration in the
credit quality of the underlying portfolio as evidenced by an
increase in the weighted average rating factor. The upgrade is
due to the rapid pace of amortization of the senior class of
Notes. The rating action is the result of Moody's on-going
surveillance of commercial real estate collateralized debt
obligation transactions.
-- Class A Senior Secured Floating Rate Term Notes, Upgraded to
Aa3 (sf); previously on March 6, 2009 Downgraded to A2 (sf)
-- Class B-1 Second Priority Fixed Rate Term Notes, Downgraded
to B3 (sf); previously on March 6, 2009 Downgraded to Baa3
(sf)
-- Class B-2 Second Priority Floating Rate Term Notes,
Downgraded to B3 (sf); previously on March 6, 2009 Downgraded
to Baa3 (sf)
Ratings Rationale
Crest 2002-1, Ltd., is a CRE CDO transaction backed by a portfolio
of commercial mortgage backed securities (59.9% of the pool
balance) and real estate investment trust debt (40.1%). As of
the September 30, 2010 Trustee report, the aggregate Note
balance of the transaction has decreased to $315.1 million from
$500.0 million at issuance, with the paydown directed to the
Class A Notes.
There is one asset with a par balance of $3.4 million (1.1% of the
current pool balance) that is considered a Defaulted Security as
of the September 30, 2010 Trustee report. There are also ten
additional assets with a par balance $75.1 million (24.1% of the
current pool balance), while not considered Defaulted Securities,
are currently Moodys rated or credit estimated at Ca or below.
Moody's expects significant losses to occur from the Defaulted
Security and the additional assets once they are realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically modeled as actual
parameters for static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's have completed updated credit estimates for the non-
Moody's rated collateral. The bottom-dollar WARF is a measure of
the default probability within a collateral pool. Moody's modeled
a bottom-dollar WARF of 3556 compared to 1040 at last review. The
distribution of current ratings and credit estimates is: A1-A3
(6.0% compared to 37.8% at last review), Baa1-Baa3 (37.8% compared
to 36.5% at last review), Ba1-Ba3 (12.5% compared to 48.6% at last
review), B1-B3 (11.4% compared to 7.7% at last review) and Caa1-C
(32.3% compared to 1.5% at last review).
WAL acts to adjust the probability of default of the reference
obligations in the pool for time. Moody's modeled to a WAL of 1.6
years compared to 2.5 years at last review.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a variable
WARR with a mean of 22.4% compared to 28.7% at last review.
Moody's modeled a variable WARR due to the vintage distribution of
the underlying collateral.
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 5.5% compared to 41.1% at last review.
The low MAC is due to higher default probability collateral
concentrated within a small number of collateral names.
Moody's review incorporated CDOROM(R) v2.6, one of Moody's CDO
rating models, which was released on May 27, 2010.
The cash flow model, CDOEdge(R) v3.2, was used to analyze the cash
flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 22.4% to 12.4% or up to 32.4% would result in average
rating movement on the rated tranches of 0 to 2 notches downward
and 0 to 1 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expect
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
CREST EXETER: Fitch Downgrades Ratings on 10 Classes of Notes
-------------------------------------------------------------
Fitch Ratings has downgraded 10 classes issued by Crest Exeter
Street Solar 2004-1, Ltd./Corp., as a result of significant
negative credit migration of the underlying collateral.
Since Fitch's last rating action in June 2010, approximately 23%
of the portfolio has been downgraded, and 6.8% is currently on
Rating Watch Negative. Approximately 36.9% has a Fitch derived
rating below investment grade and 8.6% has a rating in the 'CCC'
category or lower, compared to 24.4% and 3.4%, respectively, at
last review. As of the Oct. 29, 2010 trustee report, defaulted
securities, as defined in the transaction's governing documents,
now comprise 5.2% of the portfolio, compared to 3.4% at last
review. One defaulted security is the Rouse Co. bond (3.6%);
Rouse Co.'s parent company, GGP, has recently emerged from
bankruptcy. Additionally, 5.9% of non-defaulted collateral is
currently experiencing interest shortfalls.
This transaction was analyzed under the framework described in the
report 'Global Rating Criteria for Structured Finance CDOs' using
the Portfolio Credit Model for projecting future default levels
for the underlying portfolio. The default levels were then
compared to the breakeven levels generated by Fitch's cash flow
model of the CDO under the various default timing and interest
rate stress scenarios, as described in the report 'Global Criteria
for Cash Flow Analysis in Corporate CDOs'. Based on this
analysis, each class of notes' breakeven rates are generally
consistent with the ratings assigned below.
The Negative Rating Outlook on the class A through D notes
reflects Fitch's expectation that underlying CMBS loans will
continue to face refinance risk. The Loss Severity rating
indicates a tranche's potential loss severity given default, as
evidenced by the ratio of tranche size to the base-case loss
expectation for the collateral, as explained in 'Criteria for
Structured Finance Loss Severity Ratings'. The LS rating should
always be considered in conjunction with the probability of
default for tranches. Fitch does not assign LS ratings or
Outlooks to classes rated 'CCC' and below.
Crest Exeter 2004-1 is a cash flow commercial real estate
collateralized debt obligation which closed on April 29, 2004.
The collateral is composed of 61.9% commercial mortgage backed
securities, 23.7% real estate investment trusts, 12% commercial
real estate loans, and 2.4% Sf CDOs.
Fitch has downgraded these classes:
-- $136,930,729 Class A-1 to 'Asf/LS1' from 'AAsf/LS1'; Outlook
Negative;
-- $34,071,966 Class A-2 to 'Asf/LS1' from 'AAsf/LS1'; Outlook
Negative;
-- $8,377,070 Class B-1 to 'BBBsf/LS4' from 'Asf/LS3'; Outlook
Negative;
-- $9,214,777 Class B-2 to 'BBBsf/LS4' from 'Asf/LS3'; Outlook
Negative;
-- $1,675,414 Class C-1 to 'BBsf//LS4' from 'BBBsf/LS3'; Outlook
Negative;
-- $13,759,337 Class C-2 to 'BBsf/LS4' from 'BBBsf/LS3'; Outlook
Negative;
-- $5,026,242 Class D-1 to 'Bsf/LS4' from 'BBsf/LS3'; Outlook
Negative;
-- $11,371,872 Class D-2 to 'Bsf/LS4' from 'BBsf/LS3'; Outlook
Negative;
-- $3,769,681 Class E-1 to 'CCCsf' from 'Bsf/LS4';
-- $5,445,095 Class E-2 to 'CCCsf' from 'Bsf/LS4'.
CWALT INC: Moody's Downgrades Ratings on 108 Tranches
-----------------------------------------------------
Moody's Investors Service has downgraded the ratings of 108
tranches from seven RMBS transactions issued by CWALT, Inc. The
collateral backing these deals primarily consists of first-lien,
fixed rate Alt-A residential mortgages.
Ratings Rationale
The actions are a result of the continued performance
deterioration in Alt-A pools in conjunction with home price and
unemployment conditions that remain under duress. The actions
reflect Moody's updated loss expectations on Alt-A pools issued
from 2005 to 2007.
To assess the rating implications of the updated loss levels on
Alt-A RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
The above mentioned approach "Alt-A RMBS Loss Projection Update:
February 2010" is adjusted slightly when estimating losses on
pools left with a small number of loans. To project losses on
pools with fewer than 100 loans, Moody's first estimates a
"baseline" average rate of new delinquencies for the pool that is
dependent on the vintage of loan origination (10%, 19% and 21% for
the 2005, 2006 and 2007 vintage respectively). This baseline rate
is higher than the average rate of new delinquencies for the
vintage to account for the volatile nature of small pools. Even
if a few loans in a small pool become delinquent, there could be a
large increase in the overall pool delinquency level due to the
concentration risk. Once the baseline rate is set, further
adjustments are made based on 1) the number of loans remaining in
the pool and 2) the level of current delinquencies in the pool.
The fewer the number of loans remaining in the pool, the higher
the volatility and hence the stress applied. Once the loan count
in a pool falls below 75, the rate of delinquency is increased by
1% for every loan less than 75. For example, for a pool with 74
loans from the 2005 vintage, the adjusted rate of new delinquency
would be 10.10%. If current delinquency levels in a small pool is
low, future delinquencies are expected to reflect this trend. To
account for that, the rate calculated above is multiplied by a
factor ranging from 0.2 to 2.0 for current delinquencies ranging
from less than 2.5% to greater than 50% respectively.
Delinquencies for subsequent years and ultimate expected losses
are projected using the approach described in the methodology
publication.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
A list of updated estimated pool losses, sensitivity analysis, and
tranche recovery details is being posted on an ongoing basis for
the duration of this review period and may be found at:
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: CWALT, Inc. Alternative Loan Trust 2007-22
-- Cl. 1-A-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-5, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-6, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-7, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-8, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-9, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-10, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-11, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-12, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-13, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-14, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-15, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-16, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-17, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-18, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-X, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-4, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-5, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-6, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-7, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-8, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-9, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-10, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-11, Downgraded to Ca (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-12, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-13, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-14, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-15, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-16, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-17, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-18, Downgraded to Ca (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-19, Downgraded to Ca (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. P-O, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-X, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2006-34
-- Cl. A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-5, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-6, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-7, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-8, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-9, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. X, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2006-42
-- Cl. 1-A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-4, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-5, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-6, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-7, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-8, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-X, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-X, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2006-46
-- Cl. A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-5, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-6, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-7, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-8, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-9, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-10, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. X, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2007-13
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-5, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-6, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-7, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-8, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-9, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-10, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-11, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-12, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. X, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2007-19
-- Cl. 1-A-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-7, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-8, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-11, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-15, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-22, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-26, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2007-6
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-5, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-6, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-7, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-8, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-9, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. X, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
DEUTSCHE BANK: Fitch Rates Various 2010-C1 Certificates
-------------------------------------------------------
Fitch rates the Deutsche Bank Securities COMM 2010-C1 commercial
mortgage pass-through certificates:
-- $453,206,000 class A-1 'AAAsf/LS1'; Outlook Stable;
-- $40,000,000 class A-1D 'AAAsf/LS1'; Outlook Stable;
-- $75,089,000 class A-2 'AAAsfLS1'; Outlook Stable;
-- $179,498,000 class A-3 'AAAsf/LS1'; Outlook Stable;
-- $351,830,000* class XP-A 'AAAsf'; Outlook Stable;
-- $353,896,500* class XS-A 'AAAsf'; Outlook Stable;
-- $353,896,500* class XW-A 'AAAsf'; Outlook Stable;
-- $24,628,000 class B 'AAsf/LS3'; Outlook Stable;
-- $28,911,000 class C 'Asf/LS3'; Outlook Stable;
-- $44,973,000 class D 'BBB-sf/LS3'; Outlook Stable;
-- $7,496,000 class E 'BBB-sf/LS4'; Outlook Stable;
-- $12,849,000 class F 'BBsf/LS4'; Outlook Stable;
-- $12,850,000 class G 'B-sf/LS4'; Outlook Stable.
* Notional amount and interest only.
Fitch does not rate the interest-only class XW-B and the
$17,132,986 class H.
DLJ MORTGAGE: Moody's Upgrades Ratings on Series 2000-CKP1 Notes
----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of three classes
and affirmed five classes of DLJ Mortgage Corporation, Series
2000-CKP1:
-- Cl. S, Affirmed at Aaa (sf); previously on Nov. 6, 2000
Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on Dec. 8, 2006
Upgraded to Aaa (sf)
-- Cl. A-4, Upgraded to Aaa (sf); previously on Dec. 8, 2006
Upgraded to Aa2 (sf)
-- Cl. B-1, Upgraded to Aaa (sf); previously on Dec. 20, 2007
Upgraded to Aa3 (sf)
-- Cl. B-2, Upgraded to A3 (sf); previously on Feb. 27, 2007
Upgraded to Baa1 (sf)
-- Cl. B-3, Affirmed at Ba2 (sf); previously on April 28, 2010
Downgraded to Ba2 (sf)
-- Cl. B-5, Affirmed at C (sf); previously on April 28, 2010
Downgraded to C (sf)
-- Cl. B-6, Affirmed at C (sf); previously on April 28, 2010
Downgraded to C (sf)
Ratings Rationale
The upgrade is due to the significant increase in subordination
due to loan payoffs and amortization and stable overall
performance. The pool has paid down by 69% since last review.
The affirmations are due to key parameters, including Moody's loan
to value ratio, Moody's stressed debt service coverage ratio and
the Herfindahl Index, remaining within acceptable ranges. Based
on Moody's current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain the
current ratings.
Moody's rating action reflects a cumulative base expected loss of
20.7% of the current balance. Moody's stressed scenario loss is
24% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
, a measure of loan level diversity, is a primary determinant of
pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 11 compared to 25 at Moody's prior review.
In cases where the Herf falls below 20, Moody's also employs the
large loan/single borrower methodology. This methodology uses the
excel-based Large Loan Model v 8.0 and then reconciles and weights
the results from the two models in formulating a rating
recommendation. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated April 28, 2010.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction during the past six months.
Deal Performance
As of the October 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 86% to
$175.9 million from $1.29 billion at securitization. The
Certificates are collateralized by 46 mortgage loans ranging
in size from less than 1% to 25% of the pool, with the top ten
loans representing 64% of the pool.
Seven loans, representing 9% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Thirty-one loans have been liquidated from the pool since
securitization, resulting in an aggregate $49.5 million loss
(33% loss severity on average). Due to realized losses, classes
B-7, B-8, B-9 and C have been eliminated entirely and Class B-6
has experienced a 12% principal loss. Currently, 34 loans,
representing 62% of the pool, are in special servicing. The
largest specially serviced loan is the Sandhurst Apartments Loan
($12.5 million -- 7.1% of the pool), which is secured by 328 unit
apartment complex located in Roseville, Michigan. The loan was
transferred to special servicing in July 2010. Twenty-six of the
loans are in special servicing due to maturity default while seven
are in foreclosure and one is 90 days delinquent. The master
servicer has recognized an aggregate $5.5 million appraisal
reduction on eight of the specially serviced loans. Moody's has
estimated an aggregate $31.1 million loss (51% expected loss on
average) for the specially serviced loans.
Moody's has assumed a high default probability for three poorly
performing loans representing 5% of the pool. Moody's has
estimated a $1.9 million loss (20% expected loss based on a 50%
probability default) from the troubled loans.
Moody's was provided with full year 2009 operating results for 93%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV for the conduit component is 82%
compared to 81% at Moody's prior review. Moody's net cash flow
reflects a weighted average haircut of 12.0% to the most recently
available net operating income. Moody's value reflects a weighted
average capitalization rate of 9.6%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs for the conduit component are 1.17X and 1.37X,
respectively, compared to 1.17X and 1.38X at last review. Moody's
actual DSCR is based on Moody's net cash flow and the loan's
actual debt service. Moody's stressed DSCR is based on Moody's
NCF and a 9.25% stressed rate applied to the loan balance.
The top three performing conduit loans represent 36% of the pool.
The largest loan is the Valencia Marketplace Power Center Loan
($43.3 million -- 25.0% of the pool), which is secured by a
530,000 square foot power retail center located in Valencia,
California. The largest tenants are Wal-Mart (28% of the gross
leasable area, lease expiration October 2016) and Toys 'R' US
(8.5% of the GLA; lease expiration January 2022). The property
was 100% leased as of February 2010, the same as at last review.
Moody's LTV and stressed DSCR are 72% and 1.34X, respectively,
compared to 75% and 1.30X, at last review.
The second largest loan is the Radisson Portfolio Loan
($10.3 million -- 5.8% of the pool), which is secured by two
Radisson Hotels, totaling 224 rooms, located in Wisconsin and
Minnesota. The portfolio was transferred to special servicing in
September 2010 for maturity default. Moody's does not anticipate
any loses at this time. Moody's LTV and stressed DSCR 100% and
1.28X, respectively, compared to 127% and 0.99X at last review.
The third largest loan is the Kent Hill Plaza Loan ($9.1 million -
- 5.2% of the pool), which is secured by a 108,045 SF retail
center located in Kent, Washington. The property was 68% leased
as of June 2010, compared to 67% at last review. The loan was
transferred to special servicing in September 2010 for maturity
default. Moody's does not anticipate any loses at this time.
Moody's LTV and stressed DSCR 96% and 1.07X, respectively,
compared to 96% and 1.04X at last review.
EMPIRE FUNDING: S&P Downgrades Ratings on Seven Classes to 'D'
--------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings to 'D (sf)'
on seven classes from Empire Funding Home Loan Owner Trust's
series 1997-4, 1997-5, and 1999-1, three residential mortgage-
backed securities transactions.
The downgrades reflect S&P's assessment of missed interest
payments to noteholders of these classes as of the Oct. 25, 2010,
distribution date. S&P's rating actions were prompted by the
Oct. 13, 2010, trustee (U.S. Bank) notice, which stated that the
trustee has suspended distributions to holders pending further
developments in certain litigation affecting the trusts. S&P
lowered all of these ratings from investment-grade categories,
including three classes which S&P previously rated 'AAA (sf)'.
The underlying pool of loans backing these transactions consists
of mortgage loans secured primarily by junior (second) liens on
one- to four-family residential properties.
Rating Actions
Empire Funding Home Loan Owner Trust 1997-4
Series 1997-4
Rating
------
Class CUSIP To From
----- ----- -- ----
A-5 291701BJ8 D (sf) AAA (sf)
Empire Funding Home Loan Owner Trust 1997-5
Series 1997-5
Rating
------
Class CUSIP To From
----- ----- -- ----
A-4 291701BT6 D (sf) AAA (sf)
M-1 291701BV1 D (sf) AA (sf)
Empire Funding Home Loan Owner Trust 1999-1
Series 1999-1
Rating
------
Class CUSIP To From
----- ----- -- ----
A-5 291701DA5 D (sf) AAA (sf)
M-1 291701DB3 D (sf) AA (sf)
M-2 291701DC1 D (sf) A (sf)
B-1 291701DD9 D (sf) BBB- (sf)
EMPIRE HOME: Fitch Downgrades Ratings on All Classes of Notes
-------------------------------------------------------------
Fitch Ratings has downgraded all classes in three Empire Home Loan
residential mortgage backed security transactions to 'Csf'. The
affected classes have an aggregate balance of approximately
$3 million.
The trusts have been involved in ongoing litigation due to
allegations that the originators charged fees and rates of
interest exceeding the amounts allowed. As a result of the
litigation and the possibility that the trust and the trustee
could be held liable for the alleged actions of the orginators, US
Bank National Association (the trustee) suspended payments of
interest and principal to bondholders as of October 2010. Amounts
otherwise payable to bondholders are being retained in the trust
pending further developments. All funds that are retained will
first be distributed as a repayment of fees and costs incurred by
the trustee in performing its duties.
The downgrades reflect the increased likelihood of both permanent
interest shortfalls and principal writedowns. Since bond loss
amounts cannot be estimated at this time, Recovery Ratings have
not been assigned to the bonds.
Fitch will continue to monitor these transactions for ongoing
developments and their potential impact on the bonds' outstanding
ratings.
Fitch has downgraded these:
Empire Funding Home Loan Owner Trust 1997-4
-- A-5 (291701BJ8) to 'Csf' from 'AAAsf/LS3'.
Empire Funding Corp. 1997-5
-- A-4 (291701BT6) to 'Csf' from 'AAAsf/LS3';
-- A-4IO (291701BU3) to 'Csf' from 'AAAsf';
-- M-1 (291701BV1) to 'Csf' from 'AAsf/LS5'.
Empire Funding Corp. 1999-1
-- A-5 (291701DA5) to 'Csf' from 'AAAsf/LS3';
-- M-1 (291701DB3) to 'Csf' from 'AAsf/LS3';
-- M-2 (291701DC1) to 'Csf' from 'Asf/LS4';
-- B-1 (291701DD9) to 'Csf' from 'BBBsf/LS4'.
FALCON AUTO: Moody's Reviews Ratings on Six 2003-1 Securities
-------------------------------------------------------------
Moody's Investors Service has placed six securities from Falcon
Auto Dealership LLC, Series 2003-1 on review for possible
downgrade. The securities are backed by automobile dealership
franchise loans. The complete rating action is:
Issuer: Falcon Auto Dealership LLC, Series 2003-1
-- Class A-1, Ba1 (sf) Placed Under Review for Possible
Downgrade; previously on Sept. 29, 2009 Downgraded to Ba1
(sf)
-- Class A-2, Ba3 (sf) Placed Under Review for Possible
Downgrade; previously on Sept. 29, 2009 Downgraded to Ba3
(sf)
-- Class B, B3 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 29, 2009 Downgraded to B3 (sf)
-- Class C, Caa3 (sf) Placed Under Review for Possible
Downgrade; previously on Sept. 29, 2009 Downgraded to Caa3
(sf)
-- Class D, Ca (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 29, 2009 Downgraded to Ca (sf)
-- Class IO, Ba1 (sf) Placed Under Review for Possible
Downgrade; previously on Sept. 29, 2009 Downgraded to Ba1
(sf)
The securities listed above were placed on review for possible
downgrade due to deteriorating performance of the collateral
properties, high balances of specially serviced loans, and
potentially insufficient levels of credit support backing the
certificates against future losses relative to current ratings.
The deal has eight borrowers in special servicing, with an
outstanding loan amount of $21.48 million. The specially serviced
loans make up 58% of the current pool balance.
The credit support for the notes consists of subordination and any
available overcollateralization of the bonds by the loans. As of
November 5th, 2010, the subordination percentages are 40.4% for
the Class A notes, 28.9% for the Class B note, 21.2% for the Class
C note, and 12.5% for the Class D note. The transaction is
undercollateralized by approximately $1.38 million which
represents 1.8% of the current pool.
During the review period, Moody's will estimate the recovery rates
of foreclosed properties and assess any future stresses on the
rest of the collateral pool. Moody's will also qualitatively
assess the business challenges currently faced by the automobile
industry.
In order to estimate losses on the collateral pool, Moody's
calculates the expected loss given default of the obligors that
have become nonperforming, and also estimates future losses on
performing portion of the pool, all as a percentage of the
outstanding pool. In evaluating the nonperforming loans, key
factors include collateral valuations and expected recovery rates,
volatility around those recovery rates, historical obligor
performance, time until recovery or liquidation on defaulted
obligors, concessions due to restructuring which may negatively
impact the overall cash flow of the trust and/or the collateral,
and future industry expectations. Net losses are then evaluated
against the available credit enhancement provided by
overcollateralization, subordination, and excess spread.
Sufficiency of coverage is considered in light of remaining
borrower concentrations and concepts, remaining bond maturities,
and economic outlook.
The primary sources of uncertainty in the performance of these
transactions are the successfulness of workout strategies for
loans requiring special servicing, as well as the current
macroeconomic environment and its impact on the automobile
industry.
FFCA SECURED: Moody's Downgrades Ratings on Class F to 'C'
----------------------------------------------------------
Moody's Investors Service has downgraded the Class F note from
FFCA Secured Franchise Loan Owner Trust 2000-1. The notes are
backed by franchise loans made to fast-food and casual dining
restaurants. The complete rating action is:
Issuer: FFCA Secured Franchise Loan Owner Trust 2000-1
-- Class F, Downgraded to C (sf); previously on Aug. 25, 2004
Confirmed at Ca (sf)
Ratings Rationale
The Class F note listed above was downgraded due to deteriorating
performance of the collateral properties and potentially
insufficient levels of credit enhancement available for the note
against future losses, relative to current ratings. The credit
support for the note consists solely of subordination. As of
October 18th, 2010, the Class F note has lost 61% of its original
balance and has no subordination to protect noteholders from
future losses.
The deal has a total of 5 loans in special servicing with an
outstanding loan amount of approximately $10.6 million, which
represents 17% of the current pool. The loans are either being
restructured or the associated properties are being marketed for
sale. In addition, the deal has concept concentration risks with
Cracker Barrel (64% of outstanding loan pool), Max and Erma's
(17%), and Smith Real Estate (6%).
In order to estimate losses on the collateral pool, Moody's
calculates the expected loss given default of the obligors that
have become nonperforming, and also estimates future losses on
performing portion of the pool, all as a percentage of the
outstanding pool. In evaluating the nonperforming loans, key
factors include collateral valuations and expected recovery rates,
volatility around those recovery rates, historical obligor
performance, time until recovery or liquidation on defaulted
obligors, concessions due to restructuring which may negatively
impact the overall cash flow of the trust and/or the collateral,
and future industry expectations. Net losses are then evaluated
against the available credit enhancement provided by
overcollateralization, subordination, and excess spread.
Sufficiency of coverage is considered in light of remaining
borrower concentrations and concepts, remaining bond maturities,
and economic outlook.
The primary source of uncertainty in the performance of these
transactions are the successfulness of workout strategies for
loans requiring special servicing , as well as the current
macroeconomic environment and its impact on the restaurant and
fast food industry.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments in this transaction.
FIRST UNION: Moody's Upgrades Ratings on Two 2001-C2 Certs.
-----------------------------------------------------------
Moody's Investors Service upgraded the ratings of two classes,
downgraded three and affirmed 11 classes of First Union National
Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2001-C2:
-- Cl. A-2, Affirmed at Aaa (sf); previously on June 11, 2001
Definitive Rating Assigned Aaa (sf)
-- Cl. IO, Affirmed at Aaa (sf); previously on June 11, 2001
Definitive Rating Assigned Aaa (sf)
-- Cl. B, Affirmed at Aaa (sf); previously on May 23, 2006
Upgraded to Aaa (sf)
-- Cl. C, Affirmed at Aaa (sf); previously on May 23, 2006
Upgraded to Aaa (sf)
-- Cl. D, Affirmed at Aaa (sf); previously on May 23, 2006
Upgraded to Aaa (sf)
-- Cl. E, Affirmed at Aaa (sf); previously on Dec. 8, 2006
Upgraded to Aaa (sf)
-- Cl. F, Affirmed at Aaa (sf); previously on July 9, 2007
Upgraded to Aaa (sf)
-- Cl. G, Affirmed at Aaa (sf); previously on Sept. 25, 2008
Upgraded to Aaa (sf)
-- Cl. H, Upgraded to Aaa (sf); previously on Aug. 22, 2007
Upgraded to Aa2 (sf)
-- Cl. J, Upgraded to Aa3 (sf); previously on Aug. 22, 2007
Upgraded to A2 (sf)
-- Cl. K, Affirmed at Baa1 (sf); previously on Aug. 22, 2007
Upgraded to Baa1 (sf)
-- Cl. L, Affirmed at Ba2 (sf); previously on June 11, 2001
Definitive Rating Assigned Ba2 (sf)
-- Cl. M, Affirmed at Ba3 (sf); previously on June 11, 2001
Definitive Rating Assigned Ba3 (sf)
-- Cl. N, Downgraded to B2 (sf); previously on June 11, 2001
Definitive Rating Assigned B1 (sf)
-- Cl. O, Downgraded to Caa1 (sf); previously on June 11, 2001
Definitive Rating Assigned B2 (sf)
-- Cl. P, Downgraded to Caa2 (sf); previously on June 11, 2001
Definitive Rating Assigned B3 (sf)
Ratings Rationale
The upgrades are due to a significant increase in subordination
due to loan payoffs and amortization and overall stable pool
performance. The pool has paid down by 41% since Moody's last
review.
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans.
The affirmations are due to key parameters, including Moody's loan
to value ratio, Moody's stressed debt service coverage ratio and
the Herfindahl Index, remaining within acceptable ranges. Based
on Moody's current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their
current ratings.
Moody's rating action reflects a cumulative base expected loss of
4.6% of the current balance. At last review, Moody's cumulative
base expected loss was 1.1%. Moody's stressed scenario loss is
6.7% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 18 compared to 31 at Moody's prior review.
In cases where the Herf falls below 20, Moody's also employs the
large loan/single borrower methodology. This methodology uses the
excel-based Large Loan Model v 8.0 and then reconciles and weights
the results from the two models in formulating a rating
recommendation. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated October 8, 2009.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the November 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 49% to
$366.1 million from $1.0 billion at securitization. The
Certificates are collateralized by 64 mortgage loans ranging in
size from less than 1% to 12% of the pool, with the top ten loans
representing 32% of the pool. Twenty-three loans, representing
48% of the pool, have defeased and are collateralized with U.S.
Government securities. Defeasance at last review represented 41%
of the pool.
Twenty-four loans, representing 33% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Ten loans have been liquidated from the pool, resulting in an
aggregate realized loss of $8.7 million (10% loss severity
overall). Six loans, representing 5% of the pool, are currently
in special servicing. Moody's has estimated an aggregate
$9.6 million loss (50% expected loss on average) for the specially
serviced loans.
Moody's has assumed a high default probability for four poorly
performing loans representing 4% of the pool and has estimated a
$5.1 million aggregate loss (24% expected loss based on a 60%
probability default) from these troubled loans.
Moody's was provided with full year 2009 operating results for
100% of the pool. Excluding specially serviced and troubled
loans, Moody's weighted average LTV is 71% compared to 78% at
Moody's prior review. Moody's net cash flow reflects a weighted
average haircut of 14% to the most recently available net
operating income. Moody's value reflects a weighted average
capitalization rate of 9.7%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.41X and 1.58X, respectively, compared to
1.36X and 1.40X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
The top three performing loans represent 15% of the pool balance.
The largest loan is the Spectrum Pointe & Pacific Pointe loan
($20.4 million -- 4.0%), which is secured by two cross-
collateralized and cross-defaulted office and industrial
properties located in San Clemente and Lake Forest, California.
The Spectrum Pointe property is on the watchlist due to decline in
revenue. Moody's LTV and stressed DSCR are 86% and 1.20X,
respectively, compared to 81% and 1.29X at last review.
The second largest loan is the Monaco Park Apartments Loan
($18.1 million -- 3.6%), which is secured by a multifamily
property located in Las Vegas, Nevada. The property was 91%
leased as of June 2010. The loan is on the watchlist due to drop
in rental rates. Moody's LTV and stressed DSCR are 104% and
0.94X, respectively, compared to 85% and 1.14X at last review.
The third largest loan is the Center Pointe Shopping Center Loan
($15.2 million -$.2%), which is secured by a retail center located
in Asheboro, North Carolina. The property was 95% leased as of
March 2010. . Moody's LTV and stressed DSCR are 104% and 0.94X,
respectively, compared to 84% and 1.14X at last review.
FMAC LOAN: Moody's Reviews Ratings on Two Classes of Notes
----------------------------------------------------------
Moody's Investors Service has placed on review for possible
upgrade the Class A-3 and Class B notes from FMAC Loan Receivables
Trust 1998-C. The notes are backed by franchise loans made to
fast-food and casual dining restaurants.
The complete rating action is:
Issuer: FMAC Loan Receivables Trust 1998-C
-- Class A-3, Caa1 (sf) Placed Under Review for Possible
Upgrade; previously on Aug. 10, 2004 Downgraded to Caa1 (sf)
-- Class B (sf) Placed Under Review for Possible Upgrade;
previously on Aug. 10, 2004 Downgraded to C (sf)
The securities listed above were placed on review for possible
upgrade due to the high levels of credit enhancement available to
them. Total credit support for the notes consists of
subordination and overcollateralization. As the deal amortizes,
the sequential payment waterfall allows the subordination
percentage available to the senior notes to increase over time.
As of October 15, 2010, the total subordination percentages for
the Class A-3 note and Class B note are 76.4% and 35.2%
respectively. The current overcollateralization amount is
approximately $3.7 million which represents 7.4% of the current
pool balance.
During the review period, Moody's will estimate the recovery rates
of foreclosed properties and assess any future stresses on the
rest of the collateral pool. Moody's will also qualitatively
assess the business challenges currently faced by the restaurant
industry.
In order to estimate losses on the collateral pool, Moody's
calculates the expected loss given default of the obligors that
have become nonperforming, and also estimates future losses on
performing portion of the pool, all as a percentage of the
outstanding pool. In evaluating the nonperforming loans, key
factors include collateral valuations and expected recovery rates,
volatility around those recovery rates, historical obligor
performance, time until recovery or liquidation on defaulted
obligors, concessions due to restructuring which may negatively
impact the overall cash flow of the trust and/or the collateral,
and future industry expectations. Net losses are then evaluated
against the available credit enhancement provided by
overcollateralization, subordination, and excess spread.
Sufficiency of coverage is considered in light of remaining
borrower concentrations and concepts, remaining bond maturities,
and economic outlook.
The primary sources of uncertainty in the performance of these
transactions are the successfulness of workout strategies for
loans requiring special servicing, as well as the current
macroeconomic environment and its impact on the restaurant and
fast food industry.
GALAXY CLO: S&P Raises Ratings on Various Classes of Notes
----------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
B, C-1, and C-2 notes from Galaxy CLO 2003-1 Ltd., a
collateralized loan obligation transaction managed by PineBridge
Investments LLC. At the same time, S&P affirmed its rating on the
class A notes and removed the class A and B ratings from
CreditWatch positive.
The upgrades reflect improved performance S&P has observed in the
deal's underlying asset portfolio and significant paydown of the
class A notes since S&P's last rating action in March 2010. The
affirmation reflects the availability of credit support at the
current rating level.
According to the Oct. 4, 2010, trustee report, the transaction
currently holds $13.1 million in 'CCC' rated assets, down from
$22.2 million noted in the Feb. 15, 2010, trustee report. In
addition, the transaction holds $2.9 million in defaulted
securities, down from $10.1 million in February 2010. The deal
has paid down $65.8 million to the class A notes. The transaction
is in its amortization period, and the class A notes have been
reduced to 47.27% of their original balance. Accordingly, each of
the transaction's overcollateralization ratios have improved. The
class A O/C ratio is 137.85% versus 125.90% in February 2010, the
class B O/C ratio is 124.68% versus 116.92%, and the class C O/C
ratio is 106.58% versus 103.76%.
Standard & Poor's will continue to review whether, in S&P's view,
the ratings currently assigned to the notes remain consistent with
the credit enhancement available to support them and take rating
actions as S&P deem necessary.
Rating And Creditwatch Actions
Galaxy CLO 2003-1 Ltd.
Rating
------
Class To From
----- -- ----
A AA+ (sf) AA+ (sf)/Watch Pos
B AA- (sf) A (sf)/Watch Pos
C-1 BB- (sf) B+ (sf)
C-2 BB- (sf) B+ (sf)
GE COMMERCIAL: DBRS Downgrades Rating on Class K Certs. to 'B'
--------------------------------------------------------------
DBRS has downgraded these six classes of GE Commercial Mortgage
Corporation, Series 2004-C2 ("GE 2004-C2") Commercial Mortgage
Pass-Through Certificates:
Class J from BB (high) to BB
Class K from BB to B
Class L from BB (low) to B (low)
Class M from B (high) to CCC
Class N from B to CCC
Class O from B (low) to CCC
DBRS has also confirmed these other classes in the transaction:
Class A-1A at AAA
Class A-2 at AAA
Class A-3 at AAA
Class A-4 at AAA
Class X-1 at AAA
Class X-2 at AAA
Class B at AA (high)
Class C at AA
Class D at A (high)
Class E at A
Class F at A (low)
Class G at BBB (high)
Class H at BBB (low)
The trends for all rated classes of the transaction are Stable.
The downgrades reflect a decrease in performance for a significant
number of small loans in the transaction. Despite this, the
transaction's largest loans are performing very well and add
stability to the pool.
Continental Communities - Rolling Hills MHC (Prospectus ID#50,
0.67% of the current pool balance) was originally scheduled to
mature in February 2009. Difficulties surrounding the borrower's
ability to refinance resulted in the loan being transferred to
the special servicer to negotiate a loan modification. The
most recent appraisal of the property indicated a value of
$6.8 million, down from $11.9 million at issuance. The loan
was granted a maturity date extension to October 2010, with the
option of a second, conditional extension to April 2011. The
special servicer confirmed that the borrower was granted the
second extension after a $300,000 equity infusion to secure the
modification, with an additional $200,000 required by the time
the loan matures. The loan is performing matured balloon,
collateralized by a 312-pad manufactured housing community
located in Massillon, Ohio and has an outstanding balance of
$7,163,547. Finding a suitable refinance option for April 2011
could prove challenging given current market conditions and the
repeat extensions.
Retail properties make up 43% of the current pool balance and
include a number of under performing loans of concern. Stonebriar
Plaza (Prospectus ID#7, 2.70% of the current pool balance) is a
shopping center located in Frisco, Texas and anchored by a Toys
"R" Us and Golfsmith International. One of the property's largest
anchors, Shoe Pavilion (17% of the NRA) vacated its space in Q4
2010 due to bankruptcy. Since then, occupancy at the subject has
dropped to 67%, as of July 2010. The retail market surrounding
the Dallas, Texas area is soft and tenant demand for low rental
rates makes it a challenge to compete. In addition, the loan has
a poor leverage point of $167.27 and a YE2009 DSCR of 0.41x.
Burnsville Marketplace (Prospectus ID#28, 1.25% of the current
pool balance) has also suffered from losing a tenant due to
bankruptcy when Circuit City (13% of the NRA) vacated its space in
Q1 2009 with the company's bankruptcy filing and subsequent
liquidation of their stores. Occupancy at the property fell from
100% at YE2008 to 83% at YE2009 and the corresponding DSCR was
0.33x.
The pool has 78 months of seasoning and its total collateral has
been reduced by 31.2%. There are 104 of the original 119 loans
remaining in the pool and the current pool balance is
$1,063,437,889.
There are currently 27 loans, including one of the original top
ten, Stonebriar Plaza, on the servicer's watchlist, representing
22.3% of the current pool balance. The weighted-average DSCR of
loans on the servicer's watchlist is 0.94x.
Seven loans, representing 5.37% of the current pool balance, are
scheduled to mature in 2011, including one delinquent loan,
Tanglewood Plaza (Prospectus ID#64, 0.89% of the current pool
balance). The uncertainty of the market at this time raises
concerns as to the ability of the borrower to refinance.
Overall, the pool collateral has exhibited satisfactory
performance. There are 13 loans (10.16% of the current pool
balance) that have fully defeased since issuance, and the AFR Bank
of America Portfolio has defeased 18% of its trust balance since
issuance. The weighted-average DSCR of the entire pool is 1.59x,
with 87.8% of the pool reporting YE2009 financials.
The four largest loans in the pool (26.8% of the current pool
balance) are performing exceptionally well, with a weighted-
average DSCR of 2.34x. The combined weighted-average NCF change
is 46.5%, showing a strong confidence in the cash flow at the
properties.
The shadow-rating for Tyson's Corner Center, Pacific Place, Lake
Grove Plaza, and the AFR Bank of America Portfolio have all been
confirmed. DBRS has today discontinued the shadow rating for Lake
Grove Plaza.
GE COMMERCIAL: Moody's Upgrades Ratings on 2004-C3 Certs.
---------------------------------------------------------
Moody's Investors Service upgraded the ratings of two classes,
downgraded eight classes and affirmed 12 classes of GE Commercial
Mortgage Corporation, Commercial Mortgage Pass-Through
Certificates, Series 2004-C3:
-- Cl. A-2, Affirmed at Aaa (sf); previously on Aug. 19, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on Aug. 19, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on Aug. 19, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1A, Affirmed at Aaa (sf); previously on Aug. 19, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. X-1, Affirmed at Aaa (sf); previously on Aug. 19, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. X-2, Affirmed at Aaa (sf); previously on Aug. 19, 2004
Assigned Aaa (sf)
-- Cl. B, Upgraded to Aa1 (sf); previously on Aug. 19, 2004
Definitive Rating Assigned Aa2 (sf)
-- Cl. C, Upgraded to Aa2 (sf); previously on Aug. 19, 2004
Definitive Rating Assigned Aa3 (sf)
-- Cl. D, Affirmed at A2 (sf); previously on Aug. 19, 2004
Definitive Rating Assigned A2 (sf)
-- Cl. E, Affirmed at A3 (sf); previously on Aug. 19, 2004
Definitive Rating Assigned A3 (sf)
-- Cl. F, Downgraded to Baa2 (sf); previously on Aug. 19, 2004
Definitive Rating Assigned Baa1 (sf)
-- Cl. G, Downgraded to Ba2 (sf); previously on Aug. 19, 2004
Definitive Rating Assigned Baa2 (sf)
-- Cl. H, Downgraded to B3 (sf); previously on Aug. 19, 2004
Definitive Rating Assigned Baa3 (sf)
-- Cl. J, Downgraded to Caa2 (sf); previously on Aug. 19, 2004
Definitive Rating Assigned Ba1 (sf)
-- Cl. K, Downgraded to Caa3 (sf); previously on Aug. 19, 2004
Definitive Rating Assigned Ba2 (sf)
-- Cl. L, Downgraded to Ca (sf); previously on Aug. 19, 2004
Definitive Rating Assigned Ba3 (sf)
-- Cl. M, Downgraded to C (sf); previously on Aug. 19, 2004
Definitive Rating Assigned B1 (sf)
-- Cl. N, Downgraded to C (sf); previously on Aug. 19, 2004
Definitive Rating Assigned B2 (sf)
-- Cl. SHP-1, Affirmed at Aaa (sf); previously on Sept. 11, 2007
Upgraded to Aaa (sf)
-- Cl. SHP-2, Affirmed at Aaa (sf); previously on Sept. 11, 2007
Upgraded to Aaa (sf)
-- Cl. SHP-3, Affirmed at Aaa (sf); previously on Sept. 11, 2007
Upgraded to Aaa (sf)
-- Cl. SHP-4, Affirmed at Aaa (sf); previously on Sept. 11, 2007
Upgraded to Aaa (sf)
Ratings Rationale
The upgrades are due to the significant increase in subordination
due to loan payoffs and amortization and the pool's exposure to
defeased loans, which represent 16% of the current pool balance.
The pool has paid down by 22% since Moody's last review.
The downgrades are due to higher expected losses for the pool
resulting from anticipated losses from specially serviced and
troubled loans.
The affirmations are due to key parameters, including Moody's loan
to value ratio, the Herfindahl Index and Moody's stressed DSCR,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain their current ratings.
Moody's rating action reflects a cumulative base expected loss of
5.2% of the current balance. At last review, Moody's cumulative
base expected loss was 1.4%. Moody's stressed scenario loss is
10.3% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
, a measure of loan level diversity, is a primary determinant of
pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated April 23, 2007.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months
Deal Performance
As of the October 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 25% to
$1.03 billion from $1.38 billion at securitization. The
Certificates are collateralized by 103 mortgage loans ranging
in size from less than 1% to 5% of the pool, with the top ten
loans representing 30% of the pool. Eleven loans, representing
16% of the pool, have defeased and are collateralized with U.S.
Government securities. Defeasance at last review represented
6% of the pool. The pool contains one loan, representing 5.4%
of the pool, with an investment grade credit estimate.
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 monthly reporting package. Moody's has assumed a
high default probability for six of the watchlisted loans as well
as two additional loans that mature within the next 12 months and
have a Moody's stressed DSCR less than 1.0X. Moody's has
estimated a $11.4 million loss (20% expected loss based on an 50%
default probability) from these troubled loans.
One loan has been liquidated from the pool, resulting in a
realized loss of $515,400 (1% loss severity). Six loans,
representing 6% of the pool, are currently in special servicing.
The specially serviced loans are secured by a mix of multifamily,
retail, office, hotel and industrial properties. Moody's has
estimated an aggregate $28.1 million loss (49% expected loss on
average) for the specially serviced loans.
Moody's was provided with full year 2009 operating results for 97%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 88% compared to 93% at Moody's
prior review. Moody's net cash flow reflects a weighted average
haircut of 13% to the most recently available net operating
income. Moody's value reflects a weighted average capitalization
rate of 8.9%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.46X and 1.16X, respectively, compared to
1.40X and 1.07X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 45 compared to 74 at Moody's prior review.
The loan with a credit estimate is the 731 Lexington Avenue
Loan ($55.4 million -- 5.4% of the pool), which is secured by a
694,000 square foot office condominium. The collateral is part
of a 1.4 million square foot complex in midtown Manhattan on
Lexington Avenue between 58th and 59th Streets. The loan
represents a 20.5% pari-passu interest of a senior portion of a
first mortgage loan totaling $267.7 million. In addition, the
property is encumbered by a $86.0 million junior note held
outside of the trust. Built in 2005, the condominium is 100%
leased to Bloomberg, L.P. through 2028. The loan's anticipated
repayment date is March, 2014. Moody's current credit estimate
is A3, the same as at last review.
The top three performing conduit loans represent 9% of the pool
balance. The largest loan is the DDR-Macquarie Portfolio Loan
($40.1 million -- 3.9% of the pool), which is a pari passu
interest in a $129.4 million first mortgage loan. The loan is
secured by 20 retail properties located throughout six states and
totaling 3.3 million square feet. The portfolio was 83% leased as
of December 2009 compared to 71% at last review. Performance has
declined significantly because of occupancy declines and increased
operating expenses. The loan was transferred to special servicing
in May 2009 for imminent maturity default. The borrower was not
able to obtain refinancing on its June 1, 2009 maturity date. The
maturity date has been extended until June 2011 and the loan has
been transferred back to the master servicer. Moody's LTV and
stressed DSCR are 111% and 0.92X, respectively, compared to 78%
and 1.28X at last review.
The second largest loan is the Sun Communities Portfolio 5 Loan
($38.6 million -- 3.7%), which is secured by six manufactured home
communities containing 1,418 pads and 831 RV spaces. The
properties are located in Michigan (2), Texas (2), Florida and
Ohio. The portfolio's performance has continued to improved due
to increased revenues. The loan was interest only for the first
24 months of its loan term but now amortizes on a 360-month
schedule. Moody's LTV and stressed DSCR are 85% and 1.11X,
respectively, compared to 91% and 1.03X at last review.
The third largest loan is the Stonegate Birmingham Loan
($31.2 million -- 3.0% of the pool), which is secured by four
office buildings totalling 478,408 square feet located in Alabama.
The properties were 92% leased as of June 2010. Moody's LTV and
stressed DSCR are 90% and 1.12X, respectively, compared to 98% and
1.03X at last review.
GMAC COMMERCIAL: Moody's Upgrades Ratings on 2000-C3 Certs.
-----------------------------------------------------------
Moody's Investors Service upgraded the ratings of two classes,
downgraded five classes and affirmed six classes of GMAC
Commercial Mortgage Securities, Inc., Series 2000-C3 Mortgage
Pass-Through Certificates:
-- Cl. X, Affirmed at Aaa (sf); previously on Dec. 14, 2000
Assigned Aaa (sf)
-- Cl. B, Affirmed at Aaa (sf); previously on April 28, 2006
Upgraded to Aaa (sf)
-- Cl. C, Affirmed at Aaa (sf); previously on Dec. 8, 2006
Upgraded to Aaa (sf)
-- Cl. D, Affirmed at Aaa (sf); previously on Sept. 4, 2008
Upgraded to Aaa (sf)
-- Cl. E, Upgraded to Aaa (sf); previously on Sept. 4, 2008
Upgraded to Aa3 (sf)
-- Cl. F, Upgraded to Aa2 (sf); previously on Sept. 4, 2008
Upgraded to A2 (sf)
-- Cl. H, Affirmed at Baa2 (sf); previously on Sept. 4, 2008
Upgraded to Baa2 (sf)
-- Cl. J, Affirmed at Ba2 (sf); previously on Sept. 30, 2004
Confirmed at Ba2 (sf)
-- Cl. K, Downgraded to Caa2 (sf); previously on Sept. 30, 2004
Confirmed at Ba3 (sf)
-- Cl. L, Downgraded to Ca (sf); previously on Sept. 30, 2004
Confirmed at B1 (sf)
-- Cl. M, Downgraded to C (sf); previously on Sept. 30, 2004
Downgraded to Caa1 (sf)
-- Cl. N, Downgraded to C (sf); previously on Sept. 30, 2004
Downgraded to Caa2 (sf)
-- Cl. O, Downgraded to C (sf); previously on Sept. 30, 2004
Downgraded to Caa3 (sf)
Ratings Rationale
The upgrade is due to the significant increase in subordination
due to loan payoffs and amortization and stable overall
performance. The pool has paid down by 80% since last review.
In addition, the pool benefits from 20% defeasance.
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans and concerns about loans approaching
maturity in an adverse environment. Twenty-five loans,
representing 71% of the pool, have matured or will mature within
the next six months. Six of these loans, representing 15% of the
pool, have a Moody's stressed debt service coverage ratio less
than 1.0X.
The affirmations are due to key parameters, including Moody's loan
to value ratio, Moody's stressed DSCR and the Herfindahl Index ,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain the current ratings.
Moody's rating action reflects a cumulative base expected loss of
12.3% of the current balance. At last review, Moody's cumulative
base expected loss was 1.3%. Moody's stressed scenario loss is
15% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 13 compared to 46 at Moody's prior review.
In cases where the Herf falls below 20, Moody's also employs the
large loan/single borrower methodology. This methodology uses the
excel-based Large Loan Model v 8.0 and then reconciles and weights
the results from the two models in formulating a rating
recommendation. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated September 4, 2008.
Moody's Investors Service did not receive or take into account a
third party due diligence reports on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the October 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 82% to
$231.9 million from $1.32 billion at securitization. The
Certificates are collateralized by 32 mortgage loans ranging
in size from less than 1% to 11% of the pool, with the top ten
loans representing 59% of the pool. Three loans, representing
20% of the pool, have defeased and are collateralized with U.S.
Government securities. Defeasance at last review represented
41% of the pool.
Fifteen loans, representing 55% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. Most of the loans are
on the watchlist due to near-term maturity.
Eighteen loans have been liquidated from the pool since
securitization, resulting in an aggregate $16.3 million loss
(overall 24% loss severity on average). Due to realized losses,
classes O and P have been eliminated entirely and Class N has
experienced a 13% principal loss. Currently, 11 loans,
representing 22% of the pool, are in special servicing. The
largest specially serviced loan is the Maryland Trade Center III
Loan ($16.2 million -- 7.0% of the pool), which is secured by
185,613 square foot office building located in Greenbelt,
Maryland. The loan was transferred to special servicing in
September 2009 and is currently real estate owned. The master
servicer has recognized an aggregate $8.9 million appraisal
reduction on six of the specially serviced loans. Moody's has
estimated an aggregate $23.9 million loss (47% expected loss on
average) for the specially serviced loans.
Moody's has assumed a high default probability for three poorly
performing loans representing 9% of the pool. Moody's has
estimated a $2.7 million loss (13% expected loss based on a 50%
probability default) from the troubled loans.
Moody's was provided with full year 2009 operating results for 87%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV for the conduit component is 82%
compared to 88% at Moody's prior review. Moody's net cash flow
reflects a weighted average haircut of 10.0% to the most recently
available net operating income. Moody's value reflects a weighted
average capitalization rate of 9.5%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs for the conduit component are 1.17X and 1.29X,
respectively, compared to 1.20X and 1.50X at last review. Moody's
actual DSCR is based on Moody's net cash flow and the loan's
actual debt service. Moody's stressed DSCR is based on Moody's
NCF and a 9.25% stressed rate applied to the loan balance.
The top three performing conduit loans represent 24% of the pool.
The largest loan is the Lichtenstein Retail Portfolio Loan
($25.5 million -- 11.0% of the pool), which is secured by three
retail properties totaling 269,000 square feet. The properties
are located in Massachusetts and Connecticut. The portfolio was
83% leased as of March 2010 compared to 96% at last review. This
loan is currently on the master servicer's watchlist for a near
term maturity. Moody's LTV and stressed DSCR are 81% and 1.31X,
respectively, compared to 84% and 1.26X, at last review.
The second largest loan is the A-C Development Portfolio Loan
($16.4 million -- 7.1% of the pool), which is secured by four
grocery anchored retail centers located in South Carolina and
Georgia. The anchor in each center is Piggly Wiggly, which leases
78% of the portfolio on long term leases. The portfolio was 96%
leased as of June 2010 compared to 93% at last review. The loan
is currently on the master servicer's watchlist for failing to pay
off on its September 1, 2010 anticipated repayment date. The loan
has been extended and is due to be removed from the watchlist next
month. Moody's LTV and stressed DSCR 91% and 1.07X, respectively,
compared to 77% and 1.26X at last review.
The third largest loan is the Cross Timbers Apartment Loan
($13.4 million -- 5.8% of the pool), which is secured by a 253
unit apartment complex located in Morrisville, North Carolina.
The property was 92% leased as of March 2010, essentially the
same as at last review. This loan is currently on the master
servicer's watchlist for a near term maturity. Moody's LTV and
stressed DSCR 97% and 1.06X, respectively, compared to 105% and
0.98X at last review.
GMAC COMMERCIAL: Moody's Reviews Ratings on Nine 2003-C3 Certs.
---------------------------------------------------------------
Moody's Investors Service placed nine classes of GMAC Commercial
Mortgage Securities, Inc., Commercial Mortgage Pass-Through
Certificates, Series 2003-C3, on review for possible downgrade:
-- Cl. F, Baa1 (sf) Placed Under Review for Possible Downgrade;
previously on May 14, 2004 Definitive Rating Assigned Baa1
(sf)
-- Cl. G, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on May 14, 2004 Definitive Rating Assigned Baa2
(sf)
-- Cl. H, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on May 14, 2004 Definitive Rating Assigned Baa3
(sf)
-- Cl. J, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on May 14, 2004 Definitive Rating Assigned Ba1
(sf)
-- Cl. K, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on May 14, 2004 Definitive Rating Assigned Ba2
(sf)
-- Cl. L, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on May 14, 2004 Definitive Rating Assigned Ba3
(sf)
-- Cl. M, B1 (sf) Placed Under Review for Possible Downgrade;
previously on May 14, 2004 Definitive Rating Assigned B1 (sf)
-- Cl. N, B2 (sf) Placed Under Review for Possible Downgrade;
previously on May 14, 2004 Definitive Rating Assigned B2 (sf)
-- Cl. O, B3 (sf) Placed Under Review for Possible Downgrade;
previously on May 14, 2004 Definitive Rating Assigned B3 (sf)
The classes were placed on review for possible downgrade due to
higher expected losses for the pool resulting from realized and
anticipated losses from specially serviced and troubled loans.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated March 18, 2008.
Deal And Performance Summary
As of the October 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 40% to
$794.9 million from $1.33 billion at securitization. The
Certificates are collateralized by 58 mortgage loans ranging
in size from less than 1% to 10% of the pool.
Thirteen loans, representing 8.5% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance
Three loans have been liquidated from the trust since
securitization, resulting in a $20.4 million loss (22% loss
severity). Currently four loans, representing 8.5% of the pool,
are in special servicing. The largest specially serviced loan is
the Rainbow Corporate Center loan ($19.9 million -- 2.5%), which
was transferred to special servicing in January 2009. The master
servicer has recognized an appraisal reduction of $13.2 million
for this loan and an aggregate $21.7 million appraisal reduction
for two 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.
GRAMERCY REAL: Moody's Downgrades Ratings on Two Classes of Notes
-----------------------------------------------------------------
Moody's has affirmed nine and downgraded two classes of Notes
issued by Gramercy Real Estate CDO 2006-1, Ltd., due to the
deterioration in the credit quality of the underlying portfolio as
evidenced by an increase in the weighted average rating factor, an
increase in Defaulted Securities and sensitivity to recovery rate
scenarios. The rating action is the result of Moody's on-going
surveillance of commercial real estate collateralized debt
obligation transactions.
-- Cl. A-1, Affirmed at Aaa (sf); previously on April 7, 2009
Confirmed at Aaa (sf)
-- Cl. A-2, Downgraded to Baa3 (sf); previously on April 7, 2009
Downgraded to Baa2 (sf)
-- Cl. B, Downgraded to Caa1 (sf); previously on April 7, 2009
Downgraded to B2 (sf)
-- Cl. C, Affirmed at Caa2 (sf); previously on April 7, 2009
Downgraded to Caa2 (sf)
-- Cl. D, Affirmed at Caa3 (sf); previously on April 7, 2009
Downgraded to Caa3 (sf)
-- Cl. E, Affirmed at Caa3 (sf); previously on April 7, 2009
Downgraded to Caa3 (sf)
-- Cl. F, Affirmed at Caa3 (sf); previously on April 7, 2009
Downgraded to Caa3 (sf)
-- Cl. G, Affirmed at Caa3 (sf); previously on April 7, 2009
Downgraded to Caa3 (sf)
-- Cl. H, Affirmed at Caa3 (sf); previously on April 7, 2009
Downgraded to Caa3 (sf)
-- Cl. J, Affirmed at Caa3 (sf); previously on April 7, 2009
Downgraded to Caa3 (sf)
-- Cl. K, Affirmed at Caa3 (sf); previously on April 7, 2009
Downgraded to Caa3 (sf)
Ratings Rationale
Gramercy Real Estate CDO 2006-1 Ltd. is a CRE CDO transaction
backed by a portfolio A-notes and whole loans (62.7% of the pool
balance), mezzanine loans (16.6%), commercial mortgage backed
securities (11.6%), rake bonds (4.6%), CRE CDO (4.2%), and B-notes
(0.3%). As of the November 8, 2010 Trustee report, the aggregate
Note balance of the transaction was $1,000.0 million, the same as
that at issuance.
There are six assets with a par balance of $97.1 million (10.1% of
the current pool balance) that are considered Defaulted Securities
as of the November 8, 2010 Trustee report. While there have been
no realized losses to date, Moody's does expect significant losses
to occur once they are realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically modeled as actual
parameters for static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's have completed updated credit estimates for the non-
Moody's rated collateral. For non-CUSIP collateral, Moody's is
eliminating the additional default probability stress applied to
corporate debt in CDOROM(R) v2.6 as Moody's expect the underlying
non-CUSIP collateral to experience lower default rates and higher
recovery compared to corporate debt due to the nature of the
secured real estate collateral. The bottom-dollar WARF is a
measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF of 7,860 compared to 7,753 at
last review. The distribution of current ratings and credit
estimates is: Aaa-Aa3 (4.2% compared to 0.2% at last review), A1-
A3 (2.3% compared to 0.0% at last review), Baa1-Baa3 (3.3%
compared to 5.5% at last review), Ba1-Ba3 (2.9% compared to 11.7%
at last review), B1-B3 (7.3% compared to 9.6% at last review), and
Caa1-C (80.0% compared to 73.0% at last review).
WAL acts to adjust the probability of default of the reference
obligations in the pool for time. Moody's modeled to a WAL of
5.0 years, the same as that at last review. The modeled WAL
incorporates assumptions about the remaining reinvestment period.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a fixed WARR
of 38% compared to 42% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity). For
non-CUSIP collateral, Moody's is reducing the maximum over
concentration stress applied to correlation factors due to the
diversity of tenants, property types, and geographic locations
inherent in pooled transactions. Moody's modeled a MAC of 15.6%
compared to 17.4% at last review.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 38% to 28% or up to 48% would result in average rating
movement on the rated tranches of 1 to 6 notches downward and 0 to
2 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expect
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
GRAMERCY REAL: Moody's Takes Rating Actions on Various Classes
--------------------------------------------------------------
Moody's has affirmed three and downgraded eight classes of Notes
issued by Gramercy Real Estate CDO 2005-1, Ltd. due to the
deterioration in the credit quality of the underlying portfolio as
evidenced by an increase in Defaulted Securities, failure of the
over-collateralization tests, and sensitivity to recovery rate
scenarios. The rating action is the result of Moody's on-going
surveillance of commercial real estate collateralized debt
obligation transactions.
-- Cl. A-1, Affirmed at Aaa (sf); previously on April 7, 2009
Confirmed at Aaa (sf)
-- Cl. A-2, Affirmed at Aaa (sf); previously on April 7, 2009
Confirmed at Aaa (sf)
-- Cl. B, Downgraded to A1 (sf); previously on April 7, 2009
Downgraded to Aa3 (sf)
-- Cl. C, Downgraded to Baa3 (sf); previously on April 7, 2009
Downgraded to Baa2 (sf)
-- Cl. D, Downgraded to Ba1 (sf); previously on April 7, 2009
Downgraded to Baa3 (sf)
-- Cl. E, Downgraded to Ba2 (sf); previously on April 7, 2009
Downgraded to Ba1 (sf)
-- Cl. F, Downgraded to B1 (sf); previously on April 7, 2009
Downgraded to Ba2 (sf)
-- Cl. G, Downgraded to B3 (sf); previously on April 7, 2009
Downgraded to Ba3 (sf)
-- Cl. H, Downgraded to Caa2 (sf); previously on April 7, 2009
Downgraded to B2 (sf)
-- Cl. J, Downgraded to Caa3 (sf); previously on April 7, 2009
Downgraded to Caa1 (sf)
-- Cl. K, Affirmed at Caa3 (sf); previously on April 7, 2009
Downgraded to Caa3 (sf)
Ratings Rationale
Gramercy Real Estate CDO 2005-1 Ltd. is a CRE CDO transaction
backed by a portfolio A-notes and whole loans (56.5% of the pool
balance), commercial mortgage backed securities (25.4%) mezzanine
loans (12.5%), second mortgage (2.6%), CRE CDO (1.2%), rake bonds
(1.0%) and B-notes (0.8%). As of the November 8, 2010 Trustee
report, the aggregate Note balance of the transaction has
decreased to $961.6 million from $1,000.0 million at issuance,
with the paydown directed to the Class A-1 Notes, as a result of
failing the Class C/D/E and Class F/G/H over-collateralization
tests as well as collateral paydown since the deal turned static
in July 2010.
There are eight assets with a par balance of $168.4 million (17.1%
of the current pool balance) that are considered Defaulted
Securities as of the November 8, 2010 Trustee report. While there
have been no realized losses to date, Moody's does expect
significant losses to occur once they are realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically modeled as actual
parameters for static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's have completed updated credit estimates for the non-
Moody's rated collateral. For non-CUSIP collateral, Moody's is
eliminating the additional default probability stress applied to
corporate debt in CDOROM(R) v2.6 as Moody's expect the underlying
non-CUSIP collateral to experience lower default rates and higher
recovery compared to corporate debt due to the nature of the
secured real estate collateral. The bottom-dollar WARF is a
measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF of 6,602 compared to 7,538 at
last review. The distribution of current ratings and credit
estimates is: Aaa-Aa3 (14.7% compared to 10.2% at last review),
A1-A3 (1.0% compared to 0.5% at last review), Baa1-Baa3 (7.2%
compared to 0.6% at last review), Ba1-Ba3 (9.5% compared to 5.1%
at last review), B1-B3 (1.1% compared to 11.8% at last review),
and Caa1-C (66.5% compared to 71.8% at last review).
WAL acts to adjust the probability of default of the reference
obligations in the pool for time. Moody's modeled to a WAL of 2.6
years compared to 5.5 years at last review. The modeled WAL
reflects the current WAL with extensions on certain loan
collateral.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a fixed WARR
of 42.8% compared to 39.6% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity). For
non-CUSIP collateral, Moody's is reducing the maximum over
concentration stress applied to correlation factors due to the
diversity of tenants, property types, and geographic locations
inherent in pooled transactions. Moody's modeled a MAC of 7.4%
compared to 15.4% at last review. The lower MAC is due to greater
diversity in the default probability collateral concentrated
within a small number of collateral names.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 42.8% to 32.8% or up to 52.8% would result in average
rating movement on the rated tranches of 0 to 3 notches downward
and 0 to 7 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expect
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
GS MORTGAGE: Moody's Reviews Ratings on 13 2004-GG2 Certs.
----------------------------------------------------------
Moody's Investors Service placed 13 classes of GS Mortgage
Securities Corp. II, Commercial Mortgage Pass-Through
Certificates, Series 2004-GG2 on review for possible downgrade:
-- Cl. B, Aa2 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 3, 2009 Downgraded to Aa2 (sf)
-- Cl. C, Aa3 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 3, 2009 Downgraded to Aa3 (sf)
-- Cl. D, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 3, 2009 Downgraded to A3 (sf)
-- Cl. E, Baa1 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 3, 2009 Downgraded to Baa1 (sf)
-- Cl. F, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 3, 2009 Downgraded to Baa3 (sf)
-- Cl. G, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 3, 2009 Downgraded to Ba1 (sf)
-- Cl. H, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 3, 2009 Downgraded to Ba3 (sf)
-- Cl. J, B1 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 3, 2009 Downgraded to B1 (sf)
-- Cl. K, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 3, 2009 Downgraded to B2 (sf)
-- Cl. L, B3 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 3, 2009 Downgraded to B3 (sf)
-- Cl. M, Caa1 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 3, 2009 Downgraded to Caa1 (sf)
-- Cl. N, Caa2 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 3, 2009 Downgraded to Caa2 (sf)
-- Cl. O, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 3, 2009 Downgraded to Caa3 (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 transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated September 3, 2009.
Deal And Performance Summary
As of the October 13, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 18% to
$2.14 billion from $2.61 billion at securitization. The
Certificates are collateralized by 121 mortgage loans ranging
in size from less than 1% to 8% of the pool, with the top ten
loans representing 43% of the pool.
Twenty-five loans, representing 11% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Six loans have been liquidated from the pool, resulting in an
aggregate realized loss of $16.1 million (47% loss severity
overall). Nine loans, representing 6% of the pool, are
currently in special servicing. The specially serviced loans
are secured by a mix of office, retail and industrial property
types. The servicer has recognized appraisal reductions
totaling $46.6 million from eight of the specially serviced
loans.
Moody's review will focus on potential losses from specially
serviced and troubled loans and the performance of the overall
pool.
GS MORTGAGE: Moody's Affirms Ratings on 2006-GSFL VIII Certs.
-------------------------------------------------------------
Moody's Investors Service affirmed the ratings of eight pooled
classes and upgraded the rating of one non-pooled or rake class of
GS Mortgage Securities Corporation II, Commercial Mortgage Pass-
Through Certificates, Series 2006-GSFL VIII. Moody's rating
action is:
-- Cl. X, Affirmed at Aaa (sf); previously on Aug. 11, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. B, Affirmed at Aaa (sf); previously on July 5, 2007
Upgraded to Aaa (sf)
-- Cl. C, Affirmed at Aaa (sf); previously on March 18, 2008
Upgraded to Aaa (sf)
-- Cl. D, Affirmed at A3 (sf); previously on Dec. 3, 2009
Downgraded to A3 (sf)
-- Cl. E, Affirmed at Baa3 (sf); previously on Dec. 3, 2009
Downgraded to Baa3 (sf)
-- Cl. F, Affirmed at B1 (sf); previously on Dec. 3, 2009
Downgraded to B1 (sf)
-- Cl. G, Affirmed at Caa1 (sf); previously on Dec. 3, 2009
Downgraded to Caa1 (sf)
-- Cl. H, Affirmed at Caa2 (sf); previously on Dec. 3, 2009
Downgraded to Caa2 (sf)
-- Cl. H-HP, Upgraded to Caa1 (sf); previously on Dec. 3, 2009
Downgraded to C (sf)
Ratings Rationale
The affirmations are due to key parameters, including Moody's loan
to value ratio and Moody's stressed debt service coverage ratio,
remaining within acceptable ranges. The upgrade of the non-
pooled, or rake, class is due to the reduced loan balance of the
Hardage Portfolio Loan resulting from principal payments.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the
previous review. Even so, deviation from the expected range will
not necessarily result in a rating action. There may be
mitigating or offsetting factors to an improvement or decline in
collateral performance, such as increased subordination levels due
to amortization and loan payoffs or a decline in subordination due
to realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "Hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based Large Loan
Model v 8.0. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated December 3, 2009.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the ratings.
Deal Performance
As of the November 8, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 78% to $145.3
million from $661.2 million at securitization. The Certificates
are collateralized by three mortgage loans ranging in size from 7%
to 52% of the pool.
Moody's weighted average pooled loan to value ratio is 110%
compared to 125% at last review. Moody's stressed debt service
coverage ratio is 0.97X compared to 0.93X at last review.
Currently, two loans representing 93% of the pool balance are in
special servicing. The largest loan in the pool, the CarrAmerica
Corporate Center Loan ($75.0 million; 52% of the pool), was
transferred to special servicing in October 2010 due to the
inability to refinance the loan at the November 2010 maturity.
According to the November Trustee Statement, a loan extension is
being negotiated. The loan is secured by a campus of eight Class
A office buildings with 1,013,280 square feet of net rentable area
(NRA) located in Pleasanton, California. The largest tenants
include AT&T, Ross Stores and Farmers Insurance. As of June 2010,
the occupancy rate was 51% compared to 73% at securitization.
Moody's pooled LTV is over 100% and Moody's stressed DSCR is
0.78X. Moody's credit estimate rating for the pooled balance is C
compared to Caa3 at last review.
The second largest loan in the pool, representing 42% of the pool,
is also in special servicing. The Hardage Portfolio Loan ($61.2
million pooled balance and $4.7 million rake balance) is secured
by eight extended stay hotel properties (1,049 keys) located in
California, Maryland, Florida, Utah and Louisiana. The loan was
transferred to special servicing on February 23, 2009 due to the
borrower's inability to refinance the loan. Parties are currently
working out a resolution. The loan is current and a March 2010
appraisal values the portfolio at $86.3 million. Moody's pooled
LTV is 86% and Moody's stressed DSCR is 1.09X. Moody's current
credit estimate for the pooled balance is B3 compared to Caa3 at
last review.
Moody's credit estimate for the rake class H-HP, associated with
the Hardage Portfolio loan, is Caa1 compared to C at last review.
The class has experienced $16,906 in principal losses due to the
payment of outstanding trust expenses which equates to a 0.3%
cumulative loss. As of November 8, 2010, outstanding interest
shortfalls on class H-HP totaled $83,074. Interest shortfalls are
caused by special servicing fees, including workout and
liquidation fees, appraisal subordinate entitlement reductions and
extraordinary trust expenses associated with specially serviced
loans.
The third loan in the pool, the Investcorp Retail Portfolio Loan
($9.5 million; 7% of the pool), is a floating rate senior pari
passu interest secured by 23 shopping centers located in three
Texas MSA's (Dallas, Houston and San Antonio). There is
additional debt including a $125.4 million fixed rate pari passu
component and $123.0 million in fixed non-trust junior debt. The
loan is interest-only for the full term and matures in April 2011.
The floating rate securitized note has paid down 85% since
securitization due to property releases and the whole loan has
paid down 29% since securitization. The loan has continued to
perform. Moody's LTV for the pooled balance is 63% and Moody's
stressed DSCR is 1.72X. Moody's underlying rating for the pooled
balance is Baa2, compared to Ba3 at last review.
GSAA HOME: Moody's Downgrades Ratings on 123 Tranches
-----------------------------------------------------
Moody's Investors Service has downgraded the ratings of 123
tranches and confirmed the ratings of four tranches from 21 RMBS
transactions issued by GSAA Home Equity Trust. The collateral
backing these deals primarily consists of first-lien, fixed and
adjustable-rate Alt-A residential mortgages.
Ratings Rationale
The actions are a result of the continued performance
deterioration in Alt-A pools in conjunction with home price and
unemployment conditions that remain under duress. The actions
reflect Moody's updated loss expectations on Alt-A pools issued
from 2005 to 2007.
To assess the rating implications of the updated loss levels on
Alt-A RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: GSAA Home Equity Trust 2006-1
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2006-10
-- Cl. AF-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-5, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-6, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2006-12
-- Cl. A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2-A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2-B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3-A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3-B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2006-13
-- Cl. AF-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-5, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-6, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2006-14
-- Cl. A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2006-15, Asset-Backed Certificates,
Series 2006-15
-- Cl. AF-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-3A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-6, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-4, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-5, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-3B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2006-16, Asset-Backed Certificates,
Series 2006-16
-- Cl. A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3-A, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3-B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2006-17
-- Cl. A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3A, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2006-18
-- Cl. AV-1, Downgraded to Caa1 (sf); previously on Jan. 14,
2010 Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-2A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-2B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-3A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-3B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-4A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-4B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-5A, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-5B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-6, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2006-19
-- Cl. A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3-A, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3-B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2006-20
-- Cl. 1A1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1A2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A4A, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A4B, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. 2A1A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A1B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2006-3
-- Cl. A-1, Downgraded to Caa2 (sf); previously on Jan. 14, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2006-4
-- Cl. 1A1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1A2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. 2A1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3A1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 4A3, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 4A1, Confirmed at Caa1 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 4A2, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 4A-IO, Confirmed at Caa1 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2006-6
-- Cl. AF-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-5, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF-6, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2006-9
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4-A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4-B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2007-1
-- Cl. 1A1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1A2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A4A, Downgraded to Ca (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A4B, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. 2A1A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A1B, Downgraded to C (sf); previously on Jan. 14, 2010
B2 (sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2007-2
-- Cl. AV1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF3, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF4A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF4B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. AF5A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF5B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. AF6A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. AF6B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2007-3
-- Cl. 1A1A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1A1B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1A2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A4A, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A4B, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. 2A1A, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A1B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2007-4
-- Cl. A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3A, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2007-5
-- Cl. 1AV1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1AF2A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1AF2B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1AF3A, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1AF3B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1AF4A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1AF4B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1AF5A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1AF5B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1AF6, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1AF7A, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1AF7B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A1A, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A1B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A2A, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A2B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A3A, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A3B, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: GSAA Home Equity Trust 2007-7
-- Cl. 1A1, Downgraded to Caa2 (sf); previously on Jan. 14, 2010
A1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1A2, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A1, Downgraded to Caa2 (sf); previously on Jan. 14, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A4, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A5, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
IMPERIAL CAPITAL: S&P Withdraws Ratings on 11 Classes of Notes
--------------------------------------------------------------
Standard & Poor's Ratings Services withdrew its ratings on 11
classes of notes from Imperial Capital Bank Resecuritization Trust
2008-1, a resecuritized real estate mortgage investment conduit
residential mortgage-backed securities transaction.
The withdrawal of the ratings reflects S&P's assessment of the
termination and redemption of the outstanding notes for this
transaction by the Federal Deposit Insurance Corp. Prior to
termination, the FDIC owned 100% of the outstanding notes.
Rating Actions
Imperial Capital Bank Resecuritization Trust 2008-1
Series 2008-1
Rating
------
Class CUSIP To From
----- ----- -- ----
1A 452684AA1 NR AA (sf)/Watch Neg
1M1 452684AB9 NR AA- (sf)/Watch Neg
1M2 452684AC7 NR A+ (sf)/Watch Neg
1M3 452684AD5 NR A- (sf)/Watch Neg
1M4 452684AE3 NR BBB+ (sf)/Watch Neg
1M5 452684AF0 NR BBB (sf)/Watch Neg
1M6 452684AG8 NR BBB- (sf)/Watch Neg
1B1 452684AH6 NR BB+ (sf)/Watch Neg
1B2 452684AJ2 NR BB (sf)/Watch Neg
1B3 452684AK9 NR BB- (sf)/Watch Neg
1B4 452684AL7 NR B (sf)/Watch Neg
NR - Not rated.
ISCHUS CAPITAL: Fitch Reviews Ratings on Various Classes
--------------------------------------------------------
Fitch Ratings has reviewed Ischus Capital Management, LLC, as a
potential replacement collateralized debt obligation asset manager
for Summer Street 2005-1 and determined the manager's capabilities
to be consistent with the current ratings assigned to the
transactions.
Fitch has these ratings for Summer Street 2005-1:
-- $246,205,462 class A-1 notes rated 'Csf';
-- $38,000,000 class A-2 notes rated 'Dsf';
-- $33,000,000 class A-3 notes rated 'Dsf';
-- $13,130,086 class B notes rated 'Csf';
-- $20,303,996 class C notes rated 'Csf'.
Ischus serves as the ABS CDO management arm of Resource America,
Inc., a fixed income specialist asset manager founded in 1998.
REXI owns and operates business in the financial services, real
estate and equipment leasing sectors. As of March 31, 2010, REXI
had approximately $13.1 billion in assets under management and 701
employees. REXI is headquartered in New York City and has offices
in London, Philadelphia and Los Angeles.
Fitch was notified of a proposal to transfer the CDO asset
management responsibilities for Summer Street 2005-1 to Ischus
from GE Asset Management Incorporated. Fitch's initial and
ongoing rating of CDO transactions includes a review of the CDO
asset manager to determine whether they meet the appropriate
standards.
Fitch emphasizes that the scope of its review was solely to
determine that Ischus meets Fitch's minimum guidelines to manage
Summer Street 2005-1 within the context of Fitch's stated review
procedure for replacement managers. Furthermore, this review was
in the context of the current management responsibilities
associated with Summer Street 2005-1 and the current ratings
assigned by Fitch. Fitch is not a party to the transactions and
therefore does not provide consent or approval, as that remains
the sole preserve of the transaction parties.
Summer Street 2005-1 closed on Oct. 20, 2010. The portfolio is
primarily composed of residential mortgage-backed securities,
commercial mortgage-backed securities, and asset-backed securities
from the 2003-2008 vintages.
JP MORGAN: Moody's Downgrades Ratings on Nine 2003-LN1 Certs.
-------------------------------------------------------------
Moody's Investors Service downgraded the ratings of nine classes,
affirmed eight classes and upgraded seven non-pooled, or rake
classes of J.P. Morgan Commercial Mortgage Finance Corp., Series
2003-LN1:
-- Cl. A-1, Affirmed at Aaa (sf); previously on July 26, 2007
Affirmed at Aaa (sf)
-- Cl. A-2, Affirmed at Aaa (sf); previously on July 26, 2007
Affirmed at Aaa (sf)
-- Cl. A-1A, Affirmed at Aaa (sf); previously on July 26, 2007
Affirmed at Aaa (sf)
-- Cl. X-1, Affirmed at Aaa (sf); previously on July 26, 2007
Affirmed at Aaa (sf)
-- Cl. B, Affirmed at Aaa (sf); previously on July 26, 2007
Upgraded to Aaa (sf)
-- Cl. C, Affirmed at Aaa (sf); previously on July 26, 2007
Upgraded to Aaa (sf)
-- Cl. D, Affirmed at Aa3 (sf); previously on July 26, 2007
Upgraded to Aa3 (sf)
-- Cl. E, Affirmed at A2 (sf); previously on July 26, 2007
Upgraded to A2 (sf)
-- Cl. F, Downgraded to Baa1 (sf); previously on Nov. 4, 2010 A3
(sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to Baa3 (sf); previously on Nov. 4, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to B2 (sf); previously on Nov. 4, 2010 Baa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to Caa1 (sf); previously on Nov. 4, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to Caa2 (sf); previously on Nov. 4, 2010
Ba2 (sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to Caa3 (sf); previously on Nov. 4, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to Ca (sf); previously on Nov. 4, 2010 B1
(sf) Placed Under Review for Possible Downgrade
-- Cl. N, Downgraded to C (sf); previously on Nov. 4, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. P, Downgraded to C (sf); previously on Nov. 4, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. PS-1, Upgraded to Aa2 (sf); previously on July 26, 2007
Affirmed at A2 (sf)
-- Cl. PS-2, Upgraded to Aa3 (sf); previously on July 26, 2007
Affirmed at A3 (sf)
-- Cl. PS-3, Upgraded to A1 (sf); previously on July 26, 2007
Affirmed at Baa1 (sf)
-- Cl. PS-4, Upgraded to A2 (sf); previously on July 26, 2007
Affirmed at Baa2 (sf)
-- Cl. PS-5, Upgraded to A3 (sf); previously on July 26, 2007
Affirmed at Baa3 (sf)
-- Cl. PS-6, Upgraded to Baa1 (sf); previously on July 26, 2007
Affirmed at Ba1 (sf)
-- Cl. PS-7, Upgraded to Baa2 (sf); previously on July 26, 2007
Affirmed at Ba2 (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans. The affirmations are due to key
parameters, including Moody's loan to value ratio, Moody's
stressed debt service coverage ratio and the Herfindahl Index,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain their existing ratings.
The upgrade of the seven non pooled, or rake classes is due to
improved performance of One Post Office Square. These classes are
supported by the B note associated with the One Post Office Square
Loan, which is the largest loan in the pool.
On November 4, 2010, Moody's placed nine classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
3.2% of the current balance. At last review, Moody's cumulative
base expected loss was 2.2%. Moody's stressed scenario loss is
8.1% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a pay down analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
, a measure of loan level diversity, is a primary determinant of
pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimate 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 estimate in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated July 26, 2007.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the October 17, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 23% to $931 million
from $1.2 billion at securitization. The Certificates are
collateralized by 165 mortgage loans ranging in size from less
than 1% to 6% of the pool, with the top ten loans representing 26%
of the pool. Twenty-one loans, representing 17% of the pool, have
defeased and are collateralized with U.S. Government securities.
Defeasance at last review represented 14% of the pool. The pool
contains one loan, representing 6% of the pool, with an investment
grade credit estimate.
Forty-one loans, representing 25% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Three loans have been liquidated from the pool, resulting in an
aggregate realized loss of $23.3 million. Two loans, representing
0.4% of the pool, are currently in special servicing. Moody's has
estimated an aggregate $2.8 million loss (72% expected loss on
average) for the specially serviced loans.
Moody's has assumed a high default probability for six poorly
performing loans representing 5% of the pool and has estimated a
$10.9 million loss (23% expected loss based on a 55% probability
default) from these troubled loans.
Moody's was provided with partial year 2009 operating results for
76% of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 84% compared to 90% at Moody's
prior review. Moody's net cash flow reflects a weighted average
haircut of 11.5% to the most recently available net operating
income. Moody's value reflects a weighted average capitalization
rate of 9.25%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.81X and 1.34X, respectively, compared to
1.61X and 1.29X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 61 compared to 85 at Moody's prior review.
The loan with a credit estimate is the One Post Office Square Loan
($55.9 million -- 6.0% of the pool), which represents a 50%
participation interest in a $111.8 million first mortgage loan
secured by a 766,000 square foot Class A office building located
in Boston, Massachusetts. The property was 94% leased as of June
2010 compared to 92% at securitization. The largest tenant is
Putnam Investments, which leases 32% of the net rentable area
(NRA) through March 2019. The property is also encumbered by a
$51.2 million non-pooled subordinate note that is included in the
trust that supports non-pooled Classes PS-1 through PS-7. These
seven rake classes are all upgraded in conjunction with the credit
estimate upgrade on the senior note. Moody's credit estimate and
stressed DSCR for the senior note are Aa1 and 2.21X, respectively,
compared to A2 and 1.84X at last review.
The top three performing conduit loans represent 11% of the pool
balance. The largest loan is the IAC International Cargo Port
Loan ($46.0 million -- 4.9% of the pool), which is secured by a
376,000 square foot industrial/office property located in the
former South Boston Army Base in Boston, Massachusetts. The
property was 76% leased as of first quarter 2010 compared to 88%
at last review and 89% at securitization. Moody's LTV and
stressed DSCR are 105% and 0.95X, respectively, compared to 97%
and 1.03X at last review.
The second largest conduit loan is the Sheraton Inner Harbor Hotel
Loan ($30.96 million -- 3.3% of the pool), which is secured by a
337-room full service hotel located in the Inner Harbor of
Baltimore, Maryland. This loan is currently on the servicer's
watchlist due to declining performance due to weaker tourism
traffic. Part of the decline in performance has been offset by
amortization. The loan has amortized 8% since last review.
Moody's LTV and stressed DSCR are 132% and 0.90X, respectively,
compared to 84% and 1.42X at last review.
The third largest loan is the Chasewood Office Portfolio Loan
($22.97 million -- 2.5% of the pool), which is secured by two
suburban office buildings totaling 250,778 square feet located in
Houston, Texas. The properties were 92% leased as of first
quarter 2010 compared to 95% at last review and 93% at
securitization. The loan has amortized 7% since last review.
Moody's LTV and stressed DSCR are 77% and 1.38X, respectively,
compared to 89% and 1.18X at last review.
JP MORGAN: Moody's Downgrades Ratings on 14 2005-LDP1 Certs.
------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 14 classes and
affirmed seven classes of J.P. Morgan Chase Commercial Mortgage
Securities Corp., Commercial Mortgage Pass-Through Certificates,
Series 2005-LDP1:
-- Cl. A-2, Affirmed at Aaa (sf); previously on March 21, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on March 21, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on March 21, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-SB, Affirmed at Aaa (sf); previously on March 21, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1A, Affirmed at Aaa (sf); previously on March 21, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. X-1, Affirmed at Aaa (sf); previously on March 21, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. X-2, Affirmed at Aaa (sf); previously on March 21, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-J, Downgraded to Aa1 (sf); previously on Oct. 13, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-JFL, Downgraded to Aa1 (sf); previously on Oct. 13,
2010 Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to A1 (sf); previously on Oct. 13, 2010 Aa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to A2 (sf); previously on Oct. 13, 2010 Aa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to Baa2 (sf); previously on Oct. 13, 2010
A2 (sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Baa3 (sf); previously on Oct. 13, 2010
A3 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to Ba3 (sf); previously on Oct. 13, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to B3 (sf); previously on Oct. 13, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to Caa2 (sf); previously on Oct. 13, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to Ca (sf); previously on Oct. 13, 2010 Ba1
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to C (sf); previously on Oct. 13, 2010 Ba3
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to C (sf); previously on Oct. 13, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to C (sf); previously on Oct. 13, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. N, Downgraded to C (sf); previously on Oct. 13, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans.
The affirmations are due to key parameters, including Moody's loan
to value ratio, Moody's stressed DSCR and the Herfindahl Index,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain their current ratings.
On October 13, 2010, Moody's placed 14 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
5.0% of the current balance. Moody's stressed scenario loss is
17.3% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the credit estimate of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the credit estimate level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 30 compared to 44 at Moody's prior review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated October 9, 2008.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the October 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 26% to
$2.12 billion from $2.88 billion at securitization. The
Certificates are collateralized by 202 mortgage loans ranging
in size from less than 1% to 9% of the pool, with the top ten
non-defeased loans representing 42% of the pool. The pool
includes one loan with investment grade credit estimate,
representing 1.3% of the pool. At last review the Woodbridge
Center Loan ($201.3 million -- 9.5%) also had a credit estimate.
However, due to a decline in performance and increased leverage,
this loan is now analyzed as part of the conduit pool. Thirteen
loans, representing 7% of the pool, have defeased and are
collateralized with U.S. Government securities.
Thirty-six loans, representing 12% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Eight loans have been liquidated from the pool, resulting in an
aggregate realized loss of $23.5 million (34% loss severity
overall). Seventeen loans, representing 6% of the pool, are
currently in special servicing. At last review only two loans,
representing 1% of the pool, were in special servicing. The
master servicer has recognized an aggregate $30.7 million
appraisal reduction for ten of the specially serviced loans.
Moody's has estimated an aggregate $58.4 million loss (45%
expected loss on average) for the specially serviced loans.
Moody's has assumed a high default probability for eight poorly
performing loans representing 2% of the pool and has estimated a
$9.4 million loss (22% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 97%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 94% compared to 92% 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. Moody's value reflects a weighted average capitalization
rate of 8.75%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.39X and 1.05X, respectively, compared to
1.61X and 1.07X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
The loan that has a credit estimate is the Harbor Court Loan
($27.5 million -- 1.3%), which is secured by the leased fee
interest in land beneath a 31-story mixed-use project located in
Honolulu, Hawaii. The improvements consist of a 202,000 square
foot office building, 120 residential condominium units and a
1,046-space parking structure. Performance has been stable.
Moody's current credit estimate and stressed DSCR are Baa3 and
1.3X, respectively, the same as at last review.
The loan that previously had a credit estimate is the Woodbridge
Center Loan ($201.3 million -- 9.5%), which is secured by the
borrower's interest in a 1.6 million square foot (557,000 square
feet of loan collateral) regional mall located in Woodbridge, New
Jersey. The mall is anchored by Sears, Macy's, Lord & Taylor,
J.C. Penney and Dick's Sporting Goods. The in-line stores were
86% leased as of June 2010. The center's overall occupancy was
88% compared to 98% at last review. Performance has declined
since last review due to lower revenues. The loan sponsor is
General Growth Properties, Inc. Moody's LTV and stressed DSCR are
79% and 1.1X, respectively, compared to 67% and 1.29X at last
review.
The top three conduit loans represent 20% of the pool balance.
The largest loan is the One River Place Apartments Loan
($189.5 million -- 8.9%), which is secured by a 921-unit Class
A multifamily property located in New York City. The property
also includes 42,000 square feet of ground floor retail space.
The property was 91% leased as of January 2010 compared to 95%
at last review. Performance has declined since last review due
to lower revenues and higher expenses. The property's net
operating income has declined 5% since last review. Moody's
LTV and stressed DSCR are 99% and 0.87X, respectively, compared to
92% and 0.97X at last review.
The second largest loan is the Pier 39 Loan ($145.7 million --
6.9%), which is secured by the leasehold interest in a 242,300
square foot specialty retail center located in the Fisherman's
Wharf area in San Francisco, California. The property was 84%
leased as of May 2010 compared to 92% at last review. Performance
has declined since last review due to lower revenues. The loan is
on the servicer watchlist due to low DSCR. Moody's LTV and
stressed DSCR are 117% and 0.83X, respectively, compared to 106%
and 0.92X at last review.
The third largest loan is the Showcase Mall Loan ($92.0 million --
4.3%), which is secured by a 185,000 square foot retail and
entertainment property located in Las Vegas, Nevada. The property
was 98% leased as of June 2010, the same as at last review.
Performance has been stable. Moody's LTV and stressed DSCR are
86% and 1.03X, respectively, compared to 86% and 1.04X at last
review.
JP MORGAN: Moody's Downgrades Ratings on 15 2006-LDP7 Certs.
------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 15 classes,
confirmed one and affirmed eight classes of J.P. Morgan Chase
Commercial Mortgage Pass-Through Certificates, Series 2006-LDP7:
-- Cl. A-2, Affirmed at Aaa (sf); previously on July 12, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3A, Affirmed at Aaa (sf); previously on July 12, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3FL, Affirmed at Aaa (sf); previously on July 12, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3B, Affirmed at Aaa (sf); previously on July 12, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on July 12, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-SB, Affirmed at Aaa (sf); previously on July 12, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. X, Affirmed at Aaa (sf); previously on July 12, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1A, Affirmed at Aaa (sf); previously on July 12, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-M, Confirmed at Aaa (sf); previously on Oct. 20, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-J, Downgraded to A3 (sf); previously on Oct. 20, 2010
A1 (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to Baa2 (sf); previously on Oct. 20, 2010
A3 (sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to Baa3 (sf); previously on Oct. 20, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to Ba1 (sf); previously on Oct. 20, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Ba3 (sf); previously on Oct. 20, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to Caa1 (sf); previously on Oct. 20, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to Caa3 (sf); previously on Oct. 20, 2010
Ba2 (sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to Ca (sf); previously on Oct. 20, 2010 B1
(sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to C (sf); previously on Oct. 20, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to C (sf); previously on Oct. 20, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to C (sf); previously on Oct. 20, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to C (sf); previously on Oct. 20, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. N, Downgraded to C (sf); previously on Oct. 20, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. P, Downgraded to C (sf); previously on Oct. 20, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. Q, Downgraded to C (sf); previously on Oct. 20, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans. The confirmation and affirmations
are due to key parameters, including Moody's loan to value ratio,
Moody's stressed debt service coverage ratio and the Herfindahl
Index, remaining within acceptable ranges. Based on Moody's
current base expected loss, the credit enhancement levels for the
affirmed classes are sufficient to maintain the current ratings.
On October 20, 2010, Moody's placed 16 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
6.3% of the current balance. At last review, Moody's cumulative
base expected loss was 4.2%. Moody's stressed scenario loss is
16.7% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a pay down analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated February 9, 2009.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the ratings.
Deal Performance
As of the November 15, 2010 distribution date, the
transaction's aggregate certificate balance has decreased
by 3.5% to $3.8 billion from $3.9 billion at securitization.
The Certificates are collateralized by 260 mortgage loans
ranging in size from less than 1% to 10% of the pool, with
the top ten loans representing 37% of the pool. Two loans
have defeased, representing 0.6% of the pool, and are
collateralized by U.S. Government securities. The pool
does not contain any loans with credit estimates.
Seventy-six loans, representing 17% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Nine loans have been liquidated from the pool, resulting in an
aggregate realized loss of $17.8 million (54% loss severity).
Twenty-five loans, representing 10% of the pool, are currently
in special servicing. Moody's has estimated an aggregate
$148 million loss (44% expected loss on average) for the
specially serviced loans.
Moody's has assumed a high default probability for 14 poorly
performing loans representing 3% of the pool and has estimated a
$21.4 million loss (21% expected loss based on a 51% probability
default) from these troubled loans.
Moody's was provided with partial year 2009 operating results for
80% of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 101% compared to 141% at Moody's
prior review. Moody's net cash flow reflects a weighted average
haircut of 11.9% to the most recently available net operating
income. Moody's value reflects a weighted average capitalization
rate of 9.23%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.47X and 1.07X, respectively, compared to
1.04X and 0.90X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 45 compared to 54 at Moody's prior review.
The top three performing loans represent 14% of the pool
balance. The largest loan is the One and Two Prudential Loan
($205.0 million -- 5.4% of the pool), which is secured by a
2.2 million square foot Class A office building located in
Chicago, Illinois. The loan represents a 50% pari passu
interest in a $410.0 million first mortgage loan. Financial
performance has improved since last review. Occupancy was
reported at 90% as of March 2010 compared to 93% as of December
2008. The loan is interest only throughout the term. Moody's
LTV and stressed DSCR are 87% and 1.06X, respectively, compared
to 98% and 1.0X at securitization.
The second largest loan is the Bella Terra Retail Loan
($188.0 million -- 4.9% of the pool), which is secured by a
663,923 square foot retail center located in Huntington Beach,
California. Anchor tenants include Burlington Coat Factory,
Kohl's and Cinemark. The property's financial performance has
declined since last review due to higher operating expenses.
The property was 85% leased as of June 2010, the same as last
review. The loan is interest only throughout the term. Moody's
LTV and stressed DSCR are 137% and 0.65X, respectively, compared
to 127% and 0.74X at last review.
The third largest loan is the JQH Hotel Portfolio Loan
($142.9 million -- 3.8% of the pool), which is secured by
six hotels totaling 1,431 hotel rooms located in six states.
The hotels are operated as Embassy Suites (two), Renaissance
(one), Courtyard by Marriott (one) Sheraton (one) and Residence
Inn (one). Moody's LTV and stressed DSCR are 84% and 1.42X,
respectively, compared to 138% and 0.89X at last review.
JP MORGAN: Moody's Downgrades Ratings on 13 2007-CIBC18 Certs.
--------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 13 classes and
affirmed five classes of J.P. Morgan Chase Commercial Mortgage
Securities Trust 2007-CIBC18, Commercial Mortgage Pass-Through
Certificates, Series 2007-CIBC18:
-- Cl. A-1, Affirmed at Aaa (sf); previously on March 8, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on March 8, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on March 8, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1A, Affirmed at Aaa (sf); previously on March 8, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. X, Affirmed at Aaa (sf); previously on March 8, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-M, Downgraded to Aa3 (sf); previously on Oct. 13, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-MFL, Downgraded to Aa3 (sf); previously on Oct. 13,
2010 Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-J, Downgraded to Ba1 (sf); previously on Oct. 13, 2010
A1 (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to Ba3 (sf); previously on Oct. 13, 2010 A3
(sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to B1 (sf); previously on Oct. 13, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to B3 (sf); previously on Oct. 13, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Caa2 (sf); previously on Oct. 13, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to Ca (sf); previously on Oct. 13, 2010 Ba3
(sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to C (sf); previously on Oct. 13, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to C (sf); previously on Oct. 13, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to C (sf); previously on Oct. 13, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to C (sf); previously on Oct. 13, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to C (sf); previously on Oct. 13, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
Ratings Rationale
The downgrades are due to higher subordination required due to an
overall increase in the pool's leverage since securitization,
increased credit quality dispersion and higher expected losses
resulting from anticipated losses from specially serviced and
troubled loans.
Moody's affirmed five classes because the credit enhancement
levels for the affirmed classes are sufficient to maintain their
existing ratings based on Moody's current base expected loss.
On October 13, 2010 Moody's placed 13 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
7.9% of the current balance. At last review, Moody's cumulative
base expected loss was 4.7%. Moody's stressed scenario loss is
26.7% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the credit estimate of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the credit estimate level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior review was
part of Moody's first quarter 2009 ratings sweep of 2006-2008
vintage conduit / fusion transactions and is summarized in a press
release dated February 10, 2009.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the October 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 4% to $3.76 billion
from $3.90 billion at securitization. The Certificates are
collateralized by 216 mortgage loans ranging in size from less
than 1% to 6% of the pool, with the top ten loans representing 32%
of the pool. At securitization the Centro Heritage Portfolio 4
Loan ($226.1 million -- 6.0%) had an investment grade credit
estimate. However, due to a decline in performance and increased
leverage this loan is now analyzed as part of the conduit pool.
Sixty loans, representing 32% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Ten loans have been liquidated from the pool, resulting in an
aggregate realized loss of $44.0 million (54% loss severity
overall). Twenty-two loans, representing 7% of the pool, are
currently in special servicing. The master servicer has
recognized appraisal reductions totaling $71.3 million for 17 of
the specially serviced loans. Moody's has estimated an aggregate
$140.1 million loss (50% expected loss on average) for the
specially serviced loans.
Moody's has assumed a high default probability for 11 poorly
performing loans representing 2% of the pool and has estimated a
$15.9 million loss (25% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full year 2009 and partial year 2010
operating results, excluding specially serviced loans, for 99% and
77% of the pool, respectively. Excluding specially serviced and
troubled loans, Moody's weighted average LTV is 115% compared to
110% at securitization. The pool is characterized by significant
LTV dispersion. Approximately 75% of the pool has a LTV over 100%
and 43% of the pool has a LTV over 120%. Moody's net cash flow
reflects a weighted average haircut of 11% to the most recently
available net operating income. Moody's value reflects a weighted
average capitalization rate of 9.3%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.30X and 0.91X, respectively, compared to
1.30X and 0.92X at securitization. Moody's actual DSCR is based
on Moody's net cash flow and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 59 compared to 62 at securitization.
The loan that previously had a credit estimate is the Centro
Heritage Portfolio 4 Loan ($226.1 million -- 6.0%), which is
secured by a diverse portfolio of 16 retail properties located in
ten states. As of June 2010 the portfolio was 89% leased compared
to 94% at securitization. Performance has declined due to lower
revenues. Net Operating Income has decreased by 8% since
securitization. Moody's LTV and stressed DSCR are 77% and 1.20X,
respectively, compared to 74% and 1.25X at securitization.
The top three conduit loans represent 13% of the pool balance.
The largest loan is the 131 South Dearborn Loan ($236.0 million --
6.3%), which represents a participation interest in a
$472.0 million mortgage loan. The loan is secured by a
1.5 million square feet Class A office property located in
downtown Chicago, Illinois. The property was 95% leased as of
December 2009 compared to 92% at securitization. Performance has
been stable. Moody's LTV and stressed DSCR are 118% and 0.78X,
respectively, compared to 117% and 0.78X at securitization.
The second largest loan is the Quantico Property Trust Portfolio
Loan ($131.2 million -- 3.5%), which is secured by a portfolio of
14 properties (938,769 square feet), comprised of office,
warehouse and flex space. Thirteen of the properties are located
in Sterling, Virginia. As of June 2010 portfolio was 97% occupied
compared to 99% at securitization. Performance has been stable.
Moody's LTV and stressed DSCR are 120% and 0.81X, respectively,
compared to 122% and 0.79X at securitization.
The third largest loan is the Marriott -- Hilton Head Island Loan
($118.8 million -- 3.2%), which is secured by a 512-room full
service hotel located in Hilton Head Island, South Carolina.
Performance has declined since securitization due to the decline
in business and tourist travel as a result of the economic
recession. NOI has decreased 27% since securitization. The loan
is on the servicer watchlist due to low DSCR. Moody's LTV and
stressed DSCR are 152% and 0.76X, respectively, compared to 120%
and 0.97X at securitization.
JP MORGAN: Moody's Downgrades Ratings on 12 2007-CIBC20 Certs.
--------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 12 classes,
confirmed three classes and affirmed five classes of J.P. Morgan
Chase Commercial Mortgage Securities Corp. Commercial Mortgage
Pass-Through Certificates, Series 2007-CIBC20:
-- Cl. A-1, Affirmed at Aaa (sf); previously on Oct. 3, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-2, Affirmed at Aaa (sf); previously on Oct. 3, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on Oct. 3, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. X-2, Affirmed at Aaa (sf); previously on Oct. 3, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. X-1, Affirmed at Aaa (sf); previously on Oct. 3, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Confirmed at Aaa (sf); previously on Sept. 29, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-SB, Confirmed at Aaa (sf); previously on Sept. 29, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-1A, Confirmed at Aaa (sf); previously on Sept. 29, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-M, Downgraded to A1 (sf); previously on Sept. 29, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-MFL, Downgraded to A1 (sf); previously on Sept. 29,
2010 Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-J, Downgraded to Ba2 (sf); previously on Sept. 29, 2010
A2 (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to B1 (sf); previously on Sept. 29, 2010 A3
(sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to B2 (sf); previously on Sept. 29, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to B3 (sf); previously on Sept. 29, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Caa1 (sf); previously on Sept. 29, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to Caa2 (sf); previously on Sept. 29, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to Caa3 (sf); previously on Sept. 29, 2010
Ba2 (sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to Ca (sf); previously on Sept. 29, 2010 B1
(sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to C (sf); previously on Sept. 29, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to C (sf); previously on Sept. 29, 2010 B3
(sf) Placed Under Review for Possible Downgrade
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans. The affirmations are due to key
parameters, including Moody's loan to value ratio, Moody's
stressed debt service coverage ratio and the Herfindahl Index ,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain their current ratings.
On September 29, 2010, Moody's placed 15 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
10.6% of the current balance. At last full review, Moody's
cumulative base expected loss was 5.3%. Moody's stressed scenario
loss is 24.3% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the Excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
, a measure of loan level diversity, is a primary determinant of
pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior review is
summarized in a press release dated February 10, 2009.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the October 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 1% to $2.53 billion
from $2.56 billion at securitization. The Certificates are
collateralized by 136 mortgage loans ranging in size from less
than 1% to 12% of the pool, with the top ten loans representing
48% of the pool. One loan, representing 0.8% of the pool, has an
investment grade credit estimate. At last review, the Portola
Plaza Hotel Loan ($40.0 million -- 1.6% of the pool), also had a
credit estimate. However, the performance of this loan has
declined since last review and due to its increased leverage, the
loan is now analyzed as part of the conduit pool. The pool does
not contain any defeased loans.
Forty-one loans, representing 25% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Two loans have been liquidated from the pool since securitization,
resulting in an aggregate $5.5 million loss (85% loss severity on
average). Currently 16 loans, representing 9% of the pool, are in
special servicing. The largest specially serviced loan is the STF
Portfolio Loan ($49.0 million -- 1.9% of the pool), which is
secured by 19 industrial properties located in New Mexico (two
properties) and Texas (17). The loan was transferred to special
servicing in August 2010 due to monetary default and is currently
90+ days delinquent. The remaining 15 specially serviced loans
are secured by a mix of property types. The master servicer has
recognized an aggregate $50.1 million appraisal reduction for 13
of the specially serviced loans. Moody's has estimated an
aggregate loss of $92.6 million (49% expected loss on average) for
all of the specially serviced loans.
Moody's has assumed a high default probability for 20 poorly
performing loans representing 15% of the pool and has estimated a
$84.7 million loss (23% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 97%
of the performing pool. Excluding specially serviced and troubled
loans, Moody's weighted average LTV is 117% compared to 146% at
last review. Moody's net cash flow reflects a weighted average
haircut of 12% to the most recently available net operating
income. Moody's value reflects a weighted average capitalization
rate of 9.4%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.18X and 0.89X, respectively, compared to
1.00X and 0.74X at last full review. Moody's actual DSCR is based
on Moody's net cash flow and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 21 compared to 26 at Moody's prior review.
The loan with a credit estimate is the 1564 Broadway Loan
($19.2 million -- 0.8%), which is secured by a 52,657 square foot
office property located in New York, New York. Property
performance has improved since securitization. Moody's current
credit estimate and stressed DSCR are Baa2 and 1.53X,
respectively, compared to Baa3 and 1.39X at securitization.
The top three performing conduit loans represent 27% of the pool
balance. The largest loan is the Centro - New Plan Pool I Loan
($300.0 million -- 11.9%), which is secured by a portfolio of 18
retail properties that are cross-collateralized and cross-
defaulted and total 3.1 million square feet. The properties are
located in 12 states, with the largest concentrations in Georgia
(20%), Florida (14%) and Texas (13%). The portfolio was 91%
occupied as of December 2009 compared to 94% at last review.
Property performance has declined due to decreased rental income.
The loan has 23 months remaining in a 60-month interest only
period and will amortize on a 360-month schedule maturing in
September 2017. Moody's LTV and stressed DSCR are 125% and 0.78X,
respectively, compared to 128% and 0.79X at last review.
The second largest loan is the Gurnee Mills Loan ($246.0 million -
- 9.8%), which is a pari-passu interest in a $321.0 million first
mortgage loan. The loan is secured by the borrower's interest in
a 1.8 million square foot regional mall located in Gurnee,
Illinois. The mall's major tenants include Sears, Bass Pro Shops
Outdoor World and Kohl's. The property was 85% leased as of June
2010 compared to 91% at last review. Despite decreased occupancy,
property performance has improved since last review. The loan is
interest-only for its entire ten-year term maturing in July 2017.
Moody's LTV and stressed DSCR are 126% and 0.73X, respectively,
compared to 145% and 0.65X at last review.
The third largest loan is the North Hills Mall Loan
($141.2 million -- 5.6% of the pool), which is secured by
the borrower's interest in a 746,000 square foot mall located
in Raleigh, North Carolina. The property is situated within a
mixed-use development that includes residential condominiums,
commercial and hotel properties, a retirement community and
recreational amenities. The mall's major tenants include J.C.
Penney, Target (not part of the collateral) and Regal
Entertainment Group. The property also includes a 100,000
square foot office component. The collateral was 98% leased
as of March 2010, the same as at last review. Despite stable
occupancy and rental income, property performance has declined
since securitization due to high operating expenses. The loan
is on the master servicer's watchlist due to low DSCR. The loan
is interest-only for its entire ten-year term maturing in July
2017. Moody's considers this loan to have a high probability
of default and has identified it as a troubled loan. Moody's
LTV and stressed DSCR are 160% and 0.59X, respectively, compared
to 151% and 0.65X at last review.
JPMORGAN CHASE: S&P Downgrades Ratings on 10 2003-CIBC7 Notes
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 10
classes of commercial mortgage-backed securities from JPMorgan
Chase Commercial Mortgage Securities Corp.'s series 2003-CIBC7.
In addition, S&P affirmed its ratings on eight classes from the
same transaction.
The downgrades reflect current and potential interest shortfalls,
as well as credit support erosion S&P anticipates will occur upon
the eventual resolution of four of the pool's nine specially
serviced assets. As of the Oct. 12, 2010 remittance report, the
trust experienced interest shortfalls totaling $64,492. The
shortfalls were primarily due to appraisal subordinate entitlement
reduction amounts ($68,391) on four assets and special servicing
fees ($12,598). The current shortfall amount included a one-time
positive ASER adjustment ($46,300) relating to one of the loans.
If this adjustment was not made, the reported shortfall amount
would have been higher. S&P lowered its ratings on the class L,
M, and N certificates to 'D (sf)' as S&P expects interest
shortfalls affecting these classes to continue.
The affirmations of classes A-3, A-4, A1A, B, and C reflect
subordination levels that are consistent with the outstanding
ratings. The affirmations also reflect the liquidity available to
the securities. S&P affirmed its 'D (sf)' rating on the class P
certificate, which S&P lowered to 'D (sf)' on June 17, 2010,
following principal losses that were incurred at that time. S&P
affirmed its ratings on the class X1 and X2 interest-only
certificates based on S&P's current criteria.
S&P's analysis of this transaction also included a review of the
credit characteristics of all of the loans in the pool using its
U.S. conduit/fusion CMBS criteria. Using servicer-provided
financial information, S&P calculated an adjusted debt service
coverage of 1.63x and a loan-to-value ratio of 87.58%. S&P
further stressed the loans' cash flows under S&P's 'AAA' scenario
to yield a weighted average DSC of 1.34x and an LTV ratio of
109.39%. The implied defaults and loss severity under the 'AAA'
scenario were 25% and 46.4%, respectively. The DSC and LTV
calculations S&P noted above exclude four ($23.7 million; 2.65%)
of the nine specially serviced assets and 22 defeased loans
($153 million; 17.1%). S&P separately estimated losses for four
of nine specially serviced assets, which are included in the 'AAA'
scenario implied default and loss figures.
Credit Considerations
As of the Oct. 12, 2010, remittance report, eight loans
($64.8 million; 7.3%) in the pool were with the special servicer,
Midland Loan Services Inc. The payment status of the eight
specially serviced assets is: one loan ($11.8 million, 1.3%) is
REO, two loans ($9 million, 1.0%) are in foreclosure, two loans
($11.9 million, 1.33%) are 90 days delinquent, and one loan
($5.8 million, 0.65%) was not able to refinance at its expected
October 2010 maturity. The two remaining loans with the special
servicer ($26.3 million, 2.94%) are current. In addition, the
Farmer Jack Food Market loan ($4.4 million, 0.49%), which is 60
days delinquent, was transferred to the special servicer on
Oct. 7, 2010, subsequent to the cut-off date for the October
remittance report. Five appraisal reductions amounts totaling
$18.1 million are in effect on five of the specially serviced
loans.
The Versailles and Dana Point Apartments loan ($22.2 million;
2.5%) is the sixth-largest exposure in the pool secured by real
estate. The loan is secured by two apartment complexes built in
1986, together having 652 units, located in Dallas, Texas. The
loan was transferred to the special servicer on June 11, 2010, due
to payment default. According to the special servicer, the
limited partners of the borrowing entity have assumed control and
have indicated their ability to keep the loan current and complete
renovations at the properties. It is S&P's understanding that the
special servicer will prepare a case to approve change of property
manager and transfer of ownership interests. The loan has been
brought current through the October 2010 payment.
The University Gardens loan ($11.8 million, 1.33%) is the 10th-
largest exposure in the pool secured by real estate. The loan was
transferred to the special servicer in February 2007 due to
imminent default and is currently REO. The property consists of
an 80-unit student housing complex built in 2003 in Tallahassee,
Fla. The special servicer expects the asset to sell in the next
few months at an expected value, which would cause a substantial
loss to trust. The total exposure for this loan is $14,995,071,
which consists of $11.8 million of unpaid principal balance and
$3.1 million of advancing and interest thereon.
The Westgate Commons Shopping Center loan ($9.0 million, 1.01%) is
secured by a 90,000?sq.-ft. retail center built in 2002 in West
Fargo, N.D. The loan was transferred to the special servicer due
to payment default and is 90-plus-days delinquent. As of year-end
2009, the loan had reported a DSC of 0.48x. According to the
special servicer, the property has had recent lease signings,
which the special servicer expects to improve the financial
performance of the property. An ARA of $1.97 million is in affect
for this asset. The special servicer received a new appraisal,
which indicates a higher value for the property. As a result, the
special servicer lowered the ARA in effect for this asset, and the
master servicer made an ASER reimbursement of $46,300 during the
October 2010 remittance period. The special servicer is
negotiating a loan modification with the borrower.
The Heatherstone Apartments loan ($4.1 million, 0.46%) is a 152-
unit apartment complex in Dallas, Texas. The loan was transferred
to the special servicer on June 11, 2010. The loan has the same
borrowers as the Versailles and Dana Point Apartments loan, which
S&P discuss above. However, the two loans are not cross-
collateralized or cross-defaulted. The workout strategy for this
loan is the same as the Versailles and Dana Point Apartments, with
respect to the limited partners assuming control and bringing this
loan current for its past due payments.
The remaining five loans with the special servicer individually
represent less than 0.9% of the outstanding pool balance.
Standard & Poor's expects moderate losses upon the ultimate
resolution of three loans: the Desert Canyon loan ($7.2 million,
0.8%), the Appling Farms loan ($2.9 million, 0.3%), and the Erin
Medical Center loan ($1.7 million, 0.19%). The Drew Court loan
($5.7 million, 0.65%) is in the process of receiving a six-month
extension of maturity. The special servicer expects the Farmer
Jack Food Market loan ($4.3 million, 0.49%) to become current, as
A&P guarantees the lease for the current sole tenant at the
property.
Transaction Summary
As of the October 2010 remittance report, the transaction had
an aggregate trust balance of $893.6 million (158 loans),
compared with $1.472 billion (185 loans) at issuance. Twenty
two ($153 million, 17.1%) are defeased. The master servicer
provided full-year 2009 or 2008 financial information for 95%
of the nondefeased loans in the pool. S&P calculated a weighted
average DSC of 1.64x for the nondefeased loans in the pool based
on the reported figures. S&P's adjusted DSC and LTV were 1.63x
and 87.6%, respectively, and excluded four ($23.7 million; 2.65%)
of the nine specially serviced assets and 22 defeased loans
($153 million; 17.1%). S&P separately estimated losses for the
four specially serviced assets. S&P's adjusted DSC and LTV have
deteriorated since its last review in May 26, 2010. This is
primarily due to cash flow declines on the underlying loans.
Based on the most recent financial data available from the
servicer, 28 loans ($242 million, 27% of pool) experienced net
cash flow declines, some as high as 59%. In addition to the cash
flow declines, The Forum Shops loan ($144 million, 18.33%) was
paid off since S&P's last review, and is not included in its
current debt service calculations. This loan had an overall
reported DSC of 2.70x as of December 2009.
Thirty-three loans ($146.4 million, 16.4%) are on the master
servicer's watchlist, which includes the fourth-largest loan,
discussed below. Six loans ($26.1 million, 2.92%) have a reported
DSC between 1.0x and 1.1x, and 21 loans ($93.7 million, 10.5%)
have a reported DSC of less than 1.0x. The trust has experienced
six principal losses to date totaling $21.2 million.
Summary of Top 10 Loan Exposures
The top 10 loans secured by real estate have an aggregate
outstanding balance of $303.8 million (34.0%). Using servicer-
reported information, S&P calculated a weighted average DSC of
1.77x for the top 10 loans. S&P's adjusted DSC and LTV figures
for the top 10 loans were 1.71x and 95.3%, respectively. As of
the Oct. 12, 2010, remittance report, one loan appears on the
watchlist, which S&P discuss below.
The Colony Cove loan ($38.5 million; 4.3%) is the fourth-largest
nondefeased loan in the pool. The loan is secured by both fee and
leasehold interest in a mobile home park community consisting of
2,210 pads in Ellenton, Fla. The loan appeared on the master
servicer's watchlist due to an upcoming maturity on Nov. 1, 2010.
The master servicer has sent notification that the loan has paid
off as of Nov. 1, 2010.
Standard & Poor's analyzed the transaction according to its
current criteria. The lowered and affirmed ratings are consistent
with S&P's analysis.
Ratings Lowered
JPMorgan Chase Commercial Mortgage Securities Corp.
Commercial Mortgage Pass-Through Certificates series 2003-CIB7
Ratings
-------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
D A- (sf) A (sf) 10.80
E BBB- (sf) A- (sf) 9.05
F BB (sf) BBB+ (sf) 7.11
G BB- (sf) BBB (sf) 5.94
H B- (sf) BB+ (sf) 3.81
J CCC+(sf) BB- (sf) 3.23
K CCC- (sf) B (sf) 2.64
L D (sf) CCC (sf) 1.67
M D (sf) CCC- (sf) 0.70
N D (sf) CCC- (sf) 0.32
Ratings Affirmed
JPMorgan Chase Commercial Mortgage Securities Corp.
Commercial Mortgage Pass-Through Certificates series 2003-CIB7
Class Rating Credit enhancement (%)
----- ------ ----------------------
A-3 AAA (sf) 19.34
A-4 AAA (sf) 19.34
A1A AAA (sf) 19.34
B AA+ (sf) 15.46
C AA- (sf) 13.90
P D (sf) 0.00
X1 AAA (sf) N/A
X2 AAA (sf) N/A
N/A - Not applicable.
JPMORGAN-CIBC COMMERCIAL: S&P Cuts Ratings on Four 2006-RR1 Notes
-----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on four
classes of commercial mortgage-backed securities pass-through
certificates from JPMorgan-CIBC Commercial Mortgage-Backed
Securities Trust 2006-RR1, a U.S. resecuritized real estate
mortgage investment conduit transaction. At the same time,
S&P affirmed its 'D (sf)' ratings on eight classes from this
transaction.
The downgrades and affirmations primarily reflect S&P's analysis
following interest shortfalls to the transaction. S&P's analysis
also considered the potential for class A-1 to experience interest
shortfalls in the future.
S&P downgraded classes D through H to 'D (sf)' on June 29, 2010,
and classes J through L to 'D (sf)' on Jan. 26, 2010, to reflect
interest shortfalls that S&P expected to continue for the
foreseeable future.
According to the Oct. 21, 2010 trustee report, cumulative interest
shortfalls to the transaction totaled $3.7 million and affected
class A2 and the classes subordinate to it. The interest
shortfalls to JPM 2006-RR1 resulted from interest shortfalls on 16
of the underlying CMBS transactions, primarily due to special
servicing fees and appraisal subordinate entitlement reductions.
S&P lowered its ratings on classes B and C to 'D (sf)' due to
interest shortfalls experienced since March or April 2010 that S&P
expects will continue for the foreseeable future.
According to the Oct. 21, 2010, trustee report, JPM 2006-RR1 is
collateralized by 83 CMBS classes ($523.9 million, 100%) from 53
distinct transactions issued between 2002 and 2006. The rated
CMBS collateral has a weighted average rating of 'B+ (sf)' and a
rating range of 'A+ (sf)' to 'D (sf)'. The weighted average
credit estimate of the unrated CMBS collateral is 'ccc+'.
Standard & Poor's analyzed the transaction and its underlying
collateral assets according to its current criteria. S&P's
analysis is consistent with the lowered and affirmed ratings.
Ratings Lowered
JPMorgan-CIBC Commercial Mortgage-Backed Securities Trust 2006-RR1
Rating
------
Class To From
----- -- ----
A-1 CCC+ (sf) BB+ (sf)
A-2 CCC- (sf) B- (sf)
B D (sf) CCC- (sf)
C D (sf) CCC- (sf)
Ratings Affirmed
JPMorgan-CIBC Commercial Mortgage-Backed Securities Trust 2006-RR1
Class Rating
----- ------
D D (sf)
E D (sf)
F D (sf)
G D (sf)
H D (sf)
J D (sf)
K D (sf)
L D (sf)
LB-UBS COMMERCIAL: Moody's Reviews Ratings on 13 2004-C2 Certs.
---------------------------------------------------------------
Moody's Investors Service placed 13 classes of LB-UBS Commercial
Mortgage Trust 2004-C2, Commercial Mortgage Pass-Through
Certificates, Series 2004-C2 on review for possible downgrade:
-- Cl. D, Aa2 (sf) Placed Under Review for Possible Downgrade;
previously on March 13, 2007 Upgraded to Aa2 (sf)
-- Cl. E, A1 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 28, 2004 Definitive Rating Assigned A1
(sf)
-- Cl. F, A2 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 28, 2004 Definitive Rating Assigned A2
(sf)
-- Cl. G, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 28, 2004 Definitive Rating Assigned A3
(sf)
-- Cl. H, Baa1 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 28, 2004 Definitive Rating Assigned Baa1
(sf)
-- Cl. J, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 28, 2004 Definitive Rating Assigned Baa2
(sf)
-- Cl. K, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 28, 2004 Definitive Rating Assigned Baa3
(sf)
-- Cl. L, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on Sept. 28, 2004 Definitive Rating Assigned Ba1
(sf)
-- Cl. M, B1 (sf) Placed Under Review for Possible Downgrade;
previously on July 16, 2009 Downgraded to B1 (sf)
-- Cl. N, B2 (sf) Placed Under Review for Possible Downgrade;
previously on July 16, 2009 Downgraded to B2 (sf)
-- Cl. P, B3 (sf) Placed Under Review for Possible Downgrade;
previously on July 16, 2009 Downgraded to B3 (sf)
-- Cl. Q, Caa1 (sf) Placed Under Review for Possible Downgrade;
previously on July 16, 2009 Downgraded to Caa1 (sf)
-- Cl. S, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on July 16, 2009 Downgraded to Caa3 (sf)
The classes were placed on review due to higher expected losses
for the pool resulting from realized and anticipated losses from
specially serviced and troubled loans.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated July 16, 2009.
Deal And Performance Summary
As of the October 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 29% to $881 million
from $1.23 billion at securitization. The Certificates are
collateralized by 72 mortgage loans ranging in size from less than
1% to 17% of the pool, with the top ten loans representing 68% of
the pool.
Seventeen loans, representing 8% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Two loans have been liquidated from the pool, resulting in an
aggregate realized loss of $12.5 million (68% loss severity
overall). Eight loans, representing 5% of the pool, are currently
in special servicing. The specially serviced loans are secured by
a mix of multifamily, office, retail and self storage property
types.
Moody's review will focus on potential losses from specially
serviced and troubled loans and the performance of the overall
pool.
LB-UBS COMMERCIAL: Moody's Downgrades Ratings on 14 2006-C6 Notes
-----------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 14 classes and
affirmed eight classes of LB-UBS Commercial Mortgage Securities
Trust, Commercial Mortgage Pass-Through Certificates, Series 2006-
C6:
-- Cl. A-1, Affirmed at Aaa (sf); previously on Oct. 6, 2006
Assigned Aaa (sf)
-- Cl. A-2, Affirmed at Aaa (sf); previously on Oct. 6, 2006
Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on Oct. 6, 2006
Assigned Aaa (sf)
-- Cl. A-AB, Affirmed at Aaa (sf); previously on Oct. 6, 2006
Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on Oct. 6, 2006
Assigned Aaa (sf)
-- Cl. A-1A, Affirmed at Aaa (sf); previously on Oct. 6, 2006
Assigned Aaa (sf)
-- Cl. X-CL, Affirmed at Aaa (sf); previously on Oct. 6, 2006
Assigned Aaa (sf)
-- Cl. X-CP, Affirmed at Aaa (sf); previously on Oct. 6, 2006
Assigned Aaa (sf)
-- Cl. A-M, Downgraded to Aa1 (sf); previously on Oct. 5, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-J, Downgraded to Baa2 (sf); previously on Oct. 5, 2010
Aa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to Baa3 (sf); previously on Oct. 5, 2010 A1
(sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to Ba2 (sf); previously on Oct. 5, 2010 A2
(sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to B1 (sf); previously on Oct. 5, 2010 A3
(sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to B2 (sf); previously on Oct. 5, 2010 Baa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to Caa1 (sf); previously on Oct. 5, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to Caa2 (sf); previously on Oct. 5, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to Caa3 (sf); previously on Oct. 5, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to Ca (sf); previously on Oct. 5, 2010 Ba2
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to Ca (sf); previously on Oct. 5, 2010 Ba3
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to C (sf); previously on Oct. 5, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to C (sf); previously on Oct. 5, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. N, Downgraded to C (sf); previously on Oct. 5, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans and concerns about refinance risk in
an adverse environment. Fifty-five loans, representing 14% of the
pool, mature within the next 12 months. Fifty-one of these loans,
representing 12.8% of the pool, have a Moody's stressed debt
service coverage ratio less than 1.0X.
The affirmations are due to key parameters, including Moody's loan
to value ratio, Moody's stressed DSCR and the Herfindahl Index,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain their current ratings.
On October 5, 2010, Moody's placed 14 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
7.9% of the current balance. At last full review, Moody's
cumulative base expected loss was 1.0%. Moody's stressed scenario
loss is 19.3% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the Excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 21 compared to 33 at Moody's prior review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior review is
summarized in a press release dated February 11, 2009.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the October 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 2% to $2.98 billion
from $3.05 billion at securitization. The Certificates are
collateralized by 199 mortgage loans ranging in size from less
than 1% to 13% of the pool, with the top ten loans representing
52% of the pool. The pool does not contain any defeased loans.
Five loans, representing 19% of the pool, have investment grade
credit estimates. At securitization, an additional three loans
also had credit estimates. However, due to performance declines
and increased leverage the loans no longer have credit estimates
and are analyzed as part of the conduit pool. One of those loans,
the 125 High Street Loan, is now the largest conduit loan and is
discussed below. The other two loans are the Westfield
Chesterfield loan ($140.0 million -- 4.7%) and the Greenbrier Mall
loan ($80.1 million -- 2.7%).
Fifty-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 monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Four loans have been liquidated from the pool since
securitization, resulting in an aggregate $13.7 million loss (68%
loss severity on average). Currently 13 loans, representing 6% of
the pool, are in special servicing. The largest specially
serviced loan is the Haverhill Apartments Loan ($45.6 million --
1.5% of the pool), which is secured by a 350-unit multifamily
property located in Manassas Park, Virginia. The loan was
transferred to special servicing in October 2009 due to imminent
default and is currently real estate owned. The remaining 12
specially serviced loans are secured by a mix of property types.
The master servicer has recognized appraisal reductions totaling
$41.4 million for 11 of the specially serviced loans. Moody's has
estimated an aggregate loss of $68.9 million (41% expected loss on
average) for all of the specially serviced loans.
Moody's has assumed a high default probability for 12 poorly
performing loans representing 6% of the pool and has estimated a
$69.2 million loss (37% expected loss based on a 75% probability
default) from these troubled loans.
Moody's was provided with full year 2009 and partial year 2010
operating results for 97% and 89% of the performing pool,
respectively. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 110% compared to 135% 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
9.1%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.28X and 0.94X, respectively, compared to
1.01X and 0.77X at last full review. Moody's actual DSCR is based
on Moody's net cash flow and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
The largest loan with a credit estimate is the 1211 Avenue of the
Americas Loan ($400.0 million -- 13.4%), which is a pari-passu
interest in a $675.0 million first mortgage loan. The loan is
secured by 1.9 million square foot office property built in 1973,
renovated in 2006 and located in midtown Manhattan, New York. The
largest tenants are News America Publishing Inc (55% of the net
rentable area; lease expiration November 2020) and Ropes & Gray
LLP (14% of the NRA; lease expiration March 2027). The building
was 95% leased as of June 2010 compared to 99% at securitization.
Despite decreased occupancy, property performance has been stable.
The loan is interest-only during its entire 10-year term maturing
in September 2016. Moody's current credit estimate and stressed
DSCR are Baa3 and 1.15X, respectively, compared to Baa3 and 1.03X
at securitization.
The remaining four loans with credit estimates comprise 3.5% of
the pool. The Park Square Building Loan ($71.2 million -- 2.4% of
the pool) is secured by a 495,708 square foot office building
located in downtown Boston's Back Bay submarket. Its underlying
rating is Baa3, the same as at securitization. The Sheraton Sand
Key Hotel Loan ($16.2 million -- 0.5%), is secured by a 390-room
full-service hotel located in Clearwater, Florida. Property
performance has declined as the hotel market has been affected by
the economic downturn. The loan has a credit estimate of Baa1
compared to A2 at securitization. The Naples Walk I, II, & III
Loan ($9.8 million -- 0.3%) is secured by a 126,490 square foot
retail anchored property located in Naples. Florida. Its credit
estimate is A3, the same as at securitization. The 1155 Avenue of
the Americas Loan ($7.6 million -- 0.3%) is a pari-passu interest
in a $60.7 million first mortgage loan secured by a 739,261 square
foot office property located in New York, New York. Its credit
estimate is Aa2, the same as at securitization.
The top three performing conduit loans represent 22% of the
pool balance. The largest loan is the 125 High Street Loan
($340.0 million -- 11.4%), which is secured by a 1.5 million
square foot office property located in downtown Boston,
Massachusetts. The property was 85% leased as of June 2010,
similar to securitization. The loan is interest only throughout
its entire 10-year term maturing in August 2016. Property
performance has improved since securitization but the property has
not achieved Moody's original projections. Moody's LTV and
stressed DSCR are 80% and 1.11X, respectively, compared to 71% and
1.25X at securitization.
The second largest loan is The Shops at Las Americas Loan
($180.0 million -- 6.0%), which is secured by a 561,426 square
foot outlet mall located in San Diego, California. The mall's
major tenants include Last Call by Neiman Marcus, Nike Factory
Store and Old Navy. The property was 96% leased as of June 2010
compared to 98% at last review. Property performance has declined
due to increased expenses and decreased expense reimbursements.
The loan has 31 months remaining in an 84-month interest-only
period before amortizing on a 360-month schedule maturing in June
2016. Moody's LTV and stressed DSCR are 137% and 0.69X,
respectively, compared to 127% and 0.74X at last review.
The third largest loan is the StorageMart Portfolio Loan
($142.8 million -- 4.8% of the pool), which is secured by a
portfolio of 28 self storage properties that are cross-
collateralized and cross-defaulted and total 2.0 million square
feet. The properties are located in eight states, with the
largest concentrations in Missouri (30%) and Kansas (23%). The
portfolio is currently 72% leased and six of the loans are on the
servicer's watchlist due to low DSCR and occupancy. Property
performance remains stable and the loan has amortized 2% since
last review. The loan matures in June 2011. Moody's LTV and
stressed DSCR are 117% and 0.85X, respectively, compared to 123%
and 0.89X at last review.
LEHMAN ABS: S&P Downgrades Rating on Class A-2 Certs. to 'D'
------------------------------------------------------------
Standard & Poor's Ratings Services lowered its rating on the class
A-2 certificates issued by Lehman ABS Manufactured Housing
Contract Trust 2001-B to 'D (sf)' from 'CC (sf)'. The downgrade
of the class A-2 certificates reflects the nonpayment of full
principal to investors by Nov. 15, 2010, the certificate's stated
final distribution date. Standard & Poor's ratings reflect the
probability of default of timely interest each month and full
principal by the certificate's stated final distribution date or
legal final distribution date.
Due to cumulative net losses that have been higher than initially
expected, the transaction is not generating enough collections
each month to pay the complete scheduled principal amount due to
all outstanding class A certificates as per the transaction
documents. As such, all class A certificates have accumulated an
unpaid principal shortfall. According to the transaction
documents, the payment waterfall specifies that prior to the
normal sequential principal payment distribution, any unpaid
principal shortfall amount is to be paid pro rata amongst all the
class A certificates that are still outstanding. Accordingly, the
class A-2 certificates are receiving an amount that is equal to
their pro rata share of available monthly collections.
Over the past 12 months, principal payments to the class A-2
certificates have been averaging approximately $115,000 per month.
The class A-2 certificates had an outstanding principal balance of
approximately $7.9 million as of the November 2010 distribution
period. As such, the class A-2 certificates were not paid in full
by their stated final maturity date.
LEGG MASON: Moody's Takes Rating Actions on Various Classes
-----------------------------------------------------------
Moody's has affirmed three and downgraded two classes of Notes
issued by Legg Mason Real Estate CDO II, Corp., due to the
deterioration in the credit quality of the underlying portfolio as
evidenced by an increase in the weighted average rating factor,
the current level of Defaulted Securities, and the sensitivity of
the transaction to recovery rates. The rating action is the
result of Moody's on-going surveillance of commercial real estate
collateralized debt obligation transactions.
Issuer: Legg Mason Real Estate CDO II, Corp.
-- Cl. A-1T, Affirmed at Aaa (sf); previously on April 20, 2009
Confirmed at Aaa (sf)
-- Cl. A-1R, Affirmed at Aaa (sf); previously on April 20, 2009
Confirmed at Aaa (sf)
-- Cl. A-2, Affirmed at Aa2 (sf); previously on April 20, 2009
Downgraded to Aa2 (sf)
-- Cl. B, Downgraded to Baa3 (sf); previously on April 20, 2009
Downgraded to Baa1 (sf)
-- Cl. C, Downgraded to Caa1 (sf); previously on April 20, 2009
Downgraded to Ba2 (sf)
Ratings Rationale
Legg Mason Real Estate CDO II, Corp., is a revolving cash CRE CDO
transaction backed by a portfolio of whole loans (78.4% of the
pool balance), commercial mortgage backed securities (11.2%), CRE
CDO debt (4.9%), B-note debt (2.8%), and mezzanine debt (2.8%).
As of the October 25, 2010 Trustee report, the aggregate Note
balance of the transaction, including Income Notes and the Class
A-1R Undrawn Amountis $525 million, the same as at issuance, while
the transaction is passing all Principal Coverage Ratio and
Interest Coverage Ratio tests.
There are nine assets with par balance of $94.3 million (17.0% of
the current pool balance) that are classified as Defaulted
Securities as of the October 25, 2010 Trustee report. Moody's
expects meaningful losses from those Defaulted Securities to occur
once they are realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation . These parameters are typically modeled as actual
parameters for static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's have completed updated credit estimates for the non-
Moody's rated collateral. For non-CUSIP collateral, Moody's is
eliminating the additional default probability stress applied to
corporate debt in CDOROM(R) v2.6 as Moody's expect the underlying
non-CUSIP collateral to experience lower default rates and higher
recovery compared to corporate debt due to the nature of the
secured real estate collateral. The bottom-dollar WARF is a
measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF of 6,763 (including Defaulted
Securities) compared to 3,089 at last review. The distribution of
current ratings and credit estimates is: Aaa-Aa3 (2.5% compared to
2.2% at last review), A1-A3 (5.8% compared to 3.5% at last
review), Baa1-Baa3 (5.0% compared to 4.7% at last review), Ba1-Ba3
(0.9% compared to 0.0% at last review), B1-B3 (7.6% compared to
89.4% at last review), and Caa1-C (78.2% compared to 0.2% at last
review).
WAL acts to adjust the probability of default of the reference
obligations in the pool for time. Moody's modeled to a WAL of 2.8
years compared to 7.5 years at last review. Moody's are modeling
the actual remaining WAL of the collateral pool in the current
review.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a fixed WARR
of 51.0% (excluding Defaulted Securities) compared to 53.9% at
last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity). For
non-CUSIP collateral, Moody's is reducing the maximum over
concentration stress applied to correlation factors due to the
diversity of tenants, property types, and geographic locations
inherent in the pooled transactions. Moody's modeled a MAC of
10.9% compared to 23.0% at last review. The lower MAC is due to
the greater ratings dispersion of the collateral pool.
Moody's review incorporated CDOROM(R) v2.6, one of Moody's CDO
rating models, which was released on May 27, 2010.
The cash flow model, CDOEdge(R) v3.2, was used to analyze the cash
flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 51.0% to 40.8% or up to 61.2% would result in average
rating movement on the rated tranches of 0 to 9 notches downward
or 0 to 8 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expect
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
LNR CFL: S&P Raises Ratings on Four Classes of Notes
----------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on four
classes from LNR CFL 2004-1 Ltd., a commercial real estate
collateralized debt obligation transaction. At the same time,
S&P affirmed its ratings on three other classes from the same
transaction.
The raised and affirmed ratings reflect increased credit
enhancement, the liquidity available to the rated securities, and
S&P's analysis of both the transaction structure and the
underlying collateral.
The collateral for LNR CFL 2004-1 Ltd. consists of the class I
certificates from Structured Asset Securities Corp. series 1996-
CFL (not rated), a U.S. commercial mortgage-backed securities
transaction.
S&P's analysis included a review of the credit characteristics of
the remaining loans in SASCO 1996-CFL, as well as a review of the
transaction structure and the liquidity available to the class I
certificates.
Using servicer-provided financial information, Standard & Poor's
calculated an adjusted debt service coverage of 1.09x and a loan-
to-value ratio of 42.2%.
Transaction Summary
As of the Oct. 25, 2010, remittance report for SASCO 1996-CFL, the
aggregate trust balance was $46.1 million, which represents 2.4%
of the aggregate trust balance at issuance. There are 16 loans
remaining, down from 564 at issuance. The master servicer for the
transaction, Midland Loan Services Inc., provided financial
information for 51.2% of the loans, which was all full-year 2009
data. The lack of financial information for 48.8% of the loans
was a consideration in S&P's rating analysis.
S&P calculated a weighted average DSC of 1.36x for the transaction
based on the reported figures. S&P's adjusted DSC and LTV were
1.09x and 42.2%, respectively. As of the Oct. 25, 2010,
remittance report, no assets are reported to be with the special
servicer, LNR Partners Inc. To date, SASCO 1996-CFL has realized
principal losses of $44.2 million on 22 loans.
Credit Considerations
Five loans ($10.3 million, 22.3%) are on the master servicer's
watchlist for SASCO 1996-CFL. Details of all five watchlist loans
are:
The River Edge Apartments loan is the fourth-largest loan and the
largest loan on the watchlist with a balance of $4 million (8.6%).
The loan is secured by a 306-unit multifamily property in Ewing
Township, N.J. The property was constructed in 1976 and the
reported DSC was 1.09x for year-end 2009. The loan appears on the
watchlist due to a decline in DSC. The Kmart Store 4895 loan is
the sixth-largest loan and the second-largest loan on the
watchlist with a balance of $2.1 million (4.7%). The loan is
secured by a 91,266?sq.-ft. retail property constructed in 1992 in
Ionia, Mich. The loan appears on the watchlist because Kmart has
vacated the property. Kmart continues to make payments under a
lease expiring in September 2017.
The Kmart Store 4735 and Kmart Store 4704 loans are the third- and
fourth-largest loans on the watchlist, with an aggregate balance
of $3.8 million (8.2%). Both loans appear on the watchlist
because the respective borrowers have not submitted financial
statements. Kmart Store 4735 is a 91,266 sq.-ft. retail property
in Mitchell, S.D., while Kmart Store 4704 is a 86,479-sq.-ft.
retail property in Devils Lake, N.D. Per inspection reports
provided by the master servicer, Kmart occupies both properties.
The South Plainfield Fidelco loan is the smallest loan on the
watchlist with a balance of $380,368. The loan is secured by a
92,104?sq.-ft. warehouse property in South Plainfield, N.J. The
loan appears on the watchlist due to a decline in DSC (1.03x for
year-end 2009). In addition, the property inspection report noted
the property to be in fair condition.
S&P's analysis also considered the transaction's significant
exposure to Kmart. Of the top 10 loans for SASCO 1996-CFL, four
loans ($20.3 million, 44.1%) are secured by properties leased
entirely by Kmart, while the largest tenant (96.7% of the net
rentable area) occupying the property securing the eighth-largest
loan ($1.9 million, 4.1%) is also Kmart. Kmart has vacated the
property securing the sixth-largest loan ($2.1 million, 4.7%) as
detailed above.
Summary of Top 10 Loans
The top 10 loans for SASCO 1996-CFL have an aggregate outstanding
balance of $39.7 million (86.1%). Using servicer-reported
numbers, S&P calculated a weighted average DSC of 1.41x for the
top 10 loans. Financial information was not provided for four
($21.0 million, 45.6%) of the top 10 loans. S&P's adjusted DSC
and LTV for the top 10 loans were 1.08x and 43.5%, respectively.
Details regarding two of the top 10 exposures are:
The Kmart Distribution Center loan ($14.4 million, 31.2%) is the
largest loan. The loan is secured by a 1.6 million?sq.-ft.
warehouse property in Ocala, Fla. Kmart occupies the property
under a lease that expires in January 2016. Financial information
was not provided for the loan. The Center Stage at Oak Ridge loan
($1.9 million, 4.1%) is the eighth-largest loan. The loan is
secured by a 107,806?sq.-ft. retail property in Oak Ridge, Tenn.
Kmart is the largest tenant in the property occupying 104,231 sq.
ft. under a lease expiring in March 2017. For year-ended 2009,
reported DSC was 1.25x.
Standard & Poor's stressed the collateral according to its
criteria. The resultant credit enhancement levels are consistent
the raised and affirmed ratings.
Ratings Raised
LNR CFL 2004-1 Ltd.
CMBS resecuritization notes
Rating
------
Class To From
----- -- ----
I-7 AA+ (sf) BBB+ (sf)
I-8 A+ (sf) BBB (sf)
I-9 BBB+ (sf) BBB- (sf)
I-10 BBB- (sf) BB+ (sf)
Ratings Affirmed
LNR CFL 2004-1 Ltd.
CMBS resecuritization notes
Class Rating
----- ------
I-11 BB (sf)
I-12 BB- (sf)
I-13 B+ (sf)
LONG GROVE: Moody's Upgrades Ratings on Various Classes of Notes
----------------------------------------------------------------
Moody's Investors Service announced that it has upgraded the
ratings of these notes issued by Long Grove CLO Ltd.:
-- US$319,400,000 Class A Senior Secured Floating Rate Notes Due
2016 (current balance of $222,543,450), Upgraded to Aa1 (sf);
previously on September 15, 2009 Downgraded to Aa3 (sf);
-- US$29,000,000 Class B Second Priority Deferrable Floating
Rate Notes Due 2016, Upgraded to Baa3 (sf); previously on
September 15, 2009 Downgraded to Ba1 (sf);
-- US$17,800,000 Class C Third Priority Deferrable Floating Rate
Notes Due 2016, Upgraded to B1 (sf); previously on
September 15, 2009 Downgraded to B2 (sf);
-- US$11,000,000 Class D Fourth Priority Deferrable Floating
Rate Notes Due 2016, Upgraded to Caa3 (sf); previously on
September 15, 2009 Downgraded to Ca (sf).
Ratings Rationale
According to Moody's, the rating actions taken on the notes result
primarily from the delevering of the Class A Notes, which have
been paid down by approximately 29% or $90.5 million since the
last rating action in September 2009. As a result of the
delevering, the overcollateralization ratios have increased since
the last rating action in September 2009. As of the latest
trustee report dated October 15, 2010, the Class A, Class B, Class
C and Class D overcollateralization ratios are reported at
128.83%, 113.97%, 106.44% and 102.89%, respectively, versus August
2009 levels of 115.97%, 106.14%, 100.84% and 97.80%, respectively,
and all related overcollateralization tests are currently in
compliance.
Moody's notes that the deal has benefited from improvement in the
credit quality of the underlying portfolio since the last rating
action. Based on the October 2010 trustee report, the weighted
average rating factor is 2832 compared to 2957 in August 2009, and
securities rated Caa1 and below make up approximately 13% of the
underlying portfolio versus 18% in August 2009. The deal also
experienced a decrease in defaults. In particular, the dollar
amount of defaulted securities has decreased to about $10 million
from approximately $23 million in August 2009.
Moody's also assessed the collateral pool's elevated concentration
risk in a small number of obligors and industries. This includes
a significant concentration in debt obligations of companies in
the banking, finance, real estate, and insurance industries, which
Moody's views to be more strongly correlated in the current market
environment.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" and "Annual Sector Review (2009): Global CLOs," key
model inputs used by Moody's in its analysis, such as par,
weighted average rating factor, diversity score, and weighted
average recovery rate, may be different from the trustee's
reported numbers. In its base case, Moody's analyzed the
underlying collateral pool to have a performing par balance,
including principal proceeds, of $285.78 million, defaulted par of
$12.33 million, weighted average default probability of 23.94%
(implying a WARF of 3700), a weighted average recovery rate upon
default of 44.21%, and a diversity score of 67. 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.
Long Grove CLO Ltd., issued in June 2004, is a collateralized loan
obligation backed primarily by a portfolio of senior secured
loans.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in August 2009.
In addition to the base case analysis described above, Moody's
also performed a number of sensitivity analyses to test the impact
on all rated notes, including these:
1. Various default probabilities to capture potential defaults in
the underlying portfolio.
2. A range of recovery rate assumptions for all assets to capture
variability in recovery rates.
A summary of the impact of different default probabilities
(expressed in terms of WARF levels) on all rated notes (shown in
terms of the number of notches' difference versus the current
model output, whereby a positive difference corresponds to lower
expected losses), assuming that all other factors are held equal:
Moody's Adjusted WARF -- 20% (2960)
-- Class A: +1
-- Class B: +2
-- Class C: +2
-- Class D: +3
Moody's Adjusted WARF + 20% (4440)
-- Class A: -1
-- Class B: -1
-- Class C: -3
-- Class D: -1
A summary of the impact of different recovery rate levels on all
rated notes (shown in terms of the number of notches' difference
versus the current model output, whereby a positive difference
corresponds to lower expected losses), assuming that all other
factors are held equal:
Moody's Adjusted WARR + 2% (46.21%)
-- Class A: +1
-- Class B: 0
-- Class C: 0
-- Class D: 0
Moody's Adjusted WARR - 2% (42.21%)
-- Class A: 0
-- Class B: 0
-- Class C: -1
-- Class D: -1
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2012 and
2014 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the managers'
investment strategies and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties:
1) Delevering: The main source of uncertainty in this transaction
is whether delevering from unscheduled principal proceeds will
continue and at what pace. Delevering may accelerate due to
high prepayment levels in the loan market and/or collateral
sales by the manager, which may have significant impact on the
notes' ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of
recoveries and the manager's decision to work out versus
selling defaulted assets create additional uncertainties.
Moody's analyzed defaulted recoveries assuming the lower of the
market price and the recovery rate in order to account for
potential volatility in market prices.
3) Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation
risk on those assets. Moody's assumes an asset's terminal
value upon liquidation at maturity to be equal to the lower of
an assumed liquidation value (depending on the extent to which
the asset's maturity lags that of the liabilities) and the
asset's current market value.
MAGNOLIA FINANCE: S&P Withdraws 'CCC+' Rating to 2006-6A1 Notes
---------------------------------------------------------------
Standard & Poor's Ratings Services withdrew its 'CCC+ (sf)' rating
on the notes issued by Magnolia Finance II PLC's series 2006-6A1,
a synthetic collateralized debt obligation transaction.
S&P withdrew the rating following the repurchase and subsequent
cancellation of the notes.
MASTER SETTLEMENT: S&P Downgrades Ratings on 51 Classes
-------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 51
classes from 16 tobacco settlement-backed securitizations backed
by payments from participating tobacco manufacturers under the
Master Settlement Agreement. In addition, S&P affirmed its
ratings on 71 tranches from 24 transactions. S&P removed all of
these ratings from CreditWatch with negative implications and
assigned them negative outlooks.
The downgrades and affirmations followed S&P's revisions of the
base-case and stress-case assumptions S&P used in the cash flow
stress scenarios for these deals. The negative outlooks reflect
S&P's view that these deals may face significant industry and
litigation event risks in the next several years. The negative
outlooks reflect S&P's opinion that these deals will likely face
significant industry and litigation event risks in the next
several years.
Tobacco securitizations are backed by payments made by the
participating tobacco manufacturers under the MSA, which was
signed in 1998. The PMs are designated either as original
participating manufacturers or subsequent participating
manufacturers. Under the MSA, the PMs are required to make
payments to each state annually, in perpetuity. After the
agreement was signed, many state and local governments sold all or
a portion of their rights to receive future settlement proceeds to
investors in exchange for a payment at the time of the sale.
The ratings actions address the status of each of the tranches
placed on CreditWatch with negative implications on Aug. 4, 2010.
Under the most recent criteria update, Standard & Poor's revised
its base-case assumptions ('B' rating case) and stress-case
assumptions (higher than a 'B' rating) for factors that affect the
amount of money available to pay interest and principal on the
outstanding securities. The changes included:
Nonparticipating manufacturer adjustment -- S&P updated S&P's
assumptions regarding the magnitude and duration of disputed
amounts.
Volume decline assumptions for U.S. cigarette sales -- S&P
estimates that cigarette sales volume will decline another
1.5% to 2.5% in 2010 in addition to the base-case assumption
of 3.5%, primarily as a continued effect of the federal excise
tax increase last year. Market share assumptions for domestic
cigarette manufacturers -- S&P revised its base-case market
share assumptions: 83% for OPMs, 10% for SPMs, and 7% for NPMs.
S&P expects this market share allocation for domestic cigarette
manufacturers will remain relatively stable at this level for
the next three to four years. Reinvestment income assumptions --
S&P give full credit for rates specified in transaction documents.
Otherwise S&P assumes 0.03% in year one, 0.25% in year two, 0.4%
in year three, 0.5% in year four, 0.65% in year five, and 0.75% in
year six and thereafter.
Each of the adjustments to the criteria mentioned above reflect
Standard & Poor's views regarding U.S. cigarette shipment volume
changes and market share assumptions for different domestic
cigarette manufacturers under different rating scenarios. In
S&P's view, these assumptions largely determine the cash flow
projections that the tobacco settlement-backed securitizations
receive.
Methodology And Cash Flow Analysis
Standard & Poor's ran cash flow models for each transaction under
various stress scenarios. As part of this analysis, S&P applied
sensitivity analysis to these three cash flow stress tests:
cigarette volume decline test, the participating manufacturer
bankruptcy test, and the NPM adjustment liquidity test. S&P
affirmed its ratings on tranches that demonstrated the ability to
make timely interest and principal payments under stress scenarios
commensurate with their current ratings. S&P lowered its ratings
on transactions that were unable to make timely interest and
ultimate principal payments even under the less stressful of the
range of assumptions for a specific rating level.
The classes S&P downgraded below investment-grade were more
sensitive to S&P's current cash flow assumptions. In addition,
S&P believes these classes rely more heavily on more favorable
industry conditions and the outcomes of events that are difficult
to predict, such as the NPM adjustment dispute resolution. S&P
believes the NPM adjustment dispute will eventually be resolved
and S&P stated its view of the estimated timing of the resolution
and the recovery amount in its Aug. 4, 2010, criteria article;
however, some of the tranches rely heavily on the outcome of this
dispute, and, in S&P's view, this sensitivity is not consistent
with its definition of an investment-grade rating. Most of the
capital appreciation bonds in these deals were downgraded to the
'B' rating level.
Notable Events
Standard & Poor's also noted several occurrences in 2009 and 2010
that affected the performance of tobacco-settlement backed
securities to varying degrees. The first is the bankruptcy of
General Tobacco. General Tobacco, based in Mayodan, N.C., was a
maker of lower-priced cigarettes that became the sixth-largest
U.S. tobacco company during the past decade. General Tobacco
joined MSA in 2004, six years after it was signed by major tobacco
companies, and agreed to make payments to the states for the
ongoing sales. However, it failed to make its MSA payment in the
amount of $86.9 million (about 1.2% of the MSA payment due)
earlier this year and subsequently shut down its operations. Its
share of the domestic cigarette market was approximately 1%.
S&P expects its market share will be assumed by other tobacco
manufacturers, most likely by NPMs and SPMs, which typically focus
more on discount brand cigarettes.
Another factor was a one-time release from the NPM disputed
account by tobacco manufacturers of approximately $540 million in
2009 to the states to advance resolution of the dispute. This
money was distributed to the states last year and, in many cases,
was used to pay down outstanding principal of the existing deals.
In addition, the actual rate of inflation, measured by using the
Consumer Price Index for all urban consumers, of approximately 4%
in 2008 exceeded the 3% rate that had been modeled initially. The
actual rate has an impact on the cash flows (it is used in the
inflation adjustment calculation) not only in that particular year
but also on the cash flow available for the transactions in coming
years. The rate essentially shifts the projection curve rather
than just one point in the projection.
Description of Select Transactions
The NPM disputed settlement payment and higher inflation did not,
however, offset the steep volume decline in cigarette shipments.
The cash flows available for the transactions, especially those
originated in 2007, were sensitive to the actual volume declines
in cigarette consumption during the year 2008 and 2009 and the
revision in S&P's cash flow assumptions. The 2007 deals were
typically structured to withstand approximately 4% breakeven
decline in consumption volume for the life of the transactions.
However, during the years 2008 and 2009 the actual declines were
3.8% and 9.3%, respectively. Therefore, the payments in these
transactions fell behind their original projections and some of
the transactions were not able to adhere to their sinking fund
schedules in 2010. S&P's ratings, however, do not address
transactions' ability to make scheduled sinking fund payments.
Failure to make sinking fund payments does not constitute an event
of default according to the transactions' documents.
Even though some transactions were structured similarly, there are
important differences. For example, Buckeye Tobacco Settlement
Financing Authority, Golden State Tobacco Securitization Corp.,
and Tobacco Settlement Financing Corp. ("New Jersey") were
originated in 2007, and all three transactions have serial
maturity bonds, sinking fund turbo bonds, and capital appreciation
bonds in their structures. Typically, serial maturity bonds
represent a small percentage of a total structure, and the cash
flow outputs for these securities do not exhibit high sensitivity
to the change in assumptions or a one-time steep decline in
cigarette consumption because these transactions have a sizable
reserve accounts generally available to cover expenses, interest
payments, and payments at maturity. Sinking fund turbo bonds, on
the other hand, represent about 93%-96% of the currently
outstanding senior bonds in these transactions. Within sinking
fund turbo bonds, each tranche size, legal maturity, and the
amount of room for deviation from initial projections would play a
role in the projected performance for these securitizations. For
instance, Buckeye's class 2007A-2 bonds, maturing in 2024, were
structured with the expected maturity of approximately one year
before its legal maturity with a 4% decline in cigarette
consumption according to the initial projections. Golden State's
class 2007A-1 bonds, maturing in 2027, and New Jersey's class
2007-1A bonds, maturing in 2023, would have an expected maturity
of approximately four and three years before their legal
maturities, respectively, with the same 4% volume decline
assumptions. Therefore, due to the structural peculiarities of
each security, some tranches still could withstand S&P's higher
stresses while others could not. In S&P's analysis, S&P also took
into consideration qualitative factors that are not necessarily
captured by its cash flow runs. For example, even though the cash
flow outputs for a tranche with maturity date 30 to 35 years from
might suggest slightly stronger results than for a tranche
maturing in 12 to 15 years within the same structure, the longer
tenor to maturity, in S&P's view, increases uncertainty of the
performance and increases a probability of an event risk.
Some of the transactions that originated in the early to mid 2000s
benefited from the turbo redemption feature present in some of
these securitizations. The turbo redemptions helped these
securitizations to amortize their liabilities down more rapidly
when volume decline in cigarette consumption was more normalized
and tobacco manufacturers' market share was relatively stable.
Therefore, these transactions were able to build a cushion against
the recent steep volume declines, which allowed these deals to
withstand S&P's stress scenarios with more conservative
assumptions. The deals that originated in 2006 and 2007, however,
did not have an opportunity to amortize down at a faster pace
because there was a period of steeper volume decline in cigarette
consumption almost immediately after origination.
Tobacco settlement revenues receipts to California counties are
based on relative population share, which is adjusted every 10
years based on the U.S. Decennial Census. Most of the TSRs for
each of the California counties were based on the 2000 census,
entitling each county to a determined percentage of the state's
total TSR receipts through the release of the 2010 census in 2011.
There are currently six non-defeased transactions originated by
the California counties and city of San Diego: California County
Tobacco Securitization Agency (Gold Country Settlement Funding
Corp.), The California County Tobacco Securitization Agency (Kern
County Tobacco Funding Corp.), California County Tobacco
Securitization Agency (Fresno County Tobacco Funding Corp.),
Tobacco Securitization Corp. of Northern California (Sacramento
County Tobacco Securitization Corp.), Tobacco Securitization
Authority Of Southern California (San Diego), and California
County Tobacco Securitization Agency (Sonoma County Securitization
Corp.). Although the census data for 2009 indicates the
population of each of the counties and city of San Diego was
between 2.7% and 40.3% higher than it was in 2000, the overall
population of the state grew as well by approximately 9.1% during
that period. The percentage of the MSA payments that each county
is entitled to is determined by each county's population as a
percentage of the total population of the state. Standard &
Poor's will continue monitoring these transactions closely to
determine the effect, if any, of the reset percentage of the MSA
payments available for each county as a result of the 2010 census
data that is expected to be released in 2011.
New York Counties Tobacco Trust IV issued the bonds pursuant to an
indenture, between and among each of the 10 tobacco asset
securitization corporations and trustee. The bonds represent a
direct pass-through interest in corresponding tobacco settlement
asset-backed bonds issued by 10 TASCs on behalf of their
respective counties in New York State. Due to the pass-through
nature of the structure, the obligations of each of the 10
counties are several, not joint, and the underlying bonds are not
subject to cross default. All of the 10 TASCs pledged 100% of
their TSRs. The TSRs acquired by such TASC from the related
county along with other accounts and earnings thereon constitute
the security and a source of payment for its TASC bonds. Each
TASC also maintains an independent reserve account, which can only
be used for the obligations of that respective county. As a
result, this structure creates a weak link to whichever county
issued the highest leveraged debt. The classes from New York
Counties Tobacco IV S&P downgraded exhibited an inability to make
principal payments by their legal maturities at their original
rating levels.
Negative Outlook on Remaining Tobacco Settlement-Backed Bonds
S&P's negative outlooks on all of the remaining rated tobacco
settlement-backed bonds reflect S&P's belief that significant
industry and litigation event risks may be present for the next
several years, which could lead to downgrades.
Standard & Poor's will continue to monitor the securitizations and
take rating actions as S&P deems appropriate according to its
criteria.
Ratings Affirmed And Removed From Creditwatch Negative
* California County Tobacco Securitization Agency (Fresno County
Tobacco Funding Corp.)
* US$93 million tobacco settlement asset-backed bonds series 2002
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2023 06/01/23 17.04 BBB (sf)/Negative BBB (sf)/Watch Neg
2035 06/01/27 12.23 BBB (sf)/Negative BBB (sf)/Watch Neg
2035 06/01/35 35.27 BBB (sf)/Negative BBB (sf)/Watch Neg
2038 06/01/38 18.50 BBB (sf)/Negative BBB (sf)/Watch Neg
California County Tobacco Securitization Agency (Kern County
Tobacco Funding Corp.)
US$105 million tobacco settlement asset-backed bonds series 2002
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2002A 06/01/43 40.96 BBB (sf)/Negative BBB (sf)/Watch Neg
2002B 06/01/29 27.88 BBB (sf)/Negative BBB (sf)/Watch Neg
2002B 06/01/37 29.01 BBB (sf)/Negative BBB (sf)/Watch Neg
California County Tobacco Securitization Agency (Sonoma County
Settlement Securitization Corp.)
US$83 million tobacco settlement asset-backed bonds series 2005
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2005 06/01/21 14.84 BBB (sf)/Negative BBB (sf)/Watch Neg
2005 06/01/26 9.92 BBB (sf)/Negative BBB (sf)/Watch Neg
2005 06/01/38 31.05 BBB (sf)/Negative BBB (sf)/Watch Neg
Children?s Trust
US$1.171 billion tobacco settlement asset-backed bonds series 2002
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2024 05/15/33 471.11 BBB (sf)/Negative BBB (sf)/Watch Neg
2033 05/15/39 310.38 BBB (sf)/Negative BBB (sf)/Watch Neg
2040 05/15/43 296.26 BBB (sf)/Negative BBB (sf)/Watch Neg
District of Columbia Tobacco Settlement Financing Corp.
US$521.105 million tobacco settlement asset-backed bonds
series 2001
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2024 05/15/24 114.86 BBB (sf)/Negative BBB (sf)/Watch Neg
2033 05/15/33 169.11 BBB (sf)/Negative BBB (sf)/Watch Neg
2040 05/15/40 187.54 BBB (sf)/Negative BBB (sf)/Watch Neg
Educational Enhancement Funding Corp.
US$278.045 million tobacco settlement asset-backed bonds series
2002A and 2002B
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2002A 06/01/25 148.51 BBB (sf)/Negative BBB (sf)/Watch Neg
2002B 06/01/32 129.54 BBB (sf)/Negative BBB (sf)/Watch Neg
Erie Tobacco Asset Securitization Corp.
US$83 million tobacco settlement asset-backed bonds series 2005
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2005A 06/01/31 30.33 BBB (sf)/Negative BBB (sf)/Watch Neg
2005A 06/01/38 74.69 BBB (sf)/Negative BBB (sf)/Watch Neg
2005A 06/01/45 111.48 BBB (sf)/Negative BBB (sf)/Watch Neg
2005E 06/01/28 69.47 BBB (sf)/Negative BBB (sf)/Watch Neg
Michigan Tobacco Settlement Finance Authority
US$523 million tobacco settlement asset-backed bonds
series 2007 A B C
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2007A 06/01/22 20.00 BBB (sf)/Negative BBB (sf)/Watch Neg
2007A 06/01/22 57.19 BBB (sf)/Negative BBB (sf)/Watch Neg
Nassau County Tobacco Settlement Corp.
US$431.043 million tobacco settlement asset-backed bonds
series 2006
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2006A-1 06/01/19 42.65 BBB (sf)/Negative BBB (sf)/Watch Neg
2006A-2 06/01/25 37.91 BBB (sf)/Negative BBB (sf)/Watch Neg
New York Counties Tobacco Trust I
US$303.37 million tobacco settlement pass-through bonds
series 2000
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2019 06/01/19 14.89 BBB (sf)/Negative BBB (sf)/Watch Neg
2028 06/01/28 39.71 BBB (sf)/Negative BBB (sf)/Watch Neg
2035 06/01/35 60.45 BBB (sf)/Negative BBB (sf)/Watch Neg
2042 06/01/42 71.84 BBB (sf)/Negative BBB (sf)/Watch Neg
New York Counties Tobacco Trust II
US$215.22 million tobacco settlement pass-through bonds
series 2001
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2025 06/01/25 48.37 BBB (sf)/Negative BBB (sf)/Watch Neg
2035 06/01/35 68.01 BBB (sf)/Negative BBB (sf)/Watch Neg
2043 06/01/43 82.80 BBB (sf)/Negative BBB (sf)/Watch Neg
New York Counties Tobacco Trust III
US$79.68 million tobacco settlement pass-through bonds series 2003
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2033 06/01/33 15.18 BBB (sf)/Negative BBB (sf)/Watch Neg
2043 06/01/43 40.39 BBB (sf)/Negative BBB (sf)/Watch Neg
New York Counties Tobacco Trust IV
US$539 million tobacco settlement pass-through bonds series 2005
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2005A 06/01/21 6.97 BBB (sf)/Negative BBB (sf)/Watch Neg
2005A 06/01/26 4.52 BBB (sf)/Negative BBB (sf)/Watch Neg
2005A 06/01/38 16.58 BBB (sf)/Negative BBB (sf)/Watch Neg
2005B 06/01/27 54.61 BBB (sf)/Negative BBB (sf)/Watch Neg
Rensselaer Tobacco Asset Securitization Corp.
US$34.555 million tobacco settlement pass-through bonds series A
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2025 06/01/25 7.710 BBB (sf)/Negative BBB (sf)/Watch Neg
2035 06/01/35 10.890 BBB (sf)/Negative BBB (sf)/Watch Neg
2043 06/01/43 13.355 BBB (sf)/Negative BBB (sf)/Watch Neg
Rockland Tobacco Asset Securitization Corp.
US$47.75 million tobacco settlement pass-through bonds series 2001
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2025 06/01/25 12.01 BBB (sf)/Negative BBB (sf)/Watch Neg
2035 06/01/35 15.23 BBB (sf)/Negative BBB (sf)/Watch Neg
2043 06/01/43 18.62 BBB (sf)/Negative BBB (sf)/Watch Neg
Tobacco Securitization Authority of Southern California
US$558 million tobacco settlement asset-backed bonds series 2006
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2006A 06/01/25 111.86 BBB (sf)/Negative BBB (sf)/Watch Neg
2006A 06/01/37 186.44 BBB (sf)/Negative BBB (sf)/Watch Neg
2006A 06/01/46 236.31 BBB (sf)/Negative BBB (sf)/Watch Neg
Tobacco Securitization Corp. of Northern California
US$255 million tobacco settlement asset-backed bonds series 2005
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2005A-1 06/01/23 45.83 BBB (sf)/Negative BBB (sf)/Watch Neg
2005A-2 06/01/27 12.47 BBB (sf)/Negative BBB (sf)/Watch Neg
Iowa Tobacco Settlement Authority
US$839 million tobacco settlement asset-backed bonds
series 2005 A B C D
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2005A 06/01/46 229.91 BBB (sf)/Negative BBB (sf)/Watch Neg
2005B 06/01/34 159.37 BBB (sf)/Negative BBB (sf)/Watch Neg
2005C 06/01/33 103.48 BBB (sf)/Negative BBB (sf)/Watch Neg
2005C 06/01/42 135.12 BBB (sf)/Negative BBB (sf)/Watch Neg
2005C 06/01/46 174.13 BBB (sf)/Negative BBB (sf)/Watch Neg
Tobacco Settlement Authority (Washington)
US$517.905 million tobacco settlement asset-backed bonds
series 2002
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2026 06/01/26 279.78 BBB (sf)/Negative BBB (sf)/Watch Neg
2032 06/01/32 179.51 BBB (sf)/Negative BBB (sf)/Watch Neg
Tobacco Settlement Financing Corp. (New Jersey)
US$3,622 million tobacco settlement asset-backed bonds
series 2007-1
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2007-1A 06/01/23 623.71 BBB (sf)/Negative BBB (sf)/Watch Neg
2007-1A 06/01/26 287.62 BBB (sf)/Negative BBB (sf)/Watch Neg
Tobacco Settlement Financing Corp. (Rhode Island)
US$685 million tobacco settlement asset-backed bonds series 2002A
and 2002B
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2002-A 06/01/23 109.77 BBB (sf)/Negative BBB (sf)/Watch Neg
2002-A 06/01/42 168.26 BBB (sf)/Negative BBB (sf)/Watch Neg
2002-A 06/01/42 371.70 BBB (sf)/Negative BBB (sf)/Watch Neg
Tobacco Settlement Financing Corp. (Louisiana)
US$1.203 billion tobacco settlement asset-backed bonds series
2001A&B
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2001B-2031 05/15/30 230.39 BBB (sf)/Negative BBB (sf)/Watch Neg
2001B-2039 05/15/39 689.41 BBB (sf)/Negative BBB (sf)/Watch Neg
TSASC Inc.
US$1,361 million tobacco settlement asset-backed bonds
series 2006-1
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2006 06/01/22 284.07 BBB (sf)/Negative BBB (sf)/Watch Neg
2006 06/01/26 137.76 BBB (sf)/Negative BBB (sf)/Watch Neg
2006 06/01/34 372.65 BBB (sf)/Negative BBB (sf)/Watch Neg
Westchester Tobacco Asset Securitization Corp.
$216 million tobacco settlement asset-backed bonds series 2005
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2005 06/01/21 29.60 BBB (sf)/Negative BBB (sf)/Watch Neg
2005 06/01/26 24.10 BBB (sf)/Negative BBB (sf)/Watch Neg
2005 06/01/38 81.20 BBB (sf)/Negative BBB (sf)/Watch Neg
2005 06/01/45 81.70 BBB- (sf)/Negative BBB- (sf)/Watch Neg
Ratings Lowered And Removed From Creditwatch Negative
Buckeye Tobacco Settlement Financing Authority
US$5,531 million tobacco settlement asset-backed bonds series 2007
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2007A-2 06/01/24 200.00 BB- (sf)/Negative BBB (sf)/Watch Neg
2007A-2 06/01/24 949.53 BB- (sf)/Negative BBB (sf)/Watch Neg
2007A-2 06/01/30 687.60 BB- (sf)/Negative BBB (sf)/Watch Neg
2007A-2 06/01/34 505.20 BB- (sf)/Negative BBB (sf)/Watch Neg
2007A-2 06/01/42 250.00 BB- (sf)/Negative BBB (sf)/Watch Neg
2007A-2 06/01/47 750.00 BB- (sf)/Negative BBB (sf)/Watch Neg
2007A-2 06/01/47 1383.72 BB- (sf)/Negative BBB (sf)/Watch Neg
2007A-3 06/01/37 274.75 BB- (sf)/Negative BBB (sf)/Watch Neg
California County Tobacco Securitization Agency (Gold County
Settlement Funding Corp.)
US$59 million tobacco settlement asset-backed bonds series 2006
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2006A 06/01/46 45.00 B- (sf)/Negative B+ (sf)/Watch Neg
2006B 06/01/33 14.37 B- (sf)/Negative B+ (sf)/Watch Neg
California County Tobacco Securitization Agency (Sonoma County
Settlement Securitization Corp.)
US$83 million tobacco settlement asset-backed bonds series 2005
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2005 06/01/45 27.260 BBB- (sf)/Negative BBB (sf)/Watch Neg
Golden State Tobacco Securitization Corp.
$4,446 million tobacco settlement asset-backed bonds series 2007
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2007A-1 06/01/27 863.10 BBB- (sf)/Negative BBB (sf)/Watch Neg
2007A-1 06/01/33 610.53 BB+ (sf)/Negative BBB (sf)/Watch Neg
2007A-1 06/01/47 1250.00 BB+ (sf)/Negative BBB (sf)/Watch Neg
2007A-1 06/01/47 693.58 BB+ (sf)/Negative BBB (sf)/Watch Neg
2007A-2 06/01/37 389.19 BB+ (sf)/Negative BBB (sf)/Watch Neg
2007-B 06/01/47 271.96 B (sf)/Negative BB (sf)/Watch Neg
2007-C 06/01/47 78.55 B- (sf)/Negative BB- (sf)/Watch Neg
Michigan Tobacco Settlement Finance Authority
US$490 million tobacco settlement asset-backed bonds
series 2006 A B C
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2006A 06/01/34 363.115 BB+ (sf)/Negative BBB (sf)/Watch Neg
Michigan Tobacco Settlement Finance Authority
US$523 million tobacco settlement asset-backed bonds
series 2007 A B C
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2007A 06/01/34 112.86 BB (sf)/Negative BBB (sf)/Watch Neg
2007A 06/01/48 290.09 BB (sf)/Negative BBB (sf)/Watch Neg
2007B 06/01/52 35.65 B (sf)/Negative BBB (sf)/Watch Neg
2007C 06/01/52 7.22 B- (sf)/Negative BBB- (sf)/Watch Neg
Nassau County Tobacco Settlement Corp.
US$431.043 million tobacco settlement asset-backed bonds
series 2006
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2006A-3 06/01/35 97.005 BBB- (sf)/Negative BBB (sf)/Watch Neg
2006A-3 06/01/46 194.535 BB- (sf)/Negative BBB (sf)/Watch Neg
New York Counties Tobacco Trust IV
US$539 million tobacco settlement pass-through bonds series 2005
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2005A 06/01/42 84.98 BBB- (sf)/Negative BBB (sf)/Watch Neg
2005A 06/01/45 83.88 BB (sf)/Negative BBB (sf)/Watch Neg
2010A 06/01/41 124.40 BB+/Negative BBB/Watch Neg
Tobacco Securitization Authority of Southern California
US$558 million tobacco settlement asset-backed bonds series 2006
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2006B 06/01/46 19.77 BB- (sf)/Negative BBB (sf)/Watch Neg
2006C 06/01/46 8.69 B+ (sf)/Negative BB+ (sf)/Watch Neg
2006D 06/01/46 20.57 B- (sf)/Negative BB- (sf)/Watch Neg
Tobacco Securitization Corp. of Northern California
US$255 million tobacco settlement asset-backed bonds series 2005
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2005A-1 06/01/38 87.29 BB (sf)/Negative BBB/Watch Neg
2005A-1 06/01/45 86.57 BB- (sf)/Negative BBB/Watch Neg
2005B 06/01/45 11.67 B (sf)/Negative BB+/Watch Neg
2005C 06/01/45 11.66 B- (sf)/Negative BB-/Watch Neg
Iowa Tobacco Settlement Authority
US$839 million tobacco settlement asset-backed bonds
series 2005 A B C D
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2005D 06/01/46 15.78 BB+ (sf)/Negative BBB- (sf)/Watch Neg
Tobacco Settlement Financing Corp. (New Jersey)
US$3,622 million tobacco settlement asset-backed bonds series
2007-1
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2007-1A 06/01/29 332.27 BBB- (sf)/Negative BBB (sf)/Watch Neg
2007-1A 06/01/34 672.95 BB+ (sf)/Negative BBB (sf)/Watch Neg
2007-1A 06/01/41 1263.59 BB- (sf)/Negative BBB (sf)/Watch Neg
2007-1B 06/01/41 126.20 B (sf)/Negative BB (sf)/Watch Neg
2007-1C 06/01/34 59.79 B- (sf)/Negative BB- (sf)/Watch Neg
TSASC Inc.
US$1,361 million tobacco settlement asset-backed bonds series
2006-1
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2006 06/01/42 559.03 BBB- (sf)/Negative BBB (sf)/Watch Neg
Tobacco Settlement Financing Corp. (VA)
$1,149 million tobacco settlement asset-backed bonds series 2007
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2007A-1 06/01/46 682.65 BB (sf)/Negative BBB (sf)/Watch Neg
2007B-1 06/01/47 335.63 BB- (sf)/Negative BBB (sf)/Watch Neg
2007B-2 06/01/47 26.81 BB- (sf)/Negative BBB (sf)/Watch Neg
2007C 06/01/47 77.10 B+ (sf)/Negative BB (sf)/Watch Neg
2007D 06/01/47 27.09 B- (sf)/Negative BB- (sf)/Watch Neg
Tobacco Settlement Finance Authority (West Virginia)
US$911 million taxable tobacco settlement asset-backed bonds
series 2007
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2007A 06/01/47 845.81 BB+ (sf)/Negative BBB (sf)/Watch Neg
2007B 06/01/47 65.33 B (sf)/Negative BB+ (sf)/Watch Neg
Tobacco Settlement Financing Corp. (Rhode Island)
US$194 million tobacco settlement asset-backed bonds series 2007
Orig bal.
Class Maturity (mil. $) To From
----- -------- -------- -- ----
2007A 06/01/52 176.974 B (sf)/Negative BB (sf)/Watch Neg
2007B 06/01/52 17.336 B- (sf)/Negative BB- (sf)/Watch Neg
MERRILL LYNCH: Moody's Affirms Ratings on Nine 2005-CIP1 Certs.
---------------------------------------------------------------
Moody's Investors Service affirmed nine classes and downgraded ten
classes of Merrill Lynch Mortgage Trust, Mortgage Trust Commercial
Mortgage Pass-Through Certificates, Series 2005-CIP1:
-- Cl. A-2, Affirmed at Aaa (sf); previously on Sept. 20, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3A, Affirmed at Aaa (sf); previously on Sept. 20, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-SB, Affirmed at Aaa (sf); previously on Sept. 20, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on Sept. 20, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-M, Affirmed at Aaa (sf); previously on Sept. 20, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-J, Affirmed at A3 (sf); previously on Oct. 22, 2009
Downgraded to A3 (sf)
-- Cl. A-3B, Affirmed at Aaa (sf); previously on Sept. 20, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. XP, Affirmed at Aaa (sf); previously on Sept. 20, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. XC, Affirmed at Aaa (sf); previously on Sept. 20, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. B, Downgraded to Baa3 (sf); previously on Oct. 22, 2009
Downgraded to Baa2 (sf)
-- Cl. C, Downgraded to Ba3 (sf); previously on Oct. 22, 2009
Downgraded to Ba1 (sf)
-- Cl. D, Downgraded to Caa1 (sf); previously on Oct. 22, 2009
Downgraded to B1 (sf)
-- Cl. E, Downgraded to Caa2 (sf); previously on Oct. 22, 2009
Downgraded to B2 (sf)
-- Cl. F, Downgraded to Caa3 (sf); previously on Oct. 22, 2009
Downgraded to B3 (sf)
-- Cl. G, Downgraded to Ca (sf); previously on Oct. 22, 2009
Downgraded to Caa1 (sf)
-- Cl. H, Downgraded to C (sf); previously on Oct. 22, 2009
Downgraded to Caa3 (sf)
-- Cl. J, Downgraded to C (sf); previously on Oct. 22, 2009
Downgraded to Ca (sf)
-- Cl. K, Downgraded to C (sf); previously on Oct. 22, 2009
Downgraded to Ca (sf)
-- Cl. L, Downgraded to C (sf); previously on Oct. 22, 2009
Downgraded to Ca (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans. The affirmations are due to key
parameters, including Moody's loan to value ratio, Moody's
stressed debt service coverage ratio and the Herfindahl Index,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain their current ratings.
Moody's rating action reflects a cumulative base expected loss of
8.6% of the current balance compared to 7.4% at Moody's prior
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.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the credit estimate of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the credit estimate level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated October 22, 2009.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the October 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 12% to
$1.81 billion from $1.99 billion at securitization. The
Certificates are collateralized by 127 mortgage loans ranging
in size from less than 1% to 9.5% of the pool, with the top ten
loans representing 36% of the pool. Three loans, representing 9%
of the pool, have defeased and are collateralized by U.S.
Government securities. The pool contains one loan, representing
9% of the pool, with an investment-grade credit estimate. A
second loan also had a credit estimate at last review, but due to
a decline in performance and increased leverage, it is now
analyzed as part of the conduit pool.
Twenty-eight loans, representing 13% of the pool, are on the
master servicer's watchlist. The watchlist includes loans which
meet certain portfolio review guidelines established as part of
the CRE Finance Council monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, Moody's reviews the
watchlist to assess which loans have material issues that could
impact performance.
Two loans have been liquidated from the pool since securitization,
resulting in an aggregate $21.7 million loss (66% loss severity on
average). Currently, ten loans, representing 14% of the pool, are
in special servicing. The largest specially serviced loan is the
Highwoods Portfolio 57 Loan ($160.0 million -- 8.8% of the pool),
which is secured by a portfolio of 33 office buildings, totaling
1.95 million square feet, located in Tampa, Florida and Charlotte,
North Carolina. The loan was transferred to special servicing in
March 2010 after the borrower was unable to secure refinance prior
to the loan maturing in August 2010. The master servicer has
recognized an aggregate $67.1 million appraisal reduction for six
of the specially serviced loans. Moody's has estimated an
aggregate $79.4 million loss (32% expected loss on average) for
all of the specially serviced loans.
Moody's has also assumed a high default probability for 11 poorly
performing loans representing 5% of the pool. Moody's has
estimated a $27.1 million loss (31% expected loss based on a 66%
probability default) from the troubled loans.
Moody's was provided with full year 2009 and partial year 2010
operating results for 78% and 34% of the pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 103% compared to 107% at Moody's prior review.
Moody's net cash flow reflects a weighted average haircut of 12%
to the most recently available net operating income. Moody's
value reflects a weighted average capitalization rate of 9.5%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.45X and 1.03X, respectively, compared to
1.38X and 1.01X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 28 compared to 32 at last review.
The loan with a credit estimate is the E Walk on New 42nd Street
Loan ($77.5 million -- 4.3%), which is secured by a leasehold
interest in a 177,000 square foot theater-anchored retail center
located on 42nd Street in New York City. Performance has been
stable. The sponsor is Tishman Holding Corp. Moody's current
underlying rating and stressed DSCR are Baa2 and 1.32X,
respectively, compared to Baa2 and 1.24X at last review.
The top three performing conduit loans represent 16% of the pool.
The largest conduit loan is the Glenbrook Square Mall Loan
($172.3 million -- 9.5% of the pool), which is secured by a
1.2 million square foot (873,230 square feet of loan collateral)
regional mall in Fort Wayne, Indiana that is owned by an affiliate
of General Growth Properties Inc. This loan was transferred to
special servicing after GGP's bankruptcy filing in April 2009.
Subsequent to a modification in January 2010, the loan was
returned to the master servicer in May 2010. The mall is anchored
by Macy's, JC Penney and Sears. As of June 2010, in-line
occupancy was 88% compared to 92% at last review. Moody's LTV and
stressed DSCR are 110% and 0.86X, respectively, compared to 124%
and 0.76X at last review.
The second largest loan is the U-Haul Self-Storage Portfolio Loan
($75.0 million -- 4.1%), which is secured by a pool of 50 U-Haul
self storage facilities located throughout 26 states. The largest
state concentrations are New York (20%), Texas (11%) and
Pennsylvania (8%). The facilities contain a total of 1.1 million
square feet. As of December 2009, the portfolio was 81% occupied
compared to 83% at last review. Despite the slight decline in
occupancy, performance has improved due to higher rental revenues
and stable expenses. Moody's LTV and stressed DSCR are 73% and
1.44X, respectively, compared to 77% and 1.37X, at last review.
The third largest conduit loan is the Residence Inn Hotel
Portfolio Loan ($50.2 million -- 2.5%), which is secured by four
limited service hotels located in New York, Florida and Texas.
Performance has declined significantly due to the downturn in the
hotel sector caused by the decline in business and tourist travel.
The portfolio weighted average revenue per available room was $76
for the 12 month period ending in 2009 compared to $90 at last
review. Moody's LTV and stressed DSCR are 135% and 0.92X,
respectively, compared to 110% and 1.18X at last review.
MORGAN STANLEY: Moody's Reviews Ratings on 10 2007-XLF9 Notes
-------------------------------------------------------------
Moody's Investors Service placed ten pooled classes and two non-
pooled, or rake, classes of Morgan Stanley Capital I Inc.,
Commercial Mortgage Pass-Through Certificates, Series 2007-XLF9 on
review for possible downgrade. Moody's rating action is:
-- Cl. B, A1 (sf) Placed Under Review for Possible Downgrade;
previously on March 19, 2009 Downgraded to A1 (sf)
-- Cl. C, A2 (sf) Placed Under Review for Possible Downgrade;
previously on March 19, 2009 Downgraded to A2 (sf)
-- Cl. D, A3 (sf) Placed Under Review for Possible Downgrade;
previously on March 19, 2009 Downgraded to A3 (sf)
-- Cl. E, Baa1 (sf) Placed Under Review for Possible Downgrade;
previously on March 19, 2009 Downgraded to Baa1 (sf)
-- Cl. F, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on March 19, 2009 Downgraded to Baa3 (sf)
-- Cl. G, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on March 19, 2009 Downgraded to Ba1 (sf)
-- Cl. H, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on March 19, 2009 Downgraded to Ba2 (sf)
-- Cl. J, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on March 19, 2009 Downgraded to Ba3 (sf)
-- Cl. K, B2 (sf) Placed Under Review for Possible Downgrade;
previously on March 19, 2009 Downgraded to B2 (sf)
-- Cl. L, Caa1 (sf) Placed Under Review for Possible Downgrade;
previously on March 19, 2009 Downgraded to Caa1 (sf)
-- Cl. M-RND, B2 (sf) Placed Under Review for Possible
Downgrade; previously on March 19, 2009 Downgraded to B2 (sf)
-- Cl. N-RND, B3 (sf) Placed Under Review for Possible
Downgrade; previously on March 19, 2009 Downgraded to B3 (sf)
The 12 classes have been placed under review for downgrade due to
the deterioration in performance of assets in the trust, the
significant concentration of loans secured by hotel properties
(40% of pooled balance), the higher expected loss for the Reunion
Land loan (2%) and the refinancing risk associated with loans
approaching maturity in an adverse environment. There are
currently two loans in special servicing (4% of pooled balance)
which are the Reunion Land loan (2%) and the Hyatt Place Portfolio
loan (2%). Eight loans, representing 19.3% of the pool, are on
the master servicer's watchlist.
Moody's review will focus on the deteriorating performance of the
overall assets in the pool including specially serviced and
watchlisted loans.
MORGAN STANLEY: Moody's Takes Rating Actions on Four Classes
------------------------------------------------------------
Moody's Investors Service upgraded the rating of two non-pooled or
rake classes and affirmed the ratings of one non-pooled or rake
class and one notional interest only class of Morgan Stanley
Capital I Inc. Commercial Pass-Through Certificates, Series 2006-
XLF. Moody's rating action is:
-- Cl. X-1, Affirmed at Aaa (sf); previously on Aug. 21, 2006
Assigned Aaa (sf)
-- Cl. N-LAF, Upgraded to Aa2 (sf); previously on Mar 11, 2009
Downgraded to Baa2 (sf)
-- Cl. N-SDF, Affirmed at B1 (sf); previously on Mar 11, 2009
Downgraded to B1 (sf)
-- Cl. O-LAF, Upgraded to A2 (sf); previously on Mar 11, 2009
Downgraded to Ba2 (sf)
Ratings Rationale
The upgrades are due to principal payments associated with the
Lafayette Estates loan. The affirmations are due to key
parameters, including Moody's loan to value ratio and Moody's
stressed debt service coverage ratio, remaining within acceptable
ranges.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the
previous review. Even so, deviation from the expected range will
not necessarily result in a rating action. There may be
mitigating or offsetting factors to an improvement or decline in
collateral performance, such as increased subordination levels due
to amortization and loan payoffs or a decline in subordination due
to realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "Hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based Large Loan
Model v 8.0. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated March 11, 2009.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the ratings.
Deal Performance
As of the October 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 95% to
$72.6 million from $1.6 billion at securitization. The
Certificates are collateralized by three mortgage loans ranging
in size from 15% to 47% of the pool. The largest loan in the
pool, ResortQuest ($34 million, 47% of the pooled balance) is
secured by a 307-key full service hotel in Kauai, Hawaii that
transferred to special servicing in January of 2009 due to
immanent default.
Moody's does not rate the remaining pooled principal classes
although it does rate the notional interest only Class X-1.
Moody's also rates the non-pooled or rake classes associated with
the Sheraton Delfina loan and the Lafayette Estates loan.
The Sheraton Delfina loan ($28 million pooled balance and
$2 million non pooled balance) is secured by a 207 key full
service hotel located in Santa Monica, California. Revenue per
available room (RevPAR) for the year to date period ending June
2010 was $154.28, up 10% from the RevPAR for the year end 2009 of
$134.50. According to Smith Travel Research, RevPAR for Los
Angeles increased 5% for the same period. Moody's current LTV is
73% and stressed DSCR is 1.71X. Moody's credit estimate rating
for the pooled balance and non pooled component are Ba3 and B1
respectively, the same as last review.
The Lafayette Estates Loan ($10.6 million pooled balance and
$4.8 million non-pooled balance) is secured by the borrower's
interest in a co-op conversion multifamily complex located in the
Bronx, New York. As of June 2010, 1,114 or 60% of the original
1,872 units have been sold. The remaining 758 units are still
available and currently being marketed for sale. The loan has
paid down 75% since securitization. The non-pooled component
secures the N-LAF and O-LAF rake classes. Moody's current LTV on
the pooled loan is 28% and on the non-pooled loan is 40%. Moody's
current credit estimate for the pooled loan is Aaa compared to A1
at last review. Moody's current credit estimates for the non
pooled loan is A2 compared to Ba2 at last review.
MORNINGSIDE PARK: S&P Assigns Ratings on Various Floating Notes
---------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
ratings to Morningside Park CLO Ltd./MorningsidePark CLO LLC's
$346.0 million floating-rate notes.
The preliminary ratings are based on information as of Nov. 15,
2010. Subsequent information may result in the assignment of
final ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's assessment of:
* The credit enhancement provided to the preliminary rated notes
through the subordination of cash flows that are payable to the
subordinated notes;
* The transaction's cash flow structure, as assessed by Standard &
Poor's using the assumptions and methods outlined in its
corporate collateralized debt obligation criteria, which can
withstand the default rate projected by Standard & Poor's CDO
Evaluator model;
* The transaction's legal structure, which is expected to be
bankruptcy remote;
* The diversified collateral portfolio, which consists primarily
of speculative-grade senior secured term loans;
* The portfolio manager's experienced management team;
* S&P's expectation of timely interest and ultimate principal
payments on the rated notes, which S&P assessed using its cash
flow analysis and assumptions that are commensurate with the
assigned preliminary ratings under various interest rate
scenarios, including LIBOR rates ranging from 0.3%-12.4%; and
* The transaction's overcollateralization and interest coverage
tests, a failure of which will lead to the diversion of interest
and principal proceeds to reduce the outstanding balance of the
rated notes.
Preliminary Ratings Assigned
Morningside Park CLO Ltd./Morningside Park CLO LLC
Class Rating Amount (mil. $)
----- ------ ---------------
A AAA (sf) 265.0
B AA (sf) 22.0
C (deferrable) A (sf) 38.0
D (deferrable) BBB (sf) 17.0
E (deferrable) BB (sf) 4.0
Subordinated NR 54.0
NR -- Not rated.
N-STAR REAL: Fitch Downgrades Ratings on Five Classes of Notes
--------------------------------------------------------------
Fitch Ratings has downgraded five and affirmed two classes issued
by N-Star Real Estate CDO V Ltd as a result of significant
negative credit migration of the underlying collateral.
Since Fitch's last rating action in January 2010, approximately
46.6% of the portfolio has been downgraded, and 6.2% is currently
on Rating Watch Negative. Approximately 72.4% has a Fitch derived
rating below investment grade and 32.8% has a rating in the 'CCC'
rating category or lower, compared to 64.9% and 12.5%,
respectively, at last review. As of the Oct. 18, 2010 trustee
report, defaulted securities, as defined in the transaction's
governing documents, now comprise 9.4% of the portfolio, compared
to 4.5% at last review. Additionally, 8.6% of non-defaulted
collateral are currently experiencing interest shortfalls.
This transaction was analyzed under the framework described in the
report 'Global Rating Criteria for Structured Finance CDOs' using
the Portfolio Credit Model for projecting future default levels
for the underlying portfolio. The default levels were then
compared to the breakeven levels generated by Fitch's cash flow
model of the CDO under the various default timing and interest
rate stress scenarios, as described in the report 'Global Criteria
for Cash Flow Analysis in Corporate CDOs'. Based on this
analysis, the class A through C notes' breakeven rates are
generally consistent with the ratings assigned below.
For the class D through F 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 D through F notes have been downgraded to 'CC',
indicating that default is probable. All overcollateralization
and interest coverage tests are passing their respective
covenants.
The Negative Rating Outlook on the class A notes reflects Fitch's
expectation that underlying CMBS loans will continue to face
refinance risk. The Loss Severity rating indicates a tranche's
potential LS given default, as evidenced by the ratio of tranche
size to the base-case loss expectation for the collateral, as
explained in 'Criteria for Structured Finance Loss Severity
Ratings'. The LS rating should always be considered in
conjunction with the probability of default for tranches. Fitch
does not assign LS ratings or Outlooks to classes rated 'CCC' and
below.
N-Star V is a collateralized debt obligation which closed
Sept. 22, 2005. The transaction ended its reinvestment period
on Sept. 22, 2010. The portfolio is composed of 69.5% commercial
mortgage-backed securities; 15.8% real estate investment trust
securities; 14.3% SF CDOs; and 0.4% commercial real estate loans,
including single borrower 'rake' classes of CMBS. N-Star V is
currently overcollateralized by $143 million, primarily as a
result of collateral purchases at a discount during the
reinvestment period.
Fitch has downgraded, affirmed, assigned LS ratings and Outlooks
to these classes as indicated:
-- $335,547,761 class A-1 notes downgraded to 'Bsf/LS3' from
'BBsf', Outlook Negative;
-- $46,472,397 class A-2 notes affirmed at 'Bsf/LS5', Outlook
Negative ;
-- $40,935,261 class B notes downgraded to 'CCCsf' from
'Bsf/LS5';
-- $17,921,536 class C notes affirmed at 'CCCsf';
-- $15,068,922 class D notes downgraded to 'CCsf' from 'CCCsf';
-- $4,943,872 class E notes downgraded to 'CCsf' from 'CCCsf';
-- $12,606,874 class F notes downgraded to 'CCsf' from 'CCCsf'.
NORTEK INC: Moody's Assigns 'B3' Corporate Family Rating
--------------------------------------------------------
Moody's Investors Service assigned Nortek, Inc., a B3 Corporate
Family Rating, a B3 Probability of Default Rating, and a Caa2
rating to the proposed Senior Unsecured Notes due 2018. These are
first time ratings following the company's emergence from Chapter
11 bankruptcy on December 17, 2009. Moody's also assigned a
speculative grade liquidity rating of SGL-3. The rating outlook
is stable.
These ratings/assessments were affected by this action:
* Corporate Family Rating assigned B3;
* Probability of Default Rating assigned B3; and,
* Senior Unsecured Notes due 2018 rated Caa2 (LGD5, 87%).
A speculative grade liquidity rating of SGL-3 is assigned.
Rating Rationale
Nortek's B3 Corporate Family Rating considers the company's
exposure to cyclical end markets including new home construction
and the repair and remodeling sector, as well as the commercial
industry. Nortek is exposed to volatile raw material costs for
commodities such as steel, copper, and aluminum. Nortek's rating
also considers the risk of future debt-financed acquisitions, and
related financial and integration risk. The company also faces
significant refinancing risks in late 2013 when approximately
$1.0 billion of committed facilities mature. The company's
track record of sizeable shareholder distributions contributed
to creditor losses in the past and management compensation remain
a recurring risk consideration, despite ownership changes.
Nortek's portfolio of well-established brand names, and solid
market positions across a broad array of building products
support its credit profile. Additionally, Nortek's cost
reduction actions appear to be resulting in improved operating
efficiencies. Its EBITA margin was 5.1% for the last twelve
months through October 2, 2010 (Moody's adjusted) and the
company's size based on revenues are robust relative to the
rating. Revolver availability supports the rating as well.
The Caa2 rating on the proposed $300 million senior unsecured
notes due 2018, two notches below the corporate family rating,
reflects structural subordination to about $1.0 billion in senior
committed obligations including the $300 million senior secured
revolving credit facility due 2013 and the $753.3 million senior
secured notes due 2013. A portion of the notes proceeds along
with other company resources will be used for acquisitions, and
the remaining balance will be used to redeem $75 million of the
secured notes due 2013 and to pay related fees and expenses.
Nortek has indicated that proceeds from any over subscription will
be allocated for future redemption of the secured notes, which
would likely occur within the first half of 2011.
The SGL-3 reflects Moody's belief that availability under Nortek's
domestic $300 million asset-based revolving credit should be
sufficient to meet any potential shortfall in operating cash flows
and working capital requirements. The company has no near-term
maturities, but alternate sources of liquidity are constrained
since its domestic assets are encumbered to secure its bank
borrowings and senior secured notes due 2013.
The stable outlook reflects Moody's expectations that Nortek's
operating margins will remain steady and revolver availability
will give it the ability to contend with ongoing economic
uncertainties and the resulting impact on the residential and
commercial end markets.
Although Moody's anticipates improving operating margins, Nortek
must demonstrate its ability to generate meaningful levels of free
cash flow. Over the intermediate term an improved liquidity
profile and operating performance that results in debt-to-EBITDA
sustained below 5.0 times and EBITA-to-interest expense
comfortably above 2.0 times (all ratios adjusted per Moody's
methodology) could result in a positive rating action.
Factors which might pressure the ratings include erosion in the
company's financial performance, more debt financed acquisitions,
any dividends to shareholders or a deteriorating liquidity
profile. Debt-to-EBITDA sustained above 6.0 times or EBITA-to-
interest expense remaining below 1.0 times (all ratios adjusted
per Moody's methodology) for an extended period of time would
likely result in rating pressures.
Nortek, Inc., headquartered in Providence, Rhode Island, is a
diversified manufacturer of branded, residential and commercial
building products. Its products include residential ventilation
products, home technology products, and air conditioning and
heating products for residential and commercial applications.
Revenues for the last twelve month through October 2, 2010,
totaled approximately $1.9 billion.
PEACHTREE FRANCHISE: Moody's Reviews Ratings on Two 1999-A Notes
----------------------------------------------------------------
Moody's Investors Service has placed the Class B and Class C
subordinate notes from Peachtree Franchise Loan LLC 1999-A on
review for possible downgrade. The notes are backed by franchise
loans made to fast-food and casual dining restaurants. The
complete rating action is:
Issuer: Peachtree Franchise Loan LLC 1999-A
-- Class B, B1 (sf) Placed Under Review for Possible Downgrade;
previously on Dec. 20, 2004 Downgraded to B1 (sf)
-- Class C, Caa3 (sf) Placed Under Review for Possible
Downgrade; previously on Dec. 20, 2004 Downgraded to Caa3
(sf)
The securities listed above were placed on review for possible
downgrade due to deteriorating performance of the collateral
properties and potentially insufficient levels of credit
enhancement available for the notes against future losses,
relative to current ratings.
The credit support for the notes consists solely of subordination.
As of October 15th, 2010, the Class C note has no subordination,
and the subordination percentage for the Class B note is 20%.
During the review period, Moody's will estimate the recovery rates
of foreclosed properties and assess any future stresses on the
rest of the collateral pool. Moody's will also qualitatively
assess the business challenges currently faced by the restaurant
industry.
In order to estimate losses on the collateral pool, Moody's
calculates the expected loss given default of the obligors that
have become nonperforming, and also estimates future losses on
performing portion of the pool, all as a percentage of the
outstanding pool. In evaluating the nonperforming loans, key
factors include collateral valuations and expected recovery rates,
volatility around those recovery rates, historical obligor
performance, time until recovery or liquidation on defaulted
obligors, concessions due to restructuring which may negatively
impact the overall cash flow of the trust and/or the collateral,
and future industry expectations. Net losses are then evaluated
against the available credit enhancement provided by
overcollateralization, subordination, and excess spread.
Sufficiency of coverage is considered in light of remaining
borrower concentrations and concepts, remaining bond maturities,
and economic outlook.
The primary sources of uncertainty in the performance of this
transaction are the successfulness of workout strategies for loans
requiring special servicing, as well as the current macroeconomic
environment and its impact on the restaurant and fast food
industry.
PEGASUS AVIATION: Moody's Downgrades Ratings on All Tranches
------------------------------------------------------------
Moody's Investors Service announced that it is downgrading the
ratings on all tranches of three separate pooled aircraft lease-
backed securitizations sponsosred by Pegasus Aviation, Inc., and
previously on review for possible downgrade. The three
transactions are dated, pre 9/11 deals with small remaining pools
of aircraft, dominated by older models with little expectations of
future demand. As a result, Moody's expects cash flows from these
transactions to remain very weak, with little prospect for
recovery.
Ratings Rationale
The aircraft portfolio backing Pegasus Aviation Lease
Securitization Trust, Series 1999-1 (PALS 1999) contains many old-
vintage, less popular aircraft types, which have experienced large
declines in demand and whose values have declined notably over the
last couple of years. This explains both the inability of the
transaction to generate positive cash flows sufficient to make
principal payments and the number of aircraft on ground. The last
time the Class A noteholders received a principal payment was in
May 2003 and there are currently seven aircraft on the ground out
of 22 aircraft in the portfolio. The Class A principal payments
are subordinate to potentially high operational expenses and Class
B and C interest; therefore it is expected that the principal
payments on the Class A will continue to miss minimum levels in
future.
Pegasus Aviation Lease Securitization II, Series 2000-1 (PALS
2000) also contains many older and less popular aircraft types.
As a result, there are currently eight aircraft on ground out of
the 23 aircraft in the portfolio. Given the current economic and
competitive environment, it is likely that these aircraft will
either remain on the ground or generate significantly lower lease
rates compared to the previous agreements. The Class A-1 notes
continue to receive some principal payments, but have fallen
further behind compared to their scheduled amortization there is
considerable doubt as to whether it will be fully repaid by its
legal final maturity of March 2015.
Pegasus Aviation Lease Securitization Trust III, Series 2001-1
(PALS 2001) has a younger and more marketable pool of aircraft
compared to the aircraft in the PALS 1999 and 2000 transactions.
Currently there are eight aircraft on the ground out of 36
aircraft in the portfolio. Given the current economic and
competitive environment, it is likely that these aircraft will
either remain on the ground or generate significantly lower lease
rates compared to the previous agreements. The transaction
continues to make principal payments, but only on the most senior
class; the Class A-3 notes. Nevertheless, the principal paydown
on the Class A-3 has fallen behind the extended payment schedule
and there is considerable doubt as to whether the class A-3 will
be fully repaid by its legal final maturity of March 2014.
The complete ratings actions:
Issuer: Pegasus Aviation Lease Securitization Trust, Series 1999-1
-- US$175.4 Million Class A-1, Downgraded to C(sf) from
Caa1(sf); previously on November 2, 2009 Placed Under Review
for Possible Downgrade
-- US$174.0 Million Class A-2, Downgraded to C(sf) from
Caa1(sf); previously on November 2, 2009 Placed Under Review
for Possible Downgrade
Issuer: Pegasus Aviation Lease Securitization II (PALS), Series
2000-1
-- US$194.3 Million Class A-1 Downgraded to Ca(sf) from B3(sf);
previously on November 2, 2009 Placed Under Review for
Possible Downgrade
-- US$312.0 Million Class A-2, Downgraded to Ca(sf) from B3(sf);
previously on November 2, 2009 Placed Under Review for
Possible Downgrade
Issuer: Pegasus Aviation Lease Securitization III (PALS III),
Series 2001-1
-- US$282.0 Million Class A-1, Downgraded to Caa3(sf) from
B2(sf); previously on November 2, 2009 Placed Under Review
for Possible Downgrade
-- US$197.0 Million Class A-2, Downgraded to Caa3(sf) from
B2(sf); previously on November 2, 2009 Placed Under Review
for Possible Downgrade
-- US$73.7 Million Class A-3, Downgraded to Caa3(sf) from
B2(sf); previously on November 2, 2009 Placed Under Review
for Possible Downgrade
-- US$57.2 Million Class B-1, Downgraded to C(sf) from Caa2(sf);
previously on November 2, 2009 Placed Under Review for
Possible Downgrade
-- US$52.8 Million Class B-2, Downgraded to C(sf) from Caa2(sf);
previously on November 2, 2009 Placed Under Review for
Possible Downgrade
-- US$64.2 Million Class C-1, Downgraded to C(sf) from Caa3(sf);
previously on November 2, 2009 Placed Under Review for
Possible Downgrade
-- US$33.5 Million Class C-2, Downgraded to C(sf) from Caa3(sf);
previously on November 2, 2009 Placed Under Review for
Possible Downgrade
-- US$44.9 Million Class D-1, Downgraded to C(sf) from Caa3(sf);
previously on November 2, 2009 Placed Under Review for
Possible Downgrade
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports have a neutral impact on the rating.
PRIME MORTGAGE: Moody's Downgrades Ratings on Three Tranches
------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of three
tranches issued by Prime Mortgage Trust 2006-CL1. The collateral
backing this deal primarily consists of first-lien, fixed rate
Alt-A residential mortgages.
Ratings Rationale
The actions are a result of the continued performance
deterioration in Alt-A pools in conjunction with home price and
unemployment conditions that remain under duress. The actions
reflect Moody's updated loss expectations on Alt-A pools issued
from 2005 to 2007.
To assess the rating implications of the updated loss levels on
Alt-A RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
The above mentioned approach "Alt-A RMBS Loss Projection Update:
February 2010" is adjusted slightly when estimating losses on
pools left with a small number of loans. To project losses on
pools with fewer than 100 loans, Moody's first estimates a
"baseline" average rate of new delinquencies for the pool that is
dependent on the vintage of loan origination (10%, 19% and 21% for
the 2005, 2006 and 2007 vintage respectively). This baseline rate
is higher than the average rate of new delinquencies for the
vintage to account for the volatile nature of small pools. Even
if a few loans in a small pool become delinquent, there could be a
large increase in the overall pool delinquency level due to the
concentration risk. Once the baseline rate is set, further
adjustments are made based on 1) the number of loans remaining in
the pool and 2) the level of current delinquencies in the pool.
The fewer the number of loans remaining in the pool, the higher
the volatility and hence the stress applied. Once the loan count
in a pool falls below 75, the rate of delinquency is increased by
1% for every loan less than 75. For example, for a pool with 74
loans from the 2005 vintage, the adjusted rate of new delinquency
would be 10.10%. If current delinquency levels in a small pool is
low, future delinquencies are expected to reflect this trend. To
account for that, the rate calculated above is multiplied by a
factor ranging from 0.2 to 2.0 for current delinquencies ranging
from less than 2.5% to greater than 50% respectively.
Delinquencies for subsequent years and ultimate expected losses
are projected using the approach described in the methodology
publication.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
A list of updated estimated pool losses, sensitivity analysis, and
tranche recovery details is being posted on an ongoing basis for
the duration of this review period and may be found at:
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: Prime Mortgage Trust 2006-CL1
-- Cl. A-1, Downgraded to Caa1 (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Caa1 (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. M-1, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
PRUDENTIAL SECURITIES: Moody's Takes Actions on 1998-C1 Notes
-------------------------------------------------------------
Moody's Investors Service upgraded the ratings of two classes,
downgraded two classes and affirmed four classes of Prudential
Securities Secured Financing Corp., Mortgage Pass-Through
Certificates, Series 1998-C1:
-- Cl. A-EC, Affirmed at Aaa (sf); previously on July 10, 2002
Assigned Aaa (sf)
-- Cl. D, Affirmed at Aaa (sf); previously on Aug. 2, 2006
Upgraded to Aaa (sf)
-- Cl. E, Affirmed at Aaa (sf); previously on Sept. 27, 2006
Upgraded to Aaa (sf)
-- Cl. F, Affirmed at Aaa (sf); previously on July 9, 2007
Upgraded to Aaa (sf)
-- Cl. H, Upgraded to Aa2 (sf); previously on March 25, 2009
Upgraded to A2 (sf)
-- Cl. J, Upgraded to Baa1 (sf); previously on March 25, 2009
Upgraded to Baa2 (sf)
-- Cl. L, Downgraded to Caa3 (sf); previously on March 25, 2009
Downgraded to Caa1 (sf)
-- Cl. M, Downgraded to C (sf); previously on March 25, 2009
Downgraded to Ca (sf)
Ratings Rationale
The upgrades are due to the significant increase in subordination
due to loan payoffs and amortization. The pool has paid down by
24% since last review. In addition, the pool benefits from 10%
defeasance.
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans. The affirmations are due to key
parameters, including Moody's loan to value ratio, Moody's
stressed debt service coverage ratio and the Herfindahl Index ,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain the current ratings.
Moody's rating action reflects a cumulative base expected loss of
3.9% of the current balance. Moody's stressed scenario loss is 6%
of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expects overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated March 25, 2009.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction during the past six months.
Deal Performance
As of the October 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 89% to
$131.7 million from $1.15 billion at securitization. The
Certificates are collateralized by 45 mortgage loans ranging in
size from less than 1% to 9% of the pool, with the top ten loans
representing 48% of the pool. Two loans, representing 10% of the
pool, have defeased and are collateralized with U.S. Government
securities.
Eleven loans, representing 22% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Fifteen loans have been liquidated from the pool since
securitization, resulting in an aggregate $20.8 million loss (36%
loss severity on average). Due to realized losses, class N-1 has
been eliminated entirely and Class M has experienced a 41%
principal loss. Currently, one loan, representing 4% of the pool,
is in special servicing. The specially serviced loan is the
Willow Brook Village Shopping Center Loan ($4.96 million -- 3.8%
of the pool), which is secured by a 179,741 square foot retail
center located in Coldwater, Michigan. The loan was transferred
to special servicing in April 2010 and is currently in
foreclosure. Moody's has estimated a $2.8 million loss (56%
expected loss) for the specially serviced loan.
Moody's has assumed a high default probability for two poorly
performing loans representing 1% of the pool. Moody's has
estimated a $378,000 loss (20% expected loss based on a 50%
probability default) from the troubled loans.
Moody's was provided with full year 2009 operating results for 90%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 64% compared to 72% at Moody's
prior review. Moody's net cash flow reflects a weighted average
haircut of 13.0% to the most recently available net operating
income. Moody's value reflects a weighted average capitalization
rate of 10.4%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs for are 1.61X and 2.01X, respectively, compared
to 1.67X and 1.81X at last review. Moody's actual DSCR is based
on Moody's net cash flow and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
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 23 compared to 26 at Moody's prior review.
The top three performing conduit loans represent 23% of the
pool. The largest loan is the Aberfeldy III Portfolio Loan
($11.7 million -- 8.9% of the pool), which is secured by seven
properties located throughout Texas. The portfolio totals
371,000 SF and consists of three office properties, three retail
properties and one mixed use property. The portfolio was 81%
leased as of June 2010 compared to 84% at last review. Despite
the decline in occupancy, performance has improved due to
increased rental revenues. The loan has amortized by 5% since
last review. Moody's LTV and stressed DSCR are 87% and 1.33X,
respectively, compared to 106% and 1.10X, at last review.
The second largest loan is the Aberfeldy I Portfolio Loan
($9.5 million -- 7.2% of the pool), which is secured by eight
properties located throughout Texas. The portfolio totals
273,000 SF and consists of four office properties, three retail
properties and one mixed use property. The portfolio was 79%
leased as of June 2010 compared to 85% at last review. Four of
the properties are on the master servicer's watchlist due to low
DSCR. The decline in performance has been offset by amortization.
The loan has amortized 6% since last review. Moody's LTV and
stressed DSCR 95% and 1.22X, respectively, the same as at last
review.
The third largest loan is the Westwood Plaza Loan ($8.6 million --
6.5% of the pool), which is secured by a 173,854 SF shopping
center located in Westwood, New Jersey. The property was 98%
leased as of July 2010, the same as at last review. Moody's LTV
and stressed DSCR 47% and 2.30X, respectively, compared to 50% and
2.17X at last review.
RESIDENTIAL ASSET: Moody's Downgrades Ratings on 139 Tranches
-------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 139
tranches and upgraded 1 tranches from 15 RMBS transactions issued
by Residential Asset Securitization Trust. The collateral backing
these deals primarily consists of first-lien, mostly adjustable-
rate Alt-A residential mortgages.
Ratings Rationale
The actions are a result of the continued performance
deterioration in Alt-A pools in conjunction with home price and
unemployment conditions that remain under duress. The actions
reflect Moody's updated loss expectations on Alt-A pools issued
from 2005 to 2007.
To assess the rating implications of the updated loss levels on
Alt-A RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
In addition to adjustments to reflect updated loss expectations,
the ratings of two senior tranches in Residential Asset
Securitization Trust 2006-A8 are being adjusted to reflect certain
omissions in the transaction documents. The prospectus supplement
designates Class 2-A-5 as a super senior tranche that is supported
by Class 2-A-8. However, the allocation of loss language in both
the prospectus supplement and the Pooling and Servicing Agreement
allows for only pro-rata loss allocation to the tranches. In this
transaction subordination has been depleted and the Trustee is
allocating losses pro-rata to both the bonds. Moody's ratings for
the Class 2-A-5 and Class 2-A-8 tranches, previously viewed as
super senior and super senior support tranches, respectively, have
been adjusted to reflect this pro-rata structure.
In addition, for the deals affected by the actions, when
calculating the rate of new delinquencies (as described on page 4
of the methodology publication referenced above), Moody's took
into account loans that were reclassified from delinquent to
current due to modification in order to not understate the rate of
new delinquencies.
The above mentioned approach "Alt-A RMBS Loss Projection Update:
February 2010" is adjusted slightly when estimating losses on
pools left with a small number of loans. To project losses on
pools with fewer than 100 loans, Moody's first estimates a
"baseline" average rate of new delinquencies for the pool that is
dependent on the vintage of loan origination (10%, 19% and 21% for
the 2005, 2006 and 2007 vintage respectively). This baseline rate
is higher than the average rate of new delinquencies for the
vintage to account for the volatile nature of small pools. Even
if a few loans in a small pool become delinquent, there could be a
large increase in the overall pool delinquency level due to the
concentration risk. Once the baseline rate is set, further
adjustments are made based on 1) the number of loans remaining in
the pool and 2) the level of current delinquencies in the pool.
The fewer the number of loans remaining in the pool, the higher
the volatility and hence the stress applied. Once the loan count
in a pool falls below 75, the rate of delinquency is increased by
1% for every loan less than 75. For example, for a pool with 74
loans from the 2005 vintage, the adjusted rate of new delinquency
would be 10.10%. If current delinquency levels in a small pool is
low, future delinquencies are expected to reflect this trend. To
account for that, the rate calculated above is multiplied by a
factor ranging from 0.2 to 2.0 for current delinquencies ranging
from less than 2.5% to greater than 50% respectively.
Delinquencies for subsequent years and ultimate expected losses
are projected using the approach described in the methodology
publication.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Complete rating actions are:
Issuer: Residential Asset Securitization Trust 2006-A1
-- Cl. 1-A-1, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-3, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-4, Confirmed at Caa2 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-5, Confirmed at Caa2 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-6, Confirmed at Caa2 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-7, Confirmed at Caa2 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-8, Confirmed at Caa2 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1, Confirmed at Caa2 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-1, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-2, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-3, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-4, Confirmed at Caa2 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Confirmed at Caa2 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-X, Downgraded to Caa2 (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
Issuer: Residential Asset Securitization Trust 2006-A11
-- Cl. 1-A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-3, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-4, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-5, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-7, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-X, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-PO, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-1, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: Residential Asset Securitization Trust 2006-A14CB
-- Cl. 1-A-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-3, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-4, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-6, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-7, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-X, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: Residential Asset Securitization Trust 2006-A15
-- Cl. A-10, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Residential Asset Securitization Trust 2006-A2
-- Cl. A-1, Confirmed at Caa2 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Confirmed at Caa2 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to Caa2 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-5, Confirmed at Caa2 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-6, Confirmed at Caa2 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-7, Downgraded to Caa2 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-8, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-9, Confirmed at Caa2 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-10, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-11, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-X, Downgraded to Caa2 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Confirmed at Caa2 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: Residential Asset Securitization Trust 2006-A3CB
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-X, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: Residential Asset Securitization Trust 2006-A4IP
-- Cl. 1-A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-5, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-6, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-7, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-8, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-9, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-10, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-PO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-X, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Residential Asset Securitization Trust 2006-A5CB
-- Cl. A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-5, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-6, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-7, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-X, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: Residential Asset Securitization Trust 2006-A6
-- Cl. 1-A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-3, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-4, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-5, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-6, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-7, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-8, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-9, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-10, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-11, Downgraded to Ca (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-12, Downgraded to Ca (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-13, Downgraded to Ca (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-14, Downgraded to Ca (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-5, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-6, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-7, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-8, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-9, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-10, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-11, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-12, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-13, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: Residential Asset Securitization Trust 2006-A7CB
-- Cl. 1-A-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-5, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-6, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-3, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-4, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-5, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-6, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-7, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-2, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. A-X, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: Residential Asset Securitization Trust 2006-A8
-- Cl. 1-A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-3, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-4, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-5, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-3, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-4, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-5, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-6, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-7, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-8, Upgraded to Ca (sf); previously on Jan 29, 2009
Downgraded to C (sf)
-- Cl. 3-A-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-5, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-7, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-8, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-9, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-10, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-11, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: Residential Asset Securitization Trust 2006-A9CB
-- Cl. A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-5, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-6, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-7, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-8, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-9, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-10, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-11, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-12, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-X, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
Issuer: Residential Asset Securitization Trust 2007-A1
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: Residential Asset Securitization Trust 2007-A5
-- Cl. 2-A-3, Confirmed at Caa2 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-5, Confirmed at Caa2 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
RESIDENTIAL REINSURANCE: S&P Assigns 'BB' Rating on 2010-II Notes
-----------------------------------------------------------------
Standard & Poor's Ratings Services said that it assigned its
preliminary 'BB (sf)' rating to the Class 1, Series 2010-II notes
to be issued by Residential Reinsurance 2010 Ltd.
This preliminary rating is the same as the final rating S&P
assigned to the company's Class 1 Series 2010-I notes because both
have the same risk profile.
Ratings List
Residential Reinsurance 2010 Ltd.
Class 1, Series 2010-II notes BB (sf) (preliminary)
RFC 2006-1: Fitch Takes Rating Actions on Various Classes
---------------------------------------------------------
Fitch Ratings has downgraded three and affirmed eight classes of
RFC 2006-1, Ltd./LLC, formerly known as CBRE Realty Finance CDO
2006-1, Ltd./LLC, reflecting Fitch's increased base case loss
expectation of 44.3%. Fitch's performance expectation
incorporates prospective views regarding commercial real estate
market value and cash flow declines and the financial stress
currently faced by the collateral asset manager.
The downgrades are a result of the increased base case expected
loss for the portfolio of 44.3% from 34.8% at last review. The
higher expected loss is attributed to a larger percentage of
defaulted assets and Fitch Loans of Concern in the portfolio and
the lower credit quality of the rated securities portion of the
portfolio (16.6%). The weighted average rating of the rated
securities has decreased in credit quality to 'CCC+/CCC' from 'B+'
at last review. Further, defaulted assets are currently at 15.5%
compared to 9.4% at last review while Fitch Loans of Concern are
at 27.7% from 21% at last review.
RFC 2006-1 is a commercial real estate collateralized debt
obligation managed by Realty Finance Corp. RFC is currently
facing financial distress and has disclosed on its website that it
is contemplating filing Chapter 7 bankruptcy. According to the
Indenture, should interest collections be insufficient to cover
the classes rated to timely interest and RFC, as advancing agent,
is unable to advance, Bank of America Merrill Lynch, as trustee
and backup advancing agent, would advance interest obligations it
deems recoverable.
As of the October 2010 trustee report and per Fitch
categorizations, the CDO was substantially invested: 52.2% whole
loan/A-notes, 18.2% mezzanine loans, 12.7% B-notes, 16.6% rated
securities, and 0.3% cash. Further, all overcollateralization
ratios were failing and the class F and class G interest coverage
ratios were also failing. As such, all principal proceeds and
interest proceeds after payment of interest to class B within the
waterfall are redirected as principal to the class A-1 despite the
fact that the transaction has a five-year reinvestment period that
ends in March 2011. Since last review, $25.6 million of the class
A notes were paid down.
Under Fitch's methodology, approximately 71.6% of the portfolio is
modeled to default in the base case stress scenario, defined as
the 'B' stress. In this scenario, the modeled average cash flow
decline is 7.7% from, generally, either year end 2009 or trailing
12-month first or second quarter 2010. Fitch estimates that
average recoveries will be low at 38%.
The largest component of Fitch's base case loss expectation is a
mezzanine position (4.9%) secured by interests in a 1,310-room
full service hotel located in Honolulu, Hawaii. Fitch modeled a
full loss on this highly leveraged position in its base case
scenario.
The next largest component of Fitch's base case loss expectation
is a whole loan (6.8%) secured by a 72-room boutique hotel located
in the Times Square area of New York City. Current property level
cash flow does not fully support operating expenses or cover debt
service payments. Fitch modeled a substantial loss in its base
case scenario.
The third largest component of Fitch's base case loss expectation
is a mezzanine position (3.9%) secured by interests in a 575-room
full service hotel located in Tucson, Arizona. The loan is a non-
performing matured balloon. Debt service reserves have been
completely depleted. Fitch modeled a full loss on this highly
leveraged position in its base case scenario.
This transaction was analyzed according to the 'U.S. CREL CDO
Surveillance Criteria', which applies stresses to property cash
flows and debt service coverage ratio tests to project future
default levels for the underlying portfolio. Cash flow stresses
have been updated to reflect more recently available data on
commercial real estate performance. Recoveries are based on
stressed cash flows and Fitch's long-term capitalization rates.
In consideration of Fitch's view of the collateral asset manager,
Fitch raised the percentage of recognized maturity defaults in the
stress scenarios. The default levels were then compared to the
breakeven levels generated by Fitch's cash flow model of the CDO
under the various default timing and interest rate stress
scenarios, as described in the report 'Global Criteria for Cash
Flow Analysis in CDOs'. Based on this analysis, the class A-1
notes' credit characteristics are generally consistent with the
'B' rating category.
The ratings for classes A-2 through K are based on a deterministic
analysis, which considers Fitch's base case loss expectation for
the pool, and the current percentage of defaulted assets and Fitch
Loans of Concern factoring in anticipated recoveries relative to
each class' credit enhancement. Based on this analysis, classes
A-2, B, and C are consistent with the 'CCC' rating category.
Classes D, E, and F are consistent with the 'CC' rating category.
Classes G, H, J, and K are deemed to be consistent with the 'C'
rating category.
The Negative Outlook maintained on class A-1 reflect Fitch's
expectation of further negative credit migration of the underlying
collateral. The class also maintains a Loss Severity rating of
'LS3'. The LS rating indicates the tranche's potential loss
severity given default, as evidenced by the ratio of tranche size
to the expected loss for the collateral under the 'B' stress. LS
ratings should always be considered in conjunction with
probability of default indicated by a class' long-term credit
rating.
Classes A-2 through K are assigned Recovery Ratings to provide a
forward-looking estimate of recoveries on currently distressed or
defaulted structured finance securities. Recovery Ratings are
calculated using Fitch's cash flow model, and incorporate Fitch's
current 'B' stress expectation for default and recovery rates, the
'B' stress US$ LIBOR up-stress, and a 24-month recovery lag. All
modeled distributions are discounted at 10% to arrive at a present
value and compared to the class' tranche size to determine a
Recovery Rating.
The assignment of 'RR5' to class A-2 reflects modeled recoveries
of 29% of its outstanding balance. The expected recovery proceeds
are broken down:
-- Present value of expected principal recoveries ($0 million);
-- Present value of expected interest payments ($9.6 million);
-- Total present value of recoveries ($9.6 million);
-- Sum of undiscounted recoveries ($15 million).
The assignment of 'RR5' to class B reflects modeled recoveries of
23% of its outstanding balance. The expected recovery proceeds
are broken down:
-- Present value of expected principal recoveries ($0 million);
-- Present value of expected interest payments ($8.1 million);
-- Total present value of recoveries ($8.1 million);
-- Sum of undiscounted recoveries ($11.7 million).
Classes C through K are assigned a Recovery Rating of 'RR6' as the
present value of the recoveries is less than 10% of the class's
principal balance.
Fitch has downgraded and assigned Loss Severity, Recovery Rating,
and Outlook to this class, as indicated:
-- $285,578,151 class A-1 downgraded to 'Bsf/LS3' from
'BBsf/LS3'; Outlook Negative;
-- $33,000,000 class A-2 downgraded to 'CCCsf/RR5' from
'Bsf/LS5';
-- $34,500,000 class B downgraded to 'CCCsf/RR5' from 'Bsf/LS5'.
Fitch has affirmed these classes, as indicated:
-- $15,000,000 class C affirmed at 'CCCsf', revised to 'RR6'
from 'RR5';
-- $13,500,000 class D affirmed at 'CCsf/RR6';
-- $9,000,000 class E affirmed at 'CCsf/RR6';
-- $10,500,000 class F affirmed at 'CCsf/RR6';
-- $13,500,000 class G affirmed at 'Csf/RR6';
-- $4,500,000 class H affirmed at 'Csf/RR6';
-- $24,000,000 class J affirmed at 'Csf/RR6';
-- $20,250,000 class K affirmed at 'Csf/RR6'.
ROOSEVELT UNION: Moody's Lifts Rating on $1.5 Mil. Debt From 'Ba1'
------------------------------------------------------------------
Moody's Investors Service has upgraded to Baa2 from Ba1 the rating
on Roosevelt Union Free School District's $1.5 million of
outstanding long term general obligation debt.
Ratings Rationale
The upgrade to Baa2 reflects the district's substantially improved
financial position after three consecutive years of operating
surpluses. The rating action also reflects the State Department
of Education continued oversight of the district, below average
wealth levels and very high debt burden offset with state building
aid.
New York State Department Of Education Oversight Since 2002; Two
Debt Service Payments Missed
Beginning in 2002, the State Legislature authorized the New York
State Commissioner of Education to appoint a fiscal administrator
for the district. The fiscal administrator responsibilities
included the review of district financial operations and the
planning and implementation of a five-year financing stabilization
plan. Despite the administrator's presence, the district missed
two interest-only debt service payments on their 2003 Bonds, once
in December 2005 and again in December 2006. While the district
failed to make payments to the Depository Trust Company, an event
of default did not exist as DTC made the payments on time. DTC
has announced that its practice of making paying debt service
without receipt of payment from the issuer will cease by February
2011. The missed debt service payments largely reflected poor
financial controls and significantly constrained cash liquidity,
as evidenced by the borrowing of cash from the Capital Projects
Fund and the partial repayment of this loan with cash flow notes.
In March 2007, the New York State Comptroller released an audit
report that revealed a substantially weaker financial position
than had been previously reported, despite oversight of the
district by the State DOE. The Comptroller's report, which was
requested by the State DOE, indicated that, after five years of
financial mismanagement and poor budgeting, the district had an
accumulated deficit of approximately $12 million. Beginning in
2007, the Fiscal Administrator began working at the district's
offices on a daily basis and, working with a new Superintendent,
implemented a deficit reduction plan and established internal
controls to ensure debt service payments were not missed again.
In addition to receiving one-time state aid revenues of
approximately $14 million in fiscal 2008, the district began to
review all expenditures and make cuts where necessary. While the
State DOE still maintains a presence at the district, it is no
longer involved in the day-to-day operations. Additionally, at
the upcoming May 2011 budget vote, the last remaining member of
the State DOE interim board is expected to step down, allowing for
the five-member board to be wholly elected by the district voters.
Future rating reviews will heavily factor management's ability to
maintain new internal controls established over the past four
years without the reliance of the State DOE and fiscal
administrator.
Strengthened Internal Controls And Three Consectutive Years Of
Positive Operating Results Key To Rating Upgrade
Moody's expects the district's financial position to stabilize at
recently improved levels, given conservative budgeting on
expenditures and the implementation of a new fiscal policy. Over
the past four years the district has implemented a new fiscal
policy which improves various internal controls on spending and
ensures adequate and on time debt service payments. The
district's General Fund balance deficit in fiscal 2007 was
-$7.9 million, or -12.8% of revenues on an undesignated basis due
to lack of voter approval of local budgets, which required the
district to operate within a more constrained contingency budget,
and the Board of Education's failure to cut expenditures to
operate within this constraint. Since then, the district's
financial performance has improved through state management
oversight as well as an $8 million grant from the state to
eliminate the accumulated General Fund deficit. Positive
financial operations ($5.8 million surplus), combined with an
unbudgeted $6 million increase in the annual academic improvement
grant, enabled the district to amass a $14.6 million General Fund
balance, or a healthy 17.7% of revenues. The district finished
fiscal 2009 with a second consecutive operating surplus
($5.3 million), reflective of the improved budget techniques and
ongoing financial monitoring under a new fiscal management team.
Fiscal 2010 ended with a third consecutive operating surplus of
$3.6 million, increasing reserves to $23.6 million, or 32.6% of
revenues. The operating surplus was driven primarily by
conservative budgeting on various expenditures, including
instruction ($7 million), employee benefits ($3.7 million) and
central services ($1.2 million). These and other various
expenditure cuts helped fully replenish a $2.5 million fund
balance appropriation and a $7.7 million shortfall in state aid
(net of federal stimulus money). Additional financial flexibility
is available to the district with approximately $8 million
available in the Debt Service Fund for payment of principal and
interest.
The voter-approved fiscal 2011 budget increases by $2.8 million to
$84 million, a 3.4% increase over fiscal 2010 budget-to-budget
reflecting contractual increases consistent with New York school
districts. The budget was balanced with $3.295 in appropriated
fund balance, an increase of $795,000 over the previous year, a
$1.8 million increase in state aid and a marginal increase in
property tax revenues. Positively, the district, once an annual
issuer of cash flow notes for operations, has not issued a Revenue
Anticipation Note since July 2007 ($11 million), reflecting the
district's strong cash position of $23.9 million (33.1% of fiscal
2010 revenues). Additionally, voter approval for district budgets
has been strong over the past three years as the district has
managed to pass each of those budgets. Negatively, the district
has had six finance directors over the past five years, creating
instability within the finance department. With the State-
appointed Fiscal Administrator scheduled to leave the district at
the end of fiscal 2011, continued state aid declines, and the end
of federal stimulus monies, stability within management and the
ability to effectively manage the district's finances at the
recently improved levels will be key rating drivers moving
forward.
Very High Debt Burden Offset Somewhat By Significant State
Building Aid Allocations
Moody's expects the district's high direct debt burden of 12% to
remain manageable, given the district's high state school building
aid ratio of 90%. The district's upcoming $15 million Bond
Anticipation Note for renovations at the high school has been
factored into the debt burden; no other near-term debt is
expected. The district's overall debt burden, including all
overlapping obligations of Nassau County (GO rated A1/negative
outlook), the Town of Hempstead (GO rated Aaa) and the Village of
Freeport (GO rated A1), is a very high 13.7%. The adjusted debt
burden decreases to a still above average 3% of full valuation
when taking into account the district's significant state building
aid. Amortization of principal is slow with 26% paid within ten
years. Debt service was a high 12.8% of fiscal 2010 expenditures.
Tax Base Characterized By Weak Wealth Levels And Modest
Appreciation
Moody's expects continued stability for the district's
$1.2 billion tax base given its location in Nassau County,
approximately twenty miles east of mid-town Manhattan with
proximity to employment opportunities. Despite limited
expansion options, market value appreciation has resulted in
a 3.8% average annual increase in full value over the past
five years. The decline in the district's assessed value over
the past four years reflects Nassau County's revaluation at
0.25% of full market value. Wealth levels in the district are
slightly below state averages, and while full value per capita
is below the state average at $68,753 but is much lower than
comparable Long Island credits.
What Could Make The Rating Go Up:
-- Stability of the district's financial position at recently
improved levels.
-- Improved direct debt burden.
What Could Make The Rating Go Down:
-- Deterioration of the district's financial position.
-- Failure to implement internal controls resulting in another
missed debt service payment.
Key Statistics:
* 2000 population: 17,286
* 2010 full valuation: $1.2 billion
* 2010 full value per capita: $68,753
* Direct debt burden: 12%
* Overall debt burden: 13.7%
* Overall debt burden (adjusted): 3%
* Payout of principal (10 years): 26%
* FY 2010 General Fund balance: $23.6 million (32.6% of General
Fund revenues)
* FY 2010 General Fund Cash balance: $23.9 million (33.1% of
General Fund revenues)
* Median family income: $57,281 (110.8% of state)
* Per capita income: $17,609 (75.3% of state)
* Debt outstanding: $127.3 million
SAGAMORE CLO: S&P Raises Ratings on Various Classes of Notes
------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
A-1, A-2, A-3, B, C-1, and C-2 notes from Sagamore CLO Ltd., a
collateralized loan obligation transaction managed by Invesco
Senior Secured Management Inc. At the same time, S&P removed its
ratings on the class A-1, A-2, and A-3 notes from CreditWatch with
positive implications.
S&P has observed improved performance in the transaction's
underlying asset portfolio, significant paydowns of the
class A notes, and an improvement in the transaction's
overcollateralization ratios since S&P lowered its ratings
on all the notes in March 2010 following a review of the
transaction under its criteria for rating corporate
collateralized debt obligations.
According to the October 2010 trustee report, the balance of
defaulted obligations in the transaction was $8.4 million,
down from $16.7 million as of the February 2010 trustee report.
Additionally, the transaction has paid down approximately
$61.7 million to the class A notes since S&P's last rating
action, including a $10.3 million payment in the Oct. 15, 2010,
distribution, which increased the O/C available to support the
rated notes. The O/C ratio for the class A notes was 127.5%
as of October 2010, up from 120.6% according to the February
2010 trustee report. Similarly, the class B O/C ratio has
improved to 114.6% from 111.1%, and the class C O/C ratio has
improved to 104.9% from 103.7%.
Standard & Poor's will continue to review whether, in its view,
the ratings assigned to the notes remain consistent with the
credit enhancement available to support them and take rating
actions as S&P deems necessary.
Rating And Creditwatch Actions
Sagamore CLO Ltd.
Rating
------
Class To From
----- -- ----
A-1 AA+ (sf) A+ (sf)/Watch Pos
A-2 AA+ (sf) A+ (sf)/Watch Pos
A-3 AA+ (sf) A+ (sf)/Watch Pos
B BB+ (sf) B+ (sf)
C-1 B- (sf) CCC+ (sf)
C-2 B- (sf) CCC+ (sf)
SALOMON BROTHERS: S&P Downgrades Ratings on Nine 2001-C2 Notes
--------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on nine
classes of commercial mortgage-backed securities from Salomon
Brothers Commercial Mortgage Trust 2001-C2. S&P lowered its
ratings on classes M, N, and P to 'D (sf)'. Concurrently, S&P
affirmed its ratings on seven other classes from the same
transaction.
The downgrades follow S&P's analysis of interest shortfalls that
have affected the trust which S&P expects will continue. As of
the Oct. 13, 2010 remittance report, the trust had experienced
monthly interest shortfalls totaling $91,564, primarily related
to appraisal subordinate entitlement reduction amounts associated
with four of seven specially serviced assets. Four of these
assets had appraisal reduction amounts in effect totaling
$13.0 million, which generated ASERs of $79,659. Further driving
the interest shortfalls were monthly special servicing fees
($11,297). The monthly interest shortfalls affected the class M,
N, and P certificates. S&P expects these shortfalls to continue
and as a result, S&P lowered these classes to 'D (sf)'.
The lowered ratings also reflect reduced liquidity available to
the remaining pooled classes as well as credit support erosion
that S&P anticipate will occur upon the eventual resolution of the
eight specially serviced loans. In arriving at S&P's adjusted
ratings, S&P also considered the volume of loans maturing within
the next year.
The affirmations of the principal and interest certificates
reflect liquidity support and subordination levels that are
consistent with the outstanding ratings. S&P affirmed its rating
on the class XC interest-only certificates based on its current
criteria.
In addition, S&P affirmed its 'AAA (sf)' rating on the junior
unpooled "BR" certificate associated with the Birch Run Outlet
Center loan ($36.0 million; 6.0% ), a senior companion loan
contributed to the trust. Both the junior and senior components
have been defeased.
S&P's analysis included a review of the credit characteristics of
all of the loans in the pool. Using servicer-provided financial
information, S&P calculated an adjusted debt service coverage of
1.33x and a loan-to-value ratio of 77.6%. S&P further stressed
the loans' cash flows under S&P's 'AAA' scenario to yield a
weighted average DSC of 1.00x and an LTV ratio of 94.2%. The
implied defaults and loss severity under the 'AAA' scenario were
30.1% and 27.1%, respectively. The DSC and LTV calculations S&P
noted above exclude eight ($62.2 million; 10.4%) out of nine
specially serviced assets and 24 defeased loans ($256.9 million;
42.1%). S&P separately estimated losses for the eight specially
serviced assets, which S&P included in its 'AAA' scenario implied
default and loss severity figures.
Credit Considerations
As of the Oct. 13, 2010, remittance report, seven assets
($54.8 million; 9.2%) in the pool were with the special
servicer, CWCapital Asset Management LLC. In addition, two
additional loans ($11.4 million; 1.9%) were transferred to
special servicing due to imminent monetary default, but the
transfers were too late to be reflected in the October
remittance report. The payment status of the nine assets
now with CWCapital is as follows: two are real estate owned
($28.6 million; 4.8%), two are 90-plus-days delinquent
($13.3 million; 2.2%), one is 30 days delinquent ($1.5 million;
0.3%), and four are late but within their grace periods
($22.8 million; 3.8%). Four of the specially serviced assets
have ARAs in effect totaling $13.0 million.
The Cannery, the largest nondefeased asset in the pool and the
largest asset with the special servicer, has a total exposure of
$18.7 million (2.9%), which includes $1,352,121 of advancing and
interest thereon. The mixed-use property, which is REO, totals
98,641 sq. ft. of retail and office space. The property is in
downtown San Francisco and was built in 1907 and renovated in
2001. The loan was transferred to the special servicer on
April 5, 2010, due to imminent monetary default, and an ARA of
$3.7 million is in effect. The property is listed with a broker
and is being marketed for sale. S&P expects a moderate loss upon
the eventual resolution of this asset.
Market Square Shopping Center, the fifth-largest nondefeased
asset in the pool and the second-largest asset with the special
servicer, has a total exposure of $14.2 million (2.9%), which
includes $2,971,318 of advancing and interest thereon. The
property, which is also REO, is a 209,283-sq.-ft. anchored
shopping center in Spartanburg, S.C., built in 1989 and
renovated in 1996. The loan was transferred to the special
servicer on June 24, 2004, due to a monetary default, and an
ARA of $6.3 million is in effect. The property is listed with
a broker and is being marketed for sale. S&P expects a moderate
loss upon the eventual resolution of this asset as well.
The seven remaining specially serviced assets ($37.6 million,
6.3%) have balances that individually represent less than 1.3% of
the total pool balance. S&P separately estimated losses six of
these assets, resulting in a weighted average loss severity is
20.4%. The special servicer expects that the remaining asset
($6.7 million; 1.1%), which is a loan maturing on Sept. 10, 2011,
that is currently 90-plus-days delinquent, will either be
reinstated or paid off in full by the end of January 2011.
One loan totaling $10.0 million (1.7%) was previously with the
special servicer and has been returned to the master servicer.
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 they continue to perform and remain with the master
servicer.
Excluding the transaction's 24 defeased loans and nine specially
serviced loans, 62 loans ($276.0 million, 46.1%) have anticipated
repayment dates or final maturity dates through year-end 2011.
Standard & Poor's considered this large volume of loans with near-
term ARDs/maturities in its rating actions.
Transaction Summary
As of the Oct. 13, 2010, remittance report, the transaction
had an aggregate trust balance of $598.3 million (102 loans)
and a whole loan balance of $619.9 million, compared with a
$866.0 million trust balance (138 loans) and an $887.6 million
whole loan balance at issuance. Midland Loan Services Inc.,
the master servicer, provided financial information for 94.9%
of the nondefeased loans. All of the servicer-provided
financial information was either full-year 2008 or full-year
2009 data. S&P calculated a weighted average DSC of 1.32x for
the nondefeased loans in the pool based on the reported figures.
S&P's adjusted DSC and LTV were 1.33x and 77.6%, respectively
and exclude eight ($62.2 million; 10.4%) of the nine specially
serviced assets and 24 defeased loans ($256.9 million; 42.1%).
S&P separately estimated losses for the eight specially serviced
assets. Twenty-eight loans are on the master servicer's watchlist
($118.6 million; 19.8%), including the two loans that were
transferred from the master servicer to special servicing after
the October remittance date ($11.4 million; 1.9%). Four loans
($12.5 million, 2.1%) have a reported DSC between 1.0x and 1.1x,
and 17 loans ($77.5 million, 13.0%) have a reported DSC of less
than 1.0x. The trust has experienced $15.0 million of principal
losses to date.
Summary of Top 10 Loans
The top 10 assets secured by real estate have an aggregate
outstanding trust and whole balance of $116.5 million (19.5%).
Using servicer-reported information, S&P calculated a weighted
average DSC of 1.52x. S&P's adjusted DSC and LTV figures for the
top 10 assets were 1.18x and 83.2%, respectively. These figures
exclude the largest and fifth-largest nondefeased assets in the
pool, The Cannery asset ($17.3 million; 2.9%) and the Market
Square Shopping Center asset ($11.3 million; 1.9%), which are with
the special servicer and discussed above.
The Cumberland Crossing loan ($14.2 million; 2.4%) is the third-
largest nondefeased asset in the pool and is secured by a 258,414-
sq.-ft. anchored retail property in Millville, N.J., that was
built in 1994. This loan was placed on the master servicer's
watchlist to reflect the risk that Pathmark, the property's
second-largest tenant (58,822; 22.8%), would vacate the premises.
However, Pathmark subsequently extended its lease to Dec. 31,
2019. The reported DSC was 1.44x for year-end 2009, while the
reported occupancy was 86% as of March 2010. Based on the current
leasing status, S&P estimate a DSC of 1.11x.
The Redwood Business Park No. 3 loan ($14.1 million; 2.4%) is
the fourth-largest nondefeased asset in the pool and is secured
by a 144,000-sq.-ft. office building in Petaluma, Calif., built
in 1996. This loan appears on the master servicer's watchlist
due to low occupancy. While the property is 100% leased to
Alcatel/Lucent pursuant to a 72,000 sf. ft. lease expiring
April 20, 2011, and another 72,000 sq. ft. lease expiring Oct. 31,
2011, Alcatel/Lucent only occupies 50% of the property. The
reported DSC was 1.41x for year-end 2009, and S&P estimate a DSC
of 0.80x, considering the near-term maturities of the two leases.
The Marketplace at Palmdale loan ($10.0 million; 1,7%) is the
sixth-largest nondefeased loan in the pool and is secured by a
215,202-sq.-ft. anchored retail property in Palmdale, Calif.,
built in 2001. The loan appears on the master servicer's
watchlist due to a low DSC. The reported DSC was 0.90x for year-
end 2009, while the reported occupancy was 96.2% as of July 20,
2010. Based on the current leasing status, S&P estimate a DSC of
1.03x.
Standard & Poor's stressed the loans in the pool according to its
U.S. conduit/fusion criteria. The resultant credit enhancement
levels are consistent with S&P's lowered and affirmed ratings.
Ratings Lowered
Salomon Bros. Commercial Mortgage Trust 2001-C2
Commercial mortgage pass-through certificates series 2001-C2
Rating
------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
F A+ (sf) AA- (sf) 13.84
G BBB+ (sf) A+ (sf) 11.49
H BBB- (sf) A- (sf) 9.68
J B+ (sf) BBB (sf) 6.61
K CCC+ (sf) BB+ (sf) 4.26
L CCC- (sf) BB (sf) 3.18
M D (sf) B+ (sf) 2.27
N D (sf) B- (sf) 1.19
P D (sf) CCC (sf) 0.29
Ratings Affirmed
Salomon Bros. Commercial Mortgage Trust 2001-C2 (Pooled)
Commercial mortgage pass-through certificates series 2001-C2
Class Rating Credit enhancement (%)
----- ------ ----------------------
A3 AAA (sf) 30.09
B AAA (sf) 23.95
C AAA (sf) 22.15
D AA+ (sf) 17.63
E AA (sf) 15.64
X1 AAA (sf) N/A
N/A - Not applicable.
Salomon Bros. Commercial Mortgage Trust 2001-C2 (Nonpooled)
Commercial mortgage pass-through certificates series 2001-C2
Class Rating Credit enhancement (%)
----- ------ ----------------------
BR AAA (sf) N/A
N/A - Not applicable.
SASCO 2007-BHC1: S&P Downgrades Ratings on Seven Classes of Notes
-----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on seven
classes from SASCO 2007-BHC1 Trust, a U.S. resecuritized real
estate mortgage investment conduit transaction. At the same time,
S&P affirmed its 'D (sf)' ratings on 10 classes from the
transaction.
The downgrades and affirmations primarily reflect S&P's analysis
of the transaction following interest shortfalls to the
transaction. S&P's analysis also considered the potential for
class A-1 to experience interest shortfalls in the future.
S&P downgraded classes G through M to 'D (sf)' on May 19, 2010,
class N to 'D (sf)' on Jan. 27, 2010, classes P and Q to 'D (sf)'
on Dec. 10, 2009, and class S to 'D (sf)' on Feb. 19, 2009, to
reflect interest shortfalls that S&P expected to continue for the
foreseeable future.
According to the Oct. 21, 2010 trustee report, remaining deferred
interest to the transaction totaled $4.5 million affecting class
A-2 and the classes subordinate to it. The interest shortfalls to
SASCO 2007-BHC1 Trust resulted from interest shortfalls on 21 of
the underlying CMBS transactions primarily due to special
servicing fees and appraisal subordinate entitlement reductions.
S&P lowered its ratings on classes A-2 through F to 'D (sf)' due
to interest shortfalls experienced since March, April, and June of
2010, which S&P expects will continue for the foreseeable future.
According to the Oct. 21, 2010, trustee report, SASCO 2007-BHC1 is
collateralized by 88 CMBS classes ($501.3 million, 100%) from 42
distinct transactions issued between 2004 and 2006. The rated
CMBS collateral has a weighted average rating of 'B- (sf)' and a
rating range of 'BBB- (sf)' to 'D (sf)'. The weighted average
credit estimate of the unrated CMBS collateral is 'b'.
Standard & Poor's analyzed the transaction and its underlying
collateral assets according to its current criteria. S&P's
analysis is consistent with the lowered and affirmed ratings.
Ratings Lowered
SASCO 2007-BHC1 Trust
Commercial mortgage-backed securities pass-through certificates
Rating
------
Class To From
----- -- ----
A-1 CCC+ (sf) B+ (sf)
A-2 D (sf) CCC- (sf)
B D (sf) CCC- (sf)
C D (sf) CCC- (sf)
D D (sf) CCC- (sf)
E D (sf) CCC- (sf)
F D (sf) CCC- (sf)
Ratings Affirmed
SASCO 2007-BHC1 Trust
Commercial mortgage-backed securities pass-through certificates
Class Rating
----- ------
G D (sf)
H D (sf)
J D (sf)
K D (sf)
L D (sf)
M D (sf)
N D (sf)
P D (sf)
Q D (sf)
S D (sf)
SAXON ASSET: S&P Downgrades Ratings on Five Classes of Certs.
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on five
classes of mortgage pass-through certificates from Saxon Asset
Securities Trust 2004-2, a U.S. subprime residential mortgage-
backed securities transaction. Additionally, S&P affirmed its
ratings on two other classes of certificates from two additional
RMBS transactions issued in 1992 and 2003 and removed them from
CreditWatch with negative implications.
The downgrades reflect S&P's assessment of interest shortfalls on
the affected classes during recent remittance periods. S&P's
ratings reflect its view of the magnitude of the interest payment
deficiencies that have affected each class to date compared with
the remaining principal balance owed and the likelihood that
certificateholders will be reimbursed for these deficiencies. The
downgrades also reflect S&P's view of the balance of current
delinquencies of the affected transaction. Four of the lowered
ratings were speculative-grade before the downgrades.
The affirmations reflect S&P's view of actual reimbursements of
interest shortfalls on the affected classes during recent
remittance periods.
Rating Actions
Saxon Asset Securities Trust 2004-2
Series 2004-2
Rating
------
Class CUSIP To From
----- ----- -- ----
MF-2 805564QB0 CCC (sf) A- (sf)
MF-3 805564QC8 CCC (sf) BB+ (sf)
MF-4 805564QD6 CCC (sf) B+ (sf)
MF-5 805564QE4 CCC (sf) B (sf)
MF-6 805564QF1 CC (sf) B- (sf)
Saxon Mortgage Securities Corp.
Series 1992-1
Rating
------
Class CUSIP To From
----- ----- -- ----
B-1 805570AC2 BBB- (sf) BBB- (sf)/Watch Neg
Bear Stearns ALT-A Trust 2003-3
Series 2003-3
Rating
------
Class CUSIP To From
----- ----- -- ----
I-A 07386HCE9 AAA (sf) AAA (sf)/Watch Neg
SORIN REAL: Moody's Takes Rating Actions on Various Classes
-----------------------------------------------------------
Moody's has downgraded two and affirmed five classes of Notes
issued by Sorin Real Estate CDO I, Ltd. due to the deterioration
in the credit quality of the underlying portfolio as evidenced by
an increase in the weighted average rating factor, and increase in
Defaulted Securities. The rating action is the result of Moody's
on-going surveillance of commercial real estate collateralized
debt obligation transactions.
Moody's rating action is:
-- Class A1 Floating Rate Senior Notes, Affirmed at Ba3 (sf);
previously on March 12, 2009 Downgraded to Ba3 (sf)
-- Class A2 Floating Rate Senior Notes, Downgraded to Ca (sf);
previously on March 12, 2009 Downgraded to Caa3 (sf)
-- Class B Floating Rate Senior Notes, Affirmed at Ca (sf);
previously on March 12, 2009 Downgraded to Ca (sf)
-- Class C Floating Rate Subordinate Notes, Downgraded to C
(sf); previously on March 12, 2009 Downgraded to Ca (sf)
-- Class D Floating Rate Subordinate Notes, Affirmed at C (sf);
previously on March 12, 2009 Downgraded to C (sf)
-- Class E Floating Rate Subordinate Notes, Affirmed at C (sf);
previously on March 12, 2009 Downgraded to C (sf)
-- Class F Fixed Rate Subordinate Notes, Affirmed at C (sf);
previously on March 12, 2009 Downgraded to C (sf)
Ratings Rationale
Sorin Real Estate CDO I, Ltd., is a CRE CDO transaction backed by
a portfolio of commercial mortgage backed securities (54.8% of the
pool balance), asset backed securities including (24.8%), B-Notes
(10.7%), collateralized debt obligations (8.9%) and mezzanine debt
(0.4%). As of the April 30, 2010 Trustee report, the aggregate
Note balance of the transaction has decreased to $388.1 million
from $403.0 million at issuance, with the paydown directed to the
Class A Notes, as a result of the failure of the Class A/B
principal coverage test.
There are twenty-four assets with par balance of $88.3 million
(26.3% of the current pool balance) that are considered Defaulted
Securities as of the September 30, 2010 Trustee report. Eleven of
these assets (71.1% of the defaulted balance) are CMBS, twelve
assets are ABS (27.5%) and one asset is a term loan (1.2%). While
there have been limited realized losses to date, Moody's does
expect significant losses to occur once they are realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life , weighted average recovery rate , and Moody's asset
correlation . These parameters are typically modeled as actual
parameters for static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's have completed updated credit estimates for the non-
Moody's rated collateral. For non-CUSIP collateral, Moody's is
eliminating the additional default probability stress applied to
corporate debt in CDOROM(R) v2.6 as Moody's expect the underlying
non-CUSIP collateral to experience lower default rates and higher
recovery compared to corporate debt due to the nature of the
secured real estate collateral. The bottom-dollar WARF is a
measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF of 3,465 compared to 1,6333
at last review. The distribution of current ratings and credit
estimates is: Aaa-Aa3 (16.0% compared to 16.8% at last review),
A1-A3 (2.1% compared to 8.2% at last review), Baa1-Baa3 (18.6%
compared to 22.5% at last review), Ba1-Ba3 (16.4% compared to
22.5% at last review), B1-B3 (13.5% compared to 14.3% at last
review), and Caa1-C (33.4% compared to 15.6% at last review).
WAL acts to adjust the probability of default of the reference
obligations in the pool for time. Moody's modeled to a WAL of 2.5
years compared to 4.0 years at last review.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a fixed WARR
of 20.3% compared to 24.6% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity). For
non-CUSIP collateral, Moody's is reducing the maximum over
concentration stress applied to correlation factors due to the
diversity of tenants, property types, and geographic locations
inherent in the pooled transactions. Moody's modeled a MAC of
9.7% compared to 15.6% at last review. The low MAC is due to
higher default probability collateral concentrated within a small
number of collateral names.
Moody's review incorporated CDOROM(R) v2.6, one of Moody's CDO
rating models, which was released on May 27, 2010.
The cash flow model, CDOEdge(R) v3.2, was used to analyze the cash
flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 20.3% to 10.3% or up to 30.3% would result in average
rating movement on the rated tranches of 0 to 1 notches downward
and 0 to 1 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expect
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
SOUNDVIEW HOME: S&P Corrects Rating on Class II-A-1 From 'CCC'
--------------------------------------------------------------
Standard & Poor's Ratings Services corrected its rating on class
II-A-1 from Soundview Home Loan Trust 2007-WMC1 by raising it to
'AA+ (sf)' from 'CCC (sf)'. In addition, S&P lowered its rating
on class M-2 and affirmed its ratings on six other classes from
this transaction.
On March 26, 2010, as a result of an error, S&P lowered its rating
on class II-A-1 to 'CCC (sf)' and removed it from CreditWatch with
negative implications as part of a larger review of U.S. Subprime
and Alternative-A residential mortgage-backed securities. The
rating of class II-A-1 should have remained at 'AAA (sf)/Watch
Neg' on this date.
The corrected rating on class II-A-1 reflects the current rating
on Assured Guaranty Municipal Corp. ('AA+'), which provides bond
insurance to the security. According to S&P's criteria, the issue
credit rating on a fully credit-enhanced issue is the higher of
(i) the rating on the credit enhancer; and (ii) the SPUR on the
securities.
The lowered rating on class M-2 to 'D (sf)' reflects S&P's
assessment of recent principal write-downs to this class. The
'CCC (sf)' rating affirmations on classes 1-A-1, III-A-1 through
III-A-4 and the 'CC (sf)' rating affirmation on class M-1 are
based on S&P's view of the amount of credit enhancement available
to these classes as of the October 2010 distribution period.
The downgrades and affirmations incorporate S&P's current and
projected losses based on the dollar amounts of loans currently
in the transaction's delinquency, foreclosure, and real estate
owned pipelines, as well as S&P's projection of future defaults.
S&P also incorporated cumulative losses to date in its analysis
when assessing rating outcomes.
To maintain a 'AAA' rating, S&P considers whether a bond will
likely be able to withstand approximately 150% of its base-case
loss assumptions, subject to individual caps and qualitative
factors assumed on specific transactions. For a class for which
we've affirmed a 'B' rating, S&P considers whether a bond is
likely able to withstand its base-case loss assumptions. Other
rating categories are dispersed, approximately equally, between
these two loss assumptions.
Rating Corrected
Soundview Home Loan Trust 2007-WMC1
Series 2007-WMC1
Rating
------
Class CUSIP Current March 26* Pre-March 26
----- ----- ------- --------- ------------
II-A-1 83612NAB1 AA+ (sf) CCC (sf) AAA (sf)/Watch Neg
* As noted above, the rating on class II-A-1 should have remained
at 'AAA (sf)/Watch Neg' on March 26.
Rating Lowered
Soundview Home Loan Trust 2007-WMC1
Series 2007-WMC1
Rating
------
Class CUSIP To From
----- ----- -- ----
M-2 83612NAH8 D (sf) CC (sf)
Ratings Affirmed
Soundview Home Loan Trust 2007-WMC1
Series 2007-WMC1
Class CUSIP Rating
----- ----- ------
I-A-1 83612NAA3 CCC (sf)
III-A-1 83612NAC9 CCC (sf)
III-A-2 83612NAD7 CCC (sf)
III-A-3 83612NAE5 CCC (sf)
III-A-4 83612NAF2 CCC (sf)
M-1 83612NAG0 CC (sf)
SOUTH COAST: Fitch Downgrades Ratings on Three Classes of Notes
---------------------------------------------------------------
Fitch Ratings has downgraded and withdrawn the ratings on three
classes of notes issued by South Coast Funding VI, Ltd.:
-- $0 class A-1 notes paid in full;
-- $27,250,568 class A-2 notes downgraded to 'Dsf' from 'Csf';
withdrawn;
-- $30,000,000 class B notes downgraded to 'Dsf' from 'Csf';
withdrawn;
-- $13,169,375 class C notes downgraded to 'Dsf' from 'Csf';
withdrawn.
This rating action is a result of the liquidation of the
collateral. South Coast VI entered an event of default on July 9,
2010 due to the aggregate amount of principal collateral falling
below 100% of the aggregate outstanding amount of class A and
class B notes. The required majority of the noteholders voted to
accelerate and liquidate the portfolio on Sept. 15, 2010.
The trustee held public auctions on Oct.13 and 14, 2010 and sold
the collateral. The proceeds from the sale were distributed on
Nov. 4, 2010. The proceeds were sufficient to pay class A-1
interest, pay off class A-1, and class A-2 interest. The class A-
2 notes received $8,749,431 or 24.3% of the outstanding principal
balance; however, proceeds were insufficient to fully pay off
class A-2. The class B and C notes sustained full losses.
South Coast VI was a structured finance collateralized debt
obligation that closed on Sept. 29, 2004 and was managed by TCW
Investment Management Company. The transaction exited its
reinvestment period in September 2007.
SQUARED CDO: Moody's Downgrades Ratings on Four Classes of Notes
----------------------------------------------------------------
Moody's Investors Service announced that it has downgraded the
ratings of four classes of notes issued by Squared CDO 2007-1,
Ltd. The notes affected by the rating action are:
-- US$935,000,000 Class A-1 Senior Secured Floating Rate
Notes due 2057 (current balance of $930,856,135), Downgraded
to C (sf); previously on June 2, 2010 Downgraded to Ca (sf).
-- US$70,000,000 Class A-2a Senior Secured Floating Rate
Notes due 2057, Downgraded to C (sf); previously on
February 19, 2010 Downgraded to Ca (sf).
-- US$10,000,000 Class A-2b Senior Secured Fixed Rate Notes
due 2057, Downgraded to C (sf); previously on February 19,
2010 Downgraded to Ca (sf).
-- US$37,000,000 Class B Senior Secured Floating Rate Notes
due 2057, Downgraded to C (sf); previously on February 19,
2010 Downgraded to Ca (sf).
Ratings Rationale
Squared CDO 2007-1, Ltd., is a collateralized debt obligation
backed primarily by a portfolio of SF CDO tranches. On
January 16, 2008, the transaction experienced an event of default
caused by a failure of the ratio of the Portfolio Balance to the
sum of the Aggregate Outstanding Amount of the Class A-1 Notes and
the Class A-2 Notes to be greater than or equal to 100 percent,
pursuant Section 5.1(g) of the Indenture dated May 11, 2007. That
event of default is continuing.
According to Moody's, the rating downgrade action is the result of
deterioration in the credit quality of the underlying portfolio.
Such credit deterioration is observed through numerous factors,
including a decline in the average credit rating of the portfolio
(as measured by an increase in the weighted average rating
factor), an increase in the dollar amount of defaulted securities,
and missing interest payment. According to the trustee, all
assets in the portfolio are defaulted. Additionally, the
transaction failed to make the interest payment due on the senior
most tranche on recent payment dates.
Moody's notes that in arriving at its ratings of ABS CDOs, there
exist a number of sources of uncertainty, operating both on a
macro level and on a transaction-specific level. Among the
general macro uncertainties are those surrounding future housing
prices, pace of residential mortgage foreclosures, loan
modification and refinancing, unemployment rate and interest
rates. 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.
In deriving its ratings, Moody's uses the collateral instrument's
current rating-based expected loss, Moody's recovery rate table,
and the original rating of the instrument along with its average
life to infer an unadjusted default probability.
The approach Moody's takes to defining the default distribution
for the SF CDO collateral depends on the structure of the CDO
itself.
Moody's applied the Monte Carlo simulation framework within
CDOROMv2.6 to model the loss distribution for SF CDOs. Within
this framework, defaults are generated so that they occur with the
frequency indicated by the adjusted default probability pool (the
default probability associated with the current rating multiplied
by the Resecuritization Stress) for each credit in the reference.
Specifically, correlated defaults are simulated using a normal (or
"Gaussian") copula model that applies the asset correlation
framework. Recovery rates for defaulted credits are generated by
applying within the simulation the distributional assumptions,
including the 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 of: collateral cash
flows, the transaction covenants, the priority of payments
(waterfall) for interest and principal proceeds received from
portfolio assets, reinvestment assumptions, the timing of
defaults, interest-rate scenarios and foreign exchange risk (if
present). The Expected Loss for each tranche is the weighted
average of losses to each tranche across all the scenarios, where
the weight is the likelihood of the scenario occurring. Moody's
defines the loss as the shortfall in the present value of cash
flows to the tranche relative to the present value of the promised
cash flows. The present values are calculated using the promised
tranche coupon rate as the discount rate. For floating rate
tranches, the discount rate is based on the promised spread over
Libor and the assumed Libor scenario.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
STRATA 2005-19: Moody's Takes Rating Actions on 2005-19 Notes
-------------------------------------------------------------
Moody's Investors Service announced this rating action on Strata
2005-19, Limited, a collateralized debt obligation transaction.
The CSO, issued in 2005, references a portfolio of synthetic
corporate senior secured loans.
-- US$15,000,000 Floating Rate Notes Due 2015, Upgraded to B1
(sf); previously on March 18, 2009 Downgraded to Caa3 (sf)
Ratings Rationale
Moody's explained that it took the rating action because of the
level of credit enhancement remaining in the transaction and the
improvement in the credit quality of the underlying portfolio.
The portfolio has experienced nine credit events, equivalent to
12% of the portfolio, and 2.6% in losses based on the portfolio
notional at closing. Strong recoveries have helped maintain the
credit enhancement. The current subordination protecting the
tranche against first portfolio losses is now 11.2%. The 10-year
weighted average rating factor of the portfolio is 3028,
equivalent to B3 compared to a WARF of 3768 from the last rating
review in March 2009, excluding settled credit events.
The rating action factors in a number of sensitivity analyses and
stress scenarios, as discussed below. Moody's presents the
results in terms of the number of notches' difference versus the
base case, where higher notches correspond to lower expected
losses and vice-versa:
* Reference entities with insufficient credit information are
generally modeled with rating in the Caa range. Moody's
performed a sensitivity analysis by replacing the rating of
these entities with the average portfolio rating, which resulted
in a model output two notches higher than in the base case.
* The committee has reviewed the impact of a scenario consisting
of reducing the maturity of the transaction by six months,
keeping all other things equal. This model-run generated a
result one notch higher than under the base case.
* Market Implied Ratings ("MIRS") were modeled in place of the
corporate fundamental rating to derive the default probability
of each corporate name in the reference portfolio. The gap
between an MIR and a Moody's corporate fundamental rating is an
indicator of the extent of the divergence of credit view between
Moody's and the market on each referenced name in the CSO
portfolio. The results is one notch higher compared to the base
case.
* Moody's performed a stress analysis consisting in defaulting
reference entities with a rating of Caa1 or below, generating a
result four notches lower than under the base case.
* Removing the notch adjustment on ratings of reference entities
on negative outlook or on watch for downgrade. The result of
this run is two notches higher than in the base case.
Moody's analysis also accounts for the risk of the swap
counterparty defaulting and the risk of the collateral. These
additional risks are not material compared to the risk coming from
the reference portfolio.
In addition to the quantitative factors that are explicitly
modeled, qualitative factors are part of rating committee
considerations. These qualitative factors include the structural
protections in each transaction, the recent deal performance in
the current market environment, the legal environment, and
specific documentation features. All information available to
rating committees, including macroeconomic forecasts, input from
other Moody's analytical groups, market factors, and judgments
regarding the nature and severity of credit stress on the
transactions, may influence the final rating decision.
Moody's analysis of CSOs is subject to uncertainties, the
primary sources of which include complexity, governance and
leverage. Although the CDOROM model captures many of the
dynamics of the Corporate CSO structure, it remains a
simplification of the complex reality. Of greatest concern
are (a) variations over time in default rates for instruments
with a given rating, (b) variations in recovery rates for
instruments with particular seniority/security characteristics
and (c) uncertainty about the default and recovery correlations
characteristics of the reference pool. Similarly on the
legal/structural side, the legal analysis although typically
based in part on opinions (and sometimes interpretations) of
legal experts at the time of issuance, is still subject to
potential changes in law, case law and the interpretations of
courts and (in some cases) regulatory authorities. The
performance of this CSO is also dependent on on-going decisions
made by one or several parties, including the Manager and the
Trustee. Although the impact of these decisions is mitigated by
structural constraints, anticipating the quality of these
decisions necessarily introduces some level of uncertainty in
Moody's assumptions. Given the tranched nature of Corporate CSO
liabilities, rating transitions in the reference pool may have
leveraged rating implications for the ratings of the Corporate CSO
liabilities, thus leading to a high degree of volatility. All
else being equal, the volatility is likely to be higher for more
junior or thinner liabilities.
The base case scenario modeled fits into the central macroeconomic
scenario predicted by Moody's of a sluggish recovery scenario of
the corporate universe. Should macroeconomics conditions evolve
towards a more severe scenario such as a double dip recession, the
CSO rating will likely be downgraded to an extent that depends on
the expected severity of the worsening conditions.
STRATS TRUST: S&P Downgrades Rating on Class A Certs. to 'D'
------------------------------------------------------------
Standard & Poor's Ratings Services lowered its rating on STRATS
Trust For Ambac Financial Group Inc. Securities Series 2007-1's
$34.287 million callable class A certificates to 'D' from 'C'.
S&P's rating on the class A certificates is dependent on the
rating on the underlying security, Ambac Financial Group Inc.'s
directly issued capital securities due Feb. 7, 2087 ('D').
The rating action follows the Nov. 9, 2010, lowering of S&P's
rating on the underlying security to 'D' from 'C'.
STRUCTURED ASSET: Moody's Reviews Ratings on Two Units
------------------------------------------------------
Moody's Investors Service announced that it has placed on review
for upgrade the ratings of these units issued by Structured Asset
Trust Unit Repackagings AIG Capital Security Backed Series 2002-
11:
-- $39,332,000 of 6.000% Class A Callable Units; Ba2 Placed
Under Review for Possible Upgrade; previously on March 18,
2009 Downgraded to Ba2
-- $39,332,000 Notional Amount of Interest-Only 1.539% Class B
Callable Units; Ba2 Placed Under Review for Possible Upgrade;
previously on March 18, 2009 Downgraded to Ba2
The transaction is a structured note whose ratings are based on
the rating of the Underlying Securities and the legal structure of
the transaction. The rating actions are a result of the change of
the rating of the underlying securities which are the $$73,991,000
aggregate principal amount of $39,332,000 of 7.5070% trust
preferred capital securities due December 1, 2045, issued by
American General Institutional Capital A which were placed on
review for upgrade by Moody's on November 5, 2010.
SUNTRUST ALTERNATIVE: Moody's Confirms Ratings on Nine Tranches
---------------------------------------------------------------
Moody's Investors Service has confirmed the ratings of nine
tranches issued by SunTrust Alternative Loan Trust 2006-1F. The
collateral backing this deal primarily consists of first-lien,
fixed rate Alt-A residential mortgages.
Ratings Rationale
The actions are a result of the continued performance
deterioration in Alt-A pools in conjunction with home price and
unemployment conditions that remain under duress. The actions
reflect Moody's updated loss expectations on Alt-A pools issued
from 2005 to 2007.
To assess the rating implications of the updated loss levels on
Alt-A RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
The above mentioned approach "Alt-A RMBS Loss Projection Update:
February 2010" is adjusted slightly when estimating losses on
pools left with a small number of loans. To project losses on
pools with fewer than 100 loans, Moody's first estimates a
"baseline" average rate of new delinquencies for the pool that is
dependent on the vintage of loan origination (10%, 19% and 21% for
the 2005, 2006 and 2007 vintage respectively). This baseline rate
is higher than the average rate of new delinquencies for the
vintage to account for the volatile nature of small pools. Even
if a few loans in a small pool become delinquent, there could be a
large increase in the overall pool delinquency level due to the
concentration risk. Once the baseline rate is set, further
adjustments are made based on 1) the number of loans remaining in
the pool and 2) the level of current delinquencies in the pool.
The fewer the number of loans remaining in the pool, the higher
the volatility and hence the stress applied. Once the loan count
in a pool falls below 75, the rate of delinquency is increased by
1% for every loan less than 75. For example, for a pool with 74
loans from the 2005 vintage, the adjusted rate of new delinquency
would be 10.10%. If current delinquency levels in a small pool is
low, future delinquencies are expected to reflect this trend. To
account for that, the rate calculated above is multiplied by a
factor ranging from 0.2 to 2.0 for current delinquencies ranging
from less than 2.5% to greater than 50% respectively.
Delinquencies for subsequent years and ultimate expected losses
are projected using the approach described in the methodology
publication.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Complete rating actions are:
Issuer: SunTrust Alternative Loan Trust 2006-1F
-- Cl. I-A-1, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-3, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-4, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Confirmed at Ca (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. X, Confirmed at Ca (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. II-A, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. III-S, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
SYMPHONY CREDIT: S&P Withdraws Ratings on Three Classes of Notes
----------------------------------------------------------------
Standard & Poor's Ratings Services withdrew its ratings on the
class A, B, and C notes from Symphony Credit Partners II Ltd., a
collateralized loan obligation transaction managed by Symphony
Asset Management LLC.
The withdrawals follow the optional redemption of the rated notes,
pursuant to section 9.1(a) of the indenture, on the Oct. 29, 2010,
payment date.
Ratings Withdrawn
Symphony Credit Partners II Ltd.
Rating
------
Class To From
----- -- ----
A NR A+ (sf)
B NR BBB+ (sf)
C NR BB+ (sf)
NR - Not rated.
TIERS CORPORATE: Moody's Reviews 'Ba2' Rating on Amortizing Class
-----------------------------------------------------------------
Moody's Investors Service announced that it has placed on review
for upgrade the rating of these certificates issued by TIERS
Corporate Bond-Backed Certificates Trust AGC 1997-10:
-- $79,665,000 aggregate Certificate Principal Balance of
Amortizing Class; Ba2 Placed Under Review for Possible
Upgrade; previously on March 18, 2009 Downgraded to Ba2
The transaction is a structured note whose rating is based on the
rating of the Underlying Securities and the legal structure of the
transaction. The rating action is a result of the change of the
rating of the underlying securities which are the 8.125% Capital
Securities, Series B issued by American General Institutional
Capital B which were placed on review for upgrade by Moody's on
November 5, 2010.
TRIBUNE LTD: S&P Downgrades Ratings on Various Notes to 'D'
-----------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on Tribune
Ltd.'s series 29, 31, 33, and 40 notes to 'D (sf)' from 'CC (sf)'
and its rating on series 30 to 'Dsrp (sf)' from 'CCsrp (sf)'. S&P
subsequently withdrew these ratings. At the same time, S&P also
withdrew its 'CCC- (sf)' rating on Tribune Ltd.'s series 38 notes.
All of these transactions are synthetic collateralized debt
obligation transactions.
The downgrades follow a number of credit events within the
portfolio of underlying corporate reference entities. S&P
received final valuations on the credit events in the underlying
portfolio, which indicated that losses in the portfolio caused
these notes to incur full principal losses. S&P withdrew its
ratings on series 38 following their repurchase and subsequent
cancellation.
Rating Actions
Tribune Ltd.
Series 29
Rating
------
Class To From
----- -- ----
Tranche D (sf) CC (sf)
NR D (sf)
Tribune Ltd.
Series 30
Rating
------
Class To From
----- -- ----
Tranche Dsrp (sf) CCsrp (sf)
NR Dsrp (sf)
Tribune Ltd.
Series 31
Rating
------
Class To From
----- -- ----
Tranche D (sf) CC (sf)
NR D (sf)
Tribune Ltd.
Series 33
Rating
------
Class To From
----- -- ----
Tranche D (sf) CC (sf)
NR D (sf)
Tribune Ltd.
Series 40
Rating
------
Class To From
----- -- ----
Tranche D (sf) CC (sf)
NR D (sf)
Tribune Ltd.
Series 38
Rating
------
Class To From
----- -- ----
Tranche NR CCC- (sf)
NR -- Not rated.
VERMONT ECONOMIC: Moody's Affirms 'Ba2' Preferred Stock Rating
--------------------------------------------------------------
Moody's Investors Service assigned a Baa1 senior secured rating to
a proposed offering of $30 million of Vermont Economic Development
Authority Recovery Zone Facility Bonds (Central Vermont Public
Service Corporation Issue -- Series 2010) to be issued on behalf
of Central Vermont Public Service Corporation. Concurrently,
Moody's affirmed all of CVPS' other ratings and its stable rating
outlook.
Ratings affirmed include:
-- Issuer Rating at Baa3
-- 8.91% Series JJ First Mortgage Bonds due 12/15/2031 at Baa1
-- 6.9% Series OO First Mortgage Bonds due 12/15/2023 at Baa1
-- 5.0% Series SS First Mortgage Bonds due 6/15/2011 at Baa1
-- 5.72% Series TT First Mortgage Bonds due 6/15/2019 at Baa1
-- 6.83% Series UU First Mortgage Bonds due 5/15/2028 at Baa1
-- Preferred Stock at Ba2
The Baa1 rating assigned is consistent with the Baa1 rating for
CVPS' currently outstanding first mortgage bonds and takes into
account that the obligation of CVPS to provide funds for repayment
of the VEDA bonds will be senior secured and rank pari-passu with
CVPS' other senior secured debt outstanding under its FMB
indenture. Under the FMB indenture, investors benefit from a
first mortgage lien on substantially all of CVPS' utility property
and plant as defined and hold a superior priority of claim
position versus CVPS' senior unsecured creditors.
The rating assignment and affirmations take into account CVPS'
primarily regulated business and operating risks; the utility's
regionally competitive power supply portfolio; and the strength of
its financial profile, including liquidity supported by a
committed revolver. The rating also reflects the degree of
regulatory support provided by the Vermont Public Service Board.
"The collaborative working relationships among the Vermont
Department of Public Service (i.e., the consumer advocate), the
VPSB and CVPS in recent years continues to carry significant
weighting in Moody's assessment of CVPS' creditworthiness", said
Kevin Rose, lead analyst for CVPS at Moody's New York office. "In
particular, the three-year Alternative Regulation Plan approved in
2008, has been an effective means to improve the certainty and
timeliness of the company's cost recovery", Mr. Rose adds.
CVPS maintained a sound financial profile over the 2007 -2009
period, with CFO pre-w/c to interest and debt metrics averaging
around 4.1x and 18.4%, respectively. Moody's ratings for CVPS
assume that the company will be challenged to sustain its key
metrics at these levels as its negative free cash flow will
require debt financing for a portion of its significantly higher
capital expenditure program over the next five years, including
upgrades and maintenance of existing infrastructure and
acquisition of the Vermont Marble Power division utility assets of
Omya, Inc., as well as additional equity investments in Vermont
Electric Power Company, Inc./Vermont Transco LLC, which owns the
high voltage transmission system in Vermont. Nevertheless, key
metrics for CVPS should still remain within the Baa-rating
category, according to Moody's Regulated Electric and Gas
Utilities Rating Methodology published in August 2009.
Key credit issues going forward include the current lack of
support in the state for extending the operating license for the
Vermont Yankee nuclear power plant and the need for CVPS to extend
and/or replace the significant power supply contracts it has in
place with the current owners of VY and Hydro Quebec (i.e., CVPS
currently derives the substantial majority of its power needs from
these two sources). A new energy agreement which CVPS and other
utilities in Vermont entered into with a subsidiary of Hydro
Quebec would partially address this challenge, and the purchase
power agreement is awaiting VPSB approval. Moreover, Moody's
consider the ARP approach to ratemaking to be credit positive to
date, so extension of this approach in a similarly supportive form
beyond 2011, as requested in a pending filing with the VPSB, will
also have a bearing on the future credit quality of CVPS. Absent
approval of this request, the current ARP would continue at least
through the end of 2011.
CVPS' stable rating outlook reflects Moody's expectation that the
company will continue its focus on conservative financing of core
utility investments, that the ARP will continue to provide for
timely recovery of costs and that the VPSB will continue to be
supportive to the overall credit quality of the company.
Upward momentum for the ratings of CVPS appears limited in the
near term, given the company's plans for debt financing of at
least a portion of the significant planned capital investment.
Downward rating pressure for CVPS would develop in these
circumstances: degradation of credit metrics to levels below 2.7x
for CFO Pre-W/C + interest to interest and 13% for CFO Pre-W/C to
debt; unfavorable treatment in future rate cases by the VPSB; a
negative liquidity event; and difficulties renewing power purchase
agreements or doing so at a much higher cost than assumed in
projections.
VERTICAL ABS: S&P Downgrades Ratings on Various Classes of Notes
----------------------------------------------------------------
Standard & Poor's Rating Services lowered its ratings on the class
A-1, A-2, and B notes from Vertical ABS CDO 2005-1 Ltd., a cash
flow collateralized debt obligation transaction backed mainly by
subprime residential mortgage backed securities. Concurrently,
S&P affirmed its 'CC (sf)' ratings on the class C and D notes and
affirmed its 'AAA (sf)' rating on the combo securities. The 'AAA
(sf)' rated notes are fully backed by U.S. Treasury principal
strips.
S&P lowered its rating on the class A-1 note to reflect factors
including credit deterioration and negative rating actions on
underlying U.S. subprime residential mortgage-backed securities
since the last time S&P took rating action on this transaction.
The downgrades of the class A-2 and B notes follow the interest
shortfall to the class A-2 and B notes. The downgrade to 'D (sf)'
for these two notes is consistent with S&P's published criteria
for ratings on CDO transactions that have triggered an EOD due to
an interest shortfall on a nondeferrable tranche.
Rating Actions
Vertical ABS CDO 2005-1 Ltd.
Rating
------
Class To From
----- -- ----
A-1 CC (sf) CCC (sf)
A-2 D (sf) CC (sf)
B D (sf) CC (sf)
Ratings Affirmed
Vertical ABS CDO 2005-1 Ltd.
Class Rating
----- ------
C CC (sf)
D CC (sf)
Combo securities AAA (sf)
WACHOVIA BANK: Moody's Takes Rating Actions on 2003-C5 Certs.
-------------------------------------------------------------
Moody's Investors Service upgraded the ratings of two classes,
downgraded five classes and affirmed 11 classes of Wachovia Bank
Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2003-C5:
-- Cl. A-1, Affirmed at Aaa (sf); previously on July 8, 2003
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1A, Affirmed at Aaa (sf); previously on July 8, 2003
Definitive Rating Assigned Aaa (sf)
-- Cl. A-2, Affirmed at Aaa (sf); previously on July 8, 2003
Definitive Rating Assigned Aaa (sf)
-- Cl. X-P, Affirmed at Aaa (sf); previously on July 8, 2003
Definitive Rating Assigned Aaa (sf)
-- Cl. X-C, Affirmed at Aaa (sf); previously on July 8, 2003
Definitive Rating Assigned Aaa (sf)
-- Cl. B, Affirmed at Aaa (sf); previously on Dec. 21, 2006
Upgraded to Aaa (sf)
-- Cl. C, Affirmed at Aaa (sf); previously on Dec. 21, 2006
Upgraded to Aaa (sf)
-- Cl. D, Upgraded to Aaa (sf); previously on Sept. 18, 2008
Upgraded to Aa1 (sf)
-- Cl. E, Upgraded to Aa1 (sf); previously on Sept. 18, 2008
Upgraded to Aa2 (sf)
-- Cl. F, Affirmed at A1 (sf); previously on Sept. 18, 2008
Upgraded to A1 (sf)
-- Cl. G, Affirmed at A3 (sf); previously on Sept. 18, 2008
Upgraded to A3 (sf)
-- Cl. H, Affirmed at Baa2 (sf); previously on Sept. 18, 2008
Upgraded to Baa2 (sf)
-- Cl. J, Affirmed at Ba1 (sf); previously on July 8, 2003
Definitive Rating Assigned Ba1 (sf)
-- Cl. K, Downgraded to B1 (sf); previously on July 8, 2003
Definitive Rating Assigned Ba2 (sf)
-- Cl. L, Downgraded to B3 (sf); previously on July 8, 2003
Definitive Rating Assigned Ba3 (sf)
-- Cl. M, Downgraded to Caa1 (sf); previously on July 8, 2003
Definitive Rating Assigned B1 (sf)
-- Cl. N, Downgraded to Caa2 (sf); previously on July 8, 2003
Definitive Rating Assigned B2 (sf)
-- Cl. O, Downgraded to Caa3 (sf); previously on July 8, 2003
Definitive Rating Assigned B3 (sf)
Ratings Rationale
The upgrades are due to the significant increase in subordination
due to loan payoffs and amortization and the pool's exposure to
defeased loans, which represent 9% of the current pool balance.
The pool has paid down by 11% since Moody's last review.
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans and concerns about loans approaching
maturity in an adverse environment. Twenty-five loans,
representing 21% of the pool, have either matured or will mature
within the next 36 months and have a Moody's stressed debt service
coverage ratio less than 1.0X.
The affirmations are due to key parameters, including Moody's loan
to value ratio, the Herfindahl Index and Moody's stressed DSCR,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain their current ratings.
Moody's rating action reflects a cumulative base expected loss of
3.4% of the current balance. At last review, Moody's cumulative
base expected loss was 1.6%. Moody's stressed scenario loss is
8.3% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
, a measure of loan level diversity, is a primary determinant of
pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated September 18, 2008.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months
Deal Performance
As of the October 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 23% to $926 million
from $1.20 billion at securitization. The Certificates are
collateralized by 136 mortgage loans ranging in size from less
than 1% to 7% of the pool, with the top ten loans representing 30%
of the pool. Sixteen loans, representing 9% of the pool, have
defeased and are collateralized with U.S. Government securities.
The pool contains one loan, representing 6.7% of the pool, with an
investment grade credit estimate.
Thirty-five loans, representing 22% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. Moody's has assumed a
high default probability for six of the watchlisted loans and has
estimated a $12.7 million loss (20% expected loss based on an 50%
default probability) from these troubled loans.
Three loans have been liquidated from the pool, resulting in an
aggregate realized loss of $3.9 million (12% loss severity
overall). Three loans, representing 2% of the pool, are currently
in special servicing. The specially serviced loans are secured by
an office property and two multifamily properties and each
represent less than 2% of the pool. Moody's has estimated an
aggregate $3.9 million loss (52% expected loss on average) for the
specially serviced loans.
Moody's was provided with full year 2009 operating results for 99%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 84% compared to 87% at Moody's
prior review. Moody's net cash flow reflects a weighted average
haircut of 12% to the most recently available net operating
income. Moody's value reflects a weighted average capitalization
rate of 9.2%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.46X and 1.28X, respectively, compared to
1.42X and 1.18X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 55 compared to 64 at Moody's prior review.
The loan with a credit estimate is the Lloyd Center Loan
($62.1 million -- 6.7% of the pool), which is a parri passu
interest in a $124.2 million first mortgage loan. The loan
is secured by the borrower's interest in a 1.5 million square
foot regional mall located in Portland, Oregon. The center is
anchored by Macy's, Sears and Nordstrom. The mall was 97%
leased as of December 2009 compared to 96% at last review. The
loan sponsor is Glimcher Realty Trust. Performance has been
stable and the loan has benefited from amortization. The loan
has amortized 4% since last review. Moody's current underlying
rating and stressed DSCR are Baa1 and 1.55X, respectively,
compared to Baa2 and 1.46X at last review.
The top three performing conduit loans represent 11% of the pool
balance. The largest loan is the One South Broad Street Loan
($40.4 million -- 4.4% of the pool), which is secured by a 464,000
square foot Class A office building located in downtown
Philadelphia, Pennsylvania. The property was 84% leased as of
June 2010 compared to 86% at last review and 91% at
securitization. The decline in occupancy is due to the largest
tenant relinquishing a portion of its space at the expiration of
its lease. Despite the decline in occupancy, performance has
improved since last review and the loan has benefited from
amortization. The loan has amortized 4% since last review.
Moody's LTV and stressed DSCR are 73% and 1.29X, respectively,
compared to 86% and 1.16X at last review.
The second largest loan is the 673 First Avenue Loan
($30.9 million -- 3.3% of the pool), which is secured by a
leasehold interest in a 427,000 square foot Class B office
building located in the United Nations submarket of New York
City. The property was 100% leased as of June 2010 compared
to 99% at last review. The loan sponsor is SL Green Realty
Corp. Financial performance has improved and the loan has
amortized 5% since last review. Moody's LTV and stressed
DSCR are 56% and 1.90X, respectively, compared to 84% and
1.33X at last review.
The third largest loan is the Hamilton House Apartments Loan
($25.5 million -- 2.8% of the pool), which is secured by a 304-
unit multifamily property located in Washington, D.C. The
property was 95% occupied as of June 2009 compared to 99% at last
review. Property performance has improved since securitization.
The loan has amortized 4% since last review. Moody's LTV and
stressed DSCR are 67% and 1.30X, respectively, compared to 72% and
1.19X at last review.
WACHOVIA BANK: Moody's Downgrades Ratings on Eight 2003-C7 Certs.
-----------------------------------------------------------------
Moody's Investors Service downgraded the ratings of eight classes
and affirmed eight classes of Wachovia Bank Commercial Mortgage
Trust, Commercial Mortgage Pass-Through Certificates, Series 2003-
C7:
-- Cl. A-1, Affirmed at Aaa (sf); previously on Nov. 6, 2003
Definitive Rating Assigned Aaa (sf)
-- Cl. A-2, Affirmed at Aaa (sf); previously on Nov. 6, 2003
Definitive Rating Assigned Aaa (sf)
-- Cl. X-C, Affirmed at Aaa (sf); previously on Nov. 6, 2003
Definitive Rating Assigned Aaa (sf)
-- Cl. B, Affirmed at Aaa (sf); previously on Dec. 21, 2006
Upgraded to Aaa (sf)
-- Cl. C, Affirmed at Aaa (sf); previously on Dec. 21, 2006
Upgraded to Aaa (sf)
-- Cl. D, Affirmed at Aa2 (sf); previously on Aug. 21, 2008
Upgraded to Aa2 (sf)
-- Cl. E, Affirmed at A1 (sf); previously on Aug. 21, 2008
Upgraded to A1 (sf)
-- Cl. F, Affirmed at A3 (sf); previously on Aug. 21, 2008
Upgraded to A3 (sf)
-- Cl. G, Downgraded to Baa3 (sf); previously on Nov. 6, 2003
Definitive Rating Assigned Baa2 (sf)
-- Cl. H, Downgraded to B1 (sf); previously on Nov. 6, 2003
Definitive Rating Assigned Baa3 (sf)
-- Cl. J, Downgraded to B3 (sf); previously on Nov. 6, 2003
Definitive Rating Assigned Ba1 (sf)
-- Cl. K, Downgraded to Caa3 (sf); previously on Nov. 6, 2003
Definitive Rating Assigned Ba2 (sf)
-- Cl. L, Downgraded to Ca (sf); previously on Nov. 6, 2003
Definitive Rating Assigned Ba3 (sf)
-- Cl. M, Downgraded to Ca (sf); previously on Nov. 6, 2003
Definitive Rating Assigned B1 (sf)
-- Cl. N, Downgraded to C (sf); previously on Nov. 6, 2003
Definitive Rating Assigned B2 (sf)
-- Cl. O, Downgraded to C (sf); previously on Nov. 6, 2003
Definitive Rating Assigned B3 (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans and concerns about loans approaching
maturity in an adverse environment. Twenty-four loans,
representing 26% of the pool, have either matured or will mature
within the next 36 months and have a Moody's stressed debt service
coverage ratio less than 1.0X.
The affirmations are due to key parameters, including Moody's loan
to value ratio, the Herfindahl Index and Moody's stressed DSCR,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain their current ratings.
Moody's rating action reflects a cumulative base expected loss of
5.1% of the current balance. At last review, Moody's cumulative
base expected loss was 2.0%. Moody's stressed scenario loss is
10.0% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
, a measure of loan level diversity, is a primary determinant of
pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated August 21, 2008.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months
Deal Performance
As of the October 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 24% to $773 million
from $1.01 billion at securitization. The Certificates are
collateralized by 106 mortgage loans ranging in size from less
than 1% to 10% of the pool, with the top ten loans representing
40% of the pool. Sixteen loans, representing 13% of the pool,
have defeased and are collateralized with U.S. Government
securities. At last review the Regency Square Mall ($45.1 million
-- 5.8% of the pool) had an investment grade credit estimate.
However, due to a decline in performance and increased leverage,
this loan is now analyzed as part of the conduit pool.
Eighteen loans, representing 20% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. Moody's has assumed a
high default probability for four of the watchlisted loans and has
estimated a $9.8 million loss (28% expected loss based on an 70%
default probability) from these troubled loans.
Three loans have been liquidated from the pool, resulting in an
aggregate realized loss of $4.9 million (22% loss severity
overall). Four loans, representing 8% of the pool, are currently
in special servicing. The largest specially serviced loan is the
Santa Clara County Office Loan ($33.4 million -- 4.3%), which is
secured by a 152,000 square foot office property located in San
Jose, California. The loan was transferred into special servicing
in January 2010 due to the borrower's bankruptcy filing. The
property is 100% leased to Santa Clara County through December
2012. The remaining loans in special servicing are secured by
office properties and each represent less than 2% of the pool.
Moody's has estimated an aggregate $18.3 million loss (31%
expected loss on average) for the specially serviced loans.
Moody's was provided with full year 2009 operating results for 96%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 82% compared to 87% at Moody's
prior review. Moody's net cash flow reflects a weighted average
haircut of 13% to the most recently available net operating
income. Moody's value reflects a weighted average capitalization
rate of 8.9%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.57X and 1.24X, respectively, compared to
1.46X and 1.16X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 28 compared to 35 at Moody's prior review.
The top three performing conduit loans represent 20% of the
pool balance. The largest loan is the Chelsea Market Loan
($79.3 million -- 10.3%), which represents a 50% participation
interest in a $158.6 million first mortgage loan. The loan is
secured by a 1.1 million square foot Class B loft-style office
building with ground level retail located in the Chelsea office
submarket of New York City. The property was 95% leased as of
December 2009 compared to 99% at last review. The loan sponsor
is The Jamestown Companies. Moody's LTV and stressed DSCR are 61%
and 1.59X, respectively, compared to 78% and 1.24X at last review.
The second largest loan is the Regency Square Mall Loan
($45.1 million -- 5.8% of the pool), which represents a 50%
participation interest in a $90.2 million first mortgage loan.
The loan is secured by the borrower's interest in a 1.5 million
square foot regional mall located in Jacksonville, Florida. The
mall is anchored by Sears, Dillard's, Belk and J.C. Penney. The
center was 93% leased as of December 2009 compared to 96% at last
review. The loan sponsor is General Growth Properties, Inc. The
property's reported NOI declined 24% from 2008 to 2009. Moody's
LTV and stressed DSCR are 98% and 0.96X, respectively, compared to
63% and 1.58X at last review.
The third largest loan is the Columbia Place Mall Loan
($28.5 million -- 3.7% of the pool), which is secured by the
borrower's interest in a 1.1 million square foot regional mall
located in Columbia, South Carolina. The center is anchored by
Sears and Macy's. The loan is currently on the watchlist due to
the property's declining performance which is a direct result of
decreasing occupancy and rental revenues. The property has lost
two anchor tenants (Dillard's and Steve and Barry's) since
securitization and these spaces are vacant. The loan sponsor is
CBL & Associates Properties, Inc. Moody's considers this loan to
be a high default risk and has identified it as a troubled loan.
Moody's LTV and stressed DSCR are 143% and 0.70X, respectively,
compared to 74% and 1.43X at last review.
WACHOVIA BANK: Moody's Affirms Ratings on 12 2006-C28 Certs.
------------------------------------------------------------
Moody's Investors Service affirmed the ratings of 12 classes and
downgraded 11 classes of Wachovia Bank Commercial Mortgage
Securities Trust Commercial Mortgage Pass-Through Certificates,
Series 2006-C28:
-- Cl. A-1, Affirmed at Aaa (sf); previously on Nov. 19, 2009
Affirmed at Aaa (sf)
-- Cl. A-2, Affirmed at Aaa (sf); previously on Nov. 19, 2009
Affirmed at Aaa (sf)
-- Cl. A-AB, Affirmed at Aaa (sf); previously on Nov. 19, 2009
Affirmed at Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on Nov. 19, 2009
Affirmed at Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on Nov. 19, 2009
Affirmed at Aaa (sf)
-- Cl. A-4FL, Affirmed at Aaa (sf); previously on Nov. 19, 2009
Affirmed at Aaa (sf)
-- Cl. A-1A, Affirmed at Aaa (sf); previously on Nov. 19, 2009
Affirmed at Aaa (sf)
-- Cl. A-M, Downgraded to Aa3 (sf); previously on Nov. 4, 2010
Aa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-J, Downgraded to Ba1 (sf); previously on Nov. 4, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to Ba3 (sf); previously on Nov. 4, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to B3 (sf); previously on Nov. 4, 2010 Ba3
(sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to Caa1 (sf); previously on Nov. 4, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Caa2 (sf); previously on Nov. 4, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to Caa3 (sf); previously on Nov. 4, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to Ca (sf); previously on Nov. 4, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to C (sf); previously on Nov. 4, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to C (sf); previously on Nov. 4, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to C (sf); previously on Nov. 4, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Affirmed at C (sf); previously on Nov. 19, 2009
Downgraded to C (sf)
-- Cl. M, Affirmed at C (sf); previously on Nov. 19, 2009
Downgraded to C (sf)
-- Cl. N, Affirmed at C (sf); previously on Nov. 19, 2009
Downgraded to C (sf)
-- Cl. O, Affirmed at C (sf); previously on Nov. 19, 2009
Downgraded to C (sf)
-- Cl. P, Affirmed at C (sf); previously on Nov. 19, 2009
Downgraded to C (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from anticipated losses from specially serviced and
troubled loans and concerns about loans approaching maturity in an
adverse environment. Twenty-one loans, representing 16% of the
pool, mature within the next 12 months and have a Moody's stressed
debt service coverage ratio less than 1.0X.
The affirmations are due to key parameters, including Moody's loan
to value ratio, Moody's stressed DSCR and the Herfindahl Index,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain their current ratings.
On November 4, 2010, Moody's placed 11 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
10.2% of the current balance compared to 9.6% at Moody's prior
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.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the credit estimate of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the credit estimate level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated November 19, 2009.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the October 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 2% to $3.53 billion
from $3.60 billion at securitization. The Certificates are
collateralized by 207 mortgage loans ranging in size from less
than 1% to 7% of the pool, with the top ten loans representing 43%
of the pool. The pool does not contain any defeased loans or
loans with credit estimates.
Forty-eight loans, representing 19% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
The pool has not experienced any realized losses to date.
Currently, 25 loans, including two of the pool's top five loans,
are in special servicing. The special serviced loans represent
18% of the pool. The largest specially serviced loan is the
Montclair Plaza Loan ($190.0 million -- 5.4% of the pool), which
is secured by a 875,000 square foot regional mall located in
Montclair, California. The mall is anchored by Macy's, Sears and
JC Penney. The loan was transferred to special servicing in
January 2010 for monetary default and is currently 60+ days
delinquent. The sponsor is General Growth Properties.
Negotiations for a potential loan modification between GGP and CW
Capital, the special servicer, remain pending. Moody's is not
estimating a loss on this loan at this time.
The remaining 24 specially serviced loans are secured by a mix of
property types. The master servicer has recognized an aggregate
$205.3 million appraisal reduction for 19 of the specially
serviced loans. Moody's has estimated an aggregate $230.1 million
loss (53% expected loss on average) for the specially serviced
loans.
Moody's has also assumed a high default probability for seven
poorly performing loans, representing 4% of the pool. Moody's has
estimated a $59.6 million loss (20% expected loss based on a 50%
probability default) from the troubled loans.
Moody's was provided with full year 2009 and partial year 2010
operating results for 89% and 69% of the pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 119% compared to 134% at Moody's prior review.
Moody's net cash flow reflects a weighted average haircut of 11%
to the most recently available net operating income. Moody's
value reflects a weighted average capitalization rate of 9.5%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.22X and 0.87X, respectively, compared to
1.17X and 0.84X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 39 compared to 41 at last review.
The top three performing loans represent 17% of the pool. The
largest loan is the Gas Company Tower loan ($229.0 million -- 6.5%
of the pool), which represents a pari passu interest in a $458.0
million first mortgage loan. The loan is secured by a 1.3 million
square foot Class A office building located in downtown Los
Angeles, California. The largest tenant is the Southern
California Gas Company, which leases 43% of the premises through
November 2011. As of June 2010, the property was 99% leased
compared 95% at last review. The sponsor is Maguire Properties
LP. Moody's LTV and stressed DSCR are 133% and 0.71X,
respectively, compared to 156% and 0.61X at last review.
The second largest loan is the 1180 Peachtree St. Loan
($193.9 million -- 5.5% of the pool), which is secured by a
669,711 square foot office building located in Atlanta, Georgia.
The largest tenant is King & Spalding, which leases 64% of the
premises through March 2021. As of September 2010, the property
was 90% leased compared to 92% at last review. Moody's LTV and
stressed DSCR are 125% and 0.78X, respectively, compared to 129%
and 0.77X at last review.
The third largest loan is 311 South Wacker Drive Loan
($158.6 million -- 4.5% of the pool), which is secured by a
1.4 million square foot office tower located in downtown Chicago.
The largest tenant is Freeborn & Peters LLP, which leases 10% of
the premises through November 2022. As of September 2010, the
property was 93% leased compared to 89% at last review. Moody's
LTV and stressed DSCR are 109% and 0.89X, respectively compared to
108% and 0.90X at last review.
WACHOVIA BANK: Moody's Reviews Ratings on 16 2006-C29 Certs.
------------------------------------------------------------
Moody's Investors Service placed 16 classes of Wachovia Bank
Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2006-C29 on review for possible downgrade:
-- Cl. A-M, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on Dec. 21, 2006 Definitive Rating Assigned Aaa
(sf)
-- Cl. A-J, A2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to A2 (sf)
-- Cl. B, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to A3 (sf)
-- Cl. C, Baa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Baa1 (sf)
-- Cl. D, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Baa2 (sf)
-- Cl. E, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Ba1 (sf)
-- Cl. F, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Ba2 (sf)
-- Cl. G, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Ba3 (sf)
-- Cl. H, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to B2 (sf)
-- Cl. J, B3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to B3 (sf)
-- Cl. K, Caa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Caa1 (sf)
-- Cl. L, Caa2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Caa2 (sf)
-- Cl. M, Caa2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Caa2 (sf)
-- Cl. N, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Caa3 (sf)
-- Cl. O, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Caa3 (sf)
-- Cl. P, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Caa3 (sf)
The classes were placed on review due to higher expected losses
for the pool resulting from anticipated losses from specially
serviced and troubled loans.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated February 10, 2009.
Deal And Performance Summary
As of the October 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 0.4% to
$3.36 billion from $3.37 billion at securitization. The
Certificates are collateralized by 142 mortgage loans ranging
in size from less than 1% to 10% of the pool, with the top ten
loans representing 46% of the pool.
Forty-two 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; formerly the Commercial Mortgage
Securities Association) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, Moody's reviews the
watchlist to assess which loans have material issues that could
impact performance.
The pool has not experienced any realized losses to date. Twelve
loans, representing 6% of the pool, are currently in special
servicing. The specially serviced loans are secured by a mix of
multifamily, office, retail, hotel and industrial property types.
The servicer has recognized appraisal reductions totaling
$94.7 million from 11 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.
* Fitch Downgrades Ratings on 32 Bonds From 20 CMBS Deals to 'D'
----------------------------------------------------------------
Fitch Ratings has downgraded 32 bonds in 20 commercial mortgage-
backed securities transactions to 'D' indicating that the bonds
have incurred a principal write-down. The bonds being downgraded
to 'D' as part of this review were all previously rated 'B-', 'CC'
or 'C' indicating that a default was expected. action is limited
to just the bonds with write-downs. The remaining bonds in these
transactions have not been analyzed as part of this review.
Fitch downgrades bonds to 'D' as part of the ongoing surveillance
process and will continue to monitor these transactions for
additional defaults.
The spreadsheet also details Fitch's Recovery Ratings assigned to
the transactions. The Recovery Rating scale is based upon the
expected relative recovery characteristics of an obligation. For
structured finance, Recovery Ratings are designed to estimate
recoveries on a forward-looking basis while taking into account
the time value of money.
* Moody's Cuts Ratings on Eight Securities from Seven NIM Deals
---------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of eight
securities from seven net interest margin deals backed by
residential mortgage-backed securitizations issued by various
financial institutions. These NIM transactions rely on residual
cash flows and prepayment penalties generated by the underlying
mortgage-backed securitizations.
These cash flows are sensitive to a number of factors:
i) Magnitude and timing of losses incurred on the collateral
backing the underlying RMBS
ii) Volume and magnitude of interest rate modifications (which
affects excess spread)
iii) Prepayment speeds on the collateral backing the RMBS
iv) Impact of trigger breaches (which in turn affects step-down
and release of cash to residual bondholders)
Ratings Rationale
These securities have been downgraded due to poor performance on
the underlying transactions that has negatively impacted residual
payments to the NIM holders.
Moody's analysis of NIM transactions with respect to this review
primarily focuses on each transaction's recent average monthly
principal paydown rate as well as the projected residual cashflows
on the underlying transaction. The potential sources of cash to
the NIM include i) excess spread net of projected future losses,
ii) excess overcollateralization in the event of a step-down and
iii) collections of prepayment penalties. To the extent the NIM
has accrued unpaid interest obligations that must be paid prior to
retiring the outstanding principal, such amounts have also been
taken into account when evaluating the expected severity of loss
to the NIM bondholders.
As delinquency and losses have accumulated in the transactions
underlying the NIMs, residual cash flows have severely declined
and, in most cases, disappeared. As a result, the large majority
of these transactions have not received principal payments in
recent months and many have accrued unpaid interest. Projected
future loss levels on the large majority of underlying
transactions are now higher than previously estimated. These
elevated loss levels further reduce the likelihood that the net
interest margin securities will ultimately be paid in full.
These bonds have been receiving minimal or no principal, and only
in some cases have been receiving interest, during the past year.
The underlying RMBS transactions, due to poor performance and use
of excess spread to cover losses, show little possibility for
release of excess spread to pay the related NIM deals. If
expected losses on the related underlying collaterals pool were to
increase, it is expected that the ratings of the NIM deals
downgraded in the actions would remain stable.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Complete rating actions are:
Issuer: BSSP NIM Trust 2004-QA1
-- Notes, Downgraded to C (sf); previously on May 22, 2009
Confirmed at Caa2 (sf)
Issuer: Bear Stearns Structured Products Inc. NIM Trust 2004-10
-- Notes, Downgraded to C (sf); previously on May 15, 2009
Downgraded to Ca (sf)
Issuer: Lehman XS NIM Company 2006-5
-- Cl. B, Downgraded to C (sf); previously on June 12, 2006
Assigned Ba2 (sf)
Issuer: Lehman XS Nim 1 Company 2007-GPM2
-- Cl. A-3, Downgraded to C (sf); previously on May 15, 2009
Downgraded to Ca (sf)
Issuer: MASTR Alternative Loan NIM 2006-4
-- Cl. N-1A, Downgraded to C (sf); previously on May 15, 2009
Downgraded to Ca (sf)
-- Cl. N-1B, Downgraded to C (sf); previously on May 15, 2009
Downgraded to Ca (sf)
Issuer: MASTR CI-CW1 NIM
-- Cl. N-1, Downgraded to C (sf); previously on May 22, 2009
Downgraded to Caa3 (sf)
Issuer: SASCO Net Interest Margin Trust 2003-3XS
-- Cl. A, Downgraded to C (sf); previously on May 22, 2009
Downgraded to Ca (sf)
* S&P Downgrades Ratings on Nine Classes of Certs. to 'D'
---------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings to 'D (sf)'
on nine classes of mortgage pass-through certificates from nine
U.S. residential mortgage-backed securities transactions issued
between 1993 and 2007. Concurrently, S&P withdrew its rating on
one class from an additional U.S. RMBS transaction.
The nine downgrades to 'D (sf)' reflect S&P's assessment of
principal write-downs on the affected classes during recent
remittance periods. Two of the downgraded classes are bond-
insured by Ambac Assurance Corp. (currently rated 'R').
The single rating withdrawal reflects S&P's assessment that the
affected class represents residual certificates with no principal
or interest obligation to the holder.
Approximately 44.44% of the defaulted classes were from
transactions backed by Alternative-A (Alt-A) or subprime mortgage
loan collateral. The nine defaulted classes consisted of these:
* Three from subprime transactions (33.33%);
* Two from prime jumbo transactions (22.22%);
* Two from reperforming transactions (22.22%);
* One from an Alt-A transaction (11.11%); and
* One from a closed-end second-lien transaction (11.11%).
All of the ratings S&P lowered to 'D (sf)' were speculative-grade
before the downgrades, and S&P lowered eight of the affected
ratings from the 'CC (sf)' rating category.
Standard & Poor's will continue to monitor its ratings on
securities that experience principal write-downs, and S&P will
adjust the ratings in accordance with S&P's criteria.
Rating Actions
CSMC Asset-Backed Trust 2007-NC1 OSI
Series 2007-NC1 OSI
Rating
------
Class CUSIP To From
----- ----- -- ----
M-8 12638LAM0 D (sf) CC (sf)
CWHEQ Home Equity Loan Trust, Series 2006-S6
Series 2006-S6
Rating
------
Class CUSIP To From
----- ----- -- ----
A-1 126684AA7 D (sf) CC (sf)
Fannie Mae REMIC Trust 2004-W14
Series 2004-W14
Rating
------
Class CUSIP To From
----- ----- -- ----
B-4 31394BU51 D (sf) CC (sf)
GreenPoint Mortgage Funding Trust 2005-AR5
Series 2005-AR5
Rating
------
Class CUSIP To From
----- ----- -- ----
III-A-2 39538WEL8 D (sf) CC (sf)
IndyMac IMJA Mortgage Loan Trust 2007-A4
Series 2007-A4
Rating
------
Class CUSIP To From
----- ----- -- ----
A-2 45670VAB1 D (sf) CC (sf)
Merrill Lynch Mortgage Investors Trust, Series 2007-SL1
Series 2007-SL1
Rating
------
Class CUSIP To From
----- ----- -- ----
G 59025AAL8 NR CC (sf)
Salomon Brothers Mortgage Securities VII Inc.
Series 1993- 7
Rating
------
Class CUSIP To From
----- ----- -- ----
A 79548KGS1 D (sf) B+ (sf)
SG Mortgage Securities Trust 2006-OPT2
Series 2006-OPT2
Rating
------
Class CUSIP To From
----- ----- -- ----
M-4 78420MAK5 D (sf) CC (sf)
Structured Asset Securities Corporation
Series 2004-19XS
Rating
------
Class CUSIP To From
----- ----- -- ----
M3 86359BD81 D (sf) CC (sf)
Structured Asset Securities Corporation Mortgage Loan Trust
Series 2006-RF2
Rating
------
Class CUSIP To From
----- ----- -- ----
B5 86361AAG4 D (sf) CC (sf)
NR - Not rated.
* S&P Downgrades Ratings on 10 Classes From Three RMBS Deals
------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 10
classes from three U.S. residential mortgage-backed securities
transactions backed by scratch-and-dent and Alternative A mortgage
loan collateral issued between 2003 and 2005. S&P affirmed its
ratings on 18 classes from two of the downgraded transactions. In
addition, S&P withdrew its rating on one additional class. It was
previously on CreditWatch with negative implications.
S&P lowered four ratings to 'D (sf)' due to interest shortfalls
that could not be reimbursed.
The collateral backing these transactions originally consisted
predominantly of Alternative-A and reperforming first-lien, fixed-
and adjustable-rate residential mortgage loans secured by one- to
four-family properties.
Although S&P typically use projected monthly default rates based
on structure-specific cumulative losses and seasoning when
analyzing transactions with reperforming collateral, in certain
circumstances S&P projected losses by applying assumptions
regarding the percentage of loans within the delinquency pipeline
that S&P assume will liquidate for structures that were showing
increases in delinquencies.
To assess the creditworthiness of each class, S&P analyzed the
ability of each class to withstand additional credit deterioration
as a result of the application of its loss assumptions. In order
to maintain a 'B' rating on a class, S&P assessed whether, in
S&P's view, a class could absorb the base-case loss assumption
used in its analysis.
In order for a scratch-and-dent and Alt-A class to maintain a
rating higher than 'B', S&P assessed whether the class could
withstand losses exceeding the base-case loss assumptions at a
percentage specific to each rating category, up to 150% for an
'AAA' rating. For example, in general, S&P would assess whether
one class could withstand approximately 110% of its remaining
base-case loss assumption to maintain a 'BB' rating, while S&P
would assess whether a different class could withstand
approximately 120% of S&P's remaining base-case loss assumption to
maintain a 'BBB' rating. Each class with an affirmed 'AAA' rating
can, in S&P's view, withstand approximately 150% of its remaining
base-case loss assumption under S&P's analysis.
The lowered ratings reflect S&P's belief that the amount of credit
enhancement available for the downgraded classes is insufficient
to cover losses at the previous rating levels, given S&P's current
projected losses. The affirmations reflect S&P's belief that the
classes will likely have sufficient credit enhancement to support
the ratings at their current levels. Certain classes that benefit
from a bond insurance policy reflect the higher of the rating of
the bond insurer and the tranche's underlying rating. S&P
withdrew its rating on the class II-1-A-3 interest-only
certificates from Bear Stearns Asset Backed Securities I Trust
2005-AC6 in accordance with S&P's criteria for interest-only
securities. Subordination, and any applicable
overcollateralization and excess spread, provides credit support
for the affected transactions.
S&P monitors these transactions to incorporate updated losses and
delinquency-pipeline performance to assess whether, in S&P's view,
the applicable credit enhancement features are sufficient to
support the current ratings. S&P will continue to monitor these
transactions and take additional rating actions as S&P considers
appropriate based on S&P's criteria.
Rating Actions
Bear Stearns Asset Backed Securities I Trust 2005-AC6
Series 2005-AC6
Rating
------
Class CUSIP To From
----- ----- -- ----
I-B-3 073879M47 CC (sf) CCC (sf)
II-1-A-1 073879M54 AA+ (sf) AAA (sf)
II-1-A-2 073879M62 AA+ (sf) AAA (sf)
II-1-A-3 073879M70 NR BB+ (sf)/Watch Neg
Fannie Mae REMIC Trust 2003-W10
Series 2003-W10
Rating
------
Class CUSIP To From
----- ----- -- ----
3M 31393DUX7 BB+ AA
3B-1 31393DUY5 CCC A
3B-2 31393DUZ2 CC BBB
GSMPS Mortgage Loan Trust 2004-3
Series 2004-3
Rating
------
Class CUSIP To From
----- ----- -- ----
B1 36228F3D6 D (sf) AA (sf)
B2 36228F3E4 D (sf) A (sf)
B3 36228F3F1 D (sf) BBB (sf)
B4 36228F3G9 D (sf) BB (sf)
Ratings Affirmed
Bear Stearns Asset Backed Securities I Trust 2005-AC6
Series 2005-AC6
Class CUSIP Rating
----- ----- ------
I-A-1 073879L30 AAA (sf)
I-A-2 073879L48 AAA (sf)
I-A-3 073879L55 AAA (sf)
I-A-4 073879L63 AAA (sf)
1-M-1 073879L71 AA (sf)
I-M-2 073879L89 BB- (sf)
I-M-3 073879L97 B- (sf)
I-B-1 073879M21 CCC (sf)
I-B-2 073879M39 CCC (sf)
I-B-4 073879P51 CC (sf)
II-2-A 073879M88 CCC (sf)
II-1-PO 073879N20 CCC (sf)
II-B-1 073879N38 CC (sf)
Fannie Mae REMIC Trust 2003-W10
Series 2003-W10
Class CUSIP Rating
----- ----- ------
2M 31393DUH2 AA
2B-1 31393DUJ8 A
2B-2 31393DUK5 BBB
2B-3 31393DUL3 BB
2B-4 31393DUM1 B
NR -- Not rated.
* S&P Downgrades Ratings on 16 Certs. From Three CMBS Transactions
------------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 16
classes of certificates from three U.S. commercial mortgage-backed
securities transactions due to interest shortfalls. S&P lowered
its ratings on seven of these classes to 'D (sf)' because S&P
expects these interest shortfalls to continue.
Five of the seven classes that S&P downgraded to 'D (sf)' have had
accumulated interest shortfalls outstanding for five or more
months. The recurring interest shortfalls for the respective
certificates are primarily due to one or more of these factors:
* Appraisal subordinate entitlement reductions in effect for
specially serviced loans;
* Lack of servicer advancing for loans where nonrecoverable
advance declarations have been made; and
* Special servicing fees.
Standard & Poor's analysis primarily considered the ASERs based on
appraisal reduction amounts calculated using recent Member of the
Appraisal Institute appraisals. S&P also considered servicer
nonrecoverable advance declarations and special servicing fees
that are likely, in S&P's view, to cause recurring interest
shortfalls.
ARAs and resulting ASERs are implemented in accordance with each
respective transaction's terms. Typically, these terms call for
the automatic implementation of an ARA equal to 25% of the stated
principal balance of a loan when a loan is 60 days past due and an
appraisal or other valuation is not available within a specified
timeframe. S&P primarily considered ASERs based on ARAs
calculated from MAI appraisals when deciding which classes from
the affected transactions to downgrade to 'D (sf)' because ARAs
based on a principal balance haircut are highly subject to change,
or even reversal, once the special servicer obtains the MAI
appraisals.
Servicer nonrecoverable advance declarations can prompt shortfalls
due to a lack of debt service advancing, the recovery of
previously made advances deemed nonrecoverable, or the failure to
advance trust expenses when nonrecoverable declarations have been
determined. Trust expenses may include, but are not limited to,
property operating expenses, property taxes, insurance payments,
and legal expenses.
S&P detail the 16 downgraded classes from the three CMBS
transactions below.
CD 2005-C1 Commercial Mortgage Trust
S&P lowered its ratings on the class J, K, L, M, N, O, and P
certificates from CD 2005-C1 Commercial Mortgage Trust due to
interest shortfalls resulting from ASERs related to 16 of the 21
loans that are currently with the special servicer, LNR Partners
Inc., as well as special servicing fees. S&P lowered its rating
on the class H certificates because S&P believes this class is
susceptible to future interest shortfalls. As of the Oct. 18,
2010, remittance report, ARAs totaling $91.5 million were in
effect for 16 loans. The total reported ASER amount was $421,057
and the reported cumulative ASER amount was $1.96 million.
Standard & Poor's considered eight ASERs (totaling $234,665), all
of which were based on MAI appraisals, as well as current special
servicing fees in determining its rating actions. The reported
interest shortfalls totaled $432,227 and have affected all of the
classes subordinate to and including class J. Classes N, O, and P
have had accumulated interest shortfalls outstanding for six
(class N), seven (class O), and nine (class P) months, and S&P
expects these shortfalls to remain outstanding for the foreseeable
future. Consequently, S&P downgraded these classes to 'D (sf)'.
The collateral pool for the CD 2005-C1 transaction consists of 217
loans with an aggregate trust balance of $3.65 billion. As of the
Oct. 18, 2010, remittance report, 21 loans ($363.9 million; 10.0%)
in the pool were with the special servicer. The payment status of
these loans is: 10 loans are in foreclosure ($143.1 million,
3.9%), three ($91.5 million, 2.5%) are 90 or more days delinquent,
four ($65.4 million, 1.8%) are nonperforming matured balloon
loans, one ($42.9 million, 1.2%) is one-month delinquent, two
($15.5 million, 0.4%) are late and less than one month delinquent,
and one ($5.4 million, 0.1%) is two months delinquent.
Credit Suisse First Boston Mortgage Securities Corp.
Series 2005-C6
S&P lowered its ratings on the class J, K, L, M, N, and O
certificates from Credit Suisse First Boston Mortgage Securities
Corp.'s series 2005-C6 due to interest shortfalls primarily
resulting from ASERs related to 11 of the 16 loans that are
currently with the special servicer, Torchlight Investors LLC.,
as well as interest not advanced and special servicing fees.
As of the Oct. 18, 2010, remittance report, ARAs totaling
$48.9 million were in effect for 13 loans. The total reported
ASER amount was $176,047, and the reported cumulative ASER amount
was $1.8 million. Standard & Poor's considered eight ASERs
(totaling $132,090), all of which were based on MAI appraisals, as
well as interest not advanced ($59,672) and current special
servicing fees in determining its rating actions. The reported
interest shortfalls totaled $342,283 and have affected all of the
classes subordinate to and including class J. Classes M, N, and O
have had accumulated interest shortfalls outstanding for four
(classes M and N) and 11 (class O) months, and S&P expects these
shortfalls to remain outstanding for the foreseeable future.
Consequently, S&P downgraded these classes to 'D (sf)'.
The collateral pool for the CSFB 2005-C6 transaction consists of
218 loans with an aggregate trust balance of $2.22 billion. As
of the Oct. 18, 2010, remittance report, 16 loans ($129.2 million;
5.8%) in the pool were with the special servicer. The payment
status of the delinquent loans is: 12 ($109.9 million, 5.0%) are
90 or more days delinquent, two ($8.7 million, 0.4%) are current,
one ($6.9 million, 0.3%) is real estate owned, and one
($3.7 million, 0.2%) is a nonperforming matured balloon loan.
LB-UBS Commercial Mortgage Trust 2002-C7
S&P lowered its ratings on the class T certificates from LB-UBS
Commercial Mortgage Trust 2002-C7 due to interest shortfalls
resulting from ASERs related to the three of the four loans that
are currently with the special servicer, LNR Partners Inc., as
well as special servicing fees. S&P lowered its rating on the
class S certificates because S&P believes this class is
susceptible to future interest shortfalls. As of the Oct. 18,
2010, remittance report, ARAs totaling $9.0 million were in effect
for four loans. The total reported ASER amount was $41,586, and
the reported cumulative ASER amount was $589,685 million.
Standard & Poor's considered the three ASERs (totaling $41,586),
all of which were based on MAI appraisals, as well as current
special servicing fees in determining its rating actions. The
reported interest shortfalls total $39,969 (including one negative
ASER totaling $5,696) and have affected all of the classes
subordinate to and including class T. Class T has had accumulated
interest shortfalls outstanding for 12 months, and S&P expects
these shortfalls to remain outstanding for the foreseeable future.
Consequently, S&P downgraded this class to 'D (sf)'.
The collateral pool for the LB-UBS 2002-C7 transaction consists of
83 loans with an aggregate trust balance of $711 million. As of
the Oct. 18, 2010, remittance report, four loans ($15.8 million;
2.2%) in the pool were with the special servicer. The payment
status of these loans is: two ($8.7 million, 1.2%) are REO, one
($3.9 million, 0.5%) is in foreclosure, and one ($3.3 million,
0.5%) is 90 or more days delinquent.
Ratings Lowered
CD 2005-C1 Commercial Mortgage Trust
Commercial mortgage pass-through certificates
Reported
Rating Interest shortfalls ($)
------ -----------------------
Class To From Credit enhancement (%) Current Accumulated
----- -- ---- ---------------------- ------- -----------
H B- (sf) B+ (sf) 4.28 0 0
J CCC+ (sf) B (sf) 2.95 (22,493) 22,608
K CCC- (sf) B- (sf) 2.16 122,771 245,543
L CCC- (sf) B- (sf) 1.89 40,925 81,850
M CCC- (sf) CCC+ (sf) 1.49 61,384 176,392
N D (sf) CCC (sf) 1.23 40,925 154,918
O D (sf) CCC- (sf) 0.96 40,921 280,141
P D (sf) CCC- (sf) 0.69 40,925 337,185
Credit Suisse First Boston Mortgage Securities Corp.
Series 2005-C6 Commercial mortgage pass-through certificates
Reported
Rating Interest shortfalls ($)
------ -----------------------
Class To From Credit enhancement (%) Current Accumulated
----- -- ---- ---------------------- ------- -----------
J CCC+ (sf) B- (sf) 3.69 4,549 4,549
K CCC (sf) B- (sf) 3.13 51,626 51,626
L CCC- (sf) CCC+ (sf) 2.56 51,626 98.621
M D (sf) CCC+ (sf) 2.28 25,815 103,167
N D (sf) CCC (sf) 1.86 38,719 154,734
O D (sf) CCC- (sf) 1.44 38,719 252,892
LB-UBS Commercial Mortgage Trust 2002-C7
Commercial mortgage pass-through certificates
Reported
Rating Interest shortfalls ($)
------ -----------------------
Class To From Credit enhancement (%) Current Accumulated
----- -- ---- ---------------------- ------- -----------
S B- (sf) B (sf) 2.41 0 0
T D (sf) CCC- (sf) 1.16 4,940 16,077
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers"
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than $3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
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Monthly Operating Reports are summarized in every Saturday edition
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The Sunday TCR delivers securitization rating news from the week
then-ending.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
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of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published
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