/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/120212.mbx T R O U B L E D C O M P A N Y R E P O R T E R Sunday, February 12, 2012, Vol. 16, No. 42 Headlines ABACUS 2006-10: Moody's Lowers C. A Notes Rating to 'Caa3' ABACUS 2006-17: Moody's Affirms Cl. A-1 Notes Rating at 'C' AMERICREDIT FINANCIAL: Moody's Reviews 'Ba1' Rating of Cl. E Notes ARES XXIII: S&P Gives 'BB' Rating on Class E Floating-Rate Notes BANC OF AMERICA 2007-5: S&P Cuts Rating on Class J Cert. to 'CCC-' BEAR STEARNS: Fitch Affirms Junk Rating on Nine Note Classes BEAR STEARNS: Realized Losses Cue Fitch to Affirm Ratings BEAR STEARNS: S&P Affirms 'CCC-' Rating on Class J Cert. BEAR STEARNS: S&P Cuts Rating on Class B-2 to 'CCC' BEAR STEARNS: S&P Lowers Rating on Class G Cert. to 'D' BIRCH CDO I: S&P Cuts Class A-3 Note Rating to 'CCC-'; Off Watch CENTERLINE 2007-1: S&P Lowers Rating on Class E From 'CC' to 'D' CIENA CAPITAL: Moody's Reviews 'B1' Rating on Class B1 Notes CIT GROUP: DBRS Assigns 'B' Rating on Series C Notes COMM 2006-7: Expected Losses Prompt Fitch to Affirms Ratings CORE EDUCATION: S&P Gives 'B+' Rating on Senior Unsecured Notes CREDIT SUISSE: S&P Cuts Rating on Class D Cert. to 'B-' CSAM FUNDING IV: S&P Removes 'BB-' Ratings on 2 Classes Off Watch CSMC 2009-2R: S&P Lowers Rating on Class 7-A-2 From 'AAA' to 'CCC' DUANE STREET: S&P Raises Class E Note Rating to 'CCC+'; Off Watch FORD CREDIT: Moody's Assigns Ratings on FCMOT 2012-1 Notes FORD CREDIT: Moody's Assigns Ratings on FCMOT 2012-2 Notes GE COMMERCIAL: S&P Lowers Rating on Class N Certs. to 'CCC-' GENESIS 2007-2: S&P Removes 'CCC-' Class F Note Rating Off Watch GM FINANCIAL: S&P Retains Counterparty Credit Rating to 'BB' GRAMERCY 2005-1: S&P Cuts Rating on Class K From 'CCC' to 'CCC-' GSMSC 2005-ROCK: Moody's Affirms Rating of Cl. J Notes at 'Ba1' HIGHLAND CREDIT: S&P Removes 'BB' Class C 2006 Rating From Watch HUMMINGBIRD SECURITISATION: S&P Puts 'CCC' Loan Rating on Watch JPMCC 2003-C1: Moody's Affirms Rating of Cl. F Notes at 'B1' JPMCC 2004-LN2: Moody's Downgrades Cl. D Notes Rating to 'B1' LBUBS 2001-C2: Moody's Affirms Rating of Cl. F Notes at 'B1' LIGHTPOINT CLO VIII: S&P Raises Rating on Class E Notes to 'BB' MADISON AVENUE: Moody's Raises Class B Notes Rating to 'Caa3' MAGNOLIA FINANCE: Moody's Affirms Rating of Notes Due 2045 at 'C' MAGNOLIA FINANCE: Moody's Affirms Rating of Notes Due 2052 at 'C' MAGNOLIA FINANCE: Moody's Affirms Rating of Cl. D Notes at 'C' ML-CFC COMMERCIAL: Fitch Rates $109MM Class AJ Notes 'B-sf' ML-CFC COMMERCIAL: Moody's Lowers Cl. AJ Notes Rating to 'Ba3' MLFA 2005-CANADA 15: Moody's Affirms Cl. F Notes Rating at 'Ba1' MFLA 2006-CAN18: Moody's Affirms Cl. F Notes Rating at 'Ba1' MORGAN STANLEY: Fitch Downgrades Rating on 14 Note Classes MORGAN STANLEY: Fitch Lowers Rating on 19 Note Classes MOUNTAIN CLO: S&P Raises Rating on Class B-1L Notes to 'BB-' MSCI 2006-TOP 21: Moody's Lowers Rating of Cl. E Notes to 'Ba1' MSDWC 2003-HQ2: Moody's Affirms Cl. H Notes Rating at 'Ba3' NACM CLO: S&P Raises Rating on Class D Notes From 'B+' to 'BB' NEWCASTLE CDO: Fitch Affirms Junk Rating on Four Note Classes NEWCASTLE CDO: Fitch Affirms Junk Ratings on Seven Note Classes NEWSTAR COMMERCIAL: Moody's Raises Class D Notes Rating to 'Ba2' OHA PARK: S&P Raises Rating on Class D Notes From 'CCC+' to 'BB' OMEGA CAPITAL: S&P Lowers Rating on Class 5Y-B Notes to 'D' PPLUS TRUST: S&P Lowers Ratings on 2 Classes of Certs. to 'BB-' SATURNS LIMITED: S&P Cuts $25-Mil. Callable Unit Rating to 'BB-' SCSC 2007-8: Moody's Affirms Cl. F Notes Rating at 'Ba1' SPLIT YIELD: DBRS Downgrades Class I Rating to 'D' SPRING ROAD 2007-1: S&P Raises Rating on Class E Notes to 'BB+' STST 2002-1: Moody's Affirms Rating of Cl. G Notes at 'B1' STUYVESANT CDO: Moody's Upon Class A Notes Rating to Aa2 From Ba1 TIAA 2007-C4: S&P Lowers Ratings on 2 Classes of Cert. to 'D' VEGA CAPITAL: Moody's Raises Class C Notes Rating to 'Ba2' VITALITY RE II: S&P Affirms 'BB+' Rating on Class B Notes ********* ABACUS 2006-10: Moody's Lowers C. A Notes Rating to 'Caa3' ---------------------------------------------------------- Moody's has downgraded one and affirmed nine classes of Notes issued by Abacus 2006-10, LTD. The downgrade is due to the deterioration in the credit quality of the underlying portfolio of reference obligations as evidenced by an increase in the weighted average rating factor (WARF). The affirmations are due to key transaction parameters performing within levels commensurate with the existing ratings levels. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO Synthetic) transactions. Cl. A, Downgraded to Caa3 (sf); previously on Mar 2, 2011 Downgraded to Caa2 (sf) Cl. B, Affirmed at Caa3 (sf); previously on Mar 2, 2011 Downgraded to Caa3 (sf) Cl. C, Affirmed at Ca (sf); previously on Mar 2, 2011 Downgraded to Ca (sf) Cl. D, Affirmed at Ca (sf); previously on Mar 2, 2011 Downgraded to Ca (sf) Cl. E, Affirmed at Ca (sf); previously on Mar 2, 2011 Downgraded to Ca (sf) Cl. F, Affirmed at Ca (sf); previously on Mar 2, 2011 Downgraded to Ca (sf) Cl. G, Affirmed at Ca (sf); previously on Mar 2, 2011 Downgraded to Ca (sf) Cl. J, Affirmed at C (sf); previously on Mar 2, 2011 Downgraded to C (sf) Cl. K, Affirmed at C (sf); previously on Mar 2, 2011 Downgraded to C (sf) Cl. L, Affirmed at C (sf); previously on Mar 2, 2011 Downgraded to C (sf) RATINGS RATIONALE Abacus 2006-10, LTD., is a static synthetic CRE CDO transaction backed by a portfolio of tranched credit default swaps referencing $3.7 billion notional amount of commercial mortgage backed securities (CMBS). All of the reference obligations were securitized in 2004 (26.7%) and 2005 (73.3%). Currently, 74.1% of the reference obligations are rated by Moody's. Moody's has identified the following parameters as key indicators of the expected loss within CRE CDO transactions: WARF, weighted average life (WAL), weighted average recovery rate (WARR), and Moody's asset correlation (MAC). These parameters are typically modeled as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's has completed updated credit estimates for the non-Moody's rated reference obligations. The bottom-dollar WARF is a measure of the default probability within a reference pool. Moody's modeled a bottom-dollar WARF of 1,631 compared to 1,452 at last review. The distribution of current ratings is: Aaa-Aa3 (2.4% compared to 1.2% at last review), A1-A3 (21.9% compared to 21.5% at last review), Baa1-Baa3 (27.1% compared to 38.9% at last review), Ba1-Ba3 (21.9% compared to 14.2% at last review), B1-B3 (13.8% compared to 15.8% at last review), and Caa1-C (12.9% compared to 8.4% at last review). WAL acts to adjust the probability of default of the reference obligations in the pool for time. Moody's modeled to a WAL of 3.6 years compared to 4.4 at last review. WARR is the par-weighted average of the mean recovery values for the reference obligations in the pool. Moody's modeled a variable WARR with a mean of 15.6%, compared to 21.4% at last review. MAC is a single factor that describes the pair-wise asset correlation to the default distribution among the instruments within the reference obligations pool (i.e. the measure of diversity). Moody's modeled a MAC of 21.7% , compared to 22.8% at last review. Moody's review incorporated CDOROM(R) v2.8, one of Moody's CDO rating models, which was released on January 24, 2011. Changes in any one or combination of the key parameters may have rating implications on certain classes of rated notes. However, in many instances, a change in key parameter assumptions in certain stress scenarios may be offset by a change in one or more of the other key parameters. In general, the rated notes are particularly sensitive to rating changes within the reference pool. Holding all other key parameters static, changing all reference obligations' ratings or credit estimates by one notch downward or by one notch upward, would result in average rating movement on the rated notes 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 extent of the slowdown in growth in the current macroeconomic environment and the commercial real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The hotel and multifamily sectors are in recovery and improvements in the office sector continue, with fundamentals in Gateway cities outperforming their suburban counterparts. However, office demand is closely tied to employment, where fundamentals remain weak, so significant improvement may be delayed. Performance in the retail sector has been mixed with on-going rent deflation and leasing challenges. Across all property sectors, the availability of debt capital continues to improve with monetary policy expected to remain supportive and interest rate hikes postponed. Moody's central global macroeconomic scenario reflects an overall downward revision of forecasts since last quarter, amidst ongoing fiscal consolidation efforts, household and banking sector deleveraging, persistently high unemployment levels, and weak housing markets that will continue to constrain growth. The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in November 2010. ABACUS 2006-17: Moody's Affirms Cl. A-1 Notes Rating at 'C' ----------------------------------------------------------- Moody's has affirmed the ratings of all classes of Notes issued by Abacus 2006-17, Ltd. The affirmations are due to key transaction parameters performing within levels commensurate with the existing ratings levels. The rating action is the result of Moody's on- going surveillance of commercial real estate collateralized debt obligation (CRE CDO Synthetic) transactions. Cl. A-1, Affirmed at C (sf); previously on Mar 2, 2011 Downgraded to C (sf) Cl. A-2, Affirmed at C (sf); previously on Mar 26, 2010 Downgraded to C (sf) Cl. C, Affirmed at C (sf); previously on Mar 26, 2010 Downgraded to C (sf) Cl. E, Affirmed at C (sf); previously on Mar 26, 2010 Downgraded to C (sf) RATINGS RATIONALE Abacus 2006-17, Ltd. is a static synthetic CRE CDO transaction backed by a portfolio of tranched credit default swaps referencing $532.2 million notional amount of commercial mortgage backed securities (CMBS) (89.4% of notional amount) and CRE CDO debt (10.6%). All of the reference obligations were securitized in 2004 (1.9%), 2005 (46.1%), and 2006 (52.0%). Currently, 81.2% of the reference obligations are rated by Moody's. Moody's has identified the following parameters as key indicators of the expected loss within CRE CDO transactions: weighted average rating factor (WARF), weighted average life (WAL), weighted average recovery rate (WARR), and Moody's asset correlation (MAC). These parameters are typically modeled as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's has completed updated credit estimates for the non-Moody's rated reference obligations. The bottom-dollar WARF is a measure of the default probability within a reference pool. Moody's modeled a bottom-dollar WARF of 8,872 compared to 8,837 at last review. The distribution of current ratings is: Ba1-Ba3 (3.8% compared to 3.4% at last review), B1-B3 (2.8% compared to 3.4% at last review), and Caa1-C (93.4% compared to 93.2% 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 5.6 years compared to 5.9 at last review. WARR is the par-weighted average of the mean recovery values for the reference obligations in the pool. Moody's modeled a variable WARR with a mean of 0.5%, the same as last review. MAC is a single factor that describes the pair-wise asset correlation to the default distribution among the instruments within the reference obligations pool (i.e. the measure of diversity). Moody's modeled a MAC of 0.0%, the same as 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. In general, the rated notes are particularly sensitive to rating changes within the reference pool. However, in light of the performance indicators noted above, Moody's believes that it is unlikely that the ratings are sensitive to further change. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of the slowdown in growth in the current macroeconomic environment and the commercial real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The hotel and multifamily sectors are in recovery and improvements in the office sector continue, with fundamentals in Gateway cities outperforming their suburban counterparts. However, office demand is closely tied to employment, where fundamentals remain weak, so significant improvement may be delayed. Performance in the retail sector has been mixed with on-going rent deflation and leasing challenges. Across all property sectors, the availability of debt capital continues to improve with monetary policy expected to remain supportive and interest rate hikes postponed. Moody's central global macroeconomic scenario reflects an overall downward revision of forecasts since last quarter, amidst ongoing fiscal consolidation efforts, household and banking sector deleveraging, persistently high unemployment levels, and weak housing markets that will continue to constrain growth. The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in November 2010. AMERICREDIT FINANCIAL: Moody's Reviews 'Ba1' Rating of Cl. E Notes ------------------------------------------------------------------ Moody's Investors Service has placed on review for possible upgrade, twelve subordinate tranches from three 2011 subprime auto loan transactions sponsored by AmeriCredit Financial Services, Inc (AmeriCredit). Complete rating actions are: Issuer: AmeriCredit Auto Receivables Trust 2011-1 Cl. B, Aa1 (sf) Placed Under Review for Possible Upgrade; previously on Feb 3, 2011 Definitive Rating Assigned Aa1 (sf) Cl. C, Aa3 (sf) Placed Under Review for Possible Upgrade; previously on Feb 3, 2011 Definitive Rating Assigned Aa3 (sf) Cl. D, Baa1 (sf) Placed Under Review for Possible Upgrade; previously on Feb 3, 2011 Definitive Rating Assigned Baa1 (sf) Cl. E, Ba1 (sf) Placed Under Review for Possible Upgrade; previously on Feb 3, 2011 Definitive Rating Assigned Ba1 (sf) Issuer: AmeriCredit Automobile Receivables Trust 2011-2 Cl. B, Aa1 (sf) Placed Under Review for Possible Upgrade; previously on Apr 15, 2011 Definitive Rating Assigned Aa1 (sf) Cl. C, Aa3 (sf) Placed Under Review for Possible Upgrade; previously on Apr 15, 2011 Definitive Rating Assigned Aa3 (sf) Cl. D, Baa1 (sf) Placed Under Review for Possible Upgrade; previously on Apr 15, 2011 Definitive Rating Assigned Baa1 (sf) Cl. E, Ba1 (sf) Placed Under Review for Possible Upgrade; previously on Apr 15, 2011 Definitive Rating Assigned Ba1 (sf) Issuer: AmeriCredit Automobile Receivables Trust 2011-3 Cl. B, Aa1 (sf) Placed Under Review for Possible Upgrade; previously on Jun 20, 2011 Definitive Rating Assigned Aa1 (sf) Cl. C, Aa3 (sf) Placed Under Review for Possible Upgrade; previously on Jun 20, 2011 Definitive Rating Assigned Aa3 (sf) Cl. D, Baa1 (sf) Placed Under Review for Possible Upgrade; previously on Jun 20, 2011 Definitive Rating Assigned Baa1 (sf) Cl. E, Ba1 (sf) Placed Under Review for Possible Upgrade; previously on Jun 20, 2011 Definitive Rating Assigned Ba1 (sf) RATINGS RATIONALE The reviews were driven by a downward revision of collateral pool net loss expectations. The reductions are a result of improved performance of the 2010 and 2011 vintage transactions due to stronger underlying borrower credit relative to earlier vintages and a healthy used vehicle market that has increased recoveries on repossessed vehicles. Below are key performance metrics (as of the January distribution date) and credit assumptions for each affected transaction. Credit assumptions include Moody's expected lifetime CNL expected range which is expressed as a percentage of the original pool balance. Performance metrics include pool factor which is the ratio of the current collateral balance to the original collateral balance at closing; total credit enhancement, which typically consists of subordination, overcollateralization, and a reserve fund; and per annum excess spread. Issuer: AmeriCredit Automobile Receivables Trust 2011-1 Lifetime CNL expected Range -- 8.00% - 10.00%, prior expectation (Feb 2011 -- Closing) -- 16.00% Pool factor -- 75.2% Total credit enhancement (excluding excess spread): Class A 51.25%, Class B 41.61%, Class C 29.64%, Class D 17.87%, Class E 14.75% Excess spread -- Approximately 10.8% per annum Issuer: AmeriCredit Automobile Receivables Trust 2011-2 Lifetime CNL expected Range -- 8.00% - 10.00%, prior expectation (Apr 2011 -- Closing) -- 11.75% Pool factor -- 77.1% Total credit enhancement (excluding excess spread): Class A 50.35%, Class B 40.95%, Class C 29.28%, Class D 17.8%, Class E 14.75 Excess spread -- Approximately 10.9% per annum Issuer: AmeriCredit Automobile Receivables Trust 2011-3 Lifetime CNL expected Range -- 8.00% - 10.00%, prior expectation (June 2011 -- Closing) -- 10.00% Pool factor -- 84.4% Total credit enhancement (excluding excess spread): Class A 47.26%, Class B 38.67%, Class C 28.01%, Class D 17.53%, Class E 14.75 Excess spread -- Approximately 10.9% per annum The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the current macroeconomic environment, in which unemployment continues to remain at elevated levels, and strength in the used vehicle market. Moody's currently views the used vehicle market as much stronger now than it was at the end of 2008 when the uncertainty relating to the economy as well as the future of the U.S auto manufacturers was significantly greater. Overall, Moody's expects 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. The principal methodology used in rating these notes was "Moody's Approach to Rating U.S. Auto Loan Backed Securities (2011)" rating methodology published in May 2011. Other methodologies and factors that may have been considered in the process of rating these notes can also be found on Moody's website. ARES XXIII: S&P Gives 'BB' Rating on Class E Floating-Rate Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Ares XXIII CLO Ltd./Ares XXIII CLO LLC's $384.85 floating-rate notes. "The note issuance is a collateralized loan obligation securitization backed by a revolving pool consisting primarily of broadly syndicated senior secured loans," S&P said. The preliminary ratings are based on information as of Feb. 3, 2012. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect S&P's view 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 credit enhancement, which is sufficient to withstand the defaults applicable for the supplemental tests (excluding excess spread), and cash flow structure, which can withstand the default rate projected by Standard & Poor's CDO Evaluator model, as assessed by Standard & Poor's using the assumptions and methods outlined in its corporate collateralized debt obligation criteria. The transaction's legal structure, which is expected to be bankruptcy remote. The diversified collateral portfolio, which consists primarily of broadly syndicated speculative-grade senior secured term loans. The asset manager's experienced management team. "Our projections regarding the timely interest and ultimate principal payments on the preliminary rated notes, which we assessed using our cash flow analysis and assumptions commensurate with the assigned preliminary ratings under various interest-rate scenarios, including LIBOR ranging from 0.3439%-12.5332%," S&P said. The transaction's overcollateralization and interest coverage tests, a failure of which will lead to the diversion of interest and principal proceeds to reduce the balance of the rated notes outstanding. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com Preliminary Ratings Assigned Ares XXIII CLO Ltd./Ares XXIII CLO LLC Class Rating Amount (mil. $) A AAA (sf) 270.900 B-1 AA (sf) 20.950 B-2 AA (sf) 7.000 C A (sf) 43.000 D BBB (sf) 22.575 E BB (sf) 20.425 Subordinated notes NR 45.150 NR -- Not rated. BANC OF AMERICA 2007-5: S&P Cuts Rating on Class J Cert. to 'CCC-' ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on nine classes of commercial mortgage pass-through certificates from Banc of America Commercial Mortgage Trust 2007-5, a U.S. commercial mortgage-backed securities (CMBS) transaction. "In addition, we affirmed our ratings on seven other classes from the same transaction," S&P said. "Our rating actions follow our analysis of the transaction primarily using our U.S. conduit/fusion CMBS criteria and also include a review of the credit characteristics of the remaining assets in the pool, the deal structure, and the liquidity available to the trust. The downgrades reflect credit support erosion that we anticipate will occur upon the eventual resolution of nine ($107.0 million, 6.2%) of the 10 assets ($124.2 million, 7.2%) that are with the special servicer," S&P said. "The affirmed ratings on the principal and interest certificates reflect subordination and liquidity support levels that are consistent with the outstanding ratings. We affirmed our 'AAA (sf)' rating on the class XW interest-only certificate based on our current criteria," S&P said. "Using servicer-provided financial information, we calculated an adjusted debt service coverage (DSC) of 1.16x and a loan-to-value (LTV) ratio of 147.2%. We further stressed the loans' cash flows under our 'AAA' scenario to yield a weighted average DSC of 0.78x and an LTV ratio of 202.9%. The implied defaults and loss severity under the 'AAA' scenario were 92.7% and 49.2%. The DSC and LTV calculations noted above exclude nine ($107.0 million, 6.2%) of the 10 assets ($124.2 million, 7.2%) that are with the special servicer," S&P said. "We separately estimated losses for these specially serviced assets and included them in our 'AAA' scenario implied default and loss severity figures," S&P said. Credit Considerations As of the Jan. 10, 2012 trustee remittance report, 10 assets ($124.2 million, 7.2%) in the pool were with the special servicer, C-III Asset Management LLC (C-III). The reported payment status of the specially serviced assets is: three are real estate owned (REO; $47.0 million, 2.7%), one is in foreclosure ($17.2 million, 1.0%), five are 90-plus-days delinquent ($58.3 million, 3.4%), and one is 30 days delinquent ($1.7 million, 0.1%). Appraisal reduction amounts (ARAs) totaling $58.8 million are in effect against eight of the specially serviced assets. Details of the three largest specially serviced assets are as set forth. The West Hartford Portfolio asset ($35.9 million, 2.1%), the largest asset with the special servicer, consists of 23 garden- style apartment complexes totaling 680 units in Hartford, Conn. The total reported exposure is $45.0 million. The loan was transferred to C-III on Jan. 21, 2009, due to imminent payment default, and the asset became REO on July 6, 2010. The reported combined occupancy was 95.4% as of September 2011. C-III stated that it is currently evaluating an offer on the properties. An ARA of $22.4 million is in effect against the asset. We expect a significant loss upon the eventual resolution of this asset. The Eastern Silverado Center loan ($27.8 million, 1.6%) is secured by a 100,454-sq.-ft. mixed-use (retail/office) property in Las Vegas. The total reported exposure is $29.7 million. The loan, which has a reported 90-plus-days delinquent payment status, was transferred to C-III on Oct. 7, 2010, due to imminent default. The reported DSC was 0.60x for the nine months ended Sept. 30, 2011, and the reported occupancy was 91.0% as of August 2011. C-III stated that it is negotiating a potential discounted payoff with the borrower. An ARA of $17.3 million is in effect against the loan. "We expect a significant loss upon the eventual resolution of the loan," S&P said. "The 2404 Wilshire Lofts loan ($17.2 million, 1.0%) is secured by a 71-unit mid-rise multifamily apartment complex in Los Angeles. The loan was transferred to C-III on Dec. 11, 2009, due to payment default. Although the loan's payment status is categorized as in foreclosure, C-III informed us that the loan is now current and has been corrected. According to C-III, the loan was returned to the master servicer on Jan. 13, 2012," S&P said. "The remaining seven assets with the special servicer individually represent less than 1.0% of the total pool balance. ARAs totaling $19.1 million are in effect for six of these assets. We estimated losses for the seven assets and arrived at a weighted-average loss severity of 52.9%," S&P said. Transaction Summary As of the Jan. 10, 2012 trustee remittance report, the collateral pool balance was $1.7 billion, which is 92.9% of the balance at issuance. The pool consists of 89 loans and three REO assets, down from 100 loans at issuance. The master servicer, Bank of America N.A. (BofA), provided financial information for 93.4% of the loans in the pool, 58.7% of which was partial-year 2011 data, and the remainder was partial- or full-year 2010 data. "We calculated a weighted average DSC of 1.23x for the loans in the pool based on the servicer-reported figures. Our adjusted DSC and LTV ratio were 1.16x and 147.2%. Our adjusted DSC and LTV figures excluded nine ($107.0 million, 6.2%) of the 10 assets ($124.2 million, 7.2%) that are with the special servicer. We separately estimated losses for these specially serviced assets and included them in our 'AAA' scenario implied default and loss severity figures. The transaction has experienced principal losses totaling $26.0 million from six assets to date. Twenty-two loans ($539.7 million, 31.3%) in the pool are on the master servicer's watchlist. Seventeen loans ($311.0 million, 18.0%) have a reported DSC of less than 1.00x, and six loans ($240.9 million, 14.0%) have a reported DSC between 1.00x and 1.10x," S&P said. Summary of Top 10 Loans "The top 10 loans have an aggregate outstanding balance of $906.7 million (52.5%). Using servicer-reported numbers, we calculated a weighted average DSC of 1.13x for the top 10 loans. Four ($361.8 million, 21.0%) of the top 10 loans are on the master servicer's watchlist. Our adjusted DSC and LTV ratio for the top 10 loans were 0.95x and 177.7%," S&P said. The Collier Center loan ($144.5 million, 8.4%), the largest loan in the pool, is secured by a 24-story, 567,163-sq.-ft. office tower in Phoenix, Ariz. The loan is on BofA's watchlist due to a low reported DSC, which was 1.03x for the nine months ended Sept. 30, 2011. Occupancy at the building was 81.1% according to the Sept. 30, 2011 rent roll. The Smith Barney Building loan, the fifth-largest loan in the pool, has a trust balance of $99.6 million (5.8%) and a whole-loan balance of $110.3 million. The loan is secured by a 10-story, 188,232-sq.-ft. suburban office building in San Diego, Calif. The loan is on the master servicer's watchlist due to a low reported in-trust DSC, which was 0.15x for the 12 months ended June 30, 2011. Occupancy was 62.9% according to the Sept. 30, 2011 rent roll. The Green Oak Village Place loan, the seventh-largest loan in the pool, has a trust balance of $65.3 million (3.8%) and a whole-loan balance of $72.7 million. The loan is secured by a 315,094-sq.-ft. retail center in Brighton, Mich. The loan is on BofA's watchlist due to a low reported in-trust DSC, which was 1.10x for the nine months ended Sept. 30, 2011. Occupancy was 89.0% according to the Sept. 30, 2011 rent roll. The Sherman Oaks Marriott loan ($52.4 million, 3.0%), the ninth- largest loan in the pool, is secured by a 213-room, full-service hotel in Sherman Oaks, Calif. The loan is on BofA's watchlist due to a low reported DSC, which was 0.90x for the 12 months ended Sept. 30, 2011. The reported occupancy was 68.4% for the same period. "We stressed the collateral in the pool according to our current criteria. The resultant credit enhancement levels are consistent with our lowered and affirmed ratings," S&P said. Standard & Poor's 17g-7 Disclosure Report Sec Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at; http://standardandpoorsdisclosure-17g7.com Ratings Lowered Banc of America Commercial Mortgage Trust 2007-5 Commercial mortgage pass-through certificates Rating Class To From Credit enhancement (%) A-J BB- (sf) BB (sf) 11.95 B B+ (sf) BB- (sf) 10.74 C B (sf) B+ (sf) 9.93 D B (sf) B+ (sf) 8.72 E B- (sf) B+ (sf) 7.65 F B- (sf) B+ (sf) 6.97 G CCC+ (sf) B (sf) 5.90 H CCC (sf) B (sf) 4.69 J CCC- (sf) CCC+ (sf) 3.74 Ratings Affirmed Banc of America Commercial Mortgage Trust 2007-5 Commercial mortgage pass-through certificates Class Rating Credit enhancement (%) A-2 AAA (sf) 30.79 A-3 AAA (sf) 30.79 A-SB AAA (sf) 30.79 A-4 A+ (sf) 30.79 A-1A A+ (sf) 30.79 A-M BBB (sf) 20.03 XW AAA (sf) N/A N/A -- Not applicable. BEAR STEARNS: Fitch Affirms Junk Rating on Nine Note Classes ------------------------------------------------------------ Fitch Ratings has affirmed the 'AAA' classes and downgraded 10 classes of Bear Stearns Commercial Mortgage Securities Trust (BSCMS) Series 2007-TOP26. The downgrades reflect an increase in Fitch modeled losses across the pool and greater certainty of losses associated with specially serviced assets. Fitch modeled losses of 8.9% of the original pool (includes losses realized to date) based on updated cashflows and valuations of specially serviced loans. There are currently eight specially serviced loans (4.2%) in the pool. As of the January 2012 distribution date, the pool's aggregate principal balance was reduced to $1.85 billion from $2.11 billion at issuance. There are no defeased loans. There are cumulative interest shortfalls in the amount of $2.1 million currently affecting classes F through P. Fitch has identified 46 loans (20.8%) as Fitch Loans of Concern, which includes eight specially serviced loans (4.2%). The largest contributor to Fitch modeled losses is a loan (3.0%) secured by a 479,913 square foot (sf) office property located in Phoenix, AZ. The loan was transferred back to the master servicer in August 2011 after being modified in May 2011. The modification terms wrote down the principal balance by $9 million to $56 million. As of the September 2011 rent roll the property is 55.2% occupied which declined from 77.5% due to Viad Corp. significantly reducing the amount of space occupied in the building. Leases representing 12% of NRA expire through YE2012. The second largest contributor to Fitch modeled losses is a loan (2.6%) secured by a 210,186 sf office property located in Tacoma, WA. The investment grade single tenant moved its headquarters to Seattle and vacated the property in 2010. The tenant is obligated to make rental payments through November 2013; however, efforts to sublease the property have not been successful to date. A cash flow sweep was be triggered in December 2011, which has collected $580,020 to cover costs associated with re-leasing the property. The third largest contributor to Fitch modeled losses is a loan (1.7%) secured by a 260,467 sf office property located in Atlanta, GA. Occupancy as of the October 2011 rent roll is 70.3% which declined from 75.7% as of June 2010. The loss associated with this property is due to reduced cashflow from declining occupancy and rent concessions. Fitch downgrades these classes and assigns Recovery Estimates (RE): -- $160.6 million class A-J to 'BB' from 'BBB-sf'; to Outlook Negative from Stable; -- $42.1 million class B to 'CCCsf' from 'Bsf'; RE 65%; -- $18.4 million class C to 'CCCsf' from 'B-sf'; RE 0%; -- $29 million class D to 'CCsf' from 'CCCsf'; RE 0%; -- $15.8 million class E to 'CCsf' from 'CCCsf'; RE 0%; -- $18.4 million class F to 'CCsf' from 'CCCsf'; RE 0%; -- $18.4 million class G 'to 'Csf' from 'CCCsf'; RE 0%; -- $18.4 million class H to 'Csf' from 'CCsf'; RE 0%; -- $2.6 million class J to 'Csf' from 'CCsf'; RE 0%; -- $2.6 million class K to 'Csf' from 'CCsf' RE 0%. In addition, Fitch affirms these classes and revises Outlooks: -- $49 million class A-2 at 'AAAsf'; Outlook Stable; -- $65.4 million class A-3 at 'AAAsf'; Outlook Stable; -- $78 million class A-AB at 'AAAsf'; Outlook Stable; -- $991.9 million class A-4 at 'AAAsf'; Outlook Stable; -- $122.7 million class A-1A at 'AAAsf'; Outlook Stable; -- $210.6 million class A-M at 'AAAsf'; Outlook to Negative from Stable. BEAR STEARNS: Realized Losses Cue Fitch to Affirm Ratings --------------------------------------------------------- Fitch Ratings has affirmed the super senior 'AAA' classes of commercial mortgage pass-through certificates from Bear Stearns Commercial Mortgage Securities Trust, series 2007-PWR18 and downgraded 12 classes. The downgrades reflect decreased credit enhancements as a result of realized losses and additional Fitch modeled losses attributed primarily to updated values on newly transferred specially serviced loans. As of January 2012 distribution date, ten loans (3.9%) have been transferred to special servicing since last review. Fitch modeled losses of 10.0% on the current pool, compared to 10.3% of the then pool balance at Fitch's last review. As of the January 2012 distribution date, the pool's aggregate principal balance has decreased 4.5% to $2.3 billion from $2.5 billion at issuance. Fitch has designated 58 loans (33.9%) as Fitch Loans of Concern which includes 19 specially serviced loans (9.3%). Fitch expects classes H through L may be fully depleted, and class G to be impaired, due to losses associated with the specially serviced assets. As of January 2012, cumulative interest shortfalls in the amount of $3.4 million are affecting classes M and S. The largest contributor to Fitch expected loss is secured by a 600-key full-service hotel in Houston, TX. Hotel performance, which deteriorated through 2010, has begun to show signs of improvement based on 2011 trailing twelve data as of September 2011. Occupancy as of trailing-twelve-month (TTM) third-quarter 2011 improved to 62.5% from 54% in 2010. Hotel RevPAR also improved to $74.24 as of TTM Q3 from $66.38 at YE2010 and $85 at issuance. The servicer-reported debt service coverage ratio (DSCR) (based on net operating income [NOI]) was 1.05 times (x) at year-end 2010. The second largest contributor to Fitch expected loss is secured by a 405-room full-service hotel located in Norfolk, VA. The property is connected to the Waterside Convention Center, a 60,000-square foot (sf) facility owned by the city and operated by the hotel and is adjacent to the largest mall in the area, the MacArthur Center Shopping Mall. The loan transferred to the special servicer in September 2010 due to imminent default and declining property performance. The special servicer is in the process of completing a modification of the loan and it is expected to be returned to the master servicer. Occupancy,, ADR, and RevPar for the TTM ended Nov. 30, 2011 declined to 67.1%, $111.25, and $74.65, respectively, from 78.2%, $128.70, and $100.60 at issuance. The most recent servicer reported DSCR is 1.01x as of YTD Nov. 2011. The third largest contributor to Fitch expected loss is secured by a one-million square foot (SF) regional mall located in Morrow, GA, approximately 15 miles from downtown Atlanta. Collateral for the loan is 273,997 sf in-line space in the shopping center. The mall is anchored by Macy's and Sears which are not part of the collateral. The center also contains two dark anchor spaces previously occupied by JCPenney and Macy's, which are also not part of the collateral. The loan transferred to the special servicer in April 2009 due to borrower (GGP) bankruptcy. The loan was modified and returned to the master servicer in January 2011 as a corrected loan. Modified terms include a two year maturity extension to December 2019 and changes to reserve and accrued interest collection The most recent servicer reported DSCR was 1.03x as of September 2011 and occupancy was 91%. Fitch downgrades and removes Negative Outlooks for these classes: -- $182.5 million class A-J to 'CCCsf/RE100%' from 'BBsf'; -- $33.6 million class A-JA to 'CCCsf/RE40%' from 'BBsf'; -- $25 million class B to'CCCsf/RE0%' from 'Bsf'; -- $25 million class C to 'CCC/RE0%' from 'B-sf'; -- $18.9 million class D to 'CCCsf/RE0%' from 'B-sf'. Fitch also downgrades these classes: -- $25 million class E to 'CCsf/RE0%' from 'CCCsf/RE100%'; -- $18.9 million class F to 'CCsf/RE0%' from 'CCCsf/RE100%'; -- $25 million class G to 'Csf/RE0%' from CCCsf/RE100%'; -- $21.9 million class H to 'Csf/RE0%' from 'CCsf/RE100%'; -- $18.9 million class J to 'Csf/RE0%' from 'CC/RE100%; -- $25 million class K to'Csf/RE0%' from 'CCsf/RE40%'; -- $5.9 million class L to 'D/RE0%' from'C/RE0%'. Fitch affirms these classes with a Stable Outlook: -- $260.4 million class A-2 at 'AAAsf'; -- $269.7 million class A-3 at 'AAAsf'; -- $131.9 million class A-AB at 'AAAsf'; -- $710 million class A-4 at 'AAAsf'; -- $266.9 million class A-1A at 'AAAsf'; -- $211.6 million class A-M at 'AAAsf'; -- $38.9 million class A-MA at 'AAAsf'. BEAR STEARNS: S&P Affirms 'CCC-' Rating on Class J Cert. -------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on three classes of commercial mortgage pass-through certificates from Bear Stearns Commercial Mortgage Securities Trust 2002-TOP6, a U.S. commercial mortgage-backed securities (CMBS) transaction. "In addition, we affirmed our ratings on seven other classes from the same transaction," S&P said. "Our rating actions follow our analysis of the transaction primarily using our U.S. conduit/fusion CMBS criteria and included a review of the credit characteristics of the remaining collateral, the deal structure, and the liquidity available to the trust. The upgrades reflect increased credit enhancement levels due to deleveraging of the pool balance and the stable financial performance of the remaining collateral in the pool," S&P said. "The affirmed ratings on the principal and interest certificates reflect subordination and liquidity levels that are consistent with the outstanding ratings. We affirmed our 'AAA (sf)' rating on the class X-1 interest-only (IO) certificate based on our current criteria," S&P said. "Using servicer-provided financial information, we calculated adjusted debt service coverage (DSC) of 1.57x and a loan-to-value (LTV) ratio of 67.4% for the loans in the pool. We further stressed the loans' cash flows under our 'AAA' scenario to yield a weighted average DSC of 1.19x and an LTV ratio of 91.3%. The implied defaults and loss severity under the 'AAA' scenario were 54.9% and 16.2%. The DSC and LTV calculations noted above exclude the eight ($23.4 million, 9.0%) assets that are currently with the special servicer and seven ($36.0 million, 13.8%) defeased loans. We separately estimated losses for the specially serviced assets and included them in our 'AAA' scenario implied default and loss severity figures," S&P said. Credit Considerations As of the Jan. 17, 2012 trustee remittance reports, seven assets ($18.8 million, 7.2%) in the pool were with the special servicer, Berkadia Commercial Mortgage LLC (Berkadia). In addition, according to the master servicer, the Home Depot Distribution Center loan ($4.6 million, 1.8%) was transferred to the special servicer subsequent to the January 2012 trustee remittance report. The reported payment status of these assets as of the January 2012 trustee remittance report is: three ($8.7 million, 3.4%) are real estate-owned (REO) and five ($14.7 million, 5.6%) are matured balloon loans. Appraisal reduction amounts (ARAs) totaling $3.8 million were in effect against two of the specially serviced assets. Details of the three largest assets with the special servicer, all of which are top 10 assets secured by real estate, are set forth. The Ladson Crossing Shopping Center loan ($5.1 million, 1.9%) is the largest asset with the special servicer and the sixth-largest asset secured by real estate in the pool. The reported trust exposure on the loan was $5.2 million. The loan is secured by a 52,607-sq.-ft. retail property in Ladson, S.C., built in 2000. The loan was transferred to the special servicer on Nov. 9, 2011, due to imminent maturity default. The loan matured on Nov. 1, 2011. Berkadia stated that it is currently reviewing a loan modification proposal from the borrower to extend the loan. The reported DSC was 1.26x for the 12 months ended Jan. 31, 2011, and occupancy was 89.7% according to November 2011 rent roll. "We expect a minimal loss upon the eventual resolution of this loan," S&P said. The Home Depot Distribution Center loan ($4.6 million, 1.8%), the seventh-largest asset in the pool, is secured by a 228,800-sq.-ft. single-tenant-occupied industrial property in Charlotte, N.C. The loan was transferred to Berkadia on Jan. 6, 2012, due to maturity default. The loan matured on Jan. 1, 2012. According to the special servicer, the borrower has requested a 90-day loan extension to obtain refinancing and negotiate a lease extension with the sole tenant. According to the June rent roll, the property is 100% occupied by Home Depot Inc. with a lease expiration of Jan. 31, 2013. The reported DSC was 1.71x as of year-end 2010. "We expect a minimal loss upon the eventual resolution of this loan," S&P said. The Bridge Park Shopping Center asset ($4.1 million, 1.6%), the eighth-largest asset in the pool, consists of a 66,331-sq.-ft. retail property in Alpharetta, Ga., built in 2001. The reported trust exposure was $4.5 million on the asset. The loan was transferred to the special servicer on Dec. 6, 2010, due to monetary default, and the property became REO on Sept. 6, 2011. The reported occupancy on the property was 82.7% as of Oct. 31, 2011. Berkadia indicated that the retail property is currently listed for sale. "We expect a moderate loss upon the resolution of this asset," S&P said. "The remaining five assets with the special servicer individually represent less than 1.2% of the total pool balance. ARAs totaling $3.8 million are in effect for two of these assets. We estimated losses for these assets and arrived at a weighted average loss severity of 43.2%," S&P said. Transaction Summary "As of the Jan. 17, 2012, trustee remittance report, the transaction had an aggregate trust balance of $260.4 million (31 loans and three REO assets), compared with $1.1 billion (150 loans) at issuance. The master servicer, Wells Fargo Bank N.A. (Wells Fargo), provided financial information for 94.3% of the pool (by balance), which was primarily full-year 2010 and partial- year 2011 information. We calculated a weighted average DSC of 1.24x for the loans in the pool based on the reported figures. Our adjusted DSC and LTV were 1.57x and 67.4%, which excluded eight ($23.4 million, 9.0%) assets that are currently with the special servicer and seven ($36.0 million, 13.8%) defeased loans. Three of the eight specially serviced assets had reported DSCs; the weighted average DSC for the three assets was 1.42x. The trust has experienced principal losses to date totaling $14.1 million from three assets. Seven loans ($134.4 million, 51.6%) are on the master servicer's watchlist, including four of the top 10 assets. Two loans ($63.6 million, 24.4%) have a reported DSC below 1.00x," S&P said. Summary of Top 10 Assets Secured By Real Estate "The top 10 assets secured by real estate have an aggregate outstanding trust balance of $198.6 million (76.3%). Using servicer-reported information, we calculated a weighted average DSC of 1.17x for seven of the top 10 assets. The remaining three top 10 assets ($13.8 million, 5.3%) are currently with the special servicer. Our adjusted DSC and LTV figures for seven of the top 10 assets, excluding the three top 10 specially serviced assets, were 1.53x and 69.9%. Four of the top 10 assets ($128.2 million, 49.2%) in the pool are on the master servicer's watchlist," S&P said. "The Coliseum Centre loan ($62.6 million, 24.0%) is the largest asset secured by real estate in the pool. The loan is secured by a 974,329-sq.-ft. office complex in Charlotte, N.C. The loan is on Wells Fargo's watchlist due to a low reported DSC and its impending March 1, 2012, maturity. According to Wells Fargo, the borrower has not provided a refinance commitment to date. The loan's reported payment status is current. For the nine months ended Sept. 30, 2011, the reported DSC was 0.95x and occupancy was 84.5% according to the November 2011 rent roll," S&P said. The Bank One Center Office loan ($56.9 million, 21.9%), the second-largest asset in the pool, is secured by a 1.0 million-sq.- ft. office building in New Orleans, La. The loan is on Wells Fargo's watchlist due to its impending March 1, 2012 maturity. According to Wells Fargo, the borrower has not provided a refinance commitment to date. The loan's reported payment status is current. For the nine months ended Sept. 30, 2011, the reported DSC was 1.21x and occupancy was 88.3% according to the June 2011 rent roll. The Aborn Square Shopping Center loan ($5.3 million, 2.0%), the fifth-largest loan in the pool, is secured by 63,377-sq.-ft. retail property in San Jose, Calif. The loan is on Wells Fargo's watchlist due to its Feb. 1, 2012 maturity date. According to Wells Fargo, the borrower did not payoff the loan on its maturity date. The reported DSC was 1.50x for year-end 2010, and reported occupancy was 100% as of June 2011. The SableOaks loan ($3.4 million, 1.3%), the ninth-largest loan in the pool, is secured by a 68,400-sq.-ft. office property in South Portland, Maine. The loan is on Wells Fargo's watchlist due to its Feb. 1, 2012 maturity date. According to Wells Fargo, the borrower did not pay off the loan on its maturity date. The reported DSC and occupancy were 2.35x and 79.0%, as of year-end 2010. "We stressed the assets in the pool according to our criteria and the resultant credit enhancement levels are consistent with our raised and affirmed ratings," S&P said. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com Ratings Raised Bear Stearns Commercial Mortgage Securities Trust 2002-TOP6 Commercial mortgage pass-through certificates Rating Class To From Credit enhancement (%) B AAA (sf) AA+ (sf) 46.09 C AA (sf) AA- (sf) 34.28 D AA- (sf) A+ (sf) 29.46 Ratings Affirmed Bear Stearns Commercial Mortgage Securities Trust 2002-TOP6 Commercial mortgage pass-through certificates Class Rating Credit enhancement (%) A-2 AAA (sf) 57.89 E BBB+ (sf) 19.80 F BBB (sf) 16.04 G B+ (sf) 11.21 H CCC+ (sf) 7.46 J CCC- (sf) 4.24 X-1 AAA (sf) N/A N/A -- Not applicable. BEAR STEARNS: S&P Cuts Rating on Class B-2 to 'CCC' --------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 10 classes from six U.S. residential mortgage-backed securities (RMBS) transactions and removed one of them from CreditWatch with negative implications. "We subsequently withdrew our ratings on three of these classes due to the small number of loans remaining and the lack of sufficient information to maintain the ratings. We withdrew our rating on one other class from another transaction due to our interest-only criteria. Additionally, we affirmed our ratings on 45 classes from the four transactions with lowered ratings and removed two of them from CreditWatch negative," S&P said. All of the transactions in this review are backed by prime jumbo mortgage loan collateral issued from 1992 through 2004. "The downgrades reflect our belief that projected credit enhancement for the affected classes will be insufficient to cover the projected losses we applied at the previous rating stresses. For certain classes, the downgrade incorporated our interest shortfall criteria," S&P said. "The lowered ratings and subsequent withdrawals reflect our opinion that projected credit support for the affected classes will be insufficient to maintain the previous ratings. In addition, each of these classes is backed by a pool with a small number of remaining loans. If any of the remaining loans default, the resulting loss could have a greater effect on the pool's performance than if the pool consisted of a larger number of loans. Because this performance volatility may have an adverse affect on our outstanding ratings, we withdrew our ratings on the related transactions," S&P said. "The affirmations reflect our belief that the amount of projected credit enhancement available for these classes is sufficient to cover projected losses associated with these rating levels," S&P said. "In order to maintain a 'B' rating on a class from a prime jumbo transaction, we assessed whether, in our view, a class could absorb the remaining base-case loss assumptions we used in our analysis. In order to maintain a rating higher than 'B', we assessed whether the class could withstand losses exceeding our remaining base-case loss assumptions at a percentage specific to each rating category, up to 235% for a 'AAA' rating. For example, in general, we would assess whether one class could withstand approximately 127% of our remaining base-case loss assumptions to maintain a 'BB' rating, while we would assess whether a different class could withstand approximately 154% of our remaining base- case loss assumptions to maintain a 'BBB' rating. Each class with an affirmed 'AAA' rating can, in our view, withstand approximately 235% of our remaining base-case loss assumptions under our analysis," S&P said. For additional structure-level information regarding delinquencies and cumulative losses for these transactions through the November 2011 remittance period see: Losses and Delinquencies* Bear Stearns ARM Trust Original Pool Cum. Total Severe balance factor losses delinquencies delinquencies Series (mil.$) (%) (%) (%) (%) 2003-7 1,172 18.68 0.30 11.14 7.25 MASTR Adjustable Rate Mortgages Trust Original Pool Cum. Total Severe balance factor losses delinquencies delinquencies Series(mil. $) (%) (%) (%) (%) 2003-6 807 8.33 0.33 20.15 14.60 Mortgage Pass-Through Trust Original Pool Cum. Total Severe balance factor losses delinquencies delinquencies Series (mil. $) (%) (%) (%) (%) 2004-HYB3 316 19.23 0.68 14.06 12.44 Saxon Mortgage Securities Corp. Original Pool Cum. Total Severe balance factor losses delinquencies delinquencies Series(mil. $) (%) (%) (%) (%) 1992-1 100 0.28 0.00 0.00 0.00 1992-1 329 0.40 0.00 6.89 6.89 1992-6 300 0.30 0.00 14.52 4.83 Structured Mortgage Asset Residential Trust Original Pool Cum. Total Severe balance factor losses delinquencies delinquencies 1992-12 200 0.10 0.02 83.58 0.00 Structured Asset Securities Corp. Original Pool Cum. Total Severe balance factor losses delinquencies delinquencies Series(mil. $) (%) (%) (%) (%) 2002-13 296 1.95 1.18 20.05 19.26 *Cumulative losses represent the percentage of the original pool balance, and total and severe delinquencies represent the percentage of the current pool balance. Subordination provides credit support for the affected transactions. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com Rating Actions Bear Stearns ARM Trust 2003-7 Series 2003-7 Rating Class CUSIP To From II-A 07384MYR7 AA+ (sf) AAA (sf)/Watch Neg B-1 07384MZC9 BBB (sf) A+ (sf) B-2 07384MZD7 CCC (sf) B (sf) MASTR Adjustable Rate Mortgages Trust 2003-6 Series 2003-6 Rating Class CUSIP To From 4-A-1 576433GG5 AAA (sf) AAA (sf)/Watch Neg 4-A-2 576433GH3 AAA (sf) AAA (sf)/Watch Neg B-2 576433GX8 CCC (sf) B- (sf) Mortgage Pass-Through Trust 2004-HYB3 Series 2004-HYB3 Rating Class CUSIP To From M 12669FZA4 CCC (sf) B- (sf) B-1 12669FZB2 CC (sf) CCC (sf) Saxon Mortgage Securities Corp. Series 1992- 1 Rating Class CUSIP To Interim From B-1 805570AC2 NR CC (sf) BBB- (sf)/Watch Neg B-2 805570AD0 NR CC (sf) BBB- (sf) Saxon Mortgage Securities Corp. Series 1992- 6 Rating Class CUSIP To Interim From B 805570AM0 NR CC (sf) B+ (sf) Structured Asset Securities Corp. Series 2002-13 Rating Class CUSIP To From B2 86358RV87 BB+ (sf) AA (sf) BX 86358RW29 NR AA (sf) NR-Not rated. RATINGS AFFIRMED Bear Stearns ARM Trust 2003-7 Series 2003-7 Class CUSIP Rating I-A 07384MYQ9 AAA (sf) I-X 07384MZM7 AAA (sf) III-A 07384MYS5 AAA (sf) IV-A 07384MYT3 AAA (sf) IV-AM 07384MYU0 AAA (sf) V-A 07384MYV8 AAA (sf) VI-A 07384MYW6 AAA (sf) VII-A 07384MYX4 AAA (sf) VIII-A 07384MYY2 AAA (sf) IX-A 07384MYZ9 AAA (sf) V-X 07384MZP0 AAA (sf) B-3 07384MZE5 CC (sf) B-4 07384MZF2 CC (sf) MASTR Adjustable Rate Mortgages Trust 2003-6 Series 2003-6 Class CUSIP Rating 1-A-2 576433GA8 AAA (sf) 1-A-2X 576433GB6 AAA (sf) 2-A-1 576433GC4 AAA (sf) 2-A-2 576433GD2 AAA (sf) 2-A-X 576433GE0 AAA (sf) 3-A-1 576433GF7 AAA (sf) 3-A-X 576433HC3 AAA (sf) 4-A-X 576433GJ9 AAA (sf) 5-A-1 576433GK6 AAA (sf) 5-A-X 576433GL4 AAA (sf) 6-A-1 576433GM2 AAA (sf) 7-A-1 576433GN0 AAA (sf) 7-A-1X 576433HD1 AAA (sf) 7-A-2 576433GP5 AAA (sf) 7-A-2X 576433HE9 AAA (sf) 7-A-3 576433GQ3 AAA (sf) 8-A-1 576433GS9 AAA (sf) 8-A-X 576433GT7 AAA (sf) B-1 576433GW0 BBB (sf) B-3 576433GY6 CC (sf) Mortgage Pass-Through Trust 2004-HYB3 Series 2004-HYB3 Class CUSIP Rating 1A 12669FYX5 BB+ (sf) 2-A 12669FYY3 BB+ (sf) 3-A 12669FYZ0 BB+ (sf) Structured Asset Securities Corp. Series 2002-13 Class CUSIP Rating 1-AP 86358RU21 AAA (sf) 1-AX 86358RU39 AAA (sf) 1-PAX 86358RU47 AAA (sf) AP 86358RV46 AAA (sf) AX 86358RV53 AAA (sf) PAX 86358RV61 AAA (sf) B1 86358RV79 AAA (sf) BEAR STEARNS: S&P Lowers Rating on Class G Cert. to 'D' ------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on six classes of commercial mortgage pass-through certificates from Bear Stearns Commercial Mortgage Securities Trust 2007-TOP26, a U.S. commercial mortgage-backed securities (CMBS) transaction. "In addition, we affirmed our ratings on nine other classes from the same transaction," S&P said. "Our rating actions follow our analysis of the transaction structure and the liquidity available to the trust. The downgrades primarily reflect credit support erosion that we anticipate will occur upon the eventual resolution of the transaction's eight ($77.2 million, 4.2%) assets with the special servicer. We lowered our rating on class G to 'D (sf)' because we believe the accumulated interest shortfalls will remain outstanding for the foreseeable future," S&P said. "The affirmed ratings on the principal and interest certificates reflect subordination and liquidity support levels that are consistent with the outstanding ratings. We affirmed our 'AAA (sf)' ratings on the class X-1 and X-2 interest-only (IO) certificates based on our current criteria," S&P said. "Our analysis included a review of the credit characteristics of all of the remaining assets in the pool. Using servicer-provided financial information, we calculated an adjusted debt service coverage (DSC) of 1.67x and a loan-to-value (LTV) ratio of 100.2%. We further stressed the loans' cash flows under our 'AAA' scenario to yield a weighted average DSC of 1.03x and an LTV ratio of 142.5%. The implied defaults and loss severity under the 'AAA' scenario were 71.0% and 33.8%, respectively. All of the DSC and LTV calculations exclude the transaction's eight ($77.2 million, 4.2%) specially serviced assets. We separately estimated losses for these assets and included them in the 'AAA' scenario implied default and loss severity figures," S&P said. "As of the Jan. 12, 2012 trustee remittance report, the trust experienced total monthly interest shortfalls of $251,915, due primarily to appraisal subordinate entitlement reduction (ASER) amounts of $121,066 and special servicing fees and workout fees totaling $17,839. The interest shortfalls affected all classes subordinate to and including class F. We expect that the interest shortfalls affecting class G will continue for the foreseeable future, and consequently we lowered our rating on this class to 'D (sf)'," S&P said. Credit Considerations As of the Jan. 12, 2012 trustee remittance report, eight ($77.2 million, 4.2%) assets in the pool were with the special servicer, C-III Asset Management LLC. The reported payment status of these specially serviced assets is: one ($10.0 million, 0.5%) is real estate owned (REO); two ($31.6 million, 1.7%) are in foreclosure; two ($19.8 million, 1.1%) are 90-plus-days delinquent; two ($12.1 million, 0.7%) are matured balloon loans; and one ($3.7 million, 0.2%) is current. Appraisal reduction amounts (ARAs) totaling $23.6 million were in effect for three of the specially serviced assets. "The Holiday Inn - Santa Maria loan ($22.3 million, 1.2%), the largest specially serviced asset, is secured by a 207-room lodging property in Santa Maria, Calif. The loan was transferred to the special servicer in March 2010 and the payment status is reported as being in foreclosure. Recent financial reporting information is not available. There is an ARA of $9.8 million in effect against the loan, for which we expect a moderate loss upon resolution," S&P said. "The seven remaining specially serviced assets have individual balances that represent less than 1.0% of the total pool balance. ARAs totaling $13.8 million are in effect against two of the assets. We estimated losses for all seven remaining specially serviced assets and arrived at a weighted average loss severity of 46.7%," S&P said. Transaction Summary As of the Jan. 12, 2012 trustee remittance report, the collateral pool had a trust balance of $1.85 billion, down from $2.11 billion at issuance. The pool currently includes 217 loans and one REO asset. The master servicer, Wells Fargo Bank N.A., provided financial information for 90.9% of the pool (by balance), the majority of which reflected full-year 2010 or partial-year 2011 data. "We calculated a weighted average DSC of 1.76x for the pool based on the reported figures. Our adjusted DSC and LTV ratio were 1.67x and 100.2%, which exclude the transaction's eight ($77.2 million, 4.2%) specially serviced assets, for which we separately estimated losses. The trust has experienced $27.6 million in principal losses related to eight assets. Ninety-one loans ($565.2 million, 30.6%), including three ($135.5 million, 7.3%) of the top 10 loans in the pool, are on the master servicer's watchlist. Forty ($175.3 million, 9.5%) loans have a reported DSC under 1.10x, 28 ($121.9 million, 6.6%) of which have a reported DSC under 1.00x," S&P said. Summary of Top 10 Loans "The top 10 loans have an aggregate outstanding trust balance of $636.9 million (34.5%). Using servicer-reported numbers, we calculated a weighted average DSC of 2.05x for the top 10 loans. Our adjusted DSC and LTV ratio for the top 10 loans were 1.78x and 94.9%. Three ($135.5 million, 7.3%) of the top 10 loans in the pool are on the master servicer's watchlist," S&P said. The Viad Corporate Center loan ($56.0 million, 3.0%), the fifth- largest loan in the pool, is on the master servicer's watchlist due to a low reported DSC, which was 0.99x as of the six months ended June 30, 2011. The loan is secured by a 476,424-sq.-ft. office property in Phoenix. Reported occupancy was 77.0% as of June 30, 2011. The 909 A Street loan ($48.0 million, 2.6%), the sixth-largest loan in the pool, is on the master servicer's watchlist due to other default risk because the sole tenant may vacate the property. The master servicer stated that it is in the process of contacting the borrower for updated information. The loan is secured by a 210,186-sq.-ft. office property in Tacoma, Wash. Reported DSC was 1.62x as of Dec. 31, 2010, and reported occupancy was 100.0% as of June 30, 2011. The Overlook II loan ($31.5 million, 1.7%), the eighth-largest loan in the pool, is on the master servicer's watchlist due to a low reported DSC, which was 1.03x for the six months ended June 30, 2011. The loan is secured by a 254,658-sq.-ft. office property in Atlanta. Reported occupancy was 77.0% as of June 30, 2011. Standard & Poor's stressed the assets in the pool according to its current criteria, and the analysis is consistent with the lowered and affirmed ratings. Standard & Poor's 17g-7 Disclosure Report Sec Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at; http://standardandpoorsdisclosure-17g7.com Ratings Lowered Bear Stearns Commercial Mortgage Securities Trust 2007-TOP26 Commercial mortgage pass-through certificates Rating Class To From Credit enhancement (%) B BB (sf) BB+ (sf) 6.77 C BB- (sf) BB (sf) 5.77 D B (sf) BB- (sf) 4.20 E B- (sf) B+ (sf) 3.34 F CCC- (sf) CCC+ (sf) 2.35 G D (sf) CCC- (sf) 1.35 Ratings Affirmed Bear Stearns Commercial Mortgage Securities Trust 2007-TOP26 Commercial mortgage pass-through certificates Class Rating Credit enhancement (%) A-2 AAA (sf) 29.17 A-3 AAA (sf) 29.17 A-AB AAA (sf) 29.17 A-4 AAA (sf) 29.17 A-1A AAA (sf) 29.17 A-M A (sf) 17.75 A-J BBB (sf) 9.05 X-1 AAA (sf) N/A X-2 AAA (sf) N/A N/A -- Not applicable. BIRCH CDO I: S&P Cuts Class A-3 Note Rating to 'CCC-'; Off Watch ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered and removed from CreditWatch negative its ratings on the A-2L, A-2, and A-3L notes from Birch Real Estate CDO I Ltd., a static cash flow collateralized debt obligation (CDO) transaction backed by structured finance securities. "We also affirmed our rating on the class B-1 note from the same transaction," S&P said. "We previously lowered our ratings on the notes from this transaction on May 3, 2010. The transaction has since paid down the class A-1L and A-1 notes and began paying down the class A-2L and A-2 notes. As of the Jan. 3, 2012 trustee report, the class A- 2L and A-2 notes have paid down to 75.74% of their original balances. Despite the reduced notes balances, the interest coverage ratio and the overcollateralization ratios continue to fail," S&P said. "The interest proceeds collected in 2011 have been insufficient to make the interest payments due to the nondeferrable class A notes. Principal cash had to be used to make interest payments," S&P said. These factors, which have reduced the credit support available to the three remaining class A notes, prompted 's downgrades. Standard & Poor's 17g-7 Disclosure Report Sec Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at; http://standardandpoorsdisclosure-17g7.com Rating Actions Birch Real Estate CDO I Ltd. Rating Class To From A-2L BB+ (sf) BBB (sf)/Watch Neg A-2 BB+ (sf) BBB (sf)/Watch Neg A-3 CCC- (sf) CCC (sf)/Watch Neg Rating Affirmed Birch Real Estate CDO I Ltd. Class Rating B-1 CC (sf) CENTERLINE 2007-1: S&P Lowers Rating on Class E From 'CC' to 'D' ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating to 'D (sf)' from 'CC (sf)' on class E from Centerline 2007-1 Resecuritization Trust (Centerline 2007-1), a U.S. commercial real estate collateralized debt obligation (CRE CDO) transaction. "At the same time, we affirmed three 'CC (sf)' ratings from the same transaction," S&P said. The downgrade reflects principal losses of $29.7 million sustained by class E that have reduced the principal balance of class E to $12.2 million from $41.9 million at issuance. "We affirmed our 'CC (sf)' ratings on classes B, C, and D to reflect our continued expectation that the transaction will continue to defer interest payments on these classes for an extended period of time due to a termination payment owed to the hedge counterparty," S&P said. The principal losses are due to principal losses on the underlying commercial mortgage-backed securities (CMBS) collateral per the trustee reports. Ten distinct transactions experienced aggregate principal losses in the amount of $46.5 million. Standard & Poor's determined that the CMBS classes that experienced significant principal losses include: Bear Stearns Commercial Mortgage Securities Trust 2006-PWR14 (classes L through N; $10.9 million loss); JPMorgan Chase Commercial Mortgage Securities Trust 2007- CIBC18 (classes J and K; 10.5 million loss); Morgan Stanley Capital I Trust 2006-TOP21 (classes O and P; $5.3 million); and Bear Stearns Commercial Mortgage Securities Trust 2005-PWR10 (classes Q and S; $5.2 million). According to the Jan. 20, 2012 remittance report, Centerline 2007- 1 was collateralized by 65 CMBS and three resecuritized real estate mortgage investment conduit (re-REMIC) certificates ($445.9 million, 100%) from 15 distinct transactions issued between 2000 and 2007. Rating Lowered Centerline 2007-1 Resecuritization Trust Rating Class To From E D (sf) CC (sf) Ratings Affirmed Centerline 2007-1 Resecuritization Trust Class Rating B CC (sf) C CC (sf) D CC (sf) CIENA CAPITAL: Moody's Reviews 'B1' Rating on Class B1 Notes ------------------------------------------------------------- Moody's Investors Service has placed on review for possible downgrade five certificates issued in three securitizations of small business loans sponsored by Ciena Capital, LLC, formerly known as Business Loan Express. The loans are secured primarily by small balance commercial real estate. The complete rating actions are: Issuer: Business Loan Express Business Loan Trust 2003-A Class A, A2 (sf) Placed Under Review for Possible Downgrade; previously on Jan 26, 2011 Confirmed at A2 (sf) Class B, Ba3 (sf) Placed Under Review for Possible Downgrade; previously on Jan 26, 2011 Confirmed at Ba3 (sf) Issuer: Business Loan Express Business Loan Trust 2007-A Cl. A, B1 (sf) Placed Under Review for Possible Downgrade; previously on Jan 26, 2011 Downgraded to B1 (sf) Issuer: Business Loan Express SBA Loan Trust 2005-1 Cl. A, Aa3 (sf) Placed Under Review for Possible Downgrade; previously on Jan 26, 2011 Downgraded to Aa3 (sf) Cl. M, Ba1 (sf) Placed Under Review for Possible Downgrade; previously on Jan 26, 2011 Downgraded to Ba1 (sf) RATINGS RATIONALE The ratings actions were due to a decrease in available credit enhancement caused by prolonged levels of high delinquencies and continued charge-offs in the underlying collateral pools. Over the past two years, delinquencies 60 days or more past due, including REO, for these deals have remained between approximately 20% to 40% of the outstanding pool balance. The relatively high levels of delinquencies, in turn, have decreased the amount of available credit enhancement to cover future losses. The methodology used in these review actions included an analysis of the loan collateral to arrive at a preliminary range of estimated lifetime losses. This range of net losses was then evaluated against the available credit enhancement provided by the reserve account, subordination, overcollateralization, and excess spread. Sufficiency of coverage was considered in light of the credit quality of the collateral pool, industry, geographical and loan concentrations, historical variability of losses experienced by the issuer, andservicer quality. During the review period, Moody's will project expected losses on the underlying pools of loans using delinquency roll rates and an estimate of market recoveries for deals with more than 70 loans outstanding. For deals will less than 70 loans outstanding, expected losses will be projected using a loan level analysis. The Aaa volatility proxies will also be determined for deals with more than 70 loans outstanding. Driving factors of the Aaa volatility proxy for each deal are the credit quality of the collateral pool, the historical variability in losses experienced by the issuer, the servicer quality as well as the industrial, geographical and obligor concentrations. Based on Moody's revised expected losses and Aaa volatility proxies, Moody's will evaluate whether the available credit enhancement adequately protects investors against future collateral losses for given rating assignments. Primary sources of assumption uncertainty are the general economic environment, commercial property values, and the ability of small businesses to recover from the recession. Other methodologies and factors that may have been considered in the process of rating these transactions can also be found on Moody's website. CIT GROUP: DBRS Assigns 'B' Rating on Series C Notes ---------------------------------------------------- DBRS, Inc., has assigned its B (high) rating to the new Series C Notes issued by CIT Group Inc. (CIT or the Company). The trend on the rating is Positive. This rating action does not impact the issuer rating of CIT, which remains at B (high) with a Positive trend. The rating considers the secured position of the Series C Notes, which benefit from a second lien on substantially all U.S. assets of CIT that are not otherwise pledged to secure the borrowings of special purpose entities and the equity of foreign subsidiaries. Moreover, the Series C Notes rank pari passu with the existing second lien Series A Notes and Series C Notes. The rating reflects DBRS's view that recovery on the Series C Notes would be less than the first lien notes but greater than the unsecured debt. COMM 2006-7: Expected Losses Prompt Fitch to Affirms Ratings ------------------------------------------------------------ Fitch Ratings has affirmed the super senior and mezzanine classes of COMM 2006-C7, commercial mortgage pass-through certificates at 'AAA' and downgraded eight classes. The downgrades reflect an increase in Fitch expected losses largely attributed to updated valuations on specially serviced assets, particularly two loans secured by retail properties in tertiary markets. Both loans, which are within the top 15 and combined represent 7% of the transaction, were not in foreclosure at Fitch's last review and have since become real estate owned (REO). Fitch modeled losses of the transaction are 12.8% of the remaining pool. Fitch designated 48 loans (37.2%) as Fitch Loans of Concern, which includes 16 specially serviced loans (18.8%). Fitch expects losses associated with the specially serviced loans to deplete classes E thru P and slightly impact class D. Additionally, four of the top 15 loans (12.3%) are currently in special servicing, two of which (7%), are among the top three largest contributors to Fitch modeled losses. The largest contributor to Fitch expected losses is secured by a 1,032,843 square foot (sf) super regional mall located in Media, PA, approximately 12 miles from the central business district (CBD) of Philadelphia. The mall is anchored by Sears, Boscov's, JC Penney, and Kohl's. Sears and JC Penney own their stores but are subject to ground leases. The loan transferred to special servicing in October 2010 due to imminent default and subsequently became REO via a deed in lieu of foreclosure. The special servicer has installed Madison Marquette to manage and lease the mall. Madison is evaluating the mall's current tenancy, re- bidding current contracts, and developing a comprehensive leasing plan. As of December 2011, in-line occupancy was 74% and 92% for the total mall (including non-collateral anchors). Fitch expects a significant loss upon liquidation of asset based on a recent valuation obtained by the servicer. The second largest contributor to loss is secured by a 254,880 sf retail property located in Battle Creek, MI, and formally sponsored by General Growth Properties (GGP). The mall is anchored by Macy's, Sears and JC Penney. The loan was transferred back to special servicing in August 2010 due to imminent default. GGP and the special servicer could not agree on terms for a modification and the property was subsequently returned to the lender via a deed in lieu of foreclosure. The most recent servicer reported total mall occupancy and debt service coverage ratio (DSCR) are 87% and 0.36x, respectively. Fitch expects a significant loss upon liquidation of asset based on a recent valuation obtained by the servicer. The third largest contributor to loss is secured by a 305,858 sf retail property located in Westminster, CO, just north of Denver. The property was foreclosed upon in October 2011 and is currently REO. The property was 75% occupied as of December 2011. The special servicer has engaged a new leasing agent. Prior to foreclosure a new lease was signed by the receiver for a restaurant tenant in addition to a draft renewal with an existing tenant. Fitch expects a loss upon liquidation of asset based on a recent valuation obtained by the servicer. Fitch downgrades, and assigns or revises Recovery Estimates (RE) to these classes: -- $189.7 million class A-J to 'B' from 'A'; Outlook Stable; -- $52 million class B to 'CCC', from 'BB'; RE 25%; -- $24.5 million class C to 'CC' from 'BB'; RE 0%; -- $36.7 million class D to 'C' from 'B-'; RE 0%; -- $21.4 million class E to 'C' from 'B-'; RE 0%; -- $30.6 million class F to 'C' from 'B-'; RE 0%; -- $24.5 million class G to 'C'. RE 0% from 'CCC', RE 100%; -- $30.6 million class H to 'C'. RE 0% from 'CC', RE 40%. Additionally, Fitch affirms these classes: -- $12.7 million class A-2 at 'AAA'; Outlook Stable; -- $40.1 million class A-3 at 'AAA'; Outlook Stable; -- $83.1 million class A-AB at 'AAA'; Outlook Stable; -- $1,052.7 million class A-4 at 'AAA'; Outlook Stable; -- $268 million class A-1A at 'AAA'; Outlook Stable; -- $244.7 million class A-M at 'AAA'; Outlook Stable; -- $12.2 million class J at 'C', RE 0%; -- $6.1 million class K at 'C', RE 0%; -- $9.2 million class L at 'C', RE 0%; -- $3.1 million class M at 'C', RE 0%; -- $6.1 million class N at 'C', RE 0%; -- $9.2 million class O at 'C', RE 0%. Fitch had previously withdrawn the rating on the interest-only class X. CORE EDUCATION: S&P Gives 'B+' Rating on Senior Unsecured Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' issue rating to the proposed issue of senior unsecured notes due 2017 by Core Education and Consulting Solutions Inc., a wholly owned subsidiary of Core Education & Technologies Ltd. (CORE; B+/Stable/--). "CORE and some of its subsidiaries guarantee the notes, which will be issued under rule 144A and Regulation S of the Securities Act. The rating is subject to our review of the final issuance documentation," S&P said. CORE intends to use the proceeds to fund capital expenditure and potential acquisitions, and for general corporate purposes. It will also use some of the proceeds to partially repay its rupee- denominated debt. "The rating on the proposed notes is derived from the 'B+' long- term corporate credit rating on CORE. The rating on CORE reflects the fragmented and competitive nature of the education technology market globally and the company's customer concentration in the U.S., where clients face budgetary constraints. The risks from CORE's entry into lower-margin, capital-intensive businesses are also a rating weakness. Further, the company generates negative free cash flows due to its high capital expenditure and low cash generation from operations as a result of a high working capital cycle. CORE's established presence in the niche formative assessment market with high renewal rates, its wider product offerings than some education technology peers, and its expansion in India and the U.K. temper these weaknesses," S&P said. CREDIT SUISSE: S&P Cuts Rating on Class D Cert. to 'B-' ------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on three classes of commercial mortgage pass-through certificates from Credit Suisse Commercial Mortgage Trust Series 2007-C4, a U.S. commercial mortgage-backed securities (CMBS) transaction. "In addition, we affirmed our ratings on 13 other classes from the same transaction," S&P said. "Our rating actions follow our analysis of the transaction, including a review of the deal structure and the liquidity available to the trust using our U.S. conduit/fusion CMBS criteria. The downgrades further reflect credit support erosion that we anticipate will occur upon the eventual resolution of 17 ($244.3 million, 12.4%) of the 19 assets ($260.7 million, 13.2%) that are currently with the special servicer, one loan that we determined to be credit-impaired ($12.4 million, 0.6%), as well as the 2600 Michelson B Note ($24.9 million, 1.3%)," S&P said. The affirmed ratings on the principal and interest certificates reflect subordination and liquidity support levels that are consistent with the outstanding ratings. "Our analysis included a review of the credit characteristics of the remaining assets in the pool. Using servicer-provided financial information, we calculated an adjusted debt service coverage (DSC) of 1.10x and a loan-to-value (LTV) ratio of 138.2%. We further stressed the loans' cash flows under our 'AAA' scenario to yield a weighted average DSC of 0.68x and an LTV ratio of 207.8%. The implied defaults and loss severity under the 'AAA' scenario were 93.4% and 52.8%. The DSC and LTV calculations exclude 17 ($244.3 million, 12.4%) of the 19 ($260.7 million, 13.2%) specially serviced assets, one loan that we determined to be credit-impaired ($12.4 million, 0.6%), as well as the 2600 Michelson B Note ($24.9 million, 1.3%). We separately estimated losses for the excluded specially serviced assets and included them in our 'AAA' scenario implied default and loss severity figures," S&P said. Credit Considerations As of the Jan. 18, 2012 trustee remittance report, 19 assets ($260.7 million, 13.2%) in the pool were with the special servicers, Torchlight Investors LLC and NCB, FSB. The reported payment status of the specially serviced assets as of the most recent trustee remittance report is: two are real estate-owned (REO, $4.6 million, 0.2%), one is in foreclosure ($2.2 million, 0.1%), 13 are 90-plus days delinquent ($190.9 million, 9.6%), one is 30 days delinquent ($30.3 million, 1.5%), one is late but less than 30 days delinquent ($31.0 million, 1.6%), and one is current ($1.8 million, 0.1%). Appraisal reduction amounts (ARAs) totalling $74.0 million are in effect for 15 of the specially serviced assets. Details of the three largest specially serviced assets, all of which are top 10 assets, are set forth. The City Tower loan ($115.0 million, 5.8%) is the third-largest asset in the pool and the largest asset with the special servicer. The loan is secured by a 410,068-sq.-ft. class A office building in Orange, Calif. The property was built in 1988. The loan was transferred to the special servicer on Oct. 8, 2010, due to imminent default. The payment status for the loan is reported to be 90-plus-days delinquent. An ARA of $43.6 million is in effect against the loan based on an Aug. 18, 2011, appraisal value of $80.0 million. The reported DSC and occupancy for the loan were 1.04x and 76.1%, respectively, as of year-end 2010. Standard & Poor's expects a moderate loss upon the eventual resolution of this loan. The Esquire Portfolio loan ($31.0 million, 1.6%) is the ninth- largest asset in the pool and the second-largest asset with the special servicer. The loan is secured by four multifamily properties with an aggregate of 214 units in the Upper East Side neighbourhood of New York City. The properties were built between 1910 and 1930 and renovated between 1988 and 2004. The loan was transferred to the special servicer on Sept. 23, 2011, due to imminent default. The special servicer indicated that the borrower did not pay judgments and the Environmental Control Board placed a lien on the property. The payment status for the loan is reported as late but less than 30 days delinquent. The reported DSC and occupancy for the loan were 0.48x and 98.1%, respectively, as of year-end 2010. Standard & Poor's expects a moderate loss upon the eventual resolution of this loan. The Artisan Las Vegas Multifamily Portfolio loan ($30.3 million, 1.5%) is the 10th-largest asset in the pool and the third-largest asset with the special servicer. The loan is secured by 448 multifamily units in Las Vegas. The properties were built between 1976 and 1990 and renovated in 2006. The loan was transferred to the special servicer on Oct. 14, 2011, due to imminent default. The payment status for this loan is reported to be 30 days delinquent. The reported DSC and occupancy for the loan were 0.95x and 93.7% for the six months ended June 2011. Standard & Poor's expects a moderate loss upon the eventual resolution of this loan. "The 16 remaining assets with the special servicer have individual balances that represent less than 0.8% of the total pooled trust balance. ARAs totaling $30.5 million are in effect against 14 of these assets. We estimated losses for 14 of these assets, arriving at a weighted-average loss severity of 46.4%. According to the master servicer, two of the remaining assets are in the process of being returned to the master servicer," S&P said. "In addition to the specially serviced assets, we determined one loan to be credit-impaired. The University Center West - San Diego loan ($12.4 million, 0.6%) is secured by a 43,023-sq.-ft. industrial building in San Diego, Calif. The master servicer indicated that the sole tenant vacated in November 2010 and the space has been dark since then. Accordingly, we viewed this loan to be at an increased risk of default and loss," S&P said. Transaction Summary As of the Jan. 18, 2012 remittance report, the collateral pool had an aggregate trust balance of $1.98 billion, down from $2.08 billion at issuance. The pool comprises 192 loans and one REO asset, down from 211 loans at issuance. The master servicers, Wells Fargo Bank N.A., KeyCorp Real Estate Capital Markets Inc., Midland Loan Services, and NCB, FSB, provided financial information for 96.7% of the loans in the pool, most of which reflected full-year 2010 data. "We calculated a weighted average DSC of 1.07x for the loans in the pool based on the servicer-reported figures. Our adjusted DSC and LTV were 1.10x and 138.2%. Our adjusted figures exclude 17 ($244.3 million, 12.4%) of the 19 ($260.7 million, 13.2%) specially serviced assets, one loan that we determined to be credit-impaired ($12.4 million, 0.6%), as well as the 2600 Michelson B Note ($24.9 million, 1.3%). Recent financial reporting information was available for 11 of the excluded specially serviced and credit-impaired assets, which reflected a weighted average DSC of 0.98x. We separately estimated losses for the excluded specially serviced assets and included them in our 'AAA' scenario implied default and loss severity figures. To date, the transaction has experienced $46.3 million in principal losses from 20 assets. Sixty-five loans ($723.2 million, 36.6%) in the pool are on the master servicer's watchlist, including four of the top 10 assets and the 2600 Michelson B Note. Fifty- six loans ($842.0 million, 42.6%) have a reported DSC of less than 1.10x, 41 of which ($466.1 million, 23.6%) have a reported DSC of less than 1.00x," S&P said. "Five loans totaling $159.4 million (8.1%) were previously specially serviced and have 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 and principal payments on the loans (including the final balloon payments, if applicable) if they continue to perform and remain with the master servicer," S&P said. Summary of Top 10 Loans "The top 10 loans have an aggregate outstanding balance of $942.8 million (47.7%). Using servicer-reported numbers, we calculated a weighted average DSC of 0.95x for the top 10 loans. Three of the top 10 loans ($176.3 million, 8.9%) are with the special servicer and four other top 10 loans ($352.7 million, 17.8%) are on the master servicer's combined watchlist. Our adjusted DSC and LTV for the top 10 assets are 1.09x and 150.3%. Our adjusted figures exclude the specially serviced top 10 assets, as well as the 2600 Michelson B note ($24.9 million, 1.3%)," S&P said. Recent financial reporting information was available for all three specially serviced top 10 loans, which reflected a weighted average DSC of 0.94x. Details of the four largest top 10 loans on the master servicers' combined watchlist are set forth. The 245 Fifth Avenue loan ($140.0 million, 7.1%) is the second- largest loan in the pool and the largest loan on the watchlist. The loan is secured by a 25-story class B office building in the Midtown South neighborhood of New York City. The property was built in 1926, renovated in 2000, and comprises 303,139-sq.-ft. of office space. The loan appears on the master servicer's combined watchlist due to its May 11, 2012 maturity and low reported DSC. For the nine months ended Sept. 30, 2011, the reported DSC and occupancy were 1.06x and 86.2%. The 2600 Michelson loan ($91.5 million, 4.6%) is the fourth- largest loan in the pool and the second-largest loan on the watchlist. The loan is secured by a 307,271-sq.-ft. office building in Irvine, Calif. The property was built in 1986. This loan was previously sent to the special servicer due to imminent monetary default. The loan was returned to the master servicer on Oct. 20, 2011, following a loan modification. The modification terms include, but are not limited to, a $3.5 million paydown of the loan, bifurcating the trust's $95.0 million note into a $66.6 million senior A note and a $24.9 million subordinate note. For the nine months ended Sept. 30, 2011, the reported occupancy was 50.3% and the property's cash flows were insufficient to pay all operating expenses. The Meyberry House loan ($90.0 million, 4.6%) is the fifth-largest loan in the pool and the third-largest loan on the watchlist. The loan is secured by 181-unit multifamily property with eight professional units, and a 93-space garage in the Upper East Side neighborhood of New York City. The loan was transferred to the special servicer on Sept. 30, 2009, due to imminent default. The loan was returned to the master servicer on May 23, 2011, following three successive timely monthly payments. The loan is on the master servicer's combined watchlist due to low reported DSC. For the nine months ended Sept. 30, 2011, the reported DSC and occupancy were 0.60x and 95.5%. The Lakeview Plaza loan ($31.2 million, 1.6%) is the eighth- largest loan in the pool and the fourth-largest loan on the watchlist. The loan is secured by a 175,570-sq.-ft. retail property in Southeast, New York. The loan is on the master servicer's combined watchlist due to low reported DSC. For the nine months ended Sept. 30, 2011, the reported DSC and occupancy were 0.93x and 90.5%. Standard & Poor's stressed the pool collateral according to its criteria. The resultant credit enhancement levels are consistent with S&P's lowered ratings. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com Ratings Lowered Credit Suisse Commercial Mortgage Trust Series 2007-C4 Commercial mortgage pass-through certificates Rating Class To From Credit enhancement (%) B B (sf) B+ (sf) 11.86 C B (sf) B+ (sf) 10.41 D B- (sf) B+ (sf) 9.23 Ratings Affirmed Credit Suisse Commercial Mortgage Trust Series 2007-C4 Commercial mortgage pass-through certificates Class Rating Credit enhancement (%) A-2 AAA (sf) 29.21 A-3 BBB (sf) 29.21 A-AB BBB (sf) 29.21 A-4 BBB (sf) 29.21 A-1-A BBB (sf) 29.21 A-M BB (sf) 18.69 A-1-AM BB (sf) 18.69 A-J B+ (sf) 13.04 A-1-AJ B+ (sf) 13.04 E CCC+ (sf) 8.31 F CCC (sf) 7.39 G CCC- (sf) 6.34 A-X AAA (sf) N/A N/A -- Not applicable. CSAM FUNDING IV: S&P Removes 'BB-' Ratings on 2 Classes Off Watch ----------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on 10 classes of notes from CSAM Funding IV, a collateralized loan obligation (CLO) transaction managed by CSFB Alternative Capital Inc. "At the same time, we removed our ratings on the class C-1, C-2, D-1, and D-2 notes from CreditWatch, where we placed them with positive implications on Nov. 14, 2011," S&P said. "The affirmations reflect sufficient credit support available to the notes at the current rating levels since we raised our ratings on the classes on Jan. 26, 2011. The transaction has since continued to amortize. As of the Jan. 3, 2012 trustee report, the class A notes have been paid down to 41.29% of their original balance," S&P said. "We did not raise our ratings on the notes at this point primarily because the transaction is subject to potential market value risks due to its exposure to long-dated securities. The transaction currently has approximately $93 million in underlying collateral, or 26.51% of the collateral portfolio, that matures after the transaction's legal final maturity," S&P said. Standard & Poor's will continue to review whether, in its view, the ratings on the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. Standard & Poor's 17g-7 Disclosure Report Sec Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at; http://standardandpoorsdisclosure-17g7.com Rating And Creditwatch Actions CSAM Funding IV Rating Class To From C-1 BBB- (sf) BBB-(sf)/Watch Pos C-2 BBB- (sf) BBB-(sf)/Watch Pos D-1 BB- (sf) BB-(sf)/Watch Pos D-2 BB- (sf) BB-(sf)/Watch Pos Ratings Affirmed CSAM Funding IV Rating A-1 AAA (sf) A-1NV AAA (sf) A-1V AAA (sf) A-2 AA+ (sf) B-1 A+ (sf) B-2 A+ (sf) Transaction Information Issuer: CSAM Funding IV Collateral manager: CSFB Alternative Capital Inc. Trustee: The Bank of New York Mellon Transaction type: Cash flow CLO CSMC 2009-2R: S&P Lowers Rating on Class 7-A-2 From 'AAA' to 'CCC' ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its rating on class 7- A-2 from CSMC Series 2009-2R, a residential mortgage-backed securities (RMBS) resecuritized real estate mortgage investment conduit (re-REMIC) transaction. "In addition, we affirmed our ratings on 22 other classes from this transaction and removed one of them from CreditWatch negative," S&P said. "In performing our ratings analysis, we reviewed the interest and principal amounts due on the underlying securities, which are then passed through to the applicable re-REMIC classes. When performing this analysis, we applied our loss projections, incorporating our loss assumptions, to the underlying collateral to identify the principal and interest amounts that could be passed through from the underlying securities under our rating scenario stresses. We stressed our loss projections at various rating categories to assess whether the re-REMIC classes could withstand the stressed losses associated with their ratings while receiving timely payment of interest and principal consistent with our criteria. The ratings on the class 4-A-2, 5-A-2, and 7-A-2 certificates address only the expected return of the principal amount," S&P said. "As a result of this review, we lowered our rating on class 7-A-2 based on our belief that the amount of credit enhancement will be insufficient to cover projected principal losses being passed through from the underlying security at the previous rating stress. The affirmations reflect our belief that the amount of credit enhancement will be sufficient to cover projected losses being passed through from the underlying securities at the previous rating stresses," S&P said. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com Ratings Actions CSMC Series 2009-2R Series 2009-2R Rating Class CUSIP To From 5-A-1 22944FCN7 AAA (sf) AAA/Watch Neg 7-A-2 22944FCY3 CCC (sf) AAA (sf) Ratings Affirmed CSMC Series 2009-2R Series 2009-2R Class CUSIP Rating 1-A-2 22944FAC3 AAA (sf) 1-A-3 22944FAE9 AAA (sf) 1-A-4 22944FAG4 AAA (sf) 1-A-5 22944FAJ8 AAA (sf) 1-A-6 22944FAL3 AAA (sf) 1-A-7 22944FAN9 AAA (sf) 1-A-8 22944FAQ2 AAA (sf) 1-A-9 22944FAS8 AAA (sf) 1-A-10 22944FAU3 AAA (sf) 1-A-11 22944FAW9 AAA (sf) 1-A-12 22944FAY5 AAA (sf) 1-A-13 22944FBA6 AAA (sf) 1-A-14 22944FBC2 AAA (sf) 1-A-15 22944FBE8 AAA (sf) 1-A-16 22944FBG3 AAA (sf) 1-A-17 22944FBJ7 AAA (sf) 1-A-18 22944FBL2 AAA (sf) 4-A-1 22944FCJ6 AAA (sf) 4-A-2 22944FCL1 AAA (sf) 7-A-1 22944FCW7 AAA (sf) 7-R 22944FDT3 AAA (sf) DUANE STREET: S&P Raises Class E Note Rating to 'CCC+'; Off Watch ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class B, C, D, and E notes from Duane Street CLO 1 Ltd., a U.S. collateralized loan obligation (CLO) transaction managed by DiMaio Ahmad Capital LLC. "At the same time, we removed the ratings on the class B, C, D, and E notes from CreditWatch, where we placed them with positive implications on Nov. 14, 2011. Additionally, we affirmed our 'AA+ (sf)' ratings on the class A and A-2 notes," S&P said. "The upgrades mainly reflect the improved performance of the transaction's underlying asset portfolio since we lowered our ratings on all of the notes in January 2010, following the application of our September 2009 collateralized debt obligation (CDO) criteria. As of the January 2012 trustee report, the transaction had $2.00 million of defaulted assets. This was down from the $23.15 million of defaulted assets noted in the December 2009 trustee report, which we referenced for our January 2010 rating actions. Additionally, the trustee reported $14.73 million in assets from obligors rated in the 'CCC' category in January 2012, compared with $24.19 million in December 2009," S&P said. The upgrades also reflect an improvement in the overcollateralization (O/C) available to support the notes since our January 2010 rating actions. The trustee reported the following O/C ratios in the January 2012 monthly report: The class B O/C ratio was 119.67%, compared with a reported ratio of 115.77% in December 2009; and The class D O/C ratio was 108.04%, compared with a reported ratio of 104.51% in December 2009. "We affirmed our ratings on the class A and A-2 notes to reflect the availability of credit support at the current rating levels," S&P said. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. Standard & Poor's 17g-7 Disclosure Report Sec Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at; http://standardandpoorsdisclosure-17g7.com Ratings Raised Duane Street CLO 1 Ltd. Rating Class To From B A+ (sf) A (sf)/Watch Pos C BBB+ (sf) BBB- (sf)/Watch Pos D BB+ (sf) CCC- (sf)/Watch Pos E CCC+ (sf) CCC- (sf)/Watch Pos Ratings Affirmed Duane Street CLO 1 Ltd. Class Rating A AA+ (sf) A-2 AA+ (sf) Transaction Information Issuer: Duane Street CLO 1 Ltd. Co-issuer: Duane Street CLO 1 Corp. Underwriter: Morgan Stanley & Co. LLC Collateral manager: DiMaio Ahmad Capital LLC Trustee: The Bank of New York Mellon Transaction type: Cash flow CDO FORD CREDIT: Moody's Assigns Ratings on FCMOT 2012-1 Notes ---------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to the notes issued by Ford Credit Master Owner Trust 2012-1 (FCMOT 2012- 1). This transaction represents a securitization of dealer floorplan loans sponsored by Ford Motor Credit Company (Ford Credit, Ba1 positive). The complete rating action is: Cl. A, Assigned (P) Aaa (sf) Cl. B, Assigned (P) Aa1 (sf) Cl. C, Assigned (P) Aa3 (sf) Cl. D, Assigned (P) A3 (sf) RATINGS RATIONALE Moody's said the ratings are based on the quality of the underlying auto dealer floorplan receivables, the strength of the structure, the experience of Ford Credit as servicer, and the experience of Wells Fargo Bank, National Association as back-up servicer. The quality of the floorplan receivables was considered based upon a number of characteristics. A primary consideration is the strength of the manufacturers and the vehicles that the dealerships and the receivables have exposure. Moody's also considered the size of the Ford's dealership base, the dealer risk rating distribution based on Ford Credit's proprietary risk rating model, the age distribution of the receivables, and the overall trust monthly payment rate. Vehicle values under stressed historical scenarios were also considered in Moody's analysis. In cases of manufacturer bankruptcy or brand discontinuation within the industry, there has been a 15% to 30% negative impact on vehicle values. Moody's recovery rates in Moody's analysis are higher than this under more stressful rating scenarios since industry information is limited and a weaker economy could also create a more severe result. PRIMARY METHODOLOGY The principal methodology used in this rating was Moody's Approach to Rating U.S. Floorplan ABS Securities, published in January 2010. V-SCORE AND PARAMETER SENSITIVITY The V Score for this transaction is Medium, which is equal to the Medium V score assigned for the U.S. Dealer Floorplan Loan ABS sector. The V Score indicates "Medium" uncertainty about critical assumptions such as dealer default probabilities and recovery rates. Moody's V Scores provide a relative assessment of the quality of available credit information and the potential variability around the various inputs to a rating determination. The V Score ranks transactions by the potential for significant rating changes owing to uncertainty around the assumptions due to data quality, historical performance, the level of disclosure, transaction complexity, the modeling and the transaction governance that underlie the ratings. V Scores apply to the entire transaction (rather than individual tranches). Moody's Parameter Sensitivities: Moody's analysis reveals Class A sensitivity down to the Baa level when average dealer ratings are stressed to Caa1 and recovery rates are stressed an additional 50% or if dealer defaults are front-loaded in a material way. The Class B rating shows sensitivity down to the Ba level when average dealer ratings are stressed to Caa1 and recovery rates stressed an additional 40%. The Class C rating shows sensitivity down to the B level with when average dealer ratings are stressed to Caa1 and recovery rates stressed an additional 20%. The Class D rating shows sensitivity down to the B level with a recovery rate haircut of 20% and the initial average dealer ratings of B3. Parameter Sensitivities are not intended to measure how the rating of the security might migrate over time, rather they are designed to provide a quantitative calculation of how the initial rating might change if key input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged. Parameter Sensitivities only reflect the ratings impact of each scenario from a quantitative/model-indicated standpoint. Qualitative factors are also taken into consideration in the ratings process, so the actual ratings that would be assigned in each case could vary from the information presented in the Parameter Sensitivity analysis. Additional research including a pre-sale report for this transaction is available at www.moodys.com. The special reports, "Updated Report on V Scores and Parameter Sensitivities for Structured Finance Securities" and "V Scores and Parameter Sensitivities in the U.S. Vehicle ABS Sector" are also available on moodys.com. FORD CREDIT: Moody's Assigns Ratings on FCMOT 2012-2 Notes ---------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to the notes issued by Ford Credit Master Owner Trust 2012-2 (FCMOT 2012- 2). This transaction represents a securitization of dealer floorplan loans sponsored by Ford Motor Credit Company (Ford Credit, Ba1 positive). The complete rating action is: Cl. A, Assigned (P) Aaa (sf) Cl. B, Assigned (P) Aa1 (sf) Cl. C, Assigned (P) Aa3 (sf) Cl. D, Assigned (P) A3 (sf) RATINGS RATIONALE Moody's said the ratings are based on the quality of the underlying auto dealer floorplan receivables, the strength of the structure, the experience of Ford Credit as servicer, and the experience of Wells Fargo Bank, National Association as back-up servicer. The quality of the floorplan receivables was considered based upon a number of characteristics. A primary consideration is the strength of the manufacturers and the vehicles that the dealerships and the receivables have exposure. Moody's also considered the size of the Ford's dealership base, the dealer risk rating distribution based on Ford Credit's proprietary risk rating model, the age distribution of the receivables, and the overall trust monthly payment rate. Vehicle values under stressed historical scenarios were also considered in Moody's analysis. In cases of manufacturer bankruptcy or brand discontinuation within the industry, there has been a 15% to 30% negative impact on vehicle values. Moody's recovery rates in Moody's analysis are higher than this under more stressful rating scenarios since industry information is limited and a weaker economy could also create a more severe result. PRINCIPAL METHODOLOGY The principal methodology used in this rating was Moody's Approach to Rating U.S. Floorplan ABS Securities, published in January 2010. V-SCORE AND PARAMETER SENSITIVITY The V Score for this transaction is Medium, which is equal to the Medium V score assigned for the U.S. Dealer Floorplan Loan ABS sector. The V Score indicates "Medium" uncertainty about critical assumptions such as dealer default probabilities and recovery rates. Moody's V Scores provide a relative assessment of the quality of available credit information and the potential variability around the various inputs to a rating determination. The V Score ranks transactions by the potential for significant rating changes owing to uncertainty around the assumptions due to data quality, historical performance, the level of disclosure, transaction complexity, the modeling and the transaction governance that underlie the ratings. V Scores apply to the entire transaction (rather than individual tranches). Moody's Parameter Sensitivities: Moody's analysis reveals Class A sensitivity down to the Baa level when average dealer ratings are stressed to Caa1 and recovery rates are stressed an additional 50% or if dealer defaults are front-loaded in a material way. The Class B rating shows sensitivity down to the Ba level when average dealer ratings are stressed to Caa1 and recovery rates stressed an additional 40%. The Class C rating shows sensitivity down to the B level with when average dealer ratings are stressed to Caa1 and recovery rates stressed an additional 20%. The Class D rating shows sensitivity down to the B level with a recovery rate haircut of 20% and the initial average dealer ratings of B3. Parameter Sensitivities are not intended to measure how the rating of the security might migrate over time, rather they are designed to provide a quantitative calculation of how the initial rating might change if key input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged. Parameter Sensitivities only reflect the ratings impact of each scenario from a quantitative/model-indicated standpoint. Qualitative factors are also taken into consideration in the ratings process, so the actual ratings that would be assigned in each case could vary from the information presented in the Parameter Sensitivity analysis. GE COMMERCIAL: S&P Lowers Rating on Class N Certs. to 'CCC-' ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on four classes of commercial mortgage pass-through certificates from GE Commercial Mortgage Corp.'s series 2003-C1, a U.S. commercial mortgage-backed securities (CMBS) transaction. "In addition, we affirmed our ratings on 11 other classes from the same transaction," S&P said. "Our rating actions follow our analysis of the credit characteristics of the collateral remaining in the pool, as well as the deal structure and the liquidity available to the trust. We downgraded the class K, L, M, and N certificates to reflect reduced liquidity support available to these classes. We also considered the near-term loan maturities and the potential for the transaction to experience future interest shortfalls and reduced liquidity support because we believe a portion of these loans may be transferred to the special servicer if the respective borrowers are not able to refinance or payoff these loans at maturity. Excluding the defeased loans ($197.9 million, 27.9%) and specially serviced assets ($29.2 million, 4.1%), 64.2% ($455.2 million) of the remaining loans mature in 2012 and 2013," S&P said. "The affirmed ratings on the principal and interest certificates reflect subordination and liquidity support levels that are consistent with the outstanding ratings. We affirmed our 'AAA (sf)' rating on the class X-1 interest-only (IO) certificate based on our current criteria," S&P said. "Using servicer-provided financial information, we calculated an adjusted debt service coverage (DSC) of 1.37x and a loan-to-value (LTV) ratio of 85.2%. We further stressed the loans' cash flows under our 'AAA' scenario to yield a weighted average DSC of 1.17x and an LTV ratio of 106.2%. The implied defaults and loss severity under the 'AAA' scenario were 31.4% and 30.5%. All of the DSC and LTV calculations exclude the transaction's five ($29.2 million, 4.1%) assets that are currently with the special servicer and 23 ($197.9 million, 27.9%) defeased loans. We separately estimated losses for the excluded specially serviced assets and included them in the 'AAA' scenario implied default and loss severity figures," S&P said. Credit Considerations "As of the Jan. 10, 2012 trustee remittance report, four ($16.6 million, 2.3%) assets in the pool were with the special servicer, LNR Partners LLC (LNR). "The master servicer informed us that one additional loan, the Commerce Park II loan ($12.7 million, 1.8%), was transferred to LNR subsequent to the January 2012 trustee remittance report. The payment status of the specially serviced assets as of the Jan. 10, 2012 trustee remittance report is: one ($1.6 million, 0.2%) is real estate-owned (REO); one ($7.7 million, 1.1%) is 90-plus days delinquent; one ($5.4 million, 0.8%) is 60 days delinquent; and two ($14.5 million, 2.0%) are in their grace periods. Appraisal reduction amounts (ARAs) totaling $6.1 million are in effect for two of the specially serviced assets. Details on the five specially serviced loans are as set forth," S&P said. "The Commerce Park II loan ($12.7 million, 1.8%), the ninth- largest loan secured by real estate in the pool, is secured by 250,662 sq. ft. of industrial properties in Irving, Texas. The master servicer indicated that the loan was transferred to LNR on Jan. 12, 2012 (subsequent to the January 2012 trustee remittance report) due to imminent default. The master servicer placed the loan on its watchlist due to a low reported DSC, which was 1.04x for the nine months ending Sept. 30, 2011. The September 2011 rent roll shows the property to be 77.0% occupied. LNR is currently evaluating a workout strategy for this loan. We expect a moderate loss upon the eventual resolution of this loan," S&P said. "The Concourse Center loan ($7.7 million, 1.1%) has a total reported exposure of $9.0 million. It is secured by a 468,726-sq.- ft. industrial property in Cheektowaga, N.Y. The loan, which has a reported 90-day delinquent payment status, was transferred to the special servicer on Nov. 2, 2009, for imminent default. LNR indicated that a receiver was appointed in April 2011. Recent financial reporting information is not available. An ARA of $4.5 million is in effect against the loan. We expect a significant loss upon the resolution of this loan," S&P said. "The Shoppes at Audubon loan ($5.4 million, 0.8%) has a total reported exposure of $5.5 million. It is secured by a 46,252-sq.- ft. retail property in Naples, Fla. The loan was transferred to the special servicer on June 1, 2011, for imminent default. The loan's payment status is reported as 60-days delinquent. The special servicer and the borrower are currently in discussions regarding the delinquent payments. The reported DSC on the loan was 0.84x as of Dec. 31, 2010, and the reported occupancy was 75.0% as of April 2011. An ARA of $1.6 million is in effect against the loan. We expect a moderate loss upon the resolution of this loan," S&P said. "The Paradise Village MHC loan ($1.8 million, 0.2%) has a total reported exposure of $1.8 million. It is secured by an 81-pad manufacturing housing community in Tucson, Ariz. The loan was transferred to the special servicer on July 26, 2011, for collateral risk nonmonetary default. The reported DSC was 1.63x as of Dec. 31, 2010, and the reported occupancy was 83.0% as of June 2011. We expect a minimal loss upon the eventual resolution of this loan," S&P said. "The Woodridge Health Center asset ($1.6 million, 0.2%) has a total reported exposure of $3.1 million. The loan was transferred to LNR on May 11, 2010, and the asset became REO on April 28, 2011. The 59,942-sq.-ft. office property in Washington, D.C., is fully vacant. According to the special servicer, leasing efforts are ongoing. We believe the master servicer, Bank of America N.A. (BofA), will likely declare a nonrecoverability determination in the near term due because it has already advanced a significant amount (approximately $1.5 million to date) for this asset. It is our opinion that a nonrecoverability determination will likely cause liquidity interruptions due to higher interest shortfalls. We expect a minimal loss upon the eventual resolution of this asset," S&P said. Transaction Summary As of the Jan. 10, 2012 trustee remittance report, the collateral pool had a trust balance of $709.5 million, down from $1.19 billion at issuance. The pool currently includes 101 loans and one REO asset, compared to 134 loans at issuance. The master servicer provided financial information for 98.2% of the pool (by balance), the majority of which reflected full-year 2010 or partial-year 2011 data. "We calculated a weighted average DSC of 1.40x for the pool based on the reported figures. Our adjusted DSC and LTV ratio were 1.37x and 85.2%, which exclude the transaction's five ($29.2 million, 4.1%) assets that are currently with the special servicer and 23 ($197.9 million, 27.9%) defeased loans. We separately estimated losses for the excluded specially serviced assets. To date, the trust has experienced $16.9 million in principal losses related to five assets. Twenty-one loans ($174.4 million, 24.6%), including four ($78.6 million, 11.1%) of the top 10 loans in the pool, are on the master servicer's watchlist. Excluding the defeased loans and specially serviced assets, 72 ($455.2 million, 64.2%) loans mature in 2012 and 2013," S&P said. Summary of Top 10 Loans "The top 10 loans secured by real estate have an aggregate outstanding trust balance of $202.1 million (28.5%). Using servicer-reported numbers, we calculated a weighted average DSC of 1.40x for nine of the top 10 loans. The remaining top 10 loan ($12.7 million, 1.8%) is currently with the special servicer. Our adjusted DSC and LTV ratio for nine of the top 10 loans, excluding the specially serviced loan, were 1.30x and 83.8%, respectively. Four ($78.6 million, 11.1%) of the top 10 loans, including the Commerce Park II loan, in the pool are on the master servicer's watchlist," S&P said. "The Centennial Center I loan ($36.4 million, 5.1%), the second- largest loan in the pool, is on the master servicer's watchlist due to a low reported DSC, which was 1.03x as of Dec. 31, 2010. The loan is secured by a 355,457-sq.-ft. retail power center in Las Vegas, Nev. Occupancy was 85.4% according to the October 2011 rent roll. Circuit City occupied the property but vacated the space after declaring bankruptcy. The space remained vacant as of the October 2011 rent roll," S&P said. "The Charter Woods Apartments loan ($14.8 million, 2.1%), the seventh-largest loan in the pool, is on the master servicer's watchlist due to a low reported DSC, which was 1.02x for the nine months ended Sept. 30, 2011. The loan is secured by a 307-unit multifamily property in Fairborn, Ohio, built in 1998. Occupancy was 96.4%, according to the October 2011 rent roll," S&P said. "The Chatham Retail loan ($14.7 million, 2.1%), the eighth-largest loan in the pool, is on BofA's watchlist because some tenants have leases that roll within the next six months. The loan is secured by a 34,451-sq.-ft. retail space in New York City. The largest tenant, Banana Republic, which occupied 20,892 sq. ft. (60.6% of the space), had a lease that expired on Jan. 31, 2012," S&P said. According to BofA, Banana Republic will vacate the space, but expects Pier 1 Imports Inc. to lease a majority of the vacated space. Standard & Poor's stressed the assets in the pool according to its current criteria, and the analysis is consistent with the lowered and affirmed ratings. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com Ratings Lowered GE Commercial Mortgage Corp. Commercial mortgage pass-through certificates series 2003-C1 Rating Class To From Credit enhancement (%) K B+ (sf) BB+ (sf) 4.53 L B- (sf) BB- (sf) 3.48 M CCC+ (sf) B+ (sf) 3.06 N CCC- (sf) CCC+ (sf) 1.59 Ratings Affirmed GE Commercial Mortgage Corp. Commercial mortgage pass-through certificates series 2003-C1 Class Rating Credit enhancement (%) A-4 AAA (sf) 29.45 A-1A AAA (sf) 29.45 B AAA (sf) 23.59 C AAA (sf) 21.28 D AA+ (sf) 17.72 E AA (sf) 15.42 F A+ (sf) 13.95 G A (sf) 11.65 H BBB+ (sf) 9.34 J BBB- (sf) 5.78 X-1 AAA (sf) N/A N/A -- Not applicable. GENESIS 2007-2: S&P Removes 'CCC-' Class F Note Rating Off Watch ---------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on the class A, B, C, D, E, and F notes from Genesis CLO 2007-2 Ltd., a collateralized loan obligation (CLO) transaction managed by LLCP Advisors LLC. "At the same time, we removed the ratings on the class C, D, E, and F notes from CreditWatch where we placed them with positive implications on Nov. 14, 2011," S&P said. "The affirmations reflect sufficient credit support available to the notes at the current rating levels since we raised our ratings on five of the notes on Jan. 31, 2011. The transaction is now amortizing, and it has paid down the balance of the class A notes to $399 million. As of the Jan. 4, 2012 trustee report, the class A notes had been paid down to 32.32% of their original balance," S&P said. "We did not raise our ratings on the class C, D, E, and F notes at this point primarily because the transaction is subject to potential market value risks due to its exposure to long-dated securities. The transaction currently has approximately $196 million (27%) in underlying collateral that matures after the legal final maturity of the transaction. We understand that the maturity dates of these underlying assets have been extended due to the restructuring of the underlying loans," S&P said. Standard & Poor's will continue to review whether, in its view, the ratings on the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com Rating And CreditWatch Actions Genesis CLO 2007-2 Ltd. Rating Class To From C A+ (sf) A+(sf)/Watch Pos D BBB (sf) BBB(sf)/Watch Pos E BB- (sf) BB-(sf)/Watch Pos F CCC-(sf) CCC-(sf)/Watch Pos Ratings Affirmed Genesis CLO 2007-2 Ltd. Rating A AAA (sf) B AA+ (sf) Transaction Information Issuer: Genesis CLO 2007-2 Ltd. Collateral manager: LLCP Advisors LLC Trustee: Deutsche Bank Trust Co. Americas Transaction type: Cash flow CLO GM FINANCIAL: S&P Retains Counterparty Credit Rating to 'BB' ------------------------------------------------------------ Standard & Poor's Ratings Services assigned its ratings to AmeriCredit Automobile Receivables Trust 2012-1's $975.074 million automobile receivables-backed notes. The note issuance is an asset-backed securities transaction backed by subprime auto loan receivables. The ratings reflect: "The availability of approximately 44.2%, 39.3%, 32.4%, 25.9%, and 23.6% credit support for the class A, B, C, D, and E notes (based on stressed cash-flow scenarios, including excess spread), which provide coverage of more than 3.50x, 3.25x, 2.55x, 1.92x, and 1.67x our 11.25%-11.75% expected cumulative net loss range for the class A, B, C, D, and E notes. These credit support levels are commensurate with the assigned 'AAA (sf)', 'AA+ (sf)', 'A+ (sf)', 'BBB+ (sf)', and 'BBB- (sf)' ratings on the class A, B, C, D, and E notes," S&P said. "Our expectation that under a moderate, or 'BBB', stress scenario, our ratings on the class A, B, and C notes would not decline by more than one rating category of our ratings (all else being equal) over a 12-month period and our ratings on the class D and E notes would not decline by more than two rating categories over a 12-month period. Our ratings stability criteria describes the outer bound of credit deterioration within one year as being one rating category in the case of 'AAA (sf)'and 'AA (sf)' rated securities and two rating categories in the case of 'A (sf)', 'BBB (sf)', and 'BB (sf)' rated securities," S&P said. The credit enhancement in the form of subordination, overcollateralization, a reserve account, and excess spread. The timely interest and ultimate principal payments made under the stressed cash flow modeling scenarios, which are consistent with the assigned ratings. The collateral characteristics of the securitized pool of subprime auto loans. General Motors Financial Co. Inc.'s (GM Financial, formerly known as AmeriCredit Corp.; BB/Stable/--) extensive securitization performance history since 1994. On Jan. 5, 2012, Standard & Poor's raised its long-term counterparty credit rating on GM Financial to 'BB' from 'B+' and removed the rating from CreditWatch positive, where it had been placed on Sept. 30, 2011. The transaction's payment and legal structures. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com Ratings Assigned AmeriCredit Automobile Receivables Trust 2012-1 Class Rating Type Interest Amount rate(i) (mil. $) A-1 A-1+ (sf) Senior Fixed 204.900 A-2 AAA (sf) Senior Fixed 366.700 A-3 AAA (sf) Senior Fixed 137.159 B AA+ (sf) Subordinate Fixed 76.923 C A+ (sf) Subordinate Fixed 95.492 D BBB+ (sf) Subordinate Fixed 93.900 E(i) BBB- (sf) Subordinate Fixed 24.926 (i)Class E will be privately placed and is not included in the public offering amount. GRAMERCY 2005-1: S&P Cuts Rating on Class K From 'CCC' to 'CCC-' ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on eight classes from Gramercy Real Estate CDO 2005-1 Ltd. (Gramercy 2005- 1), a U.S. commercial real estate collateralized debt obligation (CRE CDO) transaction. "At the same time, we affirmed our ratings on three other classes from the same transaction," S&P said. "The downgrades and affirmations primarily reflect our assessment of increased risks and credit stability considerations regarding subordinate note cancellations that occurred prior to their repayment through the transaction's payment waterfall. The rating actions also reflect the transaction's exposure to downgraded underlying commercial mortgage-backed securities (CMBS) collateral ($122.5 million, 13.6% of the total asset balance)," S&P said. As noted in the Dec. 30, 2011, remittance report, classes E, F, G, and H had partial note cancellations without repayment. Notes Cancelled Without Payments Class Original par amount of cancelled notes ($) E 1,067,000 F 1,000,000 G 3,000,000 H 1,000,000 "In addition, our analysis of the transaction follows our rating actions on the underlying CMBS collateral. Standard & Poor's has downgraded seven securities from seven transactions totaling $122.5 million (13.6% of the total asset balance)," S&P said. Gramercy 2005-1 has exposure to the securities that Standard & Poor's has downgraded: Morgan Stanley Capital I Inc. series 2007-XLF9 (class A-2; $48.5 million, 5.4%) GS Mortgage Securities Trust 2006-GG6 (class A-J; $30.0 million, 3.3%); LB-UBS Commercial Mortgage Trust 2007-C2 (class A-J; $29.2 million, 3.2%); JPMorgan Chase Commercial Mortgage Securities Trust 2007- CIBC19 (class J; $5.5 million, 0.6%); Morgan Stanley Capital I Trust 2006-TOP23 (class B; $5.5 million, 0.6%); LB-UBS Commercial Mortgage Trust 2004-C6 (class D; $2.0 million, 0.2%); and Morgan Stanley Capital I Trust 2007-HQ13 (class D; $1.8 million, 0.2%). "In our assessment of the transaction and downgraded underlying CMBS collateral, we analyzed the transaction for increased risks and credit stability considerations due to the subordinate note cancellations," S&P said. To assess these risks, S&P applied the stresses it deemed appropriate: "We generated a cash flow analysis using two scenarios. The first scenario utilized the current balances of the notes, including any note cancellations, when modeling the interest or principal diversion mechanisms. The second scenario recognized only the balance of the senior notes in the calculation of any interest or principal diversion mechanisms," S&P said. "Using the two scenarios, we then applied the lower of the rating levels as the starting point for our rating analysis for each class of notes," S&P said. "Finally, we reviewed the level of cushion relative to our credit stability criteria and made further adjustments to the ratings that we believed were appropriate," S&P said. According to the Dec. 30, 2011 trustee report, the transaction's current assets included: 20 whole loans and senior participations ($499.3 million, 55.3%); 19 CMBS tranches ($250.0 million, 27.7%); Three B-note and mezzanine loans ($119.6 million, 13.2%); One preferred equity note ($24.1 million, 2.7%); Two rake bonds ($10.0 million, 1.1%); and Cash ($0.38 million, 0.04%). "The aggregate principal balance of the assets totaled $903.4 million, including cash and defaulted securities, while the transaction liabilities totaled $849.3 million. The trustee report noted five defaulted loans ($145.3 million, 16.1%) in the pool and two defaulted securities ($7.3 million, 0.8%). Standard & Poor's estimated specific recovery rates for the defaulted loans with a weighted average recovery rate of 21.1%. We based the recovery rates on information from the collateral manager, special servicer, and third-party data providers," S&P said. The defaulted loan assets are: Stuyvesant Town mezzanine loan ($49.1 million, 5.4%); Roddy Ranch whole loan ($33.9 million, 3.7%); Las Vegas Hilton whole loan ($27.3 million, 3.0%); Williams Gateway whole loan ($20.5 million, 2.3%); and Jameson Mezzanine IV mezzanine loan ($14.6 million, 1.6%). "According to the trustee report, the deal is passing all three par value tests and interest coverage tests, and is now in its amortization period," S&P said. "We analyzed the transaction and its underlying assets in accordance with our current criteria. Our analysis is consistent with the lowered and affirmed ratings," S&P said. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com Ratings Lowered Gramercy Real Estate CDO 2005-1 Ltd. Rating Class To From C BBB- (sf) BBB (sf) D BB+ (sf) BBB- (sf) E BB+ (sf) BBB- (sf) F BB (sf) BB+ (sf) G BB- (sf) BB+ (sf) H B+ (sf) BB (sf) J CCC (sf) B+ (sf) K CCC- (sf) CCC (sf) Ratings Affirmed Gramercy Real Estate CDO 2005-1 Ltd. Class Rating A-1 A+ (sf) A-2 A+ (sf) B BBB+ (sf) GSMSC 2005-ROCK: Moody's Affirms Rating of Cl. J Notes at 'Ba1' --------------------------------------------------------------- Moody's Investors Service affirmed the ratings of ten classes of GS Mortgage Securities Corporation II, Trust Pass-Through Certificates Series 2005-ROCK: Cl. A, Affirmed at Aaa (sf); previously on Jun 1, 2005 Definitive Rating Assigned Aaa (sf) Cl. A-FL, Affirmed at Aaa (sf); previously on Jun 1, 2005 Definitive Rating Assigned Aaa (sf) Cl. B, Affirmed at Aa1 (sf); previously on Jun 1, 2005 Definitive Rating Assigned Aa1 (sf) Cl. C-1, Affirmed at A1 (sf); previously on Mar 4, 2009 Downgraded to A1 (sf) Cl. E, Affirmed at A3 (sf); previously on Mar 4, 2009 Downgraded to A3 (sf) Cl. F, Affirmed at Baa1 (sf); previously on Mar 4, 2009 Downgraded to Baa1 (sf) Cl. G, Affirmed at Baa2 (sf); previously on Mar 4, 2009 Downgraded to Baa2 (sf) Cl. H, Affirmed at Baa3 (sf); previously on Mar 4, 2009 Downgraded to Baa3 (sf) Cl. J, Affirmed at Ba1 (sf); previously on Mar 4, 2009 Downgraded to Ba1 (sf) Cl. X-1, Affirmed at Aaa (sf); previously on Jun 1, 2005 Definitive Rating Assigned Aaa (sf) RATINGS RATIONALE The affirmations are due to the stable performance of the real estate collateral and key parameters including Moody's loan to value (LTV) ratio and Moody's stressed debt service coverage (DSCR) remaining within acceptable ranges. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of the slowdown in growth in the current macroeconomic environment and the commercial real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The hotel and multifamily sectors are in recovery and improvements in the office sector continue, with fundamentals in Gateway cities outperforming their suburban counterparts. However, office demand is closely tied to employment, where fundamentals remain weak, so significant improvement may be delayed. Performance in the retail sector has been mixed with on-going rent deflation and leasing challenges. Across all property sectors, the availability of debt capital continues to improve with monetary policy expected to remain supportive and interest rate hikes postponed. Moody's central global macroeconomic scenario reflects an overall downward revision of forecasts since last quarter, amidst ongoing fiscal consolidation efforts, household and banking sector deleveraging, persistently high unemployment levels, and weak housing markets that will continue to constrain growth. The principal methodology used in this rating was "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Moody's noted that on November 22, 2011, it released a Request for Comment, in which the rating agency has requested market feedback on potential changes to its rating methodology for Interest-Only Securities. If the revised methodology is implemented as proposed the rating on GS Mortgage Securities Corporation II, Series 2005- ROCK Class X-1 may be negatively affected. Moody's review incorporated the use of the excel-based Large Loan Model v 8.2. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- Remittance Reports and MOST(R) (Moody's Surveillance Trends) -- and on a periodic basis through a comprehensive review. Moody's prior review is summarized in a press release dated April 22, 2011. DEAL PERFORMANCE The $1,685.0 million Rockefeller Center loan is secured by a $1,210.0 million first lien mortgage on the borrower's fee interest and leasehold interests in the property; the additional $475.0 million in debt is secured by a pledge of 100% of the equity interest in the borrower held by RCPI Mezz, lLC. The fixed- rate interest-only loan has a 20-year term maturing in May 2025. Non-trust subordinate debt consists of a $320 million mezzanine loan. Rockefeller Center is a 10-building office, retail and entertainment complex, located in midtown Manhattan, New York City. The landmark development consists of approximately 6.9 million square feet of net rentable area (NRA) with 5.2 million square feet of office space, 868,388 square feet of retail and storage space, 255,714 square feet of underground parking and the 6,000-seat Radio City Music Hall. Amenities include the Top of the Rock observation deck, plaza areas and a skating rink. As of September 2011 the office space was 91% leased and the retail and storage space was 95% leased. Including Radio City Music Hall, Rockefeller Center was 92% leased, compared to 94% at the last review and at securitization. The ten largest office tenants lease approximately 42% of total office NRA and contribute approximately 48% of total office rent. The largest tenant is Deloitte, LLP with approximately 436,000 square feet. Deloitte, LLP signed an 18-year lease in January 2011 at 30 Rockefeller Plaza. Deloitte currently occupies 108,719 square feet with occupancy and lease commencement on the balance of the space scheduled for 2014 to 2015. Lazard Freres & Co. LLC is the second largest office tenant, leasing approximately 421,289 square feet at various locations. The third largest office tenant is Bank of America, N.A. leasing 321,890 square feet at 50 Rockefeller Plaza through January 2021. The fourth and fifth largest office tenants are Fiduciary Trust Co. International and Christie's Inc. These two tenants lease 179,752 square feet and 166,738, respectively with lease expirations in 2016 for Fiduciary Trust and 2027 for Christie's. Significant retail tenants include Radio City Music Hall that leases 548,250 square feet with total rent accounting for 16% of total retail rent. Radio City Music Hall's lease expires in 2023. The second largest tenant is Banana Republic, followed by NBC Universal, Inc, Faconnable USA Corp. and Ann Taylor Retail, Inc. These four tenants account for 26% of the total retail rent. Moody's loan to value (LTV) ratio is 71% and Moody's stressed debt service coverage (DSCR) is 1.30 X. Moody's credit estimate is Ba1, the same as last review. HIGHLAND CREDIT: S&P Removes 'BB' Class C 2006 Rating From Watch ---------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on four classes of notes from Highland Credit Opportunities CDO Ltd. and three classes of notes from McDonnell Loan Opportunity Ltd. and removed them from CreditWatch with negative implications, where it placed them on November 2011. Both transactions are U.S. market- value collateralized debt obligations (CDOs). Since the September 2011 monthly report, which S&P used for its November 2011 action, the overcollateralization (O/C) ratios increased for all classes for Highland Credit Opportunities CDO: The class A O/C ratio was 106.29% in December 2011, compared with 91.69% in September 2011; The class B O/C ratio was 106.02% in December 2011, compared with 93.23% in September 2011; and The class C O/C ratio was 104.01% in December 2011, compared with 93.07%. Over the same time period, the O/C ratios also increased for all classes for McDonnell Loan Opportunity Ltd: The senior O/C ratio was 114.56% in December 2011, compared with 106.34% in September 2011; and The second senior O/C ratio was 111.09% in December 2011, compared with 104.85% in September 2011. "On Aug. 31, 2010, Standard & Poor's published a request for comment asking for feedback on changes it is proposing to its methodology and assumptions for rating market-value securities. If adopted as proposed, it is likely that the final criteria would have a significant negative affect on the ratings assigned to market-value transactions," S&P said. "Standard & Poor's will continue to review whether, in its view, the ratings currently assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as we deem necessary," S&P said. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com Rating And Creditwatch Actions Highland Credit Opportunities CDO Ltd. Rating Class To From A-1 2006 A (sf) A (sf)/Watch Neg A-2 2006 A (sf) A (sf)/Watch Neg B 2006 BBB (sf) BBB (sf)/Watch Neg C 2006 BB (sf) BB (sf)/Watch Neg McDonnell Loan Opportunity Ltd. Rating Class To From B-1 2006-2 AA (sf) AA (sf)/Watch Neg 2SrTmL06-1 AA (sf) AA (sf)/Watch Neg 2dSrLn06-2 AA (sf) AA (sf)/Watch Neg HUMMINGBIRD SECURITISATION: S&P Puts 'CCC' Loan Rating on Watch --------------------------------------------------------------- Standard & Poor's Ratings Services placed on CreditWatch with negative implications its rating on the series 2 loan issued under the Hummingbird Securitisation Ltd. collateralized debt obligation (CDO) transaction. "During our monthly run of transactions on version 5.1 of our CDO evaluator, the tranche placed on CreditWatch negative had synthetic rated overcollateralization (SROC) levels that fell below 100% as of Jan. 31, 2012," S&P said. "For all the transactions that we ran on our CDO evaluator, we applied the top obligor and industry test SROCs, as well as the results of the Monte Carlo default simulation," S&P said. "By the end of the month, we intend to review the above tranche, the rating of which we placed on CreditWatch negative, along with any other tranches with ratings that are presently on CreditWatch negative or positive, in accordance with our current CDO criteria," S&P said. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com Rating Placed On CreditWatch Negative Hummingbird Securitisation Ltd. Series 2 loan Class To From Issue amount #2 Loan CCC (sf)/Watch Neg CCC (sf) JPY3.0 bil. JPMCC 2003-C1: Moody's Affirms Rating of Cl. F Notes at 'B1' ------------------------------------------------------------ Moody's Investors Service upgraded the ratings of two pooled classes and three non-pooled or rake classes and affirmed nine classes of J.P. Morgan Chase Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2003-C1: Cl. A-1, Affirmed at Aaa (sf); previously on Mar 28, 2003 Definitive Rating Assigned Aaa (sf) Cl. A-2, Affirmed at Aaa (sf); previously on Mar 28, 2003 Definitive Rating Assigned Aaa (sf) Cl. B, Affirmed at Aaa (sf); previously on Sep 2, 2010 Confirmed at Aaa (sf) Cl. C, Upgraded to Aaa (sf); previously on Sep 2, 2010 Downgraded to Aa1 (sf) Cl. D, Upgraded to Aa3 (sf); previously on Sep 2, 2010 Downgraded to A1 (sf) Cl. E, Affirmed at Baa1 (sf); previously on Sep 2, 2010 Downgraded to Baa1 (sf) Cl. F, Affirmed at B1 (sf); previously on May 4, 2011 Downgraded to B1 (sf) Cl. G, Affirmed at Caa1 (sf); previously on Sep 2, 2010 Downgraded to Caa1 (sf) Cl. H, Affirmed at Ca (sf); previously on Sep 2, 2010 Downgraded to Ca (sf) Cl. J, Affirmed at C (sf); previously on Sep 2, 2010 Downgraded to C (sf) Cl. CM-1, Upgraded to A1 (sf); previously on May 4, 2011 Upgraded to A2 (sf) Cl. CM-2, Upgraded to A2 (sf); previously on May 4, 2011 Upgraded to A3 (sf) Cl. CM-3, Upgraded to A3 (sf); previously on May 4, 2011 Upgraded to Baa1 (sf) Cl. X-1, Affirmed at Aaa (sf); previously on Mar 28, 2003 Definitive Rating Assigned Aaa (sf) RATINGS RATIONALE The upgrades of the pooled classes are due to overall improved pool financial performance and increased credit support due to loan payoffs and amortization.The upgrades for the three non- pooled, or rake classes, which are associated with the Concord Mills Mall Loan, are due to improved loan performance since last review as a result of an increase in property cash flow and loan amortization. The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. Moody's rating action reflects a cumulative base expected loss of 2.7% of the current balance. At last review, Moody's cumulative base expected loss was 4.4%. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the current sluggish macroeconomic environment and performance in the commercial real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The hotel and multifamily sectors are continuing to show signs of recovery through the first half of 2011, while recovery in the non-core office and retail sectors are tied to pace of recovery of the broader economy. Core office markets are showing signs of recovery through lending and leasing activity. The availability of debt capital continues to improve with terms returning toward market norms. Moody's central global macroeconomic scenario reflects an overall sluggish recovery as the most likely scenario through 2012, amidst ongoing individual, corporate and governmental deleveraging, persistent unemployment, and government budget considerations, however the downside risks to the outlook have risen since last quarter. The principal methodology used in this rating was "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005. Moody's noted that on November 22, 2011, it released a Request for Comment, in which the rating agency has requested market feedback on potential changes to its rating methodology for Interest-Only Securities. If the revised methodology is implemented as proposed the rating on JPMCC 2003-C1 X1 may be negatively affected. Refer to Moody's request for Comment, titled "Proposal Changing the Global Rating Methodology for Structured Finance Interest-Only Securities," for further details regarding the implications of the proposed methodology change on Moody's rating. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.60 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit estimate of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit estimate level, is incorporated for loans with similar credit estimates in the same transaction. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 23 compared to 27 at Moody's prior full review. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated May 4, 2011. DEAL PERFORMANCE As of the January 12, 2012 distribution date, the aggregate certificate balance of the pooled classes has decreased by 28% to $772 million from $1.07 billion at securitization. The Certificates are collateralized by 85 mortgage loans ranging in size from less than 1% to 18% of the pool, with the top ten non- defeased or non-specially serviced loans representing 45% of the pool. The pool includes two loans, representing 22% of the pool, with a credit estimate. Twenty-seven loans, representing 26% of the pool, have defeased and are secured by U.S. Government securities. Ten 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 (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Eight loans have been liquidated from the pool, resulting in a realized loss of $63.0 million (70% loss severity overall). Approximately 52% of this deal's aggregate realized loss is attributed to the liquidation of the Crossroads Mall Loan. This loan was the deal's second largest loan at securitization and resulted in a $33 million loss when it was disposed of in June 2010. Currently two loans, representing 2% of the pool, are in special servicing. Moody's has estimated an aggregate $8.4 million loss (54% expected loss, on average) for the specially serviced loans. The largest specially serviced loan is the 200-220 West Germantown Pike Loan ($14.3 million -- 1.8% of the pool), which is secured by two office buildings totaling 115,000 square feet (SF) located in Plymouth Meeting, PA. Loan performance deteriorated after a tenant occupying 40% of the net rentable area (NRA) vacated upon its October 2010 lease expiration. The loan is currently real estate owned (REO). Moody's has estimated an aggregate $8.4 million loss (54% expected loss based on a 98% probability of default) for the specially serviced loans. Loans representing approximately 95% of the pool mature within the next 15 months. Moody's expects most of these loans will be able to refinance at or prior to loan maturity. However, Moody's has assumed a high default probability for five poorly performing loans representing 4.5% of the pool and has estimated an aggregate $5.5 million loss (16% expected loss based on a 32% probability default) from these troubled loans. Moody's was provided with full year 2010 and full or partial year 2011 operating results for 94% and 94% of the pool, respectively. Excluding specially serviced, troubled and defeased loans, Moody's weighted average conduit LTV is 76%, the same as at last review. Moody's net cash flow reflects a weighted average haircut of 13% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.5%. Excluding specially serviced, troubled and defeased loans, Moody's actual and stressed conduit DSCR are 1.51X and 1.47X, respectively, compared to 1.56X and 1.48X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The largest loan with a credit estimate is the Concord Mills Loan ($139.1 million -- 18.0% of the pool), which is secured by a 1.26 million SF regional mall located in Concord, NC. In addition to the pooled debt, there is a $18.3 million non-pooled, or rake component, which supports Classes CM1, CM2 and CM3. The mall is a top shopping, entertainment and tourist destination in North Carolina with over 17 million visitors annually. In-line occupancy has improved from 89% at last review to 91% as of September 2011, with total mall occupancy also increasing from 94% to 95% since last review. In-line sales have increased over the last three years from $343 in 2009 to $378 in 2010 and $388 in 2011. Simon Property Group is the sponsor for the loan. Moody's credit estimate and stressed DSCR are Aa3 and 1.98X, respectively, as compared to A1 and 1.83X at last review. The second loan with a credit estimate is the Bishops Gate Loan ($32.5 million -- 4.2% of the pool), which is secured by two office buildings totaling 484 thousand SF located in Mt. Laurel, NJ. The collateral is 100% leased to PHH Mortgage, a subsidiary of PHH Corporation (Moody's senior unsecured rating Ba2; negative outlook), through December 2022. The loan has an anticipated repayment date (ARD) of January 2013 and has amortized 15% since securitization. Moody's credit estimate and stressed DSCR are A3 and 2.00X, respectively, compared to A3 and 2.04X at last review. The three largest conduit loans represent 11.5% of the outstanding pool balance. The largest loan is the Crossways/Newington Portfolio ($38.6 million -- 5.0% of the pool), which consists of two cross-collateralized loans secured by two industrial/office flex buildings totaling 844,000 SF. Both properties are located in Virginia. As of September 2011, the two properties were 86% leased, compared to 87% at last review. The loan has amortized 12% since securitization. Moody's LTV and stressed DSCR are 64% and 1.66X, respectively, compared to 62% and 1.66X at last review. The second largest loan is the Somerset Shoppes Loan ($26.2 million -- 3.4% of the pool), which is secured by a 189,000 SF community shopping center located in Boca Raton, FL. Major tenants include T.J. Maxx, Michaels and Loehmann's. The center was 93% leased as of January 2012, the same as at last review. Property performance has been stable since securitization with improvement in 2010 over 2009. At last review, Moody's value reflected the risk tied to high tenant turnover during 2011 and 2012. However, many of these tenants have renewed their leases. Moody's LTV and stressed DSCR are 92% and 1.15X, respectively, compared to 105% and 1.01X at last review. The third largest loan is the Prince Georges Metro Center IV Loan ($23.8 million -- 3.1% of the pool), which is secured by a 178,000 SF class A office building located in near Washington, DC in Hyattsville, MD. The property was constructed in 2002 as a build- to-suit for the US Department of Health and Human Services (HHS) which occupies 100% of the building under a 10-year lease expiring in December 2012. The loan has amortized 12% since securitization and matures in March 2013. Moody's believes this loan will be difficult to refinance if HHS does not renew or a replacement tenant is not found prior to loan maturity. Moody's analysis utilized a lit/dark analysis to account for this single tenant exposure. Moody's LTV and stressed DSCR are 103% and 0.99X, respectively, compared to 108% and 1.01X at last review. JPMCC 2004-LN2: Moody's Downgrades Cl. D Notes Rating to 'B1' ------------------------------------------------------------- Moody's Investors Service downgraded the ratings of four classes and affirmed the ratings of 10 classes of J.P. Morgan Chase Commercial Mortgage Securities Corp., Commercial Mortgage Pass- Through Certificates, Series 2004-LN2: Cl. A-1, Affirmed at Aaa (sf); previously on Aug 23, 2004 Definitive Rating Assigned Aaa (sf) Cl. A-2, Affirmed at Aa3 (sf); previously on Dec 2, 2010 Downgraded to Aa3 (sf) Cl. A-1A, Affirmed at Aa3 (sf); previously on Dec 2, 2010 Downgraded to Aa3 (sf) Cl. B, Affirmed at Baa1 (sf); previously on Dec 2, 2010 Downgraded to Baa1 (sf) Cl. C, Downgraded to Baa3 (sf); previously on Dec 2, 2010 Downgraded to Baa2 (sf) Cl. D, Downgraded to B1 (sf); previously on Dec 2, 2010 Downgraded to Ba2 (sf) Cl. E, Downgraded to B3 (sf); previously on Dec 2, 2010 Downgraded to B2 (sf) Cl. F, Downgraded to Caa2 (sf); previously on Dec 2, 2010 Downgraded to Caa1 (sf) Cl. G, Affirmed at Caa3 (sf); previously on Dec 2, 2010 Downgraded to Caa3 (sf) Cl. H, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to C (sf) Cl. J, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to C (sf) Cl. K, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to C (sf) Cl. L, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to C (sf) Cl. X-1, Affirmed at Aaa (sf); previously on Aug 23, 2004 Definitive Rating Assigned Aaa (sf) RATINGS RATIONALE The downgrades are due to higher than expected losses from troubled loans and loans in special servicing. Over 15% of the pool is currently in special servicing compared to 11% at the last full review. The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. Moody's rating action reflects a cumulative base expected loss of 7.8% of the current balance. At last review, Moody's cumulative base expected loss was 7.0%. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of the slowdown in growth in the current macroeconomic environment and the commercial real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The hotel and multifamily sectors are in recovery and improvements in the office sector continue, with fundamentals in Gateway cities outperforming their suburban counterparts. However, office demand is closely tied to employment, where fundamentals remain weak, so significant improvement may be delayed. Performance in the retail sector has been mixed with on-going rent deflation and leasing challenges. Across all property sectors, the availability of debt capital continues to improve with monetary policy expected to remain supportive and interest rate hikes postponed. Moody's central global macroeconomic scenario reflects an overall downward revision of forecasts since last quarter, amidst ongoing fiscal consolidation efforts, household and banking sector deleveraging, persistently high unemployment levels, and weak housing markets that will continue to constrain growth. The principal methodology used in this rating was "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000. Moody's noted that on November 22, 2011, it released a Request for Comment, in which the rating agency has requested market feedback on potential changes to its rating methodology for Interest-Only Securities. If the revised methodology is implemented as proposed the rating on J.P. Morgan Chase Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2004- LN2 Class X-1 may be negatively affected. Refer to Moody's request for Comment, titled "Proposal Changing the Global Rating Methodology for Structured Finance Interest-Only Securities," for further details regarding the implications of the proposed methodology change on Moody's rating. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.60 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit estimate of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit estimate level, is incorporated for loans with similar credit estimates in the same transaction. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 45 compared to 50 at Moody's prior review. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. DEAL PERFORMANCE As of the January 17, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 28% to $892 million from $1.25 billion at securitization. The Certificates are collateralized by 143 mortgage loans ranging in size from less than 1% to 8% of the pool, with the top ten non-defeased loans representing 32% of the pool. Nine loans, representing 5% of the pool, have defeased and are secured by U.S. Government securities. Thirty-three loans, representing 27% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Fourteen loans have been liquidated from the pool, resulting in a realized loss of $35.9 million (59% loss severity on average). Currently 15 loans, representing 15% of the pool, are in special servicing. The largest specially serviced loan is the Countryside Apartments Loan ($22.1 million -- 2.5% of the pool), which is secured by a 701-unit apartment complex located in St. Louis, Missouri. The subject was built in 1970. The loan was transferred to special servicing in January 2010 for maturity default and the property was foreclosed in January 2011. The property has been impacted by the delivery of newly renovated developments nearby. As of December 2011, the property was 56% leased compared to 72% at the last full review. The special servicer plans on marketing the property for sale after stabilization at the end of 2012. The remaining 13 specially serviced properties are secured by a mix of property types. Moody's estimates an aggregate $38.3 million loss for the specially serviced loans (45% expected loss on average). Moody's has assumed a high default probability for seven poorly performing loans representing 5% of the pool and has estimated an aggregate $6.6 million loss (15% expected loss based on a 30% probability default) from these troubled loans. Moody's was provided with full year 2010 operating results for 97% of the pool. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 89% compared to 85% at Moody's prior 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 special serviced and troubled loans, Moody's actual and stressed DSCRs are 1.44X and 1.30X, respectively, compared to 1.58X and 1.35X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The top three conduit loans represent 18% of the pool. The largest performing loan is the World Apparel Center Loan ($68.4 million -- 7.7% of the pool), which represents a 33.3% pari-passu interest in a $205.3 million first mortgage loan. The loan is secured by a 1.1 million square foot (SF) Class A office building located in the Times Square submarket of New York City. Built in 1970 and renovated in 2002, the building's principal tenants include Jones Apparel Group (Moody's senior unsecured rating Ba2, stable outlook) and JPMorgan Chase & Co. (Moody's senior unsecured rating Aa3, negative outlook). The property was 89% leased through September 2011 compared to 91% at last review and 72% at the second prior review. Jones Apparel Group, whose current lease expires in April 2012, recently renewed for an additional 15 years through April 2027. Moody's LTV and stressed DSCR are 81% and 1.17X, respectively, compared to 75% and 1.39X at last review. The second largest performing loan is the Chesapeake Square Loan ($67.8 million -- 7.6% of the pool), which is secured by an 810,305 SF (530,158 SF of collateral), single-level, enclosed regional mall located in Chesapeake, Virginia. The loan's sponsor is Simon Property Group. Anchor tenants include Target (not part of the collateral), Macy's, Sears and JC Penney. As of September 2011, total and in-line occupancy were 87% and 66% respectively (the same as at the prior review). Overall, occupancy has been on the decline primarily since late 2009 when the anchor tenant Dillard's vacated. However, Burlington Coat Factory has taken a portion of that space effective as of September 2010. Decreased rental income from the increased vacancy has deteriorated financial performance since securitization. Moody's LTV and stressed DSCR are 137% and 0.79X, respectively, compared to 138% and 0.78X at last review. The third largest performing loan is the Embassy Suites - BWI Airport Loan ($20.6 million -- 2.3% of the pool), which is secured by a 251-room full service hotel located in Linthicum, Maryland. This loan is currently on the watchlist due to low occupancy and DSCR. Occupancy, ADR, and RevPAR were 80%, $125, and $119 respectively during the second quarter 2010 compared to 69%, $100, and $83 during the same period in 2011. Overall, the hotel market has been impacted by the economic downturn but Moody's analysis incorporates an anticipated improvement in the hotel sector. Moody's LTV and stressed DSCR are 81% and 1.50X, respectively, compared to 72% and 1.70X at last review. LBUBS 2001-C2: Moody's Affirms Rating of Cl. F Notes at 'B1' ------------------------------------------------------------ Moody's Investors Service upgraded the ratings of three classes and affirmed five classes of LB-UBS, Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2001-C1: Cl. X, Affirmed at Aaa (sf); previously on May 24, 2001 Definitive Rating Assigned Aaa (sf) Cl. D, Upgraded to Aaa (sf); previously on Feb 24, 2011 Upgraded to Aa3 (sf) Cl. E, Affirmed at A3 (sf); previously on Feb 24, 2011 Upgraded to A3 (sf) Cl. F, Affirmed at B1 (sf); previously on Feb 11, 2010 Downgraded to B1 (sf) Cl. G, Upgraded to B2 (sf); previously on Feb 11, 2010 Downgraded to Caa1 (sf) Cl. H, Upgraded to Caa2 (sf); previously on Feb 11, 2010 Downgraded to Ca (sf) Cl. J, Affirmed at C (sf); previously on Feb 11, 2010 Downgraded to C (sf) Cl. K, Affirmed at C (sf); previously on Feb 11, 2010 Downgraded to C (sf) RATINGS RATIONALE The upgrades are due to increased credit subordination levels resulting from paydowns and amortization. The pool has paid down 62% since Moody's prior review. Although credit support has built up significantly since last review, Moody's is concerned about future increased interest shortfalls caused by the anticipated 1% workout fee upon the liquidation of specially serviced loans and the payoff of the largest loan in the pool, which previously had been in special servicing. The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. Moody's rating action reflects a cumulative base expected loss of 12.9% of the current balance. At last review, Moody's cumulative base expected loss was 6.6%. Although the current base expected loss is higher on a percentage basis compared to last review because of amortization, it is essentially the same as last review on a dollar basis. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of the slowdown in growth in the current macroeconomic environment and the commercial real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The hotel and multifamily sectors are in recovery and improvements in the office sector continue, with fundamentals in Gateway cities outperforming their suburban counterparts. However, office demand is closely tied to employment, where fundamentals remain weak, so significant improvement may be delayed. Performance in the retail sector has been mixed with on-going rent deflation and leasing challenges. Across all property sectors, the availability of debt capital continues to improve with monetary policy expected to remain supportive and interest rate hikes postponed. Moody's central global macroeconomic scenario reflects an overall downward revision of forecasts since last quarter, amidst ongoing fiscal consolidation efforts, household and banking sector deleveraging, persistently high unemployment levels, and weak housing markets that will continue to constrain growth. The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Moody's noted that on November 22, 2011, it released a Request for Comment, in which the rating agency has requested market feedback on potential changes to its rating methodology for Interest-Only Securities. If the revised methodology is implemented as proposed the rating on LBUBS 2001-C2 transaction Class X maybe negatively affected. Refer to Moody's request for Comment, titled "Proposal Changing the Global Rating Methodology for Structured Finance Interest-Only Securities," for further details regarding the implications of the proposed methodology change on Moody's rating. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.60 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the underlying rating of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the underlying rating level, is incorporated for loans with similar credit estimates in the same transaction. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 2, compared to 6 at the Moody's prior review. In cases where the Herf falls below 20, Moody's employs also the large loan/single borrower methodology. This methodology uses the excel-based Large Loan Model v 8.2. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. DEAL PERFORMANCE As of the January 16, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 92% to $98.6 million from $1.32 billion at securitization. The Certificates are collateralized by seven mortgage loans ranging in size from less than 1% to 66% of the pool. Three loans, representing 73% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Twenty-one loans have been liquidated from the pool since securitization, resulting in a $54.2 million loss (39% loss severity on average). The pool has experienced an aggregate $51.7 million loss at last review. Realized losses have resulted in 100% principal loss for Classes L through Q and a 70% loss to Class K. There are presently four loans, representing 27% of the pool, in special servicing. The largest specially serviced loan is the Shadowood Office Park Loan ($12.4 million -- 12.6% of the pool), which is secured by a 197,452 square foot (SF) three- building office complex located in Atlanta, Georgia. This loan was transferred to special servicing in February 2010 due to imminent default and is now real estate owned (REO). The buildings are approximately 40% leased. The second largest specially serviced loan is the Metroplex Tech Center I Loan ($9.4 million -- 9.5% of the pool), which is secured by a 106,000 SF office building located in Carrollton, Texas. The loan was transferred to special servicing in December 2009 due to technical default and it is now REO. Moody's estimates an aggregate $10.4 million loss for all specially serviced loans (38% expected loss on average). The special servicer has recognized appraisal reductions totaling $6.1 million for two specially serviced loans. Moody's was provided with full year 2010 and partial year 2011 operating results for 100% and 97%, respectively, of the performing loans. Excluding specially serviced loans, Moody's weighted average LTV is 88% compared to 73% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 15% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.4%. Excluding specially serviced loans, Moody's actual and stressed DSCRs are 1.08X and 1.15X, respectively, compared to 1.30X and 1.39X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The largest performing loan is the NewPark Mall Loan ($64.8 million -- 65.7% of the pool), which is secured by the borrower's interest in a 1.2 million SF enclosed regional shopping mall located in Newark, California. The loan sponsor is an affiliate of General Growth Properties (GGP). The loan had been in special servicing due to GGP's bankruptcy filing but was transferred back to the master servicer in the fall of 2010 after the maturity date was extended from June 2010 to August 2014 as part of the bankruptcy court's reorganization plan. Anchor tenants include Target, Macy's, Sears and JC Penney. As of September 2011 in-line and total mall occupancy were 79% and 92%, respectively, compared to 61% and 96% at last review. Financial performance has declined since last review due to lower rental rates for new and renewing tenants and an increase in concessions. Net operating income ( NOI) has decreased by 13% since last review. The loan is on the servicer's watchlist. Moody's LTV and stressed DSCR are 85% and 1.18X, respectively, compared to 71% and 1.38X at last review. The second largest performing loan is the Willow Ridge Loan ($5.3 million -- 5.4% of the pool), which is secured by a 157- unit, 11-building apartment/affordable housing property located in Avondale Estate, Georgia. The original maturity was extended to December 2012. As of September 2011 the property was 94% leased. Performance has been stable for the last two years. The loan is on the servicer's watchlist. Moody's LTV and stressed DSCR are 117% and 0.83X, respectively, compared to 118% and 0.83X at last review. The third largest performing loan is the Woodbridge Commons Shopping Center Loan ($1.6 million -- 1.6% of the pool), which is secured by a 10,609 SF retail shopping center located in Elgin, Illinois. The loan just returned from the special servicer after being extended to March 2012 with an additional extension option to March 2013. The property was apprised for $2.0 million in February 2011. Performance has declined since last review. NOI has decreased by 10% since last review. The loan is on the servicer's watchlist for upcoming maturity. Moody's LTV and stressed DSCR are 96% and 1.07X, respectively, compared to 79% and 1.29X at last review. LIGHTPOINT CLO VIII: S&P Raises Rating on Class E Notes to 'BB' --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1-B, B, C, D, and E notes from LightPoint CLO VIII Ltd., a collateralized loan obligation (CLO) transaction managed by Neuberger Berman Inc. "At the same time, we removed these ratings from CreditWatch, where we placed them with positive implications on Nov. 14, 2011. We also affirmed our rating on the class A-1-A notes," S&P said. "The upgrades reflect the improved performance we have observed in the deal's underlying asset portfolio since our November 2009 rating actions. According to the Dec. 7, 2011 trustee report, the transaction's asset portfolio did not hold any defaulted assets, down from the $14 million noted in the October 2009 trustee report. Additionally, the collateral pool consisted of approximately $13 million in assets from obligors rated in the 'CCC' category in December 2011, down from $29 million in October 2009," S&P said. "We affirmed our rating on the class A-1-A notes to reflect the sufficient credit support available at the class' current rating level," S&P said. "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 it deems necessary," S&P said. Standard & Poor's 17g-7 Disclosure Report Sec Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at; http://standardandpoorsdisclosure-17g7.com Rating And Creditwatch Actions LightPoint CLO VIII Ltd. Rating Class To From A-1-B AA+ (sf) AA (sf)/Watch Pos B AA (sf) A+ (sf)/Watch Pos C A (sf) BBB+ (sf)/Watch Pos D BBB- (sf) BB+ (sf)/Watch Pos E BB (sf) B+ (sf)/Watch Pos Rating Affirmed LightPoint CLO VIII Ltd. Class Rating A-1-A AAA (sf) MADISON AVENUE: Moody's Raises Class B Notes Rating to 'Caa3' ------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of two classes of notes issued by Madison Avenue Structured Finance CDO I, Limited. The notes affected by the rating action are: US$250,000,000 Class A Floating Rate Notes Due 2036 (current balance of $32,523,818), Upgraded to Baa3 (sf); previously on July 31, 2009 Downgraded to Ba2 (sf); US$21,000,000 Class B Floating Rate Notes Due 2036 (current balance of $21,000,000), Upgraded to Caa3 (sf); previously on June 17, 2010 Downgraded to Ca (sf). RATINGS RATIONALE According to Moody's, the rating action results primarily from the delevering of the Class A Notes. Moody's notes that the Class A Notes have paid down by approximately 44% or $25 million since the rating action in June 2010 and the par coverage on the Class A Notes has increased as a result. As of the last payment date, both interest proceeds and principal proceeds are being diverted to pay down the principal balance of the Class A Notes due to the Class AB overcollateralization test failure. Based on the latest trustee report dated December 2011, the Class AB overcollateralization ratio is reported at 104.59% versus a May 2010 level of 92.84%. Madison Avenue Structured Finance CDO I, Limited, issued on December 5, 2001, is a collateralized debt obligation backed primarily by a portfolio of RMBS, CMBS and Consumer ABS loans. The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in November 2010. Moody's applied the Monte Carlo simulation framework within CDOROMv2.8 to model the loss distribution for SF CDOs. Within this framework, defaults are generated so that they occur with the frequency indicated by the adjusted default probability pool (the default probability associated with the current rating multiplied by the Resecuritization Stress) for each credit in the reference. Specifically, correlated defaults are simulated using a normal (or "Gaussian") copula model that applies the asset correlation framework. Recovery rates for defaulted credits are generated by applying within the simulation the distributional assumptions, including correlation between recovery values. Together, the simulated defaults and recoveries across each of the Monte Carlo scenarios define the loss distribution for the reference pool. Once the loss distribution for the collateral has been calculated, each collateral loss scenario derived through the CDOROM loss distribution is associated with the interest and principal received by the rated liability classes via the CDOEdge cash-flow model. The cash flow model takes into account the following: collateral cash flows, the transaction covenants, the priority of payments (waterfall) for interest and principal proceeds received from portfolio assets, reinvestment assumptions, the timing of defaults, interest-rate scenarios and foreign exchange risk (if present). The Expected Loss (EL) for each tranche is the weighted average of losses to each tranche across all the scenarios, where the weight is the likelihood of the scenario occurring. Moody's defines the loss as the shortfall in the present value of cash flows to the tranche relative to the present value of the promised cash flows. The present values are calculated using the promised tranche coupon rate as the discount rate. For floating rate tranches, the discount rate is based on the promised spread over Libor and the assumed Libor scenario. Moody's notes that in arriving at its ratings of SF CDOs, there exist a number of sources of uncertainty, operating both on a macro level and on a transaction-specific level. Primary sources of assumption uncertainty are the extent of the slowdown in growth in the current macroeconomic environment and the commercial and residential real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. Among the uncertainties in the residential real estate property market are those surrounding future housing prices, pace of residential mortgage foreclosures, loan modification and refinancing, unemployment rate and interest rates. Moody's rating action factors in a number of sensitivity analyses and stress scenarios, discussed below. Results are shown in terms of the number of notches' difference versus the current model output, where a positive difference corresponds to lower expected loss, assuming that all other factors are held equal: Moody's non-investment grade rated assets notched up by 2 rating notches: Class A: 0 Moody's non-investment grade rated assets notched down by 2 rating notches: Class A: 0 MAGNOLIA FINANCE: Moody's Affirms Rating of Notes Due 2045 at 'C' ----------------------------------------------------------------- Moody's has affirmed one class of Notes issued by Magnolia Finance II Series 2007-5. The affirmation is due to the key transaction parameters performing within levels commensurate with the existing rating levels. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO Synthetic) transactions. Moody's rating action is: CMBS Portfolio Variable Rate Notes due October 2045, Affirmed at C (sf); previously on Mar 2, 2011 Downgraded to C (sf) RATINGS RATIONALE Magnolia Finance II plc Series 2007-5 is a static synthetic CRE CDO transaction backed by a portfolio of commercial mortgage backed securities (CMBS) reference obligations (100.0% of the pool balance). All of the CMBS reference obligations were securitized between 2005 and 2007. Moody's has identified the following parameters as key indicators of the expected loss within CRE CDO transactions: WARF, weighted average life (WAL), weighted average recovery rate (WARR), and Moody's asset correlation (MAC). These parameters are typically modeled as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's has completed updated credit estimates for the non-Moody's rated reference obligations. The bottom-dollar WARF is a measure of the default probability within a reference obligation pool. Moody's modeled a bottom-dollar WARF of 8,458 compared to 8,448 at last review. The distribution of current ratings and credit estimates is: Baa1-Baa3 (2.2% compared to 2.0% at last review), Ba1-Ba3 (2.2% compared to 0.0% at last review), B1-B3 (6.7% compared to 12.0% at last review), and Caa1-C (88.8% compared to 86.0% 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 5.5 years compared to 5.4 years at last review. WARR is the par-weighted average of the mean recovery values for the reference obligations in the pool. Moody's modeled a variable WARR with a mean of 0.0% compared to 1.1% at last review. MAC is a single factor that describes the pair-wise asset correlation to the default distribution among the instruments within the reference obligation pool (i.e. the measure of diversity). Moody's modeled a MAC of 0.0% compared to 99.9% at last review. Moody's review incorporated CDOROM(R) v2.8, one of Moody's CDO rating models, which was released on January 24, 2011. Changes in any one or combination of the key parameters may have rating implications on certain classes of rated notes. However, in many instances, a change in key parameter assumptions in certain stress scenarios may be offset by a change in one or more of the other key parameters. In general, the rated Notes are particularly sensitive to rating changes within the reference obligation pool. However, Moody's believes that it is unlikely that the ratings are sensitive to further change. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of the slowdown in growth in the current macroeconomic environment and the commercial real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The hotel and multifamily sectors are in recovery and improvements in the office sector continue, with fundamentals in Gateway cities outperforming their suburban counterparts. However, office demand is closely tied to employment, where fundamentals remain weak, so significant improvement may be delayed. Performance in the retail sector has been mixed with on-going rent deflation and leasing challenges. Across all property sectors, the availability of debt capital continues to improve with monetary policy expected to remain supportive and interest rate hikes postponed. Moody's central global macroeconomic scenario reflects an overall downward revision of forecasts since last quarter, amidst ongoing fiscal consolidation efforts, household and banking sector deleveraging, persistently high unemployment levels, and weak housing markets that will continue to constrain growth. The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in November 2010. MAGNOLIA FINANCE: Moody's Affirms Rating of Notes Due 2052 at 'C' ----------------------------------------------------------------- Moody's has affirmed one class of Notes issued by Magnolia Finance II Series 2007-2A. The affirmation is due to the key transaction parameters performing within levels commensurate with the existing rating level. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO Synthetic) transactions. Moody's rating action is: CMBS Portfolio Variable Rate Notes due November 2052, Affirmed at C (sf); previously on Mar 2, 2011 Downgraded to C (sf) RATINGS RATIONALE Magnolia Finance II plc Series 2007-2A is a static synthetic CRE CDO transaction backed by a portfolio of commercial mortgage backed securities (CMBS) reference obligations (100.0% of the pool balance). All of the CMBS reference obligations were securitized between 2005 and 2006. Moody's has identified the following parameters as key indicators of the expected loss within CRE CDO transactions: WARF, weighted average life (WAL), weighted average recovery rate (WARR), and Moody's asset correlation (MAC). These parameters are typically modeled as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's has completed updated credit estimates for the non-Moody's rated reference obligations. The bottom-dollar WARF is a measure of the default probability within a reference obligation pool. Moody's modeled a bottom-dollar WARF of 8,803 compared to 8,673 at last review. The distribution of current ratings and credit estimates is: Baa1-Baa3 (1.7% compared to 1.6% at last review), Ba1-Ba3 (0% compared to 1.6% at last review), B1-B3 (5.0% compared to 7.8% at last review), and Caa1-C (93.4% compared to 89.1% 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 5.3 years compared to 5.4 years at last review. WARR is the par-weighted average of the mean recovery values for the reference obligations in the pool. Moody's modeled a variable WARR with a mean of 0.6% compared to 3.9% at last review. MAC is a single factor that describes the pair-wise asset correlation to the default distribution among the instruments within the reference obligation pool (i.e. the measure of diversity). Moody's modeled a MAC of 99.9%, the same as 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. In general, the rated Notes are particularly sensitive to rating changes within the reference obligation pool. However, in light of the performance indicators noted above, Moody's believes that it is unlikely that the ratings are sensitive to further change. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of the slowdown in growth in the current macroeconomic environment and the commercial real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The hotel and multifamily sectors are in recovery and improvements in the office sector continue, with fundamentals in Gateway cities outperforming their suburban counterparts. However, office demand is closely tied to employment, where fundamentals remain weak, so significant improvement may be delayed. Performance in the retail sector has been mixed with on-going rent deflation and leasing challenges. Across all property sectors, the availability of debt capital continues to improve with monetary policy expected to remain supportive and interest rate hikes postponed. Moody's central global macroeconomic scenario reflects an overall downward revision of forecasts since last quarter, amidst ongoing fiscal consolidation efforts, household and banking sector deleveraging, persistently high unemployment levels, and weak housing markets that will continue to constrain growth. The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in November 2010. MAGNOLIA FINANCE: Moody's Affirms Rating of Cl. D Notes at 'C' -------------------------------------------------------------- Moody's has affirmed two classes of Notes issued by Magnolia Finance II Series 2007-2. The affirmations are due to the key transaction parameters performing within levels commensurate with the existing ratings levels. The rating on the Class E note will subsequently be withdrawn as it has experienced a write-down to zero. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO Synthetic) transactions. Moody's rating action is: Cl. D CMBS Portfolio Variable Rate Notes due November 2052, Affirmed at C (sf); previously on Mar 17, 2010 Downgraded to C (sf) Cl. E CMBS Portfolio Variable Rate Notes due November 2052, Affirmed at C (sf); previously on Mar 17, 2010 Downgraded to C (sf) RATINGS RATIONALE Magnolia Finance II Series 2007-2 is a static synthetic CRE CDO transaction backed by a portfolio of commercial mortgage backed securities (CMBS) reference obligations (100% of the pool balance). All of the CMBS reference obligations were securitized between 2005 and 2006. Moody's has identified the following parameters as key indicators of the expected loss within CRE CDO transactions: WARF, weighted average life (WAL), weighted average recovery rate (WARR), and Moody's asset correlation (MAC). These parameters are typically modeled as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's has completed updated credit estimates for the non-Moody's rated reference obligations. The bottom-dollar WARF is a measure of the default probability within a reference obligation pool. Moody's modeled a bottom-dollar WARF of 8,803 compared to 8,673 at last review. The distribution of current ratings and credit estimates is: Baa1-Baa3 (1.7% compared to 1.6% at last review), Ba1-Ba3 (0.0% compared to 1.6% at last review), B1-B3 (5.0% compared to 7.8% at last review), and Caa1-C (93.4% compared to 89.1% 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 5.3 years compared to 5.4 years at last review. WARR is the par-weighted average of the mean recovery values for the reference obligations in the pool. Moody's modeled a variable WARR with a mean of 0.6% compared to 3.9% at last review. MAC is a single factor that describes the pair-wise asset correlation to the default distribution among the instruments within the reference obligation pool (i.e. the measure of diversity). Moody's modeled a MAC of 99.9%, the same as 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. In general, the rated Notes are particularly sensitive to rating changes within the reference obligation pool. However, in light of the performance indicators noted above, Moody's believes that it is unlikely that the ratings are sensitive to further change. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of the slowdown in growth in the current macroeconomic environment and the commercial real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The hotel and multifamily sectors are in recovery and improvements in the office sector continue, with fundamentals in Gateway cities outperforming their suburban counterparts. However, office demand is closely tied to employment, where fundamentals remain weak, so significant improvement may be delayed. Performance in the retail sector has been mixed with on-going rent deflation and leasing challenges. Across all property sectors, the availability of debt capital continues to improve with monetary policy expected to remain supportive and interest rate hikes postponed. Moody's central global macroeconomic scenario reflects an overall downward revision of forecasts since last quarter, amidst ongoing fiscal consolidation efforts, household and banking sector deleveraging, persistently high unemployment levels, and weak housing markets that will continue to constrain growth. The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in November 2010. ML-CFC COMMERCIAL: Fitch Rates $109MM Class AJ Notes 'B-sf' ----------------------------------------------------------- Fitch Ratings has placed these classes of ML-CFC Commercial Mortgage Trust, series 2007-8 (ML-CFC 2007-8) on Rating Watch Negative: -- $126.9 million class AM 'AAsf'; -- $116.6 million class AM-A 'AAsf'; -- $109.4 million class AJ 'B-sf; -- $100.6 million class AJ-A 'B-sf'. The classes have been placed on Rating Watch Negative due to an expectation for increased losses following updated valuations on several specially serviced loans The largest specially serviced loan is the Empirian Multifamily Portfolio 2(14.8% of the pool), which is secured by 73 multifamily properties totaling 6,892 units, located across eight states. Fitch expects to resolve the Rating Watch status following updated information on valuations and potential resolutions. Following its review, the classes placed on Rating Watch Negative may be downgraded several categories. ML-CFC COMMERCIAL: Moody's Lowers Cl. AJ Notes Rating to 'Ba3' -------------------------------------------------------------- Moody's Investors Service downgraded the ratings of 11 classes and affirmed 10 classes of ML-CFC Commercial Mortgage Trust 2006-4 Commercial Mortgage Pass-Through Certificates, Series 2006-4: Cl. A-2, Affirmed at Aaa (sf); previously on Jan 3, 2007 Definitive Rating Assigned Aaa (sf) Cl. A-2FL, Affirmed at Aaa (sf); previously on Jan 3, 2007 Definitive Rating Assigned Aaa (sf) Cl. A-2FX, Affirmed at Aaa (sf); previously on Mar 15, 2010 Assigned Aaa (sf) Cl. A-3, Affirmed at Aaa (sf); previously on Jan 3, 2007 Definitive Rating Assigned Aaa (sf) Cl. A-1A, Affirmed at Aaa (sf); previously on Jan 3, 2007 Definitive Rating Assigned Aaa (sf) Cl. A-SB, Affirmed at Aaa (sf); previously on Jan 3, 2007 Definitive Rating Assigned Aaa (sf) Cl. AM, Downgraded to A1 (sf); previously on Dec 9, 2011 Aa2 (sf) Placed Under Review for Possible Downgrade Cl. AJ, Downgraded to Ba3 (sf); previously on Dec 9, 2011 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. AJ-FL, Downgraded to Ba3 (sf); previously on Dec 9, 2011 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. AJ-FX, Downgraded to Ba3 (sf); previously on Dec 9, 2011 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. B, Downgraded to B2 (sf); previously on Dec 9, 2011 Ba2 (sf) Placed Under Review for Possible Downgrade Cl. C, Downgraded to Caa1 (sf); previously on Dec 9, 2011 B1 (sf) Placed Under Review for Possible Downgrade Cl. D, Downgraded to Caa2 (sf); previously on Dec 9, 2011 B2 (sf) Placed Under Review for Possible Downgrade Cl. E, Downgraded to Caa3 (sf); previously on Dec 9, 2011 B3 (sf) Placed Under Review for Possible Downgrade Cl. F, Downgraded to Caa3 (sf); previously on Dec 9, 2011 Caa2 (sf) Placed Under Review for Possible Downgrade Cl. G, Downgraded to C (sf); previously on Dec 9, 2011 Ca (sf) Placed Under Review for Possible Downgrade Cl. H, Downgraded to C (sf); previously on Dec 9, 2011 Ca (sf) Placed Under Review for Possible Downgrade Cl. J, Affirmed at C (sf); previously on Apr 22, 2010 Downgraded to C (sf) Cl. K, Affirmed at C (sf); previously on Apr 22, 2010 Downgraded to C (sf) Cl. XP, Affirmed at Aaa (sf); previously on Jan 3, 2007 Definitive Rating Assigned Aaa (sf) Cl. XC, Affirmed at Aaa (sf); previously on Jan 3, 2007 Definitive Rating Assigned Aaa (sf) RATINGS RATIONALE The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans, interest shortfalls and concerns about refinance risk associated with loans that have reached maturity. The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. On December 9, 2011 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 9.4% of the current balance. At last review, Moody's cumulative base expected loss was 7.6%. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of the slowdown in growth in the current macroeconomic environment and the commercial real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The hotel and multifamily sectors are in recovery and improvements in the office sector continue, with fundamentals in Gateway cities outperforming their suburban counterparts. However, office demand is closely tied to employment, where fundamentals remain weak, so significant improvement may be delayed. Performance in the retail sector has been mixed with on-going rent deflation and leasing challenges. Across all property sectors, the availability of debt capital continues to improve with monetary policy expected to remain supportive and interest rate hikes postponed. Moody's central global macroeconomic scenario reflects an overall downward revision of forecasts since last quarter, amidst ongoing fiscal consolidation efforts, household and banking sector deleveraging, persistently high unemployment levels, and weak housing markets that will continue to constrain growth. The principal methodology used in this rating was "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005. Moody's noted that on November 22, 2011, it released a Request for Comment, in which the rating agency has requested market feedback on potential changes to its rating methodology for Interest-Only Securities. If the revised methodology is implemented as proposed the rating on ML-CFC Commercial Mortgage Trust 2006-4 Commercial Mortgage Pass-Through Certificates, Series 2006-4 Classes XP and XC may be negatively affected. Refer to Moody's request for Comment, titled "Proposal Changing the Global Rating Methodology for Structured Finance Interest-Only Securities," for further details regarding the implications of the proposed methodology change on Moody's rating. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.60 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the underlying rating of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the underlying rating level, is incorporated for loans with similar credit estimates in the same transaction. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated March 2, 2011. DEAL PERFORMANCE As of the January 12, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 19% to $3.7 billion from $4.5 billion at securitization. The Certificates are collateralized by 246 mortgage loans ranging in size from less than 1% to 11% of the pool, with the top ten loans representing 32% of the pool. The pool contains one loan with an investment grade credit estimate that represents 1% of the pool. Sixty-three 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 (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Twenty-five loans have been liquidated from the pool, resulting in an aggregate realized loss of $129.0 million (46% loss severity overall). Thirty-five loans, representing 20% of the pool, are currently in special servicing. The largest loan in special servicing is the Pinnacle Hills Promenade Loan ($140 million -- 3.8%), which is secured by a 661,071 square foot (SF) (425,965 SF of which represent the collateral) mall located in Rogers, Arkansas. The loan was transferred to special servicing in October 2011 due to imminent maturity default and was subsequently granted a 60-day extension to negotiate a long-term proposal. The loan was scheduled to mature in December 2011. The mall is anchored by Dillard's and J.C. Penney and was 92% leased as of September 2011. The workout discussion between the special servicer and borrower is ongoing and no workout agreement has been reached. The master servicer has recognized an aggregate $177.5 million appraisal reduction for 25 of the specially serviced loans. Moody's has estimated an aggregate $220.2 million loss (37% expected loss on average) for the specially serviced loans. Moody's has assumed a high default probability for 22 poorly performing loans representing 9% of the pool and has estimated a $51.3 million aggregate loss (15% expected loss based on a 50% probability default) from these troubled loans. As of the most recent remittance date, the pool has experienced cumulative interest shortfalls totaling $16.1 million and affecting Classes S through E. Moody's anticipates that the pool will continue to experience interest shortfalls caused by specially serviced loans. Interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal subordinate entitlement reductions (ASERs), loan modifications, extraordinary trust expenses and non-advancing by the master servicer based on a determination of non- recoverability. Moody's was provided with full year 2010 and partial year 2011 operating results for 97% and 56% of the pool's non-specially serviced loans, respectively. Excluding specially serviced and troubled loans, Moody's weighted average conduit LTV is 116% compared to 124% 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 9.3%. Excluding specially serviced and troubled loans, Moody's conduit actual and stressed DSCRs are 1.18X and 0.90X, respectively, compared to 1.21X and 0.85X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 48, the same at Moody's prior review. The loan with a credit estimate is the White Oaks Mall Loan ($50 million -- 1.4%), which is secured by a 834,000 SF regional mall located in Springfield, Illinois. The loan is interest only for its entire 10-year term. The property was 90% leased as of September 2011 compared to 89% at last review. The center is anchored by Sears, Macy's and Bergner's. Moody's considered potential leasing volatility in its analysis as 26% and 9% of the inline net rentable area (NRA) expires in 2012 and 2013, respectively. Moody's current credit estimate and stressed DSCR are Baa1 and 1.52X, respectively, compared to A3 and 1.56X at last review. The top three performing conduit loans represent 15% of the pool balance. The largest loan is the Park La Brea Apartments Loan ($387.5 million -- 10.6%), which represents a pari passu interest in a $775 million first mortgage loan. The loan is secured by a 4,238-unit multifamily complex located in Hollywood, California. The property was 97% leased as of October 2011, essentially the same at last review. The loan is interest only for its entire 10 year term. Moody's LTV and stressed DSCR are 104% and 0.78X, respectively, compared to 99% and 0.82X at last review. The second largest loan is the Georgetown Renaissance Portfolio Loan ($100 million -- 2.7%), which is secured by 18 cross- collateralized and cross-defaulted mixed-use properties located in Washington, DC and Alexandria, Virginia. The majority of the properties are located in the Georgetown Submarket along M Street. The portfolio was 99% leased as of September 2011 compared to 90% as of December 2010 and 74% at securitization. Although occupancy remains strong, 14% and 28% of the NRA expires in 2012 and 2013, respectively. Moody's considered the potential leasing volatility in its analysis. Overall, loan performance remains stable. Moody's LTV and stressed DSCR are 104% and 0.96X, respectively, compared to 103% and 0.97X at last review. The third largest loan is the Anaheim Plaza Loan ($61.8 million -- 1.7%), which is secured by a retail property located in Anaheim, California. The property is shadow-anchored by Walmart Supercenter and major tenants include Forever 21 (23% of the NRA), El Super (16% of the NRA) and Office Max (9% of the NRA). The property was 98% leased as of September 2011 compared to 99% as of December 2010. Moody's LTV and stressed DSCR are 137% and 0.71X, respectively, compared to 154% and 0.63X at last review. MLFA 2005-CANADA 15: Moody's Affirms Cl. F Notes Rating at 'Ba1' ---------------------------------------------------------------- Moody's affirmed the ratings of 18 classes of Merrill Lynch Financial Assets Inc., Commercial Mortgage Pass-Through Certificates, Series 2005-Canada 15: A-1, Affirmed at Aaa (sf); previously on Apr 11, 2005 Definitive Rating Assigned Aaa (sf) A-2, Affirmed at Aaa (sf); previously on Apr 11, 2005 Definitive Rating Assigned Aaa (sf) B, Affirmed at Aaa (sf); previously on Feb 16, 2011 Upgraded to Aaa (sf) C, Affirmed at Aa3 (sf); previously on Feb 16, 2011 Upgraded to Aa3 (sf) D-1, Affirmed at Baa1 (sf); previously on Feb 16, 2011 Upgraded to Baa1 (sf) D-2, Affirmed at Baa1 (sf); previously on Feb 16, 2011 Upgraded to Baa1 (sf) E-1, Affirmed at Baa3 (sf); previously on Apr 11, 2005 Definitive Rating Assigned Baa3 (sf) E-2, Affirmed at Baa3 (sf); previously on Apr 11, 2005 Definitive Rating Assigned Baa3 (sf) F, Affirmed at Ba1 (sf); previously on Apr 11, 2005 Definitive Rating Assigned Ba1 (sf) G, Affirmed at Ba2 (sf); previously on Apr 11, 2005 Definitive Rating Assigned Ba2 (sf) H, Affirmed at Ba3 (sf); previously on Apr 11, 2005 Definitive Rating Assigned Ba3 (sf) J, Affirmed at B2 (sf); previously on Dec 3, 2009 Downgraded to B2 (sf) K, Affirmed at Caa1 (sf); previously on Dec 3, 2009 Downgraded to Caa1 (sf) L, Affirmed at Caa2 (sf); previously on Dec 3, 2009 Downgraded to Caa2 (sf) XC-1, Affirmed at Aaa (sf); previously on Apr 11, 2005 Definitive Rating Assigned Aaa (sf) XC-2, Affirmed at Aaa (sf); previously on Apr 11, 2005 Definitive Rating Assigned Aaa (sf) XP-1, Affirmed at Aaa (sf); previously on Apr 11, 2005 Definitive Rating Assigned Aaa (sf) XP-2, Affirmed at Aaa (sf); previously on Apr 11, 2005 Definitive Rating Assigned Aaa (sf) RATINGS RATIONALE The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. Moody's rating action reflects a cumulative base expected loss of 1.8% of the current balance, the same as at last review. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of the slowdown in growth in the current macroeconomic environment and the commercial real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The hotel and multifamily sectors are in recovery and improvements in the office sector continue, with fundamentals in Gateway cities outperforming their suburban counterparts. However, office demand is closely tied to employment, where fundamentals remain weak, so significant improvement may be delayed. Performance in the retail sector has been mixed with on- going rent deflation and leasing challenges. Across all property sectors, the availability of debt capital continues to improve with monetary policy expected to remain supportive and interest rate hikes postponed. Moody's central global macroeconomic scenario reflects an overall downward revision of forecasts since last quarter, amidst ongoing fiscal consolidation efforts, household and banking sector deleveraging, persistently high unemployment levels, and weak housing markets that will continue to constrain growth. The methodologies used in this rating were "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005, and "Moody's Approach to Rating Canadian CMBS" published in May 2000. Moody's noted that on November 22, 2011, it released a Request for Comment, in which the rating agency has requested market feedback on potential changes to its rating methodology for Interest-Only Securities. If the revised methodology is implemented as proposed the rating on Merrill Lynch Financial Assets Inc., Commercial Mortgage Pass-Through Certificates, Series 2005-Canada 15 Classes XC-1, XC-2, XP-1 and XP-2 may be negatively affected. Refer to Moody's request for Comment, titled "Proposal Changing the Global Rating Methodology for Structured Finance Interest-Only Securities," for further details regarding the implications of the proposed methodology change on Moody's rating. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.60 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 (sf) level are driven by a pay down analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the underlying rating of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the underlying rating level, is incorporated for loans with similar credit estimates in the same transaction. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 20, up from 19 at last review. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp --and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated February 16, 2011. DEAL PERFORMANCE As of the January 12, 2012 distribution date, the transaction's aggregate certificate balance had decreased by 34.5% to $291.0 million from $440.0 million at securitization. The Certificates are collateralized by 43 mortgage loans which range in size from less than 1% to 13% of the pool, with the top ten loans representing 50% of the pool. The pool contains one loan with an investment grade credit estimate, representing 13% of the pool. Five loans, representing 16% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. One loan has been liquidated from the pool since securitization, resulting in approximately a $630,000 loss (41% loss severity overall). There are currently no loans in special servicing. Moody's has assumed a high default probability for two poorly performing loans representing 3% of the pool and has estimated a $1.4 million loss (15% expected loss based on a 50% probability default) from these troubled loans. Moody's was provided with full year 2010 financials for 62% of the pool. Excluding troubled loans, Moody's weighted average LTV is 75% compared to 76% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 11.0% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.0%. Excluding troubled loans, Moody's actual and stressed DSCRs are 1.53X and 1.38X, respectively, compared to 1.50X and 1.32X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The loan with an investment grade credit estimate is the EPR Pooled Senior Interest Loan ($36.8 million -- 12.6% of the pool), which is a 50% pari passu interest in a $73.6 million first mortgage loan. The loan is secured by four separate multiplex anchored retail plazas totaling 985,000 square feet (SF). All four multiplexes are operated by AMC Cinemas. The portfolio's weighted average occupancy on October 31, 2011 was 98%, the same as at last review. The sponsor is Entertainment Properties Trust (Moody's senior unsecured rating Baa3, stable outlook). The loan benefits from a 20 year amortization schedule and has amortized 23% since securitization and 4% since last review. The loan is currently on the watchlist due to deferred maintenance at one of the four properties. In the event that the property with deferred maintenance will need to temporarily close due to the repairs, the cash flow from the other properties is sufficient for Moody's current credit estimate. Moody's credit estimate and stressed DSCR are Aaa and 3.75X, respectively, compared to Aaa and 3.21X at last review. The top three performing conduit loans represent 17% of the pool balance. The largest conduit loan is the Calloway Saint John Loan ($20.5 million -- 7.0% of the pool), which is secured by a 271,000 SF Wal-Mart anchored retail center located in St. John, New Brunswick. The retail center is also shadow anchored by a Canadian Tire Store and Kent Home Improvement Centre. Wal-Mart leases 47% of the net rentable area (NRA) through November 2019. As of October 2011, the property was 94% leased compared to 100% at last review. The loan is full recourse to Calloway REIT. Moody's LTV and stressed DSCR are 69% and 1.32X, respectively, as compared to 69% and 1.34X at last review. The second largest conduit loan is the 276-288 St Jacques Loan ($15.0 million -- 5.21% of the pool), which is secured by a 236,000 SF office property located in Old Montreal, Quebec. As of November 2011, the property was 96% leased, compared to 99% at last review. The Government of Quebec leases approximately 55% of the NRA with lease expirations ranging from 2015-17. The loan has benefited from 1.6% amortization since last review. Moody's LTV and stressed DSCR are 72% and 1.42X, respectively, compared to 74% and 1.35X at last review. The third largest conduit loan is the Prospera Portfolio ($14.2 million -- 4.9% of the pool), which is secured by eight cross-collateralized and cross-defaulted office properties located in Abbotsford, British Columbia. The properties total 108,000 SF. The portfolio's performance has improved since last review due to increased rental rates at several of the properties. The portfolio has also benefited from 2.5% of amortization since last review. Moody's LTV and stressed DSCR are 73% and 1.37X, respectively, compared to 80% and 1.24X at last review. MFLA 2006-CAN18: Moody's Affirms Cl. F Notes Rating at 'Ba1' ------------------------------------------------------------ Moody's upgraded two classes and affirmed the ratings of 13 classes of Merrill Lynch Financial Assets Inc., Commercial Mortgage Pass-Through Certificates, Series 2006-Canada 18: Cl. A-2, Affirmed at Aaa (sf); previously on Mar 13, 2006 Definitive Rating Assigned Aaa (sf) Cl. A-3, Affirmed at Aaa (sf); previously on Mar 13, 2006 Definitive Rating Assigned Aaa (sf) Cl. B, Upgraded to Aa1 (sf); previously on Mar 13, 2006 Definitive Rating Assigned Aa2 (sf) Cl. C, Upgraded to A1 (sf); previously on Mar 13, 2006 Definitive Rating Assigned A2 (sf) Cl. D, Affirmed at Baa2 (sf); previously on Mar 13, 2006 Definitive Rating Assigned Baa2 (sf) Cl. E, Affirmed at Baa3 (sf); previously on Mar 13, 2006 Definitive Rating Assigned Baa3 (sf) Cl. F, Affirmed at Ba1 (sf); previously on Mar 13, 2006 Definitive Rating Assigned Ba1 (sf) Cl. G, Affirmed at Ba2 (sf); previously on Mar 13, 2006 Definitive Rating Assigned Ba2 (sf) Cl. H, Affirmed at Ba3 (sf); previously on Mar 13, 2006 Definitive Rating Assigned Ba3 (sf) Cl. J, Affirmed at B1 (sf); previously on Mar 13, 2006 Definitive Rating Assigned B1 (sf) Cl. K, Affirmed at B2 (sf); previously on Mar 13, 2006 Definitive Rating Assigned B2 (sf) Cl. L, Affirmed at B3 (sf); previously on Mar 13, 2006 Definitive Rating Assigned B3 (sf) Cl. XP-1, Affirmed at Aaa (sf); previously on Mar 13, 2006 Definitive Rating Assigned Aaa (sf) Cl. XP-2, Affirmed at Aaa (sf); previously on Mar 13, 2006 Definitive Rating Assigned Aaa (sf) Cl. XC, Affirmed at Aaa (sf); previously on Mar 13, 2006 Definitive Rating Assigned Aaa (sf) RATINGS RATIONALE The upgrades are due to an increase in subordination from payoffs and amortization and overall stable pool performance. The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. Moody's rating action reflects a cumulative base expected loss of 1.9% of the current balance compared to 2.0% at last review. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of the slowdown in growth in the current macroeconomic environment and the commercial real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The hotel and multifamily sectors are in recovery and improvements in the office sector continue, with fundamentals in Gateway cities outperforming their suburban counterparts. However, office demand is closely tied to employment, where fundamentals remain weak, so significant improvement may be delayed. Performance in the retail sector has been mixed with on-going rent deflation and leasing challenges. Across all property sectors, the availability of debt capital continues to improve with monetary policy expected to remain supportive and interest rate hikes postponed. Moody's central global macroeconomic scenario reflects an overall downward revision of forecasts since last quarter, amidst ongoing fiscal consolidation efforts, household and banking sector deleveraging, persistently high unemployment levels, and weak housing markets that will continue to constrain growth. The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, and "Moody's Approach to Rating Canadian CMBS" published in May 2000. Moody's noted that on November 22, 2011, it released a Request for Comment, in which the rating agency has requested market feedback on potential changes to its rating methodology for Interest-Only Securities. If the revised methodology is implemented as proposed the rating on Merrill Lynch Financial Assets Inc., Commercial Mortgage Pass-Through Certificates, Series 2006-Canada 18 Classes XP1, XP2 and XC may be negatively affected. Refer to Moody's request for Comment, titled "Proposal Changing the Global Rating Methodology for Structured Finance Interest-Only Securities," for further details regarding the implications of the proposed methodology change on Moody's rating. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.60 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 (sf) level are driven by a pay down analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the underlying rating of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the underlying rating level, is incorporated for loans with similar credit estimates in the same transaction. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 24, down from 26 at last review. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp --and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated February 9, 2011. DEAL PERFORMANCE As of the January 12, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 28% to $424.9 million from $590.2 million at securitization. The Certificates are collateralized by 63 mortgage loans which range in size from less than 1% to 11% of the pool, with the top ten loans representing 52% of the pool. No loans have credit estimates. One loan, representing 2% of the pool has defeased and is collateralized by Canadian Government securities. Eight 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 (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. No loans have been liquidated from the pool since securitization. There are currently no loans in special servicing and Moody's has estimated no losses for specially serviced loans. Moody's has assumed a high default probability for one poorly performing loan representing 0.5% of the pool and has estimated a $415,000 loss (20% expected loss based on a 50% probability default) from this troubled loan. Moody's was provided with full year 2010 operating results for 75% of the pool's non-specially serviced loans. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 80% compared to 86% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 11.0% 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 1.49X and 1.28X, respectively, compared to 1.46X and 1.23X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The top three performing loans represent 26% of the pool balance. The largest loan is the TransGlobe Pooled Senior Loan ($47.9 million -- 11.3% of the pool), which represents the borrower's 45% pari-passu interest in a $106.3 million A note. There is also $11.0 million B note held outside the trust. The loan is secured by 25 multifamily properties totaling 2,214 units located in Ontario and Nova Scotia. The loan was transferred to special servicing in September 2009 because the borrower obtained subordinate financing without the lender's approval. Prior to transferring back to the master servicer, the loan was modified, three properties were released and subordinate debt was repaid in full and a partial prepayment of $7.4 million was made. The portfolio's performance has improved since last review due to higher revenues. Moody's LTV and stressed DSCR are 88% and 1.04X, respectively, compared to 110% and 0.84X at last review. The second largest loan is the Anchored Retail Portfolio Loan ($38.2 million -- 9.0% of the pool), which is secured by 14 retail centers ranging in size from 6,054 SF to 58,343 SF and totaling 369,618 SF. Thirteen of the properties are located in Quebec and one is located in Ontario. The largest tenant at each center is Jean Coutu (34% of net rentable area), a Canadian pharmacy chain, with leases maturing in 2020. Financial performance declined slightly between year-end 2010 and 2009 with occupancy reported at 95% as of April 2011 versus 96% at last review. The loan has amortized 10% since securitization. Moody's LTV and stressed DSCR are 92% and 1.06X, respectively, compared to 96% and 1.01X at last review. The third largest performing loan is the Halifax Marriott Center Loan ($26.0 million -- 5.1% of the pool), which is secured by a six-story full service hotel located on Halifax's waterfront at the northern edge of the central business district. The property is connected to the Halifax Casino via a pedestrian walkway. Performance improved since last review and the loan has amortized 13% since securitization. Moody's LTV and stressed DSCR are 57% and 1.98X, respectively, compared to 63% and 1.80X at last review. MORGAN STANLEY: Fitch Downgrades Rating on 14 Note Classes ---------------------------------------------------------- Fitch Ratings has downgraded 14 and affirmed two classes of Morgan Stanley Capital I Trust 2005-TOP17 (MSCI 2005-TOP17) commercial mortgage pass-through certificates. The downgrades reflect updated valuations for specially serviced loans in the pool, including the recently modified Coventry Mall (9.4%). Fitch modeled losses of 7.24% of the remaining pool. There are currently five specially-serviced loans (11.65%) in the pool. As of the January 2012 distribution date, the pool's aggregate principal balance has been reduced by 22.7% (including 0.25% of realized losses) to $758.3 million from $980.8 million at issuance. Four loans in the pool (3.6%) are currently defeased. Interest shortfalls are affecting classes K through P. The largest contributor to modeled losses is a specially-serviced loan secured by Coventry Mall, an 803,898 square foot (sf) regional mall located in Pottstown, PA. The loan was transferred to special servicing in February 2011 due to the borrower's request for a loan restructure. Two of the property's tenants, Boscov's (24% of NRA) and Super Fresh Market (5% of NRA), filed for bankruptcy. As a result, the property has suffered from a decline in percentage rents since issuance. Boscov's has emerged from bankruptcy and remains in occupancy at the property. Super Fresh Market vacated in April 2009 and its parent company, A&P, filed for bankruptcy in December 2010. The loan modification closed in December 2011 and included the creation of a Hope Note. The second largest contributor to modeled losses is secured by a 50,055 sf retail center located in Fort Lauderdale, FL. Occupancy has decreased from 84% in December 2009 to 50% in June 2011. Property performance is significantly below issuance. For YE 2010, the servicer-reported DSCR was 0.57 times (x) compared to 1.34x at issuance. Fitch downgrades these classes: -- $74.8 million class A-J to 'Asf' from 'AAsf'; Outlook Stable; -- $20.8 million class B to 'BBB-sf' from 'Asf'; Outlook Stable; -- $7.4 million class C to 'BBsf' from 'Asf'; Outlook Stable; -- $11 million class D to 'CCCsf' from 'BBBsf'; RE 100%; -- $9.8 million class E to 'CCCsf' from 'BBB-sf'; RE 50%; -- $6.1 million class F to 'CCCsf' from 'BBsf'; RE 0%; -- $7.4 million class G to 'CCCsf' from 'Bsf'; RE 0%; -- $7.4 million class H to 'CCCsf' from 'B-sf'; RE 0%; -- $2.5 million class J to 'CCsf' from 'CCCsf'; RE to 0% from 100%; -- $3.7 million class K to 'CCsf' from 'CCCsf'; RE to 0% from 100%; -- $3.7 million class L to 'Csf' from 'CCCsf'; RE to 0% from 100%; -- $1.2 million class M to 'Csf' from 'CCCsf'; RE to 0% from 100%; -- $1.2 million class N to 'Csf' from 'CCCsf'; RE to 0% from 100%; -- $2.5 million class O to 'Csf' from 'CCsf'; RE to 0% from 95%. In addition, Fitch affirms these classes as indicated: -- $18 million class A-AB at 'AAAsf'; Outlook Stable; -- $576 million class A-5 at 'AAAsf'; Outlook Stable. Classes A-1 through A-4 are paid in full. Fitch does not rate class P. The rating on classes X-1 and X-2 have previously been withdrawn. MORGAN STANLEY: Fitch Lowers Rating on 19 Note Classes ------------------------------------------------------ Fitch Ratings has downgraded 19 classes of Morgan Stanley Capital I Trust 2006-HQ9 commercial mortgage pass-through certificates, primarily due to an increase in expected losses on specially serviced loans. The downgrades reflect an increase in expected losses on loans in special servicing. Fitch modeled losses of 5.8% (6.6% cumulative transaction losses which includes losses realized to date). F itch expects losses on specially serviced loans to deplete classes K through Q and a portion of class J. As of January 2012, there are cumulative interest shortfalls in the amount of $7.13 million currently affecting classes K through Q. As of the January 2012 distribution date, the pool's aggregate principal balance has been paid down by 8.2% to $2.39 billion from $2.60 billion at issuance. There are no defeased loans. Fitch has identified 59 loans (23.5%) as Fitch Loans of Concern, which includes 21 specially serviced loans (8.1%). The largest contributor to losses is the Center Point Complex Portfolio loan (1.27%) which is secured by four specialty trade- mart properties located in High Point, NC. The aggregate square footage for the portfolio is 460,681 square feet (sf). All of the tenants are in the furniture and home improvement sectors. The loan transferred to special servicing in May 2009 due to monetary default. The borrower is in process of sourcing an equity partner to pursue a loan modification. The second largest contributor to losses is a 369,052 sf retail center (1.02%) located in Dallas, TX. The property is being considered for condemnation due to plans for a Texas Department of Transportation project to expand a nearby expressway. A forbearance agreement was executed through February 2012 and the strategy for resolution will be evaluated upon ruling from the condemnation hearing in April 2012. The third largest contributor to losses is a 56,051 sf retail property (0.4%) in Ft. Myers, FL. The asset is a vacant showroom that became REO in December 2011. The property is being marketed for sale and incoming bids are being evaluated. In total, there are currently 21 loans (8.1%) in special servicing which consists of four loans (1.8%) in foreclosure, eight loans (3.8%) that are 30 to 90 days delinquent, five loans (1.3%) that are REO, three loans (0.2%) that are current and one loan (1%) that is a non-performing matured balloon loan. At Fitch's last review there were 21 loans (10.1%) in special servicing consisting of 4 loans (0.96%) in foreclosure, 10 loans (3.08%) that were 90 days delinquent and 7 loans (6.05%) that were current. Fitch downgrades these classes and revises the Recovery Estimates and Outlooks as indicated: -- $202 million class A-J to 'Asf' from 'AAsf'; Outlook Stable; -- $19.2 million class B to 'Asf' from 'AAsf'; Outlook Stable -- $35.3 million class C to 'BBBsf' from 'Asf'; Outlook Stable; -- $28.9 million class D at 'BBB-sf' from 'Asf'; Outlook to Negative from Stable; -- $22.4 million class E to 'BBsf' from 'BBBsf'; Outlook to Negative from Stable; -- $25.7 million class F to 'Bsf' from 'BBB-sf'; Outlook to Negative from Stable; -- $25.7 million class G to 'CCCsf' from 'BBsf'; RE 100%; -- $28.9 million class H to 'CCCsf' from 'Bsf'; RE 35%; -- $32.1 million class J to 'CCsf' from 'CCCsf; RE to 0% from 100%; -- $25.7 million class K to 'Csf' from 'CCCsf; RE to 0% frrom 85%'; -- $9.6 million class L to 'Csf' from 'CCCsf'; RE 0%; -- $3.2 million class M to 'Csf' from 'CCCsf'; RE 0%; -- $9.6 million class N to 'Csf' from 'CCCsf'; RE 0%; -- $6.4 million class O to 'Csf' from 'CCsf'; RE 0%; -- $3.2 million class P to 'Csf' from 'CCsf'; RE 0%; -- $2.9 million class ST-B to 'B-sf' from 'BBsf'; Outlook Stable; -- $1.1 million class ST-C to 'CCCsf' from 'BB-sf'; RE 100%; -- $2.3 million class ST-D to 'CCCsf' from 'Bsf'; RE 100%; -- $1.3 million class ST-E to 'CCCsf' from 'B-sf'; RE 100%. Additionally, Fitch affirms these classes, with a Stable Outlook: -- $152.9 million class A-1A at 'AAAsf'; Outlook Stable; -- $30 million class A-2 at 'AAAsf'; Outlook Stable; -- $215 million class A-3 at 'AAAsf'; Outlook Stable; -- $84.6 million class A-AB at 'AAAsf'; Outlook Stable; -- $784.2 million class A-4 at 'AAAsf'; Outlook Stable; -- $350 million class A-4FL at 'AAAsf'; Outlook Stable; -- $256.5 million class A-M at 'AAAsf'; Outlook Stable; -- $2.5 million class Q at 'Dsf'. The ST classes are related to a non-pooled B-Note secured by 633 17th Street. The underlying collateral is an office building in the central business district of Denver, CO. Fitch downgrades these classes as the performance of the property has declined significantly with NOI down 32% from 2009 and 20% since issuance. Fitch has withdrawn the ratings of the interest only classes X and X-MP. Fitch does not rate classes S, DP, ST-F. The interest only X-RC class, class A-1 and ST-A have been paid in full. MOUNTAIN CLO: S&P Raises Rating on Class B-1L Notes to 'BB-' ------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on the A-2L, A-3F, A-3L, and B-1L notes from Mountain Capital CLO III Ltd., a U.S. collateralized loan obligation (CLO) transaction managed by Carlyle Investment Management LLC. "At the same time, we removed the ratings from CreditWatch, where we placed them with positive implications on Nov. 14, 2011. We also affirmed our 'AAA (sf)' ratings on class A-1La and A-1Lb notes from the same transaction," S&P said. "The upgrades reflect factors that have positively affected the credit enhancement available to support the notes since we upgraded them in February 2011. The primary factor has been delevering of the transaction," S&P said. "Since February 2011, the transaction has paid down approximately $97 million to the class A-1La notes, including a $14 million payment on the Nov. 15, 2011 distribution date. The upgrades also reflect an improvement in the overcollateralization (O/C) available to support the notes since the February 2011 rating actions," S&P said. The trustee reported the O/C ratios in the January 2012 monthly report: The class A-2L O/C ratio was 157.30%, compared with a reported ratio of 126.00% in February 2011; The class A-3L O/C ratio was 127.30%, compared with a reported ratio of 113.70% in February 2011; and The class B-1L O/C ratio was 107.10%, compared with a reported ratio of 104.60% in February 2011. "We affirmed our ratings on the class A-1La and A-1Lb notes to reflect the credit support available at the current rating levels," S&P said. 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 it deems necessary. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com Rating Actions Mountain Capital CLO III Ltd. Rating Class To From A-2L AAA (sf) AA (sf)/Watch Pos A-3F A+ (sf) BBB+ (sf)/Watch Pos A-3L A+ (sf) BBB+ (sf)/Watch Pos B-1L BB- (sf) B+ (sf)/Watch Pos Ratings Affirmed Mountain Capital CLO III Ltd. Class Rating A-1La AAA (sf) A-1Lb AAA (sf) Transaction Information Issuer: Mountain Capital CLO III Ltd. Coissuer: Mountain Capital CLO III (Del) Corp. Collateral manager: Carlyle Investment Management LLC Underwriter: Bear Stearns Cos. LLC Trustee: Bank of New York Mellon (The) Transaction type: Cash flow CDO MSCI 2006-TOP 21: Moody's Lowers Rating of Cl. E Notes to 'Ba1' --------------------------------------------------------------- Moody's Investors Service downgraded the ratings of five classes and affirmed 15 classes of Morgan Stanley Capital I Trust, Commercial Pass-Through Certificates, Series 2006-TOP21: Cl. A-2, Affirmed at Aaa (sf); previously on Feb 22, 2006 Definitive Rating Assigned Aaa (sf) Cl. A-AB, Affirmed at Aaa (sf); previously on Feb 22, 2006 Definitive Rating Assigned Aaa (sf) Cl. A-3, Affirmed at Aaa (sf); previously on Feb 22, 2006 Definitive Rating Assigned Aaa (sf) Cl. A-4, Affirmed at Aaa (sf); previously on Feb 22, 2006 Definitive Rating Assigned Aaa (sf) Cl. A-M, Affirmed at Aaa (sf); previously on Feb 22, 2006 Definitive Rating Assigned Aaa (sf) Cl. A-J, Affirmed at Aa3 (sf); previously on Feb 11, 2009 Downgraded to Aa3 (sf) Cl. B, Affirmed at A2 (sf); previously on Feb 11, 2009 Downgraded to A2 (sf) Cl. C, Affirmed at A3 (sf); previously on Feb 11, 2009 Downgraded to A3 (sf) Cl. D, Downgraded to Baa3 (sf); previously on Feb 11, 2009 Downgraded to Baa2 (sf) Cl. E, Downgraded to Ba1 (sf); previously on Feb 11, 2009 Downgraded to Baa3 (sf) Cl. F, Downgraded to Ba3 (sf); previously on Feb 11, 2009 Downgraded to Ba2 (sf) Cl. G, Downgraded to B2 (sf); previously on Feb 11, 2009 Downgraded to B1 (sf) Cl. H, Affirmed at Caa1 (sf); previously on Feb 9, 2011 Downgraded to Caa1 (sf) Cl. J, Affirmed at Caa3 (sf); previously on Feb 9, 2011 Downgraded to Caa3 (sf) Cl. K, Affirmed at Caa3 (sf); previously on Feb 9, 2011 Downgraded to Caa3 (sf) Cl. L, Affirmed at Ca (sf); previously on Feb 9, 2011 Downgraded to Ca (sf) Cl. M, Affirmed at Ca (sf); previously on Feb 9, 2011 Downgraded to Ca (sf) Cl. N, Downgraded to C (sf); previously on Feb 9, 2011 Downgraded to Ca (sf) Cl. O, Affirmed at C (sf); previously on Feb 9, 2011 Downgraded to C (sf) Cl. X, Affirmed at Aaa (sf); previously on Feb 22, 2006 Definitive Rating Assigned Aaa (sf) RATINGS RATIONALE The downgrade of five classes is due to deterioration in credit support caused by higher than expected realized losses and anticipated losses from the pool's specially serviced and troubled loans. The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, and Moody's stressed debt service coverage ratio (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 3.8% of the current balance. At last review, Moody's cumulative base expected loss was 3.5%. Moody's stressed scenario loss is 18.8% of the current balance. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. Due to the high level of credit subordination and defeasance, it is unlikely that investment grade classes would be downgraded even if losses are higher than Moody's expected base. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of the slowdown in growth in the current macroeconomic environment and the commercial real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The hotel and multifamily sectors are in recovery and improvements in the office sector continue, with fundamentals in Gateway cities outperforming their suburban counterparts. However, office demand is closely tied to employment, where fundamentals remain weak, so significant improvement may be delayed. Performance in the retail sector has been mixed with on-going rent deflation and leasing challenges. Across all property sectors, the availability of debt capital continues to improve with monetary policy expected to remain supportive and interest rate hikes postponed. Moody's central global macroeconomic scenario reflects an overall downward revision of forecasts since last quarter , amidst ongoing fiscal consolidation efforts, household and banking sector deleveraging, persistently high unemployment levels, and weak housing markets that will continue to constrain growth. The principal methodology used in this rating was "CMBS: Moody's Approach to Rating Fusion Transactions" published in April 2005. See the Credit Policy page on www.moodys.com for a copy of these methodologies. Moody's noted that on November 22, 2011, it released a Request for Comment, in which the rating agency has requested market feedback on potential changes to its rating methodology for Interest-Only Securities. If the revised methodology is implemented as proposed the rating on LB-UBS 2000-C3 Class X may be negatively affected. Refer to Moody's request for Comment, titled "Proposal Changing the Global Rating Methodology for Structured Finance Interest-Only Securities," for further details regarding the implications of the proposed methodology change on Moody's rating. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.60 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit estimate of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit estimate level, is incorporated for loans with similar credit estimates in the same transaction. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 23 compared to 24 at Moody's prior review. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. DEAL PERFORMANCE As of the January 12, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 20% to $1.09 billion from $1.37 billion at securitization. The Certificates are collateralized by 111 mortgage loans ranging in size from less than 1% to 12% of the pool, with the top ten loans representing 54% of the pool. The pool includes five loans, representing 5% of the pool, with investment-grade credit estimates. Forty-eight loans, representing 35% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Four loans have been liquidated from the pool since securitization, resulting in a $10.8 million loss (45% loss severity). Currently, there are two loans in special servicing, representing 0.5% of the pool. The master servicer has not recognized any appraisal reductions for the specially serviced loans. Moody's has estimated an aggregate loss of $2.1 million (42% expected loss on average) for all of the specially serviced loans. Moody's has assumed a high default probability for four poorly performing loans representing 7% of the pool and has estimated a $15.4 million loss (20% expected loss based on a 43% probability default) from these troubled loans. The largest troubled loan is the Mervyn's Portfolio Loan ($54.8 million -- 5.0% of the pool) which is secured by 25 single tenant retail properties which were originally 100% leased to Mervyn's. Mervyn's rejected all of the leases as part of its bankruptcy filing in 2008. As of May 2011, twelve of the properties were leased to replacement tenants. The properties are located in California (23) and Texas (2) and total 1.9 million square feet (SF). The loan is structured as a pari- passu note with a total outstanding principal balance of $107.2 million. The loan is on the watchlist due to low DSCR coverage and declining financial performance since securitization but has remained current. The loan has benefited from 18% amortization since securitization, strong sponsorship and several reserve accounts for capital improvements and debt service. Moody's was provided with full year 2010 and partial 2011 operating results for 89% and 68%, respectively, for the pool. Excluding specially serviced and troubled loans, Moody's weighted average conduit LTV is 91%, the same as at last review. Moody's net cash flow reflects a weighted average haircut of 10% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.4%. Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.60X and 1.18X, essentially the same as at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The five loans with investment-grade credit estimates represent 5.2% of the pool. Moody's credit estimates for these loans are the same as last full review. The Hampton Court Co-op Loan ($14.8 million -- 1.3% of the pool), 45 East 89th Street Condop Loan ($14.0 million -- 1.2% of the pool) and Rego Park Gardens Co- op Loan ($7.66 million -- 0.7% of the pool) have credit estimates of Aaa. The 8-12 14th Street Loan ($12.5 million -- 1.1% of the pool) has a credit estimate of A1. The Sunnyhurst Apartments Loan ($10.2 -- 0.9% of the pool) has a credit estimate of Baa3. The top three performing conduit loans represent 29% of the pool balance. The largest loan is the Monmouth Mall Loan ($134.6 million -- 12.3% of the pool), which is secured by the borrower's interest in a 1.4 million SF regional mall located in Eatontown, New Jersey. The property is also encumbered by a $27.9 million junior loan which secures non-pooled classes MMA and MMB. The mall is anchored by Macy's, J.C. Penney and Lord & Taylor. Although the performance of the property has been stable, it has not achieved Moody's original projections. Boscov's, a former anchor tenant comprising 261,000 SF, been vacant for two years although its lease does not expire until April 2018. As of September 2011, the mall shops were 84% leased, the same as at last review, compared to 94% at securitization. The 2010 net operating income (NOI) was 5% lower than in 2009 due to an overall increase in operating expenses. The loan had a 60-month interest- only period and is now amortizing on a 360-month schedule maturing in September 2015. Moody's LTV and stressed DSCR for the A-note are 80% and 1.54X, respectively, compared to 73% and 1.19X at securitization. The second largest loan is the SBC-Hoffman Estates Loan ($95.7 million -- 8.7% of the pool) which is secured by a 1.7 million square foot office complex located approximately 25 miles northwest of Chicago in Hoffman Estates, Illinois. The complex is 100% leased to SBC Services Inc. through August 2016. The lease is guaranteed by AT&T Corporation (senior unsecured rating A2, stable outlook). The loan is structured as a pari passu note with a total balance of $187.6 million. The loan is currently on the watchlist because it was not able to refinance at its anticipated repayment date (ARD) in December 2010. Since last review, the loan balance has decreased by 9% due to hyper- amortization. Moody's utilized a Lit/Dark analysis to reflect potential cash flow volatility due to the single tenant exposure. Moody's LTV and stressed DSCR are 96% and 1.07X, respectively, compared to 103% and 1.06X, respectively, at last review. The third largest loan is the InTown Suites Portfolio - Roll Up Loan ($86.4 million -- 7.9% of the pool), which is secured by 30 extended-stay hotels totaling 3,791 rooms. The hotels are located in 25 cities and 17 states. Property performance has declined as the hotel market has been affected by the economic downturn. RevPAR for the 12-month period ending December 2010 was $21.46 compared to $21.14 at last review and $21.99 at securitization. The loan is amortizing on a 300-month schedule maturing in November 2015 and has paid down 13% since securitization. Moody's LTV and stressed DSCR are 88% and 1.45X, respectively, compared to 89% and 1.43X at securitization. MSDWC 2003-HQ2: Moody's Affirms Cl. H Notes Rating at 'Ba3' ----------------------------------------------------------- Moody's Investors Service upgraded the ratings of three classes and affirmed 12 CMBS classes of Morgan Stanley Dean Witter Capital I Inc. Commercial Pass-Through Certificates, Series 2003-HQ2: Cl. A-1, Affirmed at Aaa (sf); previously on Mar 27, 2003 Definitive Rating Assigned Aaa (sf) Cl. A-2, Affirmed at Aaa (sf); previously on Mar 27, 2003 Definitive Rating Assigned Aaa (sf) Cl. B, Affirmed at Aaa (sf); previously on Apr 25, 2008 Upgraded to Aaa (sf) Cl. C, Upgraded to Aa3 (sf); previously on Mar 27, 2003 Definitive Rating Assigned A2 (sf) Cl. D, Upgraded to A2 (sf); previously on Mar 27, 2003 Definitive Rating Assigned A3 (sf) Cl. E, Upgraded to A3 (sf); previously on Mar 27, 2003 Definitive Rating Assigned Baa1 (sf) Cl. F, Affirmed at Baa2 (sf); previously on Mar 27, 2003 Definitive Rating Assigned Baa2 (sf) Cl. G, Affirmed at Baa3 (sf); previously on Mar 27, 2003 Definitive Rating Assigned Baa3 (sf) Cl. H, Affirmed at Ba3 (sf); previously on Feb 9, 2011 Downgraded to Ba3 (sf) Cl. J, Affirmed at B1 (sf); previously on Feb 9, 2011 Downgraded to B1 (sf) Cl. K, Affirmed at B2 (sf); previously on Feb 9, 2011 Downgraded to B2 (sf) Cl. L, Affirmed at Caa1 (sf); previously on Feb 9, 2011 Downgraded to Caa1 (sf) Cl. M, Affirmed at Caa2 (sf); previously on Feb 9, 2011 Downgraded to Caa2 (sf) Cl. N, Affirmed at Caa3 (sf); previously on Feb 9, 2011 Downgraded to Caa3 (sf) Cl. X-1, Affirmed at Aaa (sf); previously on Mar 27, 2003 Definitive Rating Assigned Aaa (sf) RATINGS RATIONALE The upgrades are due primarily to lower expected losses from troubled loans and an increased share of defeased loans in the pool. The upgrades also reflect Moody's assumption that many of the maturing loans in the pool are well-positioned for refinance. Of the pool's loans slated to mature in the next 12 months, 86% have debt yields, DSCRs and LTVs which meet or exceed levels typically required for financing in the current marketplace. The affirmations are due to key parameters, including Moody's LTV ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. Moody's rating action reflects a cumulative base expected loss of approximately 1.5% of the current deal balance. At last review, Moody's cumulative base expected loss was approximately 2.3%. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of the slowdown in growth in the current macroeconomic environment and the commercial real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The hotel and multifamily sectors are in recovery and improvements in the office sector continue, with fundamentals in Gateway cities outperforming their suburban counterparts. However, office demand is closely tied to employment, where fundamentals remain weak, so significant improvement may be delayed. Performance in the retail sector has been mixed with on-going rent deflation and leasing challenges. Across all property sectors, the availability of debt capital continues to improve with monetary policy expected to remain supportive and interest rate hikes postponed. Moody's central global macroeconomic scenario reflects an overall downward revision of forecasts since last quarter, amidst ongoing fiscal consolidation efforts, household and banking sector deleveraging, persistently high unemployment levels, and weak housing markets that will continue to constrain growth. The methodologies used in this rating were "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005, and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Moody's noted that on November 22, 2011, it released a Request for Comment, in which the rating agency has requested market feedback on potential changes to its rating methodology for Interest-Only Securities. If the revised methodology is implemented as proposed the ratings on the interest-only class of MSDWC 2003-HQ2 Class X1 may be negatively affected. Refer to Moody's request for Comment, titled "Proposal Changing the Global Rating Methodology for Structured Finance Interest-Only Securities," for further details regarding the implications of the proposed methodology change on Moody's rating. Moody's review incorporated the use of the Excel-based CMBS Conduit Model v 2.60 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 (sf) level are driven by a pay down analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade underlying ratings is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit estimate of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the underlying rating level, is incorporated for loans with similar credit estimates in the same transaction. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 8, compared to a Herf of 9 at Moody's prior review. In cases where the Herf falls below 20, Moody's also employs the large loan/single borrower methodology. This methodology uses the excel-based Large Loan Model v 8.2 and then reconciles and weights the results from the two models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated May 26, 2010. DEAL PERFORMANCE As of the January 12, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 19% to $757.6 million from $931.6 million at securitization. The Certificates are collateralized by 52 mortgage loans ranging in size from less than 1% to 16% of the pool, with the top ten loans (excluding defeasance) representing 58% of the pool. The pool includes three loans with investment-grade credit estimates, representing 32% of the pool. Sixteen loans, representing approximately 26% of the pool, are defeased and are collateralized by U.S. Government securities. Nine loans, representing 7% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Two loans have liquidated from the pool, resulting in an aggregate realized loss of $6.8 million (53% average loan loss severity). There are no loans currently in special servicing. Moody's has assumed a high default probability for five poorly- performing loans representing 3.6% of the pool. Moody's analysis attributes to these troubled loans an aggregate $4.1 million loss (15% expected loss severity based on a 50% probability default). Moody's was provided with full-year 2010 and partial year 2011 operating results for 92% and 92% of the performing pool, respectively. Excluding troubled loans, Moody's weighted average LTV is 81%, compared to 84% at last full review. Moody's net cash flow reflects a weighted average haircut of 15% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.6% Excluding troubled loans, Moody's actual and stressed DSCRs are 1.47X and 1.33X, respectively, compared to 1.46X and 1.30X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The largest loan with credit estimate is the 1290 Avenue of the Americas Loan (20% of the pool), which represents a participation interest in the senior component of a $354 million mortgage loan. The loan is secured by a 2 million square-foot Class A office building in the Rockefeller Center submarket of Midtown Manhattan, New York City. Major tenants include the AXA Equitable Life Insurance Company (Moody's Insurance Financial Strength Rating Aa3, stable outlook), Morrison & Foerster LLP, and Microsoft Corporation (Moody's Senior Unsecured Rating Aaa, stable outlook). The loan sponsors are Vornado and The Trump Organization. The property was 92% leased as of September 2011 compared to 96% in September 2010. The property is also encumbered by a $55 million junior loan that is held outside the trust. Moody's credit estimate and stressed DSCR are Aa3 and 1.91X, respectively, compared to A1 and 1.74X at last review. The second-largest loan with a credit estimate is the Oakbrook Center Loan (9% of the pool), which represents a participation interest in a $201 million mortgage loan. The loan is secured by the borrower's interest in a mixed-use property in Oak Brook, Illinois that consists of an open-air super-regional mall, three office buildings, and a ground lease underlying a hotel and a theater. Oakbrook Center totals 2.4 million square feet, though only 1.6 million square feet is part of the loan collateral. The mall is anchored by Lord & Taylor, Macy's, Neiman Marcus, Nordstrom, Sears, and a Bloomingdale's Home & Furniture store. The Bloomingdale's store (92,000 square feet / 5.7% of collateral NRA) is slated for closure in 2012. Performance has improved slightly since the last review. The potential negative impact of increased vacancy due to the upcoming Bloomingdale's store closure was factored into Moody's analysis. The loan has amortized 3% since last review. Moody's current credit estimate and stressed DSCR are Aa3 and 1.77X, respectively, compared to Aa3 and 1.76X at last review. The third loan with a credit estimate is the TruServ Portfolio 1 Loan (3% of the pool). The loan is secured by three warehouse distribution properties totaling 1.5 million total square feet and located in Fogelsville, Pennsylvania, Springfield, Oregon, and Kingman, Arizona. The loan sponsor is W.P. Carey & Company. The properties are 100% leased to TruServ Corporation through December 2022. Moody's current credit estimate and stressed DSCR are A3 and 1.71X respectively, compared to A3 and 1.67X at last review. The top three performing conduit loans represent 20% of the pool. The largest loan is the Katy Mills Loan (12% of the pool), which represents a participation interest in a $138 million loan. The loan is secured by a 1.2 million square-foot outlet mall in Katy, Texas, 30 miles west of Houston. Major tenants include Burlington Coat Factory, Bass Pro Shops, Marshalls, Saks Off Fifth, and Neiman Marcus Last Call. Mall occupancy was 85% in September 2011 -- the same as at last review. Moody's current LTV and stressed DSCR are 94% and 1.06X, respectively, compared to 100% and 1.00X at last review. The second-largest loan is the DC Portfolio Loan (5.4% of the pool). The loan is secured by two mixed-use properties totaling 215,000 square feet in the East End submarket of downtown Washington, DC. The properties include office, multifamily, and retail space. The retail space includes space leased to the International Spy Museum. The office space includes the headquarters for the loan sponsor, Douglas Development Corp. The properties were 89% leased as of September 2011 compared to 80% in September 2010. Moody's current LTV and stressed DSCR are 78% and 1.36X, respectively, compared to 96% and 1.10X at last review. The third-largest loan is the TruServ Portfolio 2 Loan (3.1% of the pool). The loan is secured by two distribution warehouse properties totaling 1.1 million square feet, located in Corsicana, Texas and Woodland, California. The loan sponsor is W.P. Carey & Company. The properties are 100% leased to TruServ Corporation through December 2022. Moody's current LTV and stressed DSCR are 55% and, 1.81X respectively, compared to 60% and 1.72X at last review. NACM CLO: S&P Raises Rating on Class D Notes From 'B+' to 'BB' -------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class B, C, and D notes from NACM CLO I, a U.S. collateralized loan obligation (CLO) transaction managed by Nicholas Applegate Capital Management. "We affirmed our ratings on the class A-1 and A-2 notes," S&P said. "The upgrades reflect an improved performance in the deal's underlying asset portfolio since we downgraded the notes on Dec. 11, 2009. As of the Jan. 6, 2012 trustee report, the transaction had only $2.9 million in defaulted assets, compared with over $10 million noted in the Oct. 7, 2009 trustee report, which we referenced for our December 2009 rating actions. The affirmations reflect the credit support available to the class A-1 and A-2 notes at the current rating levels," S&P said. The transaction has also benefited from an increase in the overcollateralization (O/C) available to support the rated notes. The trustee reported these O/C ratios in the Jan. 6, 2012 monthly report: The A-2 O/C ratio was 121.45%, compared with a reported ratio of 119.77% in October 2009; The B O/C ratio was 113.62%, compared with a reported ratio of 112.05% in October 2009; The C O/C ratio was 108.94%, compared with a reported ratio of 107.43% in October 2009; and The D O/C ratio was 105.20%, compared with a reported ratio of 103.74% in October 2009. Standard & Poor's will continue to review whether, in its view, the ratings currently assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com Rating And Creditwatch Actions NACM CLO I Rating Class To From B A (sf) A- (sf) C BBB (sf) BBB- (sf) D BB (sf) B+ (sf) Ratings Affirmed NACM CLO I Class Rating A-1 AA+ (sf) A-2 AA (sf) Transaction Information Issuer: NACM CLO I Collateral manager: Nicholas Applegate Capital Management Trustee: The Bank of New York Mellon Transaction type: Cash flow CLO NEWCASTLE CDO: Fitch Affirms Junk Rating on Four Note Classes ------------------------------------------------------------- Fitch Ratings has affirmed all classes of Newcastle CDO IX Ltd./Newcastle CDO IX, LLC (collectively, Newcastle CDO IX) reflecting Fitch's base case loss expectation of 30.8%, an improvement from 36.2% at the last rating action. Fitch's performance expectation incorporates prospective views regarding commercial real estate market value and cash flow declines. Since last rating action, nine assets were removed from the pool and 11 assets were added. Realized losses since Fitch's last rating action were approximately $5 million, while par building was approximately $8 million. In addition, the collateralized debt obligation (CDO) is holding approximately $66.3 million in principal cash. As of the January 2012 trustee report and per Fitch categorizations, the CDO was substantially invested as follows: commercial real estate (CRE) mezzanine debt (32.2%), real estate bank loans and corporate debt (19.5%), B-notes (14.4%), whole loan/A-note (9.1%), CRE CDOs (8.3%), principal cash (8.2%), commercial mortgage-backed securities (CMBS; 3.7%), real estate investment trust debt (REIT; 3.1%), and residential mortgage- backed securities (RMBS; 1.5%). The loan portion of the collateral (55.7%) is comprised of senior debt (9.1%) and subordinate debt (either B notes or mezzanine debt) (46.6%). Fitch modeled significant losses upon default for these assets since they are generally highly leveraged debt classes. Three assets (5.3%) were defaulted or delinquent, including one B- note (3.6%), one mezzanine debt (1.5%), and one CMBS rake bond (0.2%). Fitch modeled significant to full losses on these assets. Fitch has also designated one mezzanine loan (4%) and two whole loans (0.5%) as Fitch Loans of Concern. Newcastle CDO IX was issued as an $825 million CRE collateralized debt obligation (CDO) managed by Newcastle Investment Corp. The transaction has a five-year reinvestment period during which principal proceeds may be used to invest in substitute collateral. The reinvestment period ends in May 2012. In April and September 2009, notes with a face amount of $64,525,000 were surrendered to the trustee for cancellation, which has resulted in greater cushion to the overcollateralization (OC) ratios. All OC and interest coverage (IC) ratios have remained above their covenants, as of the January 2012 trustee report. Under Fitch's methodology, approximately 63.9% 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 7.9% from, generally, trailing 12-month (TTM) second and third quarter 2011. The largest component of Fitch's base case loss expectation is a mezzanine loan (3.1%) secured by interests in a portfolio of 12 full service hotels totaling 4,718 keys located in Puerto Rico, Jamaica, and Florida. Performance remains significantly below expectations at issuance. Fitch modeled a term default and full loss on this overleveraged position in its base case scenario. The next largest component of Fitch's base case loss expectation is a mezzanine loan (4%) secured by interests in a portfolio of 100 public and private golf courses. The asset manager reported that TTM November 2011 net cash flow declined by 17% when compared to year-end 2010. Fitch modeled a term default with a significant loss in its base case scenario. The third largest component of Fitch's base case loss expectation is an A-note (2.9%) secured by a construction project of a super regional mall and entertainment facility located in New Jersey, adjacent to the Metlife Stadium. In April 2011, a replacement developer was selected and was given until March 2012 to close with a commitment for senior debt financing. Fitch modeled a term default with a moderate loss in its base case scenario. This transaction was analyzed according to the 'Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions', which applies stresses to property cash flows and debt service coverage ratio (DSCR) tests to project future default levels for the underlying portfolio. Recoveries for the loan assets are based on stressed cash flows and Fitch's long-term capitalization rates. The structured finance bonds, real estate bank loans and corporate debt portion of the collateral were analyzed in the Portfolio Credit Model according to the 'Global Rating Criteria for Structured Finance CDOs'. The combined 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 breakeven rates for classes A-1 through G are generally consistent with the ratings assigned below. The Rating Outlooks for classes A-1 and A-2 remain Stable reflecting the classes' senior position in the capital stack and positive cushion in cash flow modeling. The Outlook remains Negative for classes B through G reflecting Fitch's expectation of further negative credit migration of the underlying collateral. The 'CCC' ratings for classes H through L are based on a deterministic analysis that considers Fitch's base case loss expectation for the pool and the current percentage of defaulted assets and Fitch Loans of Concern factoring in anticipated recoveries relative to each classes credit enhancement. Fitch affirms these classes and revises Recovery Estimates (REs): -- $33,540,000 class S at 'BBBsf', Outlook Stable; -- $379,500,000 class A-1 at 'BBBsf', Outlook Stable; -- $115,500,000 class A-2 at 'BBsf', Outlook Stable; -- $37,125,000 class B at 'BBsf', Outlook Negative; -- $24,750,000 class E at 'BBsf', Outlook Negative; -- $18,562,000 class F to 'Bsf', Outlook Negative; -- $11,262,000 class G to 'Bsf', Outlook Negative; -- $18,056,000 class H to 'CCCsf', RE to 100% from 25%; -- $21,656,000 class J to 'CCCsf', RE to 100% from 10%; -- $19,593,000 class K to 'CCCsf', RE to 35% from 10%; -- $23,718,000 class L to 'CCCsf', RE to 0% from 10%. Fitch has previously withdrawn the ratings on classes C and D. Fitch does not rate the preferred shares. NEWCASTLE CDO: Fitch Affirms Junk Ratings on Seven Note Classes --------------------------------------------------------------- Fitch Ratings has affirmed all classes of Newcastle CDO VIII 1, Ltd./Newcastle CDO VIII 2, Ltd./ Newcastle CDO VIII, LLC (collectively, Newcastle CDO VIII) reflecting Fitch's base case loss expectation of 36.5%, a slight increase from 36%, at the last rating action. Fitch's performance expectation incorporates prospective views regarding commercial real estate market value and cash flow declines. The collateralized debt obligation (CDO) exited its reinvestment period in November 2011. As of the January 2012 trustee report, the transaction has paid down by $5.2 million. Since last rating action, 11 assets were removed from the pool and nine assets were added. Realized losses since Fitch's last rating action were approximately $20 million, while par building was approximately $8 million. In addition, the CDO is holding approximately $1.2 million in principal cash. As of the January 2012 trustee report and per Fitch categorizations, the CDO was substantially invested as follows: commercial mortgage-backed securities (CMBS; 15.4%), real estate bank loans and corporate debt (22.4%), commercial real estate (CRE) mezzanine debt (37.3%), CRE CDOs (10%), residential mortgage-backed securities (RMBS; 8.5%), B notes (6.3%), and principal cash (0.1%). The loan portion of the collateral (43.6%) is entirely subordinate debt (either B-notes or mezzanine debt). Fitch modeled significant losses upon default for these assets since they are generally highly leveraged debt classes. Four assets (5.6%) were reported as defaulted or delinquent, including one B-note (2.7%), two CMBS bonds (2.4%), and one RMBS bond (0.5%). Fitch modeled significant to full losses on these assets. Fitch has also designated one mezzanine loan (2.5%) as a Fitch Loan of Concern. Newcastle CDO VIII was issued as a $950 million CRE CDO managed by Newcastle Investment Corp. In April and September 2009, notes with a face amount totaling $80,187,500 were surrendered to the trustee for cancellation. As of the January 2012 trustee report, all overcollateralization and interest coverage ratios were in compliance. Under Fitch's methodology, approximately 61.4% of the portfolio is modeled to default in the base case stress scenario, defined as the 'B' stress. In this scenario, the modeled average cash flow decline is 5% from, generally, trailing 12-month second and third quarter 2011. The largest component of Fitch's base case loss expectation is a mezzanine loan (4.1%) secured by interests in a portfolio of 12 full service hotels totaling 4,718 keys located in Puerto Rico, Jamaica, and Florida. Performance remains significantly below expectations at issuance. Fitch modeled a term default and full loss on this overleveraged position in its base case scenario. The next largest component of Fitch's base case loss expectation is a mezzanine loan (1.8%) secured by an interest in a 424-room full-service hotel located in Boston, MA. Fitch modeled a term default and full loss on this overleveraged position in its base case scenario. The third largest component of Fitch's base case loss expectation is a mezzanine loan (3.8%) secured by interests in a portfolio of 13 full service hotel properties located across 10 states and Canada. The hotels are under the Westin, Hilton, Sheraton, and Marriott flags. Fitch modeled a term default and full loss on this overleveraged position in its base case scenario. This transaction was analyzed according to the 'Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions', which applies stresses to property cash flows and debt service coverage ratio (DSCR) tests to project future default levels for the underlying portfolio. Recoveries for the loan assets are based on stressed cash flows and Fitch's long-term capitalization rates. The structured finance bonds, real estate bank loans and corporate debt portion of the collateral were analyzed in the Portfolio Credit Model according to the 'Global Rating Criteria for Structured Finance CDOs'. The combined 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 breakeven rates for classes I-A through III are generally consistent with the ratings assigned below. The Rating Outlooks for classes I-A and I-AR remain Stable reflecting the classes' senior position in the capital stack. The Outlook remains Negative for classes I-B through III reflecting Fitch's expectation of further negative credit migration of the underlying collateral. The 'CCC' ratings for classes V through XII are based on a deterministic analysis that considers Fitch's base case loss expectation for the pool and the current percentage of defaulted assets and Fitch Loans of Concern factoring in anticipated recoveries relative to each classes credit enhancement. Fitch affirms these classes and revises Recovery Estimates (REs): -- $457,306,355 class I-A at 'BBsf'; Outlook Stable; -- $59,326,230 class I-AR at 'BBsf'; Outlook Stable; -- $38,000,000 class I-B at 'BBsf'; Outlook Negative; -- $42,750,000 class II at 'BBsf'; Outlook Negative; -- $42,750,000 class III at 'Bsf'; Outlook Negative; -- $28,500,000 class V at 'CCCsf'; RE to 0% from 25%; -- $22,562,500 class VIII at 'CCCsf'; RE to 0% from 10%; -- $6,000,000 class IX-FL at 'CCCsf'; RE to 0% from 10%; -- $7,600,000 class IX-FX at 'CCCsf'; RE to 0% from 10%; -- $18,650,000 class X at 'CCCsf'; RE to 0% from 10%; -- $24,125,000 class XI at 'CCCsf'; RE to 0% from 10%; -- $28,500,000 class XII at 'CCCsf'; RE to 0% from 10%. Class S has paid in full. Fitch has previously withdrawn the ratings on classes IV, VI, and VII. Fitch does not rate the preferred shares. NEWSTAR COMMERCIAL: Moody's Raises Class D Notes Rating to 'Ba2' ---------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of these notes issued by NewStar commercial Loan Trust 2005-1: US$156,000,000 Class A-1 Floating Rate Notes due 2018 (current balance of $52,934,044), Upgraded to Aaa (sf); previously on September 11, 2009 Downgraded to Aa2 (sf); US$80,476,777 Class A-2 Revolving Floating Rate Notes due 2018 (current balance of $27,021,820), Upgraded to Aaa (sf); previously on September 11, 2009 Downgraded to Aa2 (sf); US$18,750,000 Class B Floating Rate Deferrable Interest Notes due 2018 (current balance of $18,682,557), Upgraded to Aa1 (sf); previously on September 11, 2009 Downgraded to A2 (sf); US$39,375,000 Class C Floating Rate Deferrable Interest Notes due 2018 (current balance of $39,233,370), Upgraded to A2 (sf); previously on September 11, 2009 Confirmed at Ba1 (sf); US$24,375,000 Class D Floating Rate Deferrable Interest Notes due 2018 (current balance of $24,287,324), Upgraded to Ba2 (sf); previously on September 11, 2009 Confirmed at B1 (sf). In addition, Moody's has downgraded the rating of these notes: US$24,375,000 Class E Floating Rate Deferrable Interest Notes due 2018 (current balance of $24,287,325), Downgraded to Caa3 (sf); previously on September 11, 2009 Confirmed at Caa2 (sf). RATINGS RATIONALE According to Moody's, the rating actions taken on the notes are primarily a result of delevering of the senior notes since the rating action in September 2009. Moody's notes that the Class A-1 Notes and Class A-2 Notes have been paid down by approximately $141 million in aggregate since the rating action in September 2009. As a result of the delevering, the par coverage on the Class A-1 Notes, Class A-2 Notes, Class B Notes, and Class C Notes has improved. Notwithstanding the delevering of the transaction, Moody's notes that the credit quality of the underlying portfolio has deteriorated since the rating action in September 2009. Such credit deterioration is observed through an increase in the dollar amount of charged-off securities and an increase in the WARF. Based on the latest trustee report dated January 25, 2012, charged-off securities have increased from $0 in July 2009 to $40.8 million in January 2012. In addition, the weighted average rating factor is currently 4668 compared to 4023 in July 2009. The actions also reflect Moody's revised CLO assumptions described in "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011. The primary changes to the modeling assumptions include (1) a removal of the temporary 30% default probability macro stress implemented in February 2009 as well as (2) increased BET liability stress factors and increased recovery rate assumptions. Due to the impact of revised and updated key assumptions referenced in "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool to have a performing par balance of $180.6 million, charged-off loans balance of $40.8 million, a weighted average rating factor of 6195, a weighted average recovery rate upon default of 50.24%, and a diversity score of 14. The default and recovery properties of the collateral pool are incorporated in cash flow model analysis where they are subject to stresses as a function of the target rating of each CLO liability being reviewed. The default probability is derived from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate to be realized on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance trends and collateral manager latitude for trading the collateral are also factors. Moody's also notes that a material proportion of the collateral pool includes debt obligations whose credit quality has been assessed through Moody's Credit Estimates ("CEs"). Moody's analysis reflects the application of certain stresses with respect to the default probabilities associated with CEs. Specifically, the default probability stresses include (1) a one-notch equivalent downgrade assumed for CEs updated between 12-15 months ago; and (2) assuming an equivalent of Caa3 for CEs that were not updated within the last 15 months. Moody's notes that approximately 41% of the assets in the collateral pool have a Credit Estimate that has not been updated for more than 12 months. NewStar Commercial Loan Trust 2005-1, issued in August of 2005, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans of middle market issuers. The principal methodology used in this rating was "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011. Moody's modeled the transaction using the Binomial Expansion Technique, as described in Section 2.3.2.1 of the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in June 2011. Moody's notes that this transaction is subject to a high level of macroeconomic uncertainty, as evidenced by 1) uncertainties of credit conditions in the general economy and 2) the large concentration of speculative-grade debt maturing between 2013 and 2015 which may create challenges for issuers to refinance. CLO notes' performance may also be impacted by 1) the manager's investment strategy and behavior and 2) divergence in legal interpretation of CLO documentation by different transactional parties due to embedded ambiguities. 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% (4956) Class A-1: 0 Class A-2: 0 Class B: 0 Class C: +2 Class D: +1 Class E: 0 Moody's Adjusted WARF + 20% (7434) Class A-1: 0 Class A-2: 0 Class B: 0 Class C: -2 Class D: -2 Class E: -2 Sources of additional performance uncertainties are: 1) Delevering: The main source of uncertainty in this transaction is whether delevering from unscheduled principal proceeds will continue and at what pace. Delevering may accelerate due to high prepayment levels in the loan market and/or collateral sales by the manager, which may have significant impact on the notes' ratings. 2) 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. 3) Recovery of charged-off loans: Market value fluctuations in defaulted assets reported by the trustee and those assumed to be defaulted by Moody's may create volatility in the deal's overcollateralization levels. Further, the timing of recoveries and the manager's decision to work out versus sell defaulted assets create additional uncertainties. 4) 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. OHA PARK: S&P Raises Rating on Class D Notes From 'CCC+' to 'BB' ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1a, A-1b, A2, and D notes from OHA Park Avenue CLO I Ltd., a U.S. collateralized loan obligation (CLO) transaction managed by Oak Hill Advisors. "We affirmed our ratings on the class B and C notes. At the same time, we removed our rating on the class D notes from CreditWatch, where we placed it with positive implications on Dec. 20, 2011," S&P said. "The upgrades reflect improved performance in the deal's underlying asset portfolio and an increase in the credit support available to the notes since we lowered our ratings on all classes in November 2009, following the application of our September 2009 corporate collateralized debt obligation (CDO) criteria," S&P said. "As of the January 2012 trustee report, the transaction's asset portfolio had $645,000 in defaulted assets, down from $13.38 million in October 2009 trustee report that was used for analysis in the November 2009 rating actions. Many of the defaults were sold at prices higher than the assumed recovery rates," S&P said. In addition, the transaction's overcollateralization (O/C) ratios have increased since October 2009. The trustee reported these O/C ratios in the January 2012 monthly report: The class A OC ratio was 130.34%, compared with a reported ratio of 126.40% in October 2009; The class B par value ratio test was 120.07compared with a reported ratio of 116.44% in October 2009. The class C par value ratio was 113.86%, compared with a reported ratio of 110.42% in October 2009; and The class D par value ratio test was 107.67%, compared with a reported ratio of 104.42% in October 2009; "We raised our ratings on the class A-1a, A-1b, A2, and D notes due to an increase in the credit support available to them. The affirmed ratings on the class B and C notes reflect our opinion that the credit support available at the current rating levels is sufficient. The rating oN the class D notes was removed from CreditWatch," S&P said. "The obligor concentration supplemental test (which is part of our criteria for rating corporate CDO transactions) affected our rating on the class D notes in the November 2009 downgrade. The obligor concentration supplemental test did not affect any of the current ratings," S&P said. 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 it deems necessary. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com Rating And Creditwatch Actions OHA Park Avenue CLO I Ltd. Rating Class To From A-1a AAA (sf) AA+ (sf) A-1b AAA (sf) AA+ (sf) A-2 AA+ (sf) AA (sf) D BB (sf) CCC+/Watch Pos (sf) Ratings Affirmed OHA Park Avenue CLO I Ltd. Class Rating B A (sf) C BBB (sf) OMEGA CAPITAL: S&P Lowers Rating on Class 5Y-B Notes to 'D' ----------------------------------------------------------- Standard & Poor's Ratings Services lowered to 'D (sf)' from 'CC (sf)' its rating on the class 5Y-B secured notes issued under Omega Capital Investments PLC's series 48 transaction. "We lowered the rating on the notes because the transaction's aggregate losses from credit events in the underlying reference portfolio have exceeded its available credit enhancement and a principal loss has been realized," S&P said. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com Rating Lowered Omega Capital Investments PLC Series 48 secured notes Class To From Issue amount 5Y-B D (sf) CC (sf) JPY1.0 bil. The transaction's closing date was June 6, 2007. PPLUS TRUST: S&P Lowers Ratings on 2 Classes of Certs. to 'BB-' --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on PPLUS Trust Series LTD-1's $25 million class A and B certificates to 'BB-' from 'BB+'. "Our ratings on the certificates are dependent on our rating on the underlying security, Limited Brands' 6.95% debentures due March 1, 2033 ('BB-')," S&P said. "The downgrades follow our Feb. 2, 2012, lowering of our rating on the underlying security to 'BB-' from 'BB+'. We may take subsequent rating actions on the certificates due to changes in our rating on the underlying security," S&P said. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com SATURNS LIMITED: S&P Cuts $25-Mil. Callable Unit Rating to 'BB-' ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on Structured Asset Trust Unit Repackagings (SATURNS) Limited Brands Inc. Debenture Backed Series 2005-3's $25 million callable units to 'BB-' from 'BB+'. "Our rating on the callable units is dependent on our rating on the underlying security, Limited Brands' 6.95% debentures due March 1, 2033 ('BB-')," S&P said. "The downgrade follows our Feb. 2, 2012, lowering of our rating on the underlying security to 'BB-' from 'BB+'. We may take subsequent rating actions on the units due to changes in our rating on the underlying security," S&P said. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com SCSC 2007-8: Moody's Affirms Cl. F Notes Rating at 'Ba1' -------------------------------------------------------- Moody's Investors Service affirmed the ratings of 15 classes of Schooner Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-8: Cl. A-1, Affirmed at Aaa (sf); previously on Jun 27, 2007 Definitive Rating Assigned Aaa (sf) Cl. A-2, Affirmed at Aaa (sf); previously on Jun 27, 2007 Definitive Rating Assigned Aaa (sf) Cl. A-J, Affirmed at Aaa (sf); previously on Jun 27, 2007 Definitive Rating Assigned Aaa (sf) Cl. B, Affirmed at Aa2 (sf); previously on Jun 27, 2007 Definitive Rating Assigned Aa2 (sf) Cl. C, Affirmed at A2 (sf); previously on Jun 27, 2007 Definitive Rating Assigned A2 (sf) Cl. D, Affirmed at Baa2 (sf); previously on Jun 27, 2007 Definitive Rating Assigned Baa2 (sf) Cl. E, Affirmed at Baa3 (sf); previously on Jun 27, 2007 Definitive Rating Assigned Baa3 (sf) Cl. F, Affirmed at Ba1 (sf); previously on Jun 27, 2007 Definitive Rating Assigned Ba1 (sf) Cl. G, Affirmed at Ba2 (sf); previously on Jun 27, 2007 Definitive Rating Assigned Ba2 (sf) Cl. H, Affirmed at Ba3 (sf); previously on Jun 27, 2007 Definitive Rating Assigned Ba3 (sf) Cl. J, Affirmed at B1 (sf); previously on Jun 27, 2007 Definitive Rating Assigned B1 (sf) Cl. K, Affirmed at B3 (sf); previously on Feb 11, 2010 Downgraded to B3 (sf) Cl. L, Affirmed at Caa1 (sf); previously on Feb 11, 2010 Downgraded to Caa1 (sf) Cl. XP, Affirmed at Aaa (sf); previously on Jun 27, 2007 Definitive Rating Assigned Aaa (sf) Cl. XC, Affirmed at Aaa (sf); previously on Jun 27, 2007 Definitive Rating Assigned Aaa (sf) RATINGS RATIONALE The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. Moody's rating action reflects a cumulative base expected loss of 2.3% of the current balance. At last review, Moody's cumulative base expected loss was 1.4%. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the current sluggish macroeconomic environment and performance in the commercial real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The hotel and multifamily sectors are continuing to show signs of recovery through the first half of 2011, while recovery in the non-core office and retail sectors are tied to pace of recovery of the broader economy. Core office markets are showing signs of recovery through lending and leasing activity. The availability of debt capital continues to improve with terms returning toward market norms. Moody's central global macroeconomic scenario reflects an overall sluggish recovery as the most likely scenario through 2012, amidst ongoing individual, corporate and governmental deleveraging, persistent unemployment, and government budget considerations, however the downside risks to the outlook have risen since last quarter. The principal methodology used in this rating was: "CMBS: Moody's Approach to Rating Fusion Transactions" published on April 19, 2005. Other supporting methodologies include: "Moody's Approach to Rating Canadian CMBS" published in May 2000. Moody's noted that on November 22, 2011, it released a Request for Comment, in which the rating agency has requested market feedback on potential changes to its rating methodology for Interest-Only Securities. If the revised methodology is implemented as proposed the rating on SCSC 2007-8 XP and XC may be negatively affected. Refer to Moody's request for Comment, titled "Proposal Changing the Global Rating Methodology for Structured Finance Interest-Only Securities," for further details regarding the implications of the proposed methodology change on Moody's rating. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.60 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit estimate of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit estimate level, is incorporated for loans with similar credit estimates in the same transaction. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 26, the same as at Moody's prior full review. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated February 24, 2011. DEAL PERFORMANCE As of the January 12, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 7% to $479.8 million from $518.1 million at securitization. The Certificates are collateralized by 66 mortgage loans ranging in size from less than 1% to 10.2% of the pool, with the top ten loans representing 47% of the pool. The pool includes two loans with investment-grade credit estimates, representing 10% of the pool. Six 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 (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. The pool has not experienced any losses since securitization and there are currently no loans in special servicing. Moody's has assumed a high default probability for three poorly performing loans representing 4% of the pool and has estimated an aggregate $2.7 million loss (15% expected loss based on a 30% probability default) from these troubled loans. Moody's was provided with full year 2010 operating results for 100% of the pool. Excluding troubled loans Moody's, weighted average LTV is 89% compared to 90% 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 9.0%. Excluding troubled loans Moody's actual and stressed DSCRs are 1.39X and 1.13X, respectively, compared to 1.42X and 1.11X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The largest loan with a credit estimate is The Atrium on Bay Pooled Interest A-Note ($38.7 million -- 8.1%), which is secured by a 1.05 million square foot (SF) office/retail complex located in the central business district of Toronto, Ontario. The loan represents a 33% pari passu interest in a $116 million first mortgage. A $74 million B note held outside the trust also encumbers the property. The property was 98% leased as of May 2011. The largest tenant is the Canadian Imperial Bank of Commerce (CIBC) which leases 35% of the net rentable area (NRA). The property was sold in June 2011 by Hines Real Estate Investments to H&R REIT Properties. Property performance has remained stable since last review. Moody's current credit estimate and stressed DSCR are A2 and 1.73X, respectively, compared to A2 and 1.68X at last review. The second loan with a credit estimate is the 107 Woodlawn Road West Loan ($9.2 million -- 1.9%), which is secured by a 618,400 SF industrial property located in Guelph, Ontario. The property is 100% leased to Synnex Canada, a distributor technology products to resellers, through February 2019. The loan is amortizing on a 15 year schedule and has paid down by 6% since last review. Moody's current credit estimate and stressed DSCR are A1 and 1.88X, respectively, compared to A3 and 1.76X at last review. The top three performing conduit loans represent 21.1% of the pool balance. The largest loan is the Londonderry Mall Loan ($48.8 million -- 10.2% of the pool), which is secured by a 777,032 SF regional shopping center located in Edmonton, Alberta. The loan represents a 67% pari passu interest in a $73.2 million first mortgage. As of December 2010, the property was 90% leased compared to 92% in December 2009 and 97% in December 2008. Moody's LTV and stressed DSCR are 85% and 1.08X, respectively, the same as at last review. The second largest loan is the Mega Centre Cote-Vertu Loan ($26. million -- 5.5% of the pool), which is secured by a 277,477 SF anchored retail center located in Montreal, Quebec. Property performance has suffered since last review due to a decline in base rents. This has driven NOI downward although occupancy has increased to 87% as of December 2010 compared to 85% at last review. Moody's LTV and stressed DSCR are 103% and 0.89X, respectively, compared to 94% and 0.98X at last review. The third largest loan is the Atrium II Loan ($25.9 million -- 5.4% of the pool), which is secured by a 110,090 SF office building located in Calgary, Alberta. Over half of the tenant base is linked to energy exploration. The property is owned by Dundee REIT. Performance at the property has declined as occupancy has decreased from 93% at last review to 84% as of March 2011 coupled with declining base rents as current tenants renew at lower rates. Moody's LTV and stressed DSCR are 113% and 0.86X, respectively, compared to 94% and 1.03X at last review. SPLIT YIELD: DBRS Downgrades Class I Rating to 'D' -------------------------------------------------- DBRS has downgraded the rating of the 5.5% Class I Cumulative Preferred Shares (the Class I Preferred Shares) issued by Split Yield Corporation (the Company) from Pfd-5 to D and confirmed the rating of the 7.0% Class II Cumulative Preferred Shares (the Class II Preferred Shares) issued by the Company at D. On December 6, 2011, the Company announced that all of its outstanding Class I and Class II Preferred Shares would be redeemed as scheduled on February 1, 2012 (the Redemption Date), in accordance with the redemption provisions of the shares. Quadravest Capital Management, manager of the Company, began liquidating the portfolio during the latter half of January 2012 in preparation for the final redemption. On February 1, 2012, all outstanding Class I and Class II Preferred Shares were redeemed. The final redemption prices were $19.00 and $0.005 for the Class I and II Preferred Shares, respectively, which were less than the issue prices of the Class I and Class II Preferred Shares. As a result, the holders of the Class I and Class II Preferred Shares suffered a loss on their principals. SPRING ROAD 2007-1: S&P Raises Rating on Class E Notes to 'BB+' --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class B, C, D, and E notes from Spring Road CLO 2007-1 Ltd., a U.S. collateralized loan obligation (CLO) transaction managed by Denali Capital LLC. "We affirmed our ratings on the class A-1 and A-2 notes," S&P said. "The upgrades reflect an improved performance in the deal's underlying asset portfolio since we affirmed the notes on Dec. 8, 2009. As of the Jan. 10, 2012 trustee report, the transaction had only $8.55 million in defaulted assets, compared with $27.08 million noted in the Oct. 7, 2009 trustee report, which we referenced for our December 2009 review. 's affirmations reflect the credit support available to the class A-1 and A-2 notes at the current rating levels," S&P said. The transaction has also benefited from an increase in the overcollateralization (O/C) available to support the rated notes. The trustee reported the O/C ratios in the Jan. 10, 2012 monthly report: The B O/C ratio was 135.86%, compared with a reported ratio of 133.70% in October 2009; The C O/C ratio was 123.43%, compared with a reported ratio of 121.47% in October 2009; The D O/C ratio was 116.01%, compared with a reported ratio of 114.16% in October 2009; and The E O/C ratio was 108.83%, compared with a reported ratio of 107.1% in October 2009. "Standard & Poor's will continue to review whether, in its view, the ratings currently assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary," S&P said. Standard & Poor's 17g-7 Disclosure Report SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com Rating And CreditWatch Actions Spring Road CLO 2007-1 Ltd. Rating Class To From B AA+ (sf) AA (sf) C A+ (sf) A (sf) D BBB+ (sf) BBB (sf) E BB+ (sf) BB (sf) Ratings Affirmed Spring Road CLO 2007-1 Ltd. Class Rating A-1 AAA (sf) A-2 AAA (sf) Transaction Information Issuer: Spring Road CLO 2007-1 Ltd. Coissuer: Merrill Lynch CLO 2007-1 LLC Collateral manager: Denali Capital LLC Trustee: Deutsche Bank Trust Co. Americas Transaction type: Cash flow CLO STST 2002-1: Moody's Affirms Rating of Cl. G Notes at 'B1' ---------------------------------------------------------- Moody's Investors Service upgraded the ratings of four classes and affirmed six classes of Solar Trust Commercial Mortgage Pass- Through Certificates, Series 2002-1: Cl. A-2, Affirmed at Aaa (sf); previously on Dec 11, 2002 Definitive Rating Assigned Aaa (sf) Cl. B, Affirmed at Aaa (sf); previously on Apr 6, 2006 Upgraded to Aaa (sf) Cl. C, Upgraded to Aaa (sf); previously on Feb 24, 2011 Upgraded to Aa2 (sf) Cl. D, Upgraded to Aa3 (sf); previously on Feb 24, 2011 Upgraded to A3 (sf) Cl. E, Upgraded to A3 (sf); previously on Apr 6, 2006 Upgraded to Baa2 (sf) Cl. F, Upgraded to Baa3 (sf); previously on Dec 11, 2002 Definitive Rating Assigned Ba2 (sf) Cl. G, Affirmed at B1 (sf); previously on Dec 16, 2009 Downgraded to B1 (sf) Cl. H, Affirmed at Caa1 (sf); previously on Dec 16, 2009 Downgraded to Caa1 (sf) Cl. J, Affirmed at Caa2 (sf); previously on Dec 16, 2009 Downgraded to Caa2 (sf) Cl. IO, Affirmed at Aaa (sf); previously on Dec 11, 2002 Definitive Rating Assigned Aaa (sf) RATINGS RATIONALE The upgrades are due to the significant increase in subordination due to loan payoffs and amortization and overall stable pool performance. The pool has paid down by 33% since Moody's last review The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. Moody's rating action reflects a cumulative base expected loss of 2.0% of the current balance. At last review, Moody's cumulative base expected loss was 1.9%. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of the slowdown in growth in the current macroeconomic environment and the commercial real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The hotel and multifamily sectors are in recovery and improvements in the office sector continue, with fundamentals in Gateway cities outperforming their suburban counterparts. However, office demand is closely tied to employment, where fundamentals remain weak, so significant improvement may be delayed. Performance in the retail sector has been mixed with on-going rent deflation and leasing challenges. Across all property sectors, the availability of debt capital continues to improve with monetary policy expected to remain supportive and interest rate hikes postponed. Moody's central global macroeconomic scenario reflects an overall downward revision of forecasts since last quarter, amidst ongoing fiscal consolidation efforts, household and banking sector deleveraging, persistently high unemployment levels, and weak housing markets that will continue to constrain growth. The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, "Moody's Approach to Rating Canadian CMBS" published in May 2000, and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Moody's noted that on November 22, 2011, it released a Request for Comment, in which the rating agency has requested market feedback on potential changes to its rating methodology for Interest-Only Securities. If the revised methodology is implemented as proposed the rating on Solar Trust Commercial Mortgage Pass-Through Certificates, Series 2002-1 Class IO may be negatively affected. Refer to Moody's request for Comment, titled "Proposal Changing the Global Rating Methodology for Structured Finance Interest-Only Securities," for further details regarding the implications of the proposed methodology change on Moody's rating. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.60 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the underlying rating of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the underlying rating level, is incorporated for loans with similar credit estimates in the same transaction. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 13 compared to 18 at Moody's prior full review. In cases where the Herf falls below 20, Moody's also employs the large loan/single borrower methodology. This methodology uses the excel-based Large Loan Model v 8.2 and then reconciles and weights the results from the two models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated February 24, 2011. DEAL PERFORMANCE As of the January 12, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 54% to $122.2 million from $266.6 million at securitization. The Certificates are collateralized by 34 mortgage loans ranging in size from less than 1% to 13% of the pool, with the top ten loans representing 67% of the pool. Nine loans, representing 13% of the pool, have defeased and are collateralized with Canadian Government securities. Twelve loans, representing 46% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. No loans have been liquidated from the pool. One loan, representing less than 1% of the pool, is currently in special servicing. Moody's was provided with full year 2010 operating results for 88% of the pool. Excluding troubled loans, Moody's weighted average LTV is 67% compared to 65% 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 10.2%. Excluding troubled loans, Moody's actual and stressed DSCRs are 1.65X and 1.96X, respectively, compared to 1.64X and 1.92X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The top three performing loans represent 32% of the pool balance. The largest loan is the Hotel Novotel Loan ($15.3 million -- 12.5% of the pool), which is secured by a 262-key full-service hotel located in Toronto, Ontario. The property also contains 25,000 SF of office/retail space. Property performance has improved. The year to date performance as of September 30, 2011 shows revenue per available room (RevPAR) and occupancy at $107.79 and 80%, respectively, compared to $103.68 and 78% as of December 31, 2010. Moody's last review reflected a stabilized performance for this loan, which has been achieved. Moody's LTV and stressed DSCR are 73% and 1.69X, respectively, essentially the same at last review. The second largest loan is the La Porte de Gatineau Loan ($12.1 million -- 9.9% of the pool), which is secured by a 154,977 square foot (SF) retail property located in Gatineau, Quebec. The property was 85% leased as of November 2011 compared to 94% at last review. At the last review, Moody's anticipated potential leasing volatility and incorporated a stressed cash flow in its analysis. Loan performance remains stable and the loan is full recourse to the borrower. Moody's LTV and stressed DSCR are 73% and 1.44X, respectively, compared to 76% and 1.40X at last review. The third largest loan is the Parkland Mall Loan ($12.1 million -- 9.9% of the pool), which is secured by a 266,756 SF anchored mall located in Yorkton, Saskatchewan. The mall is anchored by Zellers (69% of the net rentable area; September 2016 lease expiration). The property was 84% leased as of January 2011 compared to 80% at last review. Loan performance remains stable and the loan is scheduled to mature in August 2012. Moody's LTV and stressed DSCR are 73% and 1.52X, relatively, compared to 82% and 1.36 at last review. STUYVESANT CDO: Moody's Upon Class A Notes Rating to Aa2 From Ba1 ----------------------------------------------------------------- Moody's Investors Service has upgraded the rating of one class of notes issued by Stuyvesant CDO V, Ltd. The instrument affected by the rating action is: US$25,000,000 Class A Floating Rate Notes, Upgraded to Aa2 (sf); previously on August 24, 2009 Downgraded to Ba1 (sf). RATINGS RATIONALE The rating upgrade action taken reflects the delevering of the Super Senior notes and improvement in the credit quality of the 22 securities in the reference portfolio. Moody's notes that the Super Senior notes have been paid down by approximately 58.3% or $277.1 million since the rating action in August 2009. Moreover, all of the CLO tranches in the reference portfolio are currently rated Aaa, a four notch improvement from the A1 average rating at the time of the last rating action. Stuyvesant CDO V, Limited is a synthetic collateralized debt obligation that references a portfolio of Collateralized Loan Obligations (CLOs). Moody's applied the Monte Carlo simulation framework within CDOROMv2.8 to model the loss distribution for SF CDOs. Within this framework, defaults are generated so that they occur with the frequency indicated by the adjusted default probability pool (the default probability associated with the current rating multiplied by the Resecuritization Stress) for each credit in the reference. Specifically, correlated defaults are simulated using a normal (or "Gaussian") copula model that applies the asset correlation framework. Recovery rates for defaulted credits are generated by applying within the simulation the distributional assumptions, including correlation between recovery values. Together, the simulated defaults and recoveries across each of the Monte Carlo scenarios define the loss distribution for the reference pool. Moody's notes that in arriving at its ratings of SF 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. The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in November 2010. Moody's rating action factors in a number of sensitivity analyses and stress scenarios, discussed below. Results are shown in terms of the number of notches' difference versus the current model output, where a positive difference corresponds to lower expected loss, assuming that all other factors are held equal: Aaa-rated assets notched down by 1 rating notch: Class A: -3 TIAA 2007-C4: S&P Lowers Ratings on 2 Classes of Cert. to 'D' ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on eight classes of commercial mortgage pass-through certificates from TIAA Seasoned Commercial Mortgage Trust 2007-C4, a U.S. commercial mortgage-backed securities (CMBS) transaction. "Concurrently, we affirmed our ratings on 12 other classes from the same transaction," S&P said. "Our rating actions follow our analysis of the credit characteristics of the collateral remaining in the pool, as well as the deal structure and the liquidity available to the trust. The downgrades reflect credit support erosion that we anticipate will occur upon the eventual resolution of the eight ($117.7 million, 8.9%) assets that are with the special servicer. We also considered the monthly interest shortfalls affecting the trust. We lowered our ratings to 'D (sf)' on the class Q and S certificates because we believe the accumulated interest shortfalls will remain outstanding for the foreseeable future," S&P said. "The rating affirmations on the principal and interest certificates reflect subordination and liquidity support levels that we consider to be consistent with our outstanding ratings on these classes. We affirmed our 'AAA (sf)' rating on the class X interest-only (IO) certificate based on our current criteria," S&P said. "Using servicer-provided financial information, we calculated an adjusted debt service coverage (DSC) of 1.54x and a loan-to-value (LTV) ratio of 94.5%. We further stressed the loans' cash flows under our 'AAA' scenario to yield a weighted-average DSC of 1.10x and an LTV ratio of 125.3%. The implied defaults and loss severity under the 'AAA' scenario were 60.2% and 33.3%. The DSC and LTV calculations exclude the eight ($117.7 million, 8.9%) specially serviced assets. We separately estimated losses for the excluded specially serviced assets and included them in our 'AAA' scenario implied default and loss severity figures," S&P said. "As of the Jan. 18, 2012, trustee remittance report, the trust experienced net interest shortfalls totaling $88,751. The net interest shortfalls were primarily due to appraisal subordinate entitlement reduction (ASER) amounts totaling $41,066, workout fees of $4,427, loan modification-generated shortfalls of $18,695, and special servicing fees of $24,562. The class Q and S certificates have experienced cumulative interest shortfalls for six consecutive months, which we expect to remain outstanding for the foreseeable future. Consequently, we downgraded these classes to 'D (sf)'," S&P said. Credit Considerations As of the Jan. 18, 2012 trustee remittance report, eight assets ($117.7 million, 8.9%) in the pool were with the special servicer, C-III Asset Management LLC (C-III). One of the specially serviced assets, the 711 Westchester Avenue loan ($11.7 million, 0.9%) was bi-furcated into an A note and a B note. The reported payment status of the specially serviced assets is: one is real estate-owned (REO) ($8.6 million, 0.6%); two are in foreclosure ($22.3 million, 1.7%); two are 90-plus days delinquent ($55.9 million, 4.2); one is 30 days delinquent ($10.2 million, 0.8%); one is less than 30 days delinquent ($9.0 million, 0.7%; and one is current ($11.7 million, 0.9%). Appraisal reduction amounts (ARAs) totaling $9.0 million are in effect against four of the specially serviced assets. The Regency Portfolio loan ($40.2 million, 3.0%) is the largest specially serviced asset and the fifth-largest loan in the pool. It was transferred to special servicing on May 26, 2011, due to imminent payment default. The loan's payment status is reported as 90-plus days delinquent. The loan is secured by six cross- collateralized and cross-defaulted first mortgages on eight office buildings totaling 626,998 sq. ft. located in West Des Moines, Iowa. According to C-III, a discounted payoff of the loan has been accepted. Servicer-reported combined DSC was 1.03x for the year ended Dec. 31, 2010, and reported combined occupancy was 89.0% as of March 31, 2011. Standard & Poor's anticipates a moderate loss upon the eventual resolution of this loan. The remaining seven specially serviced assets have individual balances that represent less than 1.2% of the total pool balance. ARAs totaling $9.0 million were in effect against four of these specially serviced assets. Standard & Poor's estimated a weighted- average loss severity of 22.7% for the remaining seven assets that are with the special servicer. Transaction Summary As of the Jan. 18, 2012 trustee remittance report, the collateral pool balance was $1.33 billion, which is 63.5% of the balance at issuance. The pool includes 111 loans and one REO asset, down from 148 loans at issuance. The master servicer, Wells Fargo Bank N.A. (Wells Fargo), provided financial information for 89.3% of the loan balance, 86.4% of which reflected full-year 2010 or partial- year 2011 data. "We calculated a weighted average DSC of 1.53x for the loans in the pool based on the servicer-reported figures. Our adjusted DSC and LTV ratios were 1.54x and 94.5%. The transaction has not experienced any principal losses. Five loans ($122.0 million, 9.2%) in the pool are on the master servicer's watchlist. Nine loans ($200.2 million, 15.1%) have reported DSC of less than 1.10x, seven of which ($148.3 million, 11.2%) have reported DSC below 1.00x. Summary of The Top 10 Loans "The top 10 loans have an aggregate outstanding balance of $455.0 million (34.3%). Using servicer-reported numbers, we calculated a weighted average DSC of 1.56x for the top 10 loans. Our adjusted DSC and LTV ratios, were 1.67x and 105.1% for the top 10 loans. The fifth-largest loan in the pool, the Regency Portfolio loan, is in special servicing," S&P said. Standard & Poor's stressed the assets in the pool according to its current criteria. The resultant credit enhancement levels are consistent with S&P's rating actions. Standard & Poor's 17g-7 Disclosure Report Sec Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at; http://standardandpoorsdisclosure-17g7.com Ratings Lowered TIAA Seasoned Commercial Mortgage Trust 2007-C4 Commercial mortgage pass-through certificates Rating Class To From Credit enhancement (%) J B (sf) B+ (sf) 4.13 K B- (sf) B+ (sf) 3.54 L CCC+ (sf) B (sf) 2.95 M CCC (sf) B (sf) 2.36 N CCC- (sf) B- (sf) 2.17 P CCC- (sf) B- (sf) 1.58 Q D (sf) CCC+ (sf) 1.38 S D (sf) CCC (sf) 1.18 Ratings Affirmed TIAA Seasoned Commercial Mortgage Trust 2007-C4 Commercial mortgage pass-through certificates Class Rating Credit enhancement (%) A-2 AAA (sf) 31.50 A-3 AAA (sf) 31.50 A-1A AAA (sf) 31.50 A-J A+ (sf) 14.37 B A (sf) 13.58 C BBB+ (sf) 11.42 D BBB (sf) 10.04 E BBB- (sf) 9.65 F BB+ (sf) 8.47 G BB (sf) 6.89 H BB- (sf) 5.91 X AAA (sf) N/A N/A -- Not applicable. VEGA CAPITAL: Moody's Raises Class C Notes Rating to 'Ba2' ---------------------------------------------------------- Moody's Investors Service has upgraded the rating of these notes issued by Vega Capital Ltd.: US$63,900,000 Series 2010-I Class C Principal At-Risk Variable Rate Notes due December 20, 2013, Upgraded to Ba2 (sf); previously on July 29, 2011 Confirmed at Ba3 (sf). RATING RATIONALE Vega Capital Ltd. is a catastrophe bond program that can issue notes in different series to cover a portfolio of natural catastrophe risks over specific risk periods. Investors in the Series 2010-I Notes, issued on December 14, 2010, provide protection to Swiss Reinsurance Company Ltd. ("Swiss Re") against losses that may result from the occurrence of up to five separate perils over a risk period of three years, i.e. until December 14, 2013. The perils covered by the Series 2010-I issuance include: European windstorms, Japan typhoons, Japan earthquakes, California earthquakes and North Atlantic hurricanes. Moody's notes that with less than two years remaining in the transaction, the likelihood of occurrence of the number of qualified events with the associated aggregate losses required to attach the class of rated Notes has been significantly reduced. Additionally, the transaction receives reserve account payments from Swiss Re on each payment date which has resulted in a buildup of a significant first loss position in the capital structure, in addition to the $42.6 million of unrated Class D Notes that provide a layer of protection below the rated Notes. A reserve account balance of $21.3 million is incorporated in the monitoring model. Due to the size of the remaining first loss layer and structure of the loss trigger mechanism of the transaction that limits the annual losses attributable to each separate peril, the occurrence of more than one of the covered type of perils are required for the Class C Notes to experience any losses. In addition, the rating action taken on the notes is also the result of the final loss determination reported by the Calculation Agent related to Event Notices received with respect to two Parametric Japan Earthquake Events, the Earthquake Tohoku and the Magnitude 7.9 aftershock of Tohoku Earthquake. These Events did not result in Principal Loss Amounts to the rated Notes. In reaching its determination, Moody's reviewed two Events Reports prepared by the Calculation Agent which made the following calculations for the two Parametric Japan Earthquake Events: (1) Earthquake Tohoku, Event Notice dated March 16, 2011,with an Index Value of 285.1 and an Event Percentage of 42.48%, and (2) Magnitude 7.9 aftershock of Tohoku Earthquake, Event Notice dated April 8, 2011, with an Index Value of 8.4 and an Event Percentage of 0%. Based on this calculation, the Reserve Account Loss Amount was US$15.93 million. The structure of Vega Capital Ltd. allows for the build-up over time of a first-loss protection layer via payments by the Counterparty to the Reserve Account. The principal methodology used in this rating was "Moody's Approach to Rating Catastrophe Bonds Updated" published in January 2004. VITALITY RE II: S&P Affirms 'BB+' Rating on Class B Notes --------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on Vitality Re Ltd.'s Series 2010-1 Class A notes to 'BBB+(sf)' from 'BBB- (sf)', and its rating on Vitality Re II Ltd.'s Series 2011-1 Class A notes to 'BBB+(sf)' from 'BBB (sf)'. "At the same time, we affirmed our 'BB+(sf)' rating on Vitality Re II Ltd.'s Series 2011-1 Class B notes. Each class of notes is removed from CreditWatch Positive where they were placed on Jan. 12, 2012," S&P said. "We have received updated model results from Milliman Inc. based on the methodology it used to model Vitality Re III Ltd. The upgrades reflect the improved claims experience on the covered business that Health Re Inc. ceded to Vitality Re Ltd. and to Vitality Re II Ltd. The medical benefit ratio (MBR) attachment for the Series 2010-1 Class A notes is 104%, and 105% for the Series 2011-1 Class A notes. When calculating the updated MBR for the upcoming resets, we expect the positive claims trends during the past two years to lower the probability of attachment at the related MBR. The initial MBR for each of the issues was weighted more heavily on the 2009 MBR, which had been less favorable than the MBR for 2010 and the first nine months of 2011," S&P said. "The MBR attachment for the Vitality Re II Ltd. Series 2011-1 Class B notes is 100%. Although the updated probability of attachment is lower, the adjusted probability of attachment is still within the 'BB+' rating range of the default table we use to rate the notes," S&P said. "We based our ratings on the notes on the probability of attachment in each year. Because we expect the actual results to differ from the modeled results, we adjust the probability of attachment for each class of notes in line with strengths and weaknesses identified by using the stress scenarios Milliman supplied, and then deriving adjusted probabilities of attachment for each class of notes," S&P said. "We then assign the ratings by selecting the next category below this adjusted probability of attachment that is greater than or equal to the adjusted probability of default from our insurance- linked securities default table," S&P said. Ratings List Ratings Raised, Removed From CreditWatch To From Vitality Re Ltd. Series 2010-1 Class A Notes BBB+(sf) BBB-(sf)/Watch Pos Vitality Re II Ltd. Series 2011-1 Class A Notes BBB+(sf) BBB(sf)/Watch Pos Ratings Affirmed, Removed From CreditWatch To From Vitality Re II Ltd. Series 2011-1 Class B Notes BB+(sf) BB+(sf)/Watch Pos ********* 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. 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For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors" Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland, USA. Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine Tumanda, Howard C. Tolentino, Joseph Medel C. Martirez, Denise Marie Varquez, Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Sheryl Joy P. Olano, Carlo Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2012. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. 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