/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/130113.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, January 13, 2013, Vol. 17, No. 12 Headlines ACAS CRE 2007-1: Moody's Affirms 'C' Ratings on Some Note Classes ACCESS GROUP: Fitch Lowers Rating on Class B Notes to 'BBsf' ALLSLC IV: S&P Lowers Rating on 14 Note Classes to 'BB-' AMMC CLO V: S&P Raises Rating on Class D Notes to 'B-' AMP ABX 2006-1: Moody's Cuts Rating on $65-Mil. Notes to 'Ca' APIDOS CDO II: S&P Retains Rating on Class D Notes to 'B+' BANC OF AMERICA 2004-BBA4: Moody's Keeps Caa3 Ratings on 3 Certs. BEAR STEARNS 1999-WF2: Moody's Affirms 'B2' Rating on X Certs. BEAR STEARNS 2005-TOP18: Fitch Affirms D Ratings on Class N Notes BEAR STEARNS 2006-PWR11: Fitch Cuts Rating on 5 Securities Classes BLUEMOUNTAIN CLO II: S&P Retains 'B+' Rating on Class E Notes BUCKEYE TOBACCO: Fitch Lowers Ratings on 10 Bonds CALCULUS CMBS: Moody's Cuts Rating on Class A CDS to 'Caa3' CANYON CAPITAL 2006-1: S&P Retains 'B+' Rating on Class E Notes CANYON CAPITAL 2012-1: S&P Gives Prelim. BB Rating to Cl. E Notes CENTERLINE 2007-1: Moody's Affirms 'C' Ratings on 2 Cert. Classes CIFC FUNDING 2012-III: S&P Assigns 'B' Rating to Class B-3L Notes CREDIT SUISSE 2004-C4: Moody's Cuts Rating on A-X Certs. to 'Ba3' CREDIT SUISSE 2004-C4: Moody's Affirms 'C' Ratings on 6 Certs. CW CAPITAL: Moody's Affirms 'C' Ratings on Seven Note Classes DIVERSIFIED ASSET: Moody's Raises Ratings on 2 Classes From Ba1 DLJ COMMERCIAL 1999-CG3: Moody's Affirms Caa3 Rating on S Certs. EMPORIA II: Fitch Raises Rating on $14.5-Mil. Class E Notes to 'B' EMPORIA III: Fitch Hikes Rating on $18-Mil. Class E Notes to 'B' FOXE BASIN: S&P Lowers Rating on Class D Notes to 'CC(sf)' FRASER SULLIVAN: Moody's Hikes Rating on Class D Notes From 'Ba1' GOLDEN STATE: Fitch Lowers Rating on Five Bond Classes to 'Bsf' GREENWICH CAPITAL: Moody's Keeps Caa3 Rating on N-SO Securities GMAC COMMERCIAL 1997-C2: Moody's Hikes G Certs. Rating to 'Ba1' GMAC COMMERCIAL 2000-C3: Moody's Cuts Ratings on 2 Certs. to 'C' GSR MORTGAGE 2004-9: Moody's Cuts Rating on Cl. 4A1 Secs. to Ba2 GSR MORTGAGE 2006-9F: Moody's Cuts Rating on Cl. 5A-4 Secs. to C IMPAC CMB 2005-2: Moody's Cuts Rating on 1-M-1 Tranche to 'Caa2' JP MORGAN 2004-S2: Moody's Cuts Ratings on 2 RMBS Tranches to Ca LB-UBS 2003-C3: Moody's Affirms 'Caa2' Rating on Class S Certs. LB-UBS 2005-C7: S&P Lowers Rating on Class SP-7 Notes to 'B-' LEHMAN MORTGAGE 2007-5: Moody's Ups Rating on 2-A4 Notes to Caa3 MADISON SQUARE 2004-1: Fitch Cuts Ratings on 2 Note Classes to CC MARQUETTE PARK: Moody's Hikes Rating on Class D Notes to 'Ba2' MID-STATE CAPITAL 2004-1: Moody's Hikes B Tranche Rating to 'B2' MERRILL LYNCH 2006-CA: Moody's Hikes Rating on L Certs. to Caa2 MERRILL LYNCH 2007-CA: Moody's Affirms Caa3 Rating on Cl. L Certs. MORGAN STANLEY 2013-C7: Moody's Rates Class G Certs. '(P)B2' NASSAU COUNTY: Fitch Cuts Ratings on Seven Bonds to 'B-sf' NEUBERGER BERMAN: S&P Affirms 'BB' Rating on Class E Notes RAIT CRE I: S&P Lowers Rating on 2 Note Classes to 'CCC-' SANTANDER DRIVE 2013-1: S&P Assigns BB+(sf) to Class E Sub. Notes SEQUOIA MORTGAGE 2013-1: Fitch Expects to Rate B-4 Certs. 'BBsf' SCHOONER TRUST 2005-3: Moody's Affirms B3 Rating on Cl. L Certs. SCHOONER TRUST 2005-4: Moody's Affirms B3 Rating on Cl. L Certs. SIERRA CLO II: S&P Raises Rating on Class B-2L Notes to 'BB+' TRAINER WORTHAM: Fitch Raises Rating on Class A-1 Notes to 'CCsf' WACHOVIA BANK 2002-C1: Moody's Cuts Rating on IO-I Secs. to Caa3 WACHOVIA BANK 2003-C8: S&P Cuts Rating on 5 Note Classes to 'CCC-' WACHOVIA BANK 2006-C25: Fitch Cuts Rating on $6.7MM Certs to 'Dsf' WACHOVIA BANK 2006-WHALE7: Moody's Affirms 'C' Ratings on 2 Certs * Moody's Takes Rating Actions on $186-Mil. Alt-A RMBS Tranches * S&P Takes Various Rating Actions on 37 Classes From 5 CMBS Deals * S&P Lowers Rating on Four CDO Transactions to 'D' * S&P Lowers Rating on 59 Classes From 17 U.S. RMBS Deals * S&P Lowers Rating on 2 Sec. Classes from 4 CMBS Deals to 'CCC-' ********* ACAS CRE 2007-1: Moody's Affirms 'C' Ratings on Some Note Classes ----------------------------------------------------------------- Moody's Investors Service has affirmed all classes of Notes issued by ACAS CRE CDO 2007-1 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 and re-remic (CRE CDO and Re-Remic) transactions. Moody's rating action is as follows: Cl. A, Affirmed at C (sf); previously on Feb 16, 2011 Downgraded to C (sf) Cl. B, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to C (sf) Cl. C-FL, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to C (sf) Cl. C-FX, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to C (sf) Cl. D, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to C (sf) Cl. E-FL, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to C (sf) Cl. E-FX, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to C (sf) Cl. F-FL, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to C (sf) Cl. F-FX, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to C (sf) Cl. G-FL, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to C (sf) Cl. G-FX, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to C (sf) Cl. H, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to C (sf) Cl. J, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to C (sf) Cl. K, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to C (sf) Cl. L, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to C (sf) Cl. M, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to C (sf) Cl. N, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to C (sf) Ratings Rationale ACAS CRE CDO 2007-1 LTD is a static cash transaction backed by a portfolio of 100.0% commercial mortgage backed securities (CMBS). As of the November 23, 2012 Note Valuation report, the collateral par amount is $587.0 million, representing a $587.6 million decrease since securitization due to realized losses to the collateral pool. 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 assessments for the non-Moody's rated collateral. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom-dollar WARF of 9,970 compared to 9,980 at last review. The current distribution of Moody's rated collateral and assessments for non-Moody's rated collateral is as follows: Caa1-Caa3 (0.9% compared to 0.6% at last review) and Ca-C (99.1% compared to 99.4% at last review). Moody's modeled to a WAL of 6.4 years, compared to 6.0 years at last review. The current WAL is based on the assumption about collateral extensions. Moody's modeled a fixed zero WARR, the same as last review. Moody's modeled a MAC of 0.0%, the same as last review. Moody's review incorporated CDOROM(R) v2.8, one of Moody's CDO rating models, which was released on March 22, 2012. The cash flow model, CDOEdge(R) v3.2.1.2, was used to analyze the cash flow waterfall and its effect on the capital structure of the deal. Changes in any one or combination of the key parameters may have rating implications on certain classes of rated notes. However, in many instances, a change in key parameter assumptions in certain stress scenarios may be offset by a change in one or more of the other key parameters. In general, the rated notes are particularly sensitive to changes in recovery rate assumptions. However, in light of the performance indicators noted above, Moody's believes that it is unlikely that the ratings announced are sensitive to further change. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near- term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock, albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing. The methodologies used in this rating were "Moody's Approach to Rating SF CDOs" published in May 2012, and "Moody's Approach to Rating Commercial Real Estate CDOs" published in July 2011. ACCESS GROUP: Fitch Lowers Rating on Class B Notes to 'BBsf' ----------------------------------------------------------- Fitch Ratings affirms the class A ratings and downgrades the class B rating on notes issued by the Access Group, Inc. 2003-A Indenture of Trust (AGI 2003-A). The actions follow a review of the ratings after receipt of additional information subsequent to Fitch's rating actions on Dec. 21, 2012 on AGI 2003-A. Fitch received information that an Issuer Order to the Indenture Trustee was provided for AGI 2003-A that irrevocably directs the Indenture Trustee to apply all amounts received for redemption of the outstanding notes to the Class A notes until paid in full. Given this information along with recent trust performance, which exhibits higher than anticipated defaults and declining excess spread, Fitch affirms the class A note rating at 'AA+sf'. The class B notes rating is downgraded to 'BBsf' due to the current deterioration in performance, increased default projection and decrease in excess spread. In addition, the class B notes for this transaction will no longer benefit from principal payments until the class A notes are paid in full. On Dec. 21, 2012 Fitch downgraded the class A and B notes issued by Access Group, Inc. 2003-A Indenture of Trust. At that time, the downgrade of the notes was based on loss coverage multiples no longer sufficient to maintain the ratings. Fitch increased its projected cumulative default expectations due to current performance in which delinquencies and defaults have increased. In addition, Fitch took into account that once the class A notes that are indexed to 3-month LIBOR are paid in full, principal payments can be directed to pay class B notes first and senior parity could decrease from current levels to a floor of 110%. Fitch's 'U.S. Private SL ABS Criteria' and 'Global Structured Finance Rating Criteria' were used to review the ratings. Credit enhancement consists of excess spread and overcollateralization. Furthermore, senior notes benefit from additional credit enhancement provided by the subordinate note. Fitch assumed excess spread to be the lesser of the average historical excess spread and the most recent 12-month average excess spread. That same rate was applied over the remaining life. The collateral securing the notes is 100% private student loans and consists of loans originated by Access Group. Fitch has affirmed these ratings: Access Group, Inc. 2003-A Indenture of Trust: -- Class A-2 at 'AA+sf'; Outlook Negative; -- Class A-3 at 'AA+sf'; Outlook Negative. Fitch has downgraded the following rating: Access Group, Inc. 2003-A Indenture of Trust: -- Class B to 'BBsf' from 'BBBsf'; Outlook Negative. ALLSLC IV: S&P Lowers Rating on 14 Note Classes to 'BB-' -------------------------------------------------------- Standard & Poor's Ratings Services raised its rating on the class A-13 LIBOR indexed bond from Access to Loans For Learning Student Loan Corp.'s series IV (ALLSLC IV). At the same time, S&P lowered its ratings on the remaining class A and class C bonds from ALLSLC IV. In addition, S&P removed its ratings on all the classes in this review from CreditWatch negative, where S&P placed them on Sept. 28, 2012 (see rating list). The rating actions reflect the trust's collateral performance to date, S&P's views regarding future collateral performance, the trust's structure, and the available credit enhancement. In addition, S&P's analysis incorporated cash flow modeling and secondary credit factors such as credit stability, payment priorities under certain scenarios, and sector- and issuer- specific analysis. COLLATERAL AND STRUCTURE The collateral in this pool is 100% FFELP loans, with approximately 95% FFELP consolidation loans and the balance of the pool is Stafford/PLUS loans. Loans originated under the FFELP program are at least 97% guaranteed by the U.S. Department of Education (DOE). Approximately 56% of the loans were disbursed after April 2006. These loans originated after April 2006 do not benefit from "floor" income. Non-floor income loans require the trust to rebate the positive difference between the borrowers' interest payments and special allowance payments (SAP) back to the DOE, which limits the trust's available excess spread. The bonds were issued pursuant to a master trust indenture dated May 1, 1998. The bonds include both a senior LIBOR indexed bond (approx. 16% of the liabilities), senior and subordinate taxable and tax-exempt auction rate bonds (ARS) (approx. 82% of the liabilities), and junior subordinate fixed rate bonds (approx. 2% of the liabilities). In a failed auction scenario (which is the situation for this trust), the trust documents stipulate that the ARS pay interest based on the maximum rate. The maximum rate for taxable ARS is defined as the least of: -- LIBOR plus a rating-dependent margin ranging from 2.0% to 3.0%; -- Maximum legal rate; and -- 17.0% The maximum rate for tax-exempt ARS is defined as the least of: -- The greater of the after-tax equivalent rate or SIFMA, times a rating-dependent multiplier ranging from 200% to 250%; -- Maximum legal rate; and -- 14.0% The LIBOR indexed bonds are subject to principal reduction payments as per the targeted amortization schedules outlined in the transaction documents. The LIBOR indexed bonds mature in April 2024 and the auction rate bonds mature at dates between July 2035 and October 2042. All of the bonds are subject to optional redemption at par plus accrued interest on any interest payment date, however, any redemptions are subject to meeting asset percentage requirements (generally defined as total assets divided by total liabilities). For optional redemptions, the trust must have a senior asset percentage of 110%, subordinate asset percentage of 106%, and a total asset percentage of 102%. Since the targeted asset percentages have not been reached, no optional redemptions have been made. The bonds are also subject to purchases in lieu of redemptions at the option of the issuer. The transaction documents require that the purchase price cannot exceed the par amount of any bonds purchased. There are no targeted asset percentage requirements for purchases in lieu of redemptions, however, no subordinate or junior subordinate bonds can be purchased until all of the senior bonds are paid in full. As a result, only senior class A ARS have been purchased. Releases of excess funds to the issuer are permitted, subject to a senior asset percentage of 110%, subordinate asset percentage of 106%, and a total asset percentage of 102%. All classes of bonds benefit from a reserve fund, which shall not be less than the greater of 75 basis points of the aggregate principal amount of the bonds then outstanding or $500,000. This fund, which currently stands at $5,504,438, is available to be used for the payment of principal and interest on the bonds when due and any other obligations payable from the debt service fund. Trust Performance The percentage of loans in the student loan portfolio that are in nonpaying status (31-plus-days delinquent, deferment, forbearance, and in-school or grace) currently total approximately 34.1% of the total pool balance. As of the quarterly period ending September 2012, 31-plus-day delinquent loans, loans in deferment, and loans in forbearance were approximately 11.5%, 12.1%, and 10.5%, respectively. The percentage of loans in deferment and forbearance is showing a downward trend. Recent historical numbers are shown below in table 1. Table 1 Collateral Performance Metrics As of December 31 Sept. 2012 2011 2010 2009 31+ days delinquent 11.5% 12.1% 10.6% 11.6% Deferment 12.1% 13.5% 14.1% 17.9% Forbearance 10.5% 12.3% 14.2% 11.9% The senior parity (generally defined as total assets divided by the senior class A note balance) has increased slightly since auctions began failing in 2008 and is currently at a figure of 106.3% primarily due to periodic discounted repurchases of senior bonds from the trust (see table 2). However, total parity (generally defined as total assets divided by the total note balance) has remained in a range between 98% and 100% during that same time frame. Parity growth has been stunted by the trust's payment of consolidation loan rebates and SAP rebates to the U.S. DOE. In the case of the SAP rebates, the recent low interest rate environment has played a major role in the size of the amounts rebated by the trust. Table 2 Parity As of December 31 Sept. 2012 2011 2010 2009 Senior parity 106.3% 106.1% 105.6% 104.8% Subordinate parity* 100.3% 100.4% 100.4% 100.2% Total parity 98.7% 98.9% 99.0% 98.3% * Subordinate parity generally defined as total assets divided by the sum of the senior class A note balance and subordinate class C note balance. CASH FLOW MODELING ASSUMPTIONS S&P ran midstream cash flows for this trust under various interest rate scenarios and rating stress assumptions. S&P ran break-even defaults, and these cash flow runs provided the break-even percentages that represent the maximum amount of remaining cumulative net losses the trust can absorb (as a percent of the pool balance as of the cash flow cutoff date) in each ratings scenario while meeting full and timely payment of interest and ultimate principal on the bonds. The following are some of the major assumptions we modeled: -- A moderately front-loaded six-year default curve; -- Recovery rates for defaulted student loans in the collateral pool at the government-guaranteed reimbursement rate; -- Rejected servicer claims for government guaranteed reimbursements at a rate of 1.0% to 2.5% of the claims submitted; -- Special allowance payments and interest rate subsidy delays of two months; -- Delay of U.S. DOE claim reimbursement on defaulted loans of 630 days; -- Rating dependent prepayment speeds starting at approximately 3% CPR (constant prepayment rate, an annualized prepayment speed stated as a percent of the current loan balance) that ramp up 1% per year to a maximum rate of 5%-9% CPR, after which the applicable maximum rate was held constant; -- Deferment levels of 20% for three years; -- Forbearance levels of 15% for three years; and -- Auctions were failed for the life of each series and auction rate coupons were based on maximum rate definitions in the trust indentures. CASH FLOW MODELING RESULTS/RATING ACTIONS The class A senior bonds are supported by current senior parity of 106.3%. The senior bonds are also protected as targeted asset percentages for optional redemptions or releases have not been reached limiting principal reductions to payments of the LIBOR indexed bonds per the targeted amortization schedule, or repurchases of senior class A ARS at discounts to the par face amount. Additionally, negative excess spread limits the trust's ability to build enhancement and reach the target asset percentages without repurchases of bonds at discounts. In all of S&P's cash flow scenarios, the senior class A-13 LIBOR indexed bond was paid in full (by its stated maturity date) and able to absorb a level of cumulative net losses commensurate with a 'AAA (sf)' rating before a payment default would occur. This is primarily due to their targeted amortization schedule and legal final maturity limiting their exposure to negative excess spread levels. After considering all of these factors, S&P raised its 'AA+ (sf)' rating on the class A-13 LIBOR indexed bond to 'AAA (sf)' and removed the rating from CreditWatch negative. "The downgrades of the remaining class A ARS reflect our view that while the transaction currently has senior parity of 106.3% and sufficient capacity to meet its class A debt service obligations, in the absence of improvement in trust performance, the trust may not be able to repay the principal balance of the class A ARS in full at their legal final maturity dates due to the impact of negative excess spread. Additionally, the trust does not have a net loan rate concept in its maximum rate definitions that we have seen in other similar auction rate trusts, to limit the impact of negative excess spread on repayment of interest and principal at maturity. Accordingly, we lowered our 'AA+ (sf)' rating on the senior class A ARS to 'BB- (sf)' and removed the ratings from CreditWatch negative," S&P said. "Similarly, the class C bonds are also affected by negative excess spread and the lack of a net loan rate concept in its maximum rate definition, the impact of which is evidenced in our cash flow scenarios. Additionally the class C bonds are structurally junior to the class A bonds and cannot be repurchased at discounts until the class A bonds have been paid in full. Accordingly, we lowered our 'A (sf)' rating on the class C bonds to 'B- (sf)' and removed the ratings from CreditWatch negative," S&P noted. Standard & Poor's will continue to monitor the performance of these series to assess whether the credit enhancement available remains adequate, in its view, to support the ratings on each class under various stress scenarios. 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 Temporary telephone contact numbers: Ronald Burt (917) 596-1431; Frank Trick (516) 592-7759. RATINGS RAISED AND REMOVED FROM CREDITWATCH NEGATIVE Access to Loans For Learning Student Loan Corp. Series IV Rating Class To From IV-A-13 AAA (sf) AA+ (sf)/Watch Neg RATINGS LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE Access to Loans For Learning Student Loan Corp. Series IV Rating Class To From IV-A-3 BB- (sf) AA+ (sf)/Watch Neg IV-A-4 BB- (sf) AA+ (sf)/Watch Neg IV-A-5 BB- (sf) AA+ (sf)/Watch Neg IV-A-7 BB- (sf) AA+ (sf)/Watch Neg IV-A-8 BB- (sf) AA+ (sf)/Watch Neg IV-A-9 BB- (sf) AA+ (sf)/Watch Neg IV-A-10 BB- (sf) AA+ (sf)/Watch Neg IV-A-11 BB- (sf) AA+ (sf)/Watch Neg IV-A-12 BB- (sf) AA+ (sf)/Watch Neg IV-A-14 BB- (sf) AA+ (sf)/Watch Neg IV-A-15 BB- (sf) AA+ (sf)/Watch Neg IV-A-16 BB- (sf) AA+ (sf)/Watch Neg IV-A-17 BB- (sf) AA+ (sf)/Watch Neg IV-A-18 BB- (sf) AA+ (sf)/Watch Neg IV-C-1 B- (sf) A (sf)/Watch Neg IV-C-2 B- (sf) A (sf)/Watch Neg AMMC CLO V: S&P Raises Rating on Class D Notes to 'B-' ------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on the Class A-1-B, A-2, B, C, and D notes from AMMC CLO V Ltd., a collateralized loan obligation (CLO) transaction managed by American Money Management Corp. At the same, time, Standard & Poor's removed these ratings from CreditWatch, where they were placed on Oct. 29, 2012, with positive implications. In addition, Standard & Poor's affirmed its 'AAA' ratings on the transaction's Class A-1-R and A-1-A notes (see list). The transaction continues to pay down its Class A notes in the manner specified in the transaction documents, which allows Classes A-1-R and A-1-A to receive paydowns ahead of Class A-1-B. As a result, these two classes can be paid down in full ahead of other classes and hence can support a higher rating. After the most recent payment date on Dec. 20, 2012, the Class A- 1-R, A-1-A, and A-2 balances are 60.2%, 63.15%, and 71.57%, respectively, of their original balances. The Class A-1-B balance is still 100% of its original balance. The lower balances of the notes increased the overcollateralization (O/C) ratio. As per the Dec. 11, 2012, monthly trustee report, Class B's O/C ratio was 122.5%, up from April 2011's 118.9%, which was the figure we used for our analysis during our last rating action in June 2011. Class B's O/C ratio will increase once the trustee incorporates the Dec. 20, 2012, payments. Because the manager has retained unscheduled principal repayments of the underlying assets, S&P's analysis took into account the possibility that the manager might reinvest this during the amortization period. The transaction transferred $0.262 million from the interest proceeds to a loss-replenishment account, which in turn was applied as principal proceeds to pay down the notes. This is as per a structural feature in the transaction's documents that requires such a transfer whenever the cumulative trading losses in the portfolio exceed the aggregate of the cumulative trading gains and balances in the reserve accounts. The upgrades reflect the increased credit support to the notes at the prior rating levels. The affirmations reflect the availability of adequate credit support at the current rating levels. S&P will continue to review whether it will consider the ratings on the notes to be consistent with the credit enhancement available to support them, and we will take rating actions as we deem 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 AMMC CLO V Ltd. Class To From A-1-B AAA (sf) AA+ (sf)/Watch Pos A-2 AAA (sf) AA+ (sf)/Watch Pos B AA+ (sf) AA- (sf)/Watch Pos C A+ (sf) A- (sf)/Watch Pos D B- (sf) CCC+ (sf)/Watch Pos RATINGS AFFIRMED AMMC CLO V Ltd. Class Rating A-1-R AAA (sf) A-1-A AAA (sf) AMP ABX 2006-1: Moody's Cuts Rating on $65-Mil. Notes to 'Ca' ------------------------------------------------------------- Moody's Investors Service has downgraded the rating of the following notes issued by AMP ABX 2006-1, Ltd.: U.S.$65,000,000 Notes Due 2036, Downgraded to Ca (sf); previously on August 5, 2010 Downgraded to Caa3 (sf). Ratings Rationale According to Moody's, the rating action is the result of the deterioration in the credit quality of the reference portfolio. Such credit deterioration is observed through numerous factors including deterioration in the weighted average rating factor (WARF) and an increase in credit events in the reference portfolio. Based on Moody's calculation, the WARF of the reference portfolio has deteriorated to 1049 from 898 since the last rating action in August 2010. As per the latest trustee report dated December 27, 2012 the total write-downs due to credit events in the transaction is $11.6 million. Given that the Notes are the first-loss tranche with no subordination, the trustee has already written down the Notes in respect of these credit events. Reference securities rated below investment grade comprise 33.6% of the reference portfolio with the lowest rated security currently rated Caa3. AMP ABX 2006-1, Ltd., issued in November 2006, is a synthetic collateralized debt obligation issuance referencing a portfolio of RMBS issued in 2005. The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in May 2012. 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. The capital structure is incorporated into CDOROM by specifying the attachment point and the thickness of the tranche. 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 discount rate used to present value is the current swap rate plus the promised spread on the tranche based on its remaining maturity. Solely for the purpose of discounting losses, Moody's assumes that losses on the tranche occur 60% of the way through the maturity of the tranche. The final EL of the synthetic SF CDO tranche is the discounted average of the tranche loss across all the scenarios simulated in CDOROM. Since the EL is based on a simulation process, the convergence of the simulation will depend, in part, on the number of iterations chosen for the simulation. Moody's applies a 99% confidence interval to the EL result using a Standard Error equal to the square root of the EL Variance divided by the number of Monte Carlo simulations. If this confidence interval adjustment is significant, a larger number of iterations may be used to reduce the standard error. 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 residential real estate property markets. 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: Notes: 0 Moody's non-investment grade rated assets notched down by 2 rating notches: Notes: 0 APIDOS CDO II: S&P Retains Rating on Class D Notes to 'B+' ---------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1, A-2, A-3, B, and C notes from Apidos CDO II, a collateralized loan obligation (CLO) transaction. At the same time, S&P affirmed its rating on the class D notes and removed its ratings on all of the classes in this review from CreditWatch positive (see list). The transaction is in its amortization phase following the end of its reinvestment period in January 2012 and has commenced paying down the class A-1 and A-2 notes, which are pari passu. The notes' current balance is 73.87% of the original balance, down from 99.74% in April 2012 when S&P last took a rating action on the transaction. The paydowns to the class A-1 and A-2 notes increased the overcollateralization (O/C) available to the notes. The trustee reports the following O/C ratios in the Nov. 27, 2012, monthly report: -- The class A ratio is 128.67%, up from 121.98% in the February 2012 monthly trustee report that S&P referenced during its April 2012 actions; -- The class B ratio is 116.99%, compared with 113.39% in February 2012; -- The class C ratio is 111.51%, compared with 109.23% in February 2012; and -- The class D ratio is 106.33%, compared with 105.21% in February 2012. The transaction continues to have a low level of defaults - the Nov. 27, 2012, monthly trustee report indicates $3.3M par as defaults - and the portfolio's credit quality is stable. The upgrades reflect increased credit support to the notes at the prior rating levels. The affirmation reflects the availability of adequate credit support at the current rating level. 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 ACTIONS Apidos CDO II Rating Class To From A-1 AAA (sf) AA+ (sf)/Watch Pos A-2 AAA (sf) AA+ (sf)/Watch Pos A-3 AA+ (sf) AA (sf)/Watch Pos B A+ (sf) A (sf)/Watch Pos C BBB+ (sf) BBB (sf)/Watch Pos D B+ (sf) B+ (sf)/Watch Pos E B+ (sf) B+ (sf)/Watch Pos BANC OF AMERICA 2004-BBA4: Moody's Keeps Caa3 Ratings on 3 Certs. ----------------------------------------------------------------- Moody's Investors Service affirmed the rating of four classes of Banc of America Large Loan, Inc., Commercial Mortgage Pass-Through Certificates, Series 2004-BBA4 as follows: Cl. X-1B, Affirmed at Caa2 (sf); previously on Feb 22, 2012 Downgraded to Caa2 (sf) Cl. X-2, Affirmed at Caa3 (sf); previously on Feb 22, 2012 Downgraded to Caa3 (sf) Cl. X-3, Affirmed at Caa3 (sf); previously on Feb 22, 2012 Downgraded to Caa3 (sf) Cl. X-4, Affirmed at Caa3 (sf); previously on Feb 22, 2012 Downgraded to Caa3 (sf) Ratings Rationale The affirmations are due to consistent credit quality of the Interest-Only Classes referenced classes and loans. Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan payoffs or a decline in subordination due to realized losses. Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near- term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock; albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing. The methodologies used in this rating were "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based Large Loan Model v 8.5. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. The model incorporates the CMBS IO calculator ver1.1 which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and Remittance Statements. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated February 22, 2012. Deal Performance As of the December 17, 2012 distribution date, the transaction's aggregate certificate balance has decreased by approximately 97% to $26.3 million from $912 million at securitization. The Certificates are secured by two loans constituting 39% and 61% of the pool balance. The pool has experienced losses of $564,701since securitization. As of the December 17, 2012 remittance statement, there are interest shortfalls totaling $753 to Class K. Generally, interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal subordinate entitlement reductions (ASERs) and extraordinary trust expenses. Moody's weighed average pooled loan to value (LTV) ratio over 100%, the same as last review. The largest loan in the pool is the Heritage Square I & II loan ($16 million, 61% of the pooled balance) which is collateralized by an approximately 350,000 square foot office building in Dallas, Texas. Occupancy was 63% as of September 2012. There is $6.4 million of mezzanine debt outside of the trust. The modified maturity date is June 2013. Moody's current credit assessment is Caa3, the same as last review. The second largest loan in the pool, Arapaho Business Park ($10.3 million, 39% of the pooled balance) which is securitized by an industrial park located in Richardson, Texas in the Dallas Fort Worth metro area. As of September 2012, the properties were 74.5% occupied. There is $6.6 million of subordinate debt outside of the trust. The loan transferred to special servicing in October of 2008. The modified maturity date is February 2013. Moody's current credit assessment is Caa3, the same as last review. BEAR STEARNS 1999-WF2: Moody's Affirms 'B2' Rating on X Certs. -------------------------------------------------------------- Moody's Investors Service affirmed the ratings of three classes of Bear Stearns Commercial Mortgage Securities Inc., Commercial Mortgage Pass-Through Certificates, Series 1999-WF2 as follows: Cl. E, Affirmed at Aaa (sf); previously on Oct 24, 2007 Upgraded to Aaa (sf) Cl. F, Affirmed at Aaa (sf); previously on Mar 16, 2011 Upgraded to Aaa (sf) Cl. X, Affirmed at B2 (sf); previously on Feb 22, 2012 Downgraded to B2 (sf) Ratings Rationale The affirmations of the principal classes are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. The rating of the IO Class is consistent with the performance of its referenced classes and is thus affirmed. Moody's rating action reflects a base expected loss of $1.2 million or 1.5% of the current balance, down from 2.3% ($2.3 million) at last review. Moody's provides a current list of base losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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. Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near- term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock; albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing. 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 CMBS Large Loan/Single Borrower Transactions" published in July 2000 and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessment level, is incorporated for loans with similar credit assessments in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1 which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point . For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 17 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 8.5 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 16, 2012. Deal Performance As of the December 17, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 93% to $81.3 million from $1.1 billion at securitization. The Certificates are collateralized by 62 mortgage loans ranging in size from less than 1% to 17% of the pool, with the top ten non-defeased loans representing 52% of the pool. Twelve loans, representing 16% of the pool, have defeased and are secured by U.S. Government securities. Five 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 its ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Sixteen loans have been liquidated from the pool, resulting in a realized loss of $18.8 million (25% loss severity overall). Currently no loans are in special servicing. Moody's was provided with full year 2011 and partial year 2012 operating results for 98% and 86% of the pool, respectively. Moody's weighted average LTV is 36% compared to 43% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 10.4% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.4%. Moody's actual and stressed DSCRs are 1.71X and 3.93X, respectively, compared to 1.65X and 3.20X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The top three performing conduit loans represent 32% of the pool balance. The largest loan is a portfolio of four cross- collateralized and cross-defaulted movie theaters ($14.2 million - - 17.4% of the pool), totaling 258,740 square feet (SF) and located in metropolitan St. Louis, Missouri. The properties are 100% leased to a single-tenant through January 2019. The loans are fully amortizing and the maturities are co-terminus with the lease expirations. Moody's LTV and stressed DSCR are 39% and 3.06X, respectively, compared to 42% and 2.69X at Moody's last full review. The second largest loan is the AMC Theatres Loan ($8.7 million -- 10.7%), which is secured by a 90,000 SF movie theater located in Westminster, Colorado. The property is leased to a single tenant through April 2018. The loan is fully amortizing and matures in July 2018. Moody's LTV and stressed DSCR are 36% and 3.00X, respectively, compared to 43% and 2.62X at last full review. The third largest loan is The Bay Club Hotel & Marina Loan ($3.3 million -- 4.0%), which is secured by a 105-room hotel located in San Diego, California. The loan is benefiting from amortization and has paid down 52% since securitization. The loan is amortizing on a 30-year schedule and matures in November 2013. Moody's LTV and stressed DSCR are 35% and 3.65X, respectively, compared to 45% and 2.84X at full last review. BEAR STEARNS 2005-TOP18: Fitch Affirms D Ratings on Class N Notes ----------------------------------------------------------------- Fitch Ratings has downgraded two classes and affirmed 15 classes of Bear Stearns Commercial Mortgage Securities Inc. Commercial Mortgage Pass-Through Certificates Series 2005-TOP18. A detailed list of rating actions follows at the end of this press release. Key Rating Drivers: The downgrades reflect updated valuations for specially serviced loans in the pool. Fitch modeled losses of 4.2% of the remaining pool; expected losses on the original pool balance total 2.9%. The pool has experienced $11.5 million (1.0% of the original pool balance) in realized losses to date. Fitch has designated 23 loans (12.5%) as Fitch Loans of Concern, which includes six specially serviced assets (3.4%). As of the December 2012 distribution date, the pool's aggregate principal balance has been reduced by 30.6% to $778.6 million from $1.12 billion at issuance. Per the servicer reporting, six loans (13.8% of the pool) have defeased since issuance. Interest shortfalls are currently affecting classes K through P. The largest contributor to expected losses (0.6% of the pool) is secured by a specially-serviced 116,380 sf retail property located in Whiting, NJ. The loan transferred to special servicer in July 2009 due to imminent default. Borrower was unable to meet debt service obligations due to delinquent rents from two inline tenants and anchor tenant. Special servicer pursued sale through receivership with receiver sale completed in June 2012 for the majority of the property. Remaining parcel (1.1 acres including 3,003 sf NRA) foreclosed in November 2012. This parcel is all that remains as collateral in the transaction. The next largest contributor to expected losses (1.2%) is a specially-serviced 155,462 sf office property located in Inglewood, CA. A receiver was appointed and took possession of the property in September 2012. Foreclosure sale is scheduled for the end of January 2013. Fitch downgrades these classes and assigns or revises Rating Outlooks as indicated: -- $12.6 million class D to 'BBsf' from 'BBB-sf'; Outlook to Stable from Negative; -- $11.2 million class E to 'Bsf' from 'BBsf'; Outlook to Stable from Negative. Fitch affirms these classes and assigns or revises Rating Outlooks and REs as indicated: -- $74.3 million class A-J at 'AAAsf'; Outlook to Negative from Stable; -- $29.4 million class B at 'Asf'; Outlook to Negative from Stable; -- $9.8 million class F at 'CCCsf'; RE 100%; -- $9.8 million class G at 'CCsf'; RE 90%. Fitch affirms these classes as indicated: -- $7.2 million class A-AB at 'AAAsf'; Outlook Stable; -- $517.2 million class A-4 at 'AAAsf'; Outlook Stable; -- $75 million class A-4FL at 'AAAsf'; Outlook Stable; -- $8.4 million class C at 'BBBsf'; Outlook Stable; -- $8.4 million class H at 'Csf'; RE 0%; -- $4.2 million class J at 'Csf'; RE 0%; -- $4.2 million class K at 'Csf'; RE 0%; -- $4.2 million class L at 'Csf'; RE 0%; -- $1.4 million class M at 'Csf'; RE 0%; -- $1.1 million class N at 'Dsf'; RE 0%; -- $0 class O at 'Dsf'; RE 0%. The class A-1, A-2 and A-3 certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the rating on the interest-only class X certificates. BEAR STEARNS 2006-PWR11: Fitch Cuts Rating on 5 Securities Classes ------------------------------------------------------------------ Fitch Ratings has downgraded 7 classes and affirmed 13 classes of commercial mortgage pass-through certificates from Bear Stearns Commercial Mortgage Securities Trust, series 2006-PWR11. Key Rating Drivers The downgrades reflect an increase in Fitch modeled losses primarily due to updated values on specially serviced assets. Fitch modeled losses of 9.6% of the original pool balance compared to 7.7% losses modeled at Fitch's last review. As of the December 2012 distribution date, the pool's aggregate principal balance has decreased 13.3% to $1.61 billion from $1.86 billion at issuance. Fitch has designated 31 loans (20.5%) as Fitch Loans of Concern, including nine (4.4%) specially serviced loans. As of December 2012, cumulative interest shortfalls in the amount of $4.9 million are affecting classes H through P. The two largest contributors to modeled losses, the Investcorp Retail Portfolio 1 loan (6% of the remaining pool balance) and the Investcorp Retail Portfolio 2 loan (5.5%), are cross- collateralized and cross-defaulted retail portfolios. The collateral consists of eight retail properties totaling approximately 1.6 million square feet (sf), seven of which are located in Ohio and one in Indiana. Anchor tenants are Wal-Mart, Kohl's, Dick's Sporting Goods and Officemax. The properties have been suffering from occupancy issues. Petsmart, which leases a total of 53,704 sf at two of the properties, vacated one space in June 2008 but is still paying rent. The lease expires in January 2013. Sears, which leases 11,165 sf at one property, also went dark but is still paying rent. Its lease expires in June 2013. Best Buy leases a total of 60,814 sf at two of the properties; one lease expires in January 2013 and will not be renewed. Hobby Lobby, which leases a total of 127,205 sf at two of the properties, vacated one space in September 2012 but is still paying rent. Its lease expires in December 2014. The combined occupancy as of Sept. 30, 2012 for Investcorp Retail Portfolio I decreased to 86.2% from 89.3% at YE 2011. The third quarter (3Q) 2012 servicer-reported DSCR was 1.17x, compared to 1.03x at YE2011 and 1.14x at YE2010. The combined occupancy for Investcorp Retail Portfolio 2 decreased to 88.3% as of Sept. 30, 2012 from 92.3% at YE2011. The 3Q 2012 servicer-reported DSCR was 1.28x, compared to 1.15x at YE2011 and 1.21x at YE 2010. The interest only loans are sponsored by Investcorp and Cast. The third largest contributor to losses is a retail property located in Louisville, KY (1.2%). The loan was transferred to the special servicer in April 2009 due to imminent default and was foreclosed in November 2011. The real estate owned (REO) asset was sold in December 2012 with significant realized losses. Fitch has downgraded these classes: -- $146.4 million class A-J to 'BB/sf' from 'A/sf'; Outlook Stable; -- $37.2 million class B to 'B/sf' from 'BBB-/sf'; Outlook Negative. Fitch has downgraded these classes and assigned Recovery Estimate Ratings as indicated: -- $23.2 million class C to 'CCCsf' from 'BBsf'; RE 50%; -- $27.9 million class D 'CCsf' from 'Bsf'; RE0%; -- $18.9 million class E to 'CCsf' from 'CCCsf'; RE0%; -- $20.9 million class F to 'Csf' from 'CCsf'; RE0%'; -- $18.9 million class G to 'Csf' from 'CCs'; RE0%. Fitch has affirmed these classes as indicated: -- $18.5 million class A-2 at 'AAAsf'; Outlook Stable; -- $44.8 million class A-3 at 'AAAsf'; Outlook Stable; -- $73.4 million class A-AB at 'AAAsf'; Outlook Stable; -- $830.7 billion class A-4 at 'AAAsf'; Outlook Stable; -- $104.6 million class A-1A at 'AAAsf'; Outlook Stable; -- $185.9 million class A-M at 'AAAsf'; Outlook Stable; -- $23.2 million class H at 'Csf'; RE0%; -- $7 million class J at 'Csf'; RE0%; -- $7 million class K at 'Csf'; RE0%; -- $7 million class L at 'Csf'; RE0%; -- $2.3 million class M at 'Csf'; RE0%; -- $6.2 million class N at 'Csf'; RE0%; -- $4 million class O at 'Dsf'; RE0%. Class A-1 has paid in full. Fitch does not rate class P. Fitch has previously withdrawn the rating on the interest-only class X. BLUEMOUNTAIN CLO II: S&P Retains 'B+' Rating on Class E Notes ------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class B, C, and D notes from BlueMountain CLO II Ltd., a collateralized loan obligation (CLO) transaction managed by BlueMountain Capital Management L.P. In addition, S&P affirmed its ratings on the class A, A-2, and E notes. S&P also removed its ratings on all of the classes in this review from CreditWatch positive (see list). The upgrades of the class B, C, and D notes reflect paydowns to the class A and A-2 notes. S&P affirmed its ratings on the class A, A-2, and E notes to reflect the availability of adequate credit support at the current rating levels. The transaction is in its amortization phase following the end of its reinvestment period in August 2012 and has commenced paying down the class A and A-2 notes, which are pari passu. The notes' current balance was 96% of the original balance in November 2012. Since the end of reinvestment period in August 2012, class A and class A-2 notes have paid down by about $9 million. The transaction continues to maintain a low level of defaults in the collateral pool. The Nov. 23, 2012, monthly trustee report indicated about 2.2% ($8.1 million par) of the pool as defaults. The rating on the class E notes is driven by the application of the largest obligor default test, a supplemental stress test S&P introduced as part of its 2009 corporate criteria update. S&P will continue to review whether, in its view, the ratings currently assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as we deem 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 Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING ACTIONS BlueMountain CLO II Ltd. Class Rating To From A AA+ (sf) AA+ (sf)/Watch Pos A-2 AA+ (sf) AA+ (sf) /Watch Pos B AA (sf) AA- (sf) /Watch Pos C A- (sf) BBB+ (sf) /Watch Pos D BBB- (sf) BB+ (sf) /Watch Pos E B+ (sf) B+ (sf) /Watch Pos BUCKEYE TOBACCO: Fitch Lowers Ratings on 10 Bonds ------------------------------------------------- Fitch Ratings affirms five and downgrades 10 classes of tobacco settlement asset-backed bonds from Buckeye Tobacco Settlement Financing Authority, 2007 (Ohio). For 2012, the aggregate MSA payment was 1.97% higher than the amount in 2011. Fitch published updated Tobacco Settlement ABS Criteria on July 16, 2012, which included a change in the base case assumption for the MSA payment from +1% to 0%. The rating scale was recalibrated to reflect this change, and as a result there were several downgrades. The turbo and capital appreciation bonds were put on Rating Watch Negative in July 2012 with the expectation that the change in the base case assumption could lead to downgrades. Buckeye Tobacco Settlement Financing Authority, 2007 (Ohio), along with Golden State Tobacco Securitization Corporation, UNITED STATES Series 2007-1 and Nassau County Tobacco Settlement Corporation, Tobacco Settlement Asset-Backed Bonds, Series 2006, were not reviewed with the other ABS tobacco settlement bonds in August 2012 because the reserve accounts of these transactions were below the minimum required levels and required additional analysis which was completed for this review. Fitch uses its breakeven model to analyze tobacco performance. The breakeven model assesses how much the MSA payment received by the trust could decline for each bond to pay at the legal final maturity date. The amount of the latest MSA payment that the transaction has received, the capital structure, the reserve account, and the bond's legal final dates are the key inputs to the model. Since the life of these transactions is typically long and the cash flows can be unpredictable, qualitative adjustments may be taken to avoid rating volatility by requiring two years of consecutive model outputs in order to downgrade to the model implied output. However, if more than one-notch difference exists between the current rating and the model implied rating, the bond will be downgraded to one-notch above the model output. Tobacco ratings are capped at 'BBB+sf', based on Fitch's opinion of the strength of the tobacco industry. All bonds with model outputs 'bbb+' and below carry a Negative Outlook to address concern over a future deterioration in cash flows. Fitch affirms these ratings: Senior Series 2007A-1 Senior Current Interest Serial Bonds -- $12,230,000 due June 1, 2013 at 'BBB+sf'; Outlook Stable; -- $23,995,000 due June 1, 2014 at 'BBB+sf'; Outlook Stable; -- $26,640,000 due June 1, 2015 at 'BBB+f'; Outlook Stable; -- $35,000,000 due June 1, 2016 at 'BBB+sf'; Outlook Stable; -- $38,995,000 due June 1, 2017 at 'BBB+sf'; Outlook Stable. Fitch downgrades these ratings: Senior Series 2007A-2 Senior Current Interest Turbo Term Bonds -- $200,000,000 due June 1, 2024 to 'B-sf' from 'Bsf'; removed from Negative Watch and assigned Negative Outlook; -- $949,530,000 due June 1, 2024 to 'B-sf' from 'Bsf'; removed from Negative Watch and assigned Negative Outlook; -- $687,600,000 due June 1, 2030 to 'Bsf' from 'B+sf'; removed from Negative Watch and assigned Negative Outlook; -- $505,200,000 due June 1, 2034 to 'Bsf' from 'BBsf'; removed from Negative Watch and assigned Negative Outlook; -- $250,000,000 due June 1, 2042 to 'BB+sf' from 'BBBsf'; removed from Negative Watch and assigned Negative Outlook; -- $750,000,000 due June 1, 2047 to 'Bsf' from 'BBsf'; removed from Negative Watch and assigned Negative Outlook; -- $1,383,715,000 due June 1, 2047 to 'Bsf' from 'BBsf'; removed from Negative Watch and assigned Negative Outlook. Senior Series 2007A-3 Senior Convertible Capital Appreciation Turbo Term Bonds -- $274,751,138 due June 1, 2037 to 'Bsf' from 'B+sf'; removed from Negative Watch and assigned Negative Outlook. First Subordinate Series 2007B Capital Appreciation Turbo Term Bonds -- $191,265,480 due June 1, 2047 to 'B-sf' from 'Bsf'; removed from Negative Watch and assigned Negative Outlook. Second Subordinate Series 2007C Capital Appreciation Turbo Term Bonds -- $128,182,923 due June 1, 2052 to 'B-sf' from 'Bsf'; removed from Negative Watch assigned Negative Outlook. CALCULUS CMBS: Moody's Cuts Rating on Class A CDS to 'Caa3' ----------------------------------------------------------- Moody's Investors Service has downgraded the rating of one and affirmed the ratings of five trust units issued by CALCULUS CMBS Resecuritization Trust. The downgrade is due to deterioration in underlying reference obligation performance as evidenced by negative transitions in Moody's weighted average rating factor (WARF) and weighted average recovery rate (WARR). 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. Moody's rating action is as follows: Credit Default Swap Class A, Downgraded to Caa3 (sf); previously on Jan 18, 2012 Downgraded to Caa1 (sf) Series 2006-1 Trust Units, Affirmed at Ca (sf); previously on Jan 18, 2012 Downgraded to Ca (sf) Series 2006-6 Trust Units, Affirmed at Ca (sf); previously on Jan 18, 2012 Downgraded to Ca (sf) Series 2006-3 Trust Units, Affirmed at Ca (sf); previously on Jan 18, 2012 Downgraded to Ca (sf) Series 2006-4 Trust Units, Affirmed at Ca (sf); previously on Jan 18, 2012 Downgraded to Ca (sf) Series 2006-2 Trust Units, Affirmed at Ca (sf); previously on Jan 18, 2012 Downgraded to Ca (sf) Ratings Rationale CALCULUS CMBS Resecuritization Trust is a static credit linked notes transaction backed by a portfolio of credit default swaps referencing 100% commercial mortgage backed securities (CMBS). All of the CMBS reference obligations were securitized in 2004 (2.5%), 2005 (77.7%), and 2006 (19.8%). Currently, 77% 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), 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 assessments for the non-Moody's rated reference obligations. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom-dollar WARF of 484 compared to 236 at last review. The current distribution is as follows: Aaa-Aa3 (22.0% compared to 27.0% at last review), A1-A3 (35.2% compared to 48.3% at last review),Baa1-Baa3 (23.0% compared to 22.2% at last review), Ba1-Ba3 (12.3% compared to 0.0% at last review), and B1- B3 (7.5% compared to 2.5% at last review). Moody's modeled to a WAL of 2.7 years, compared to 3.6 years at last review. Moody's modeled a variable WARR with a mean of 40.2%, compared to 44.7% at last review. Moody's modeled a MAC of 30.8%, compared to 38.5% at last review. Moody's review incorporated CDOROM(R) v2.8, one of Moody's CDO rating models, which was released on March 22, 2012. 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 credit changes within the reference obligations. Holding all other key parameters static, stressing the current ratings and credit assessments of the reference obligations by one notch downward or one notch upward affects the model results by approximately 0 notch negatively and 0 to 1 notch positively, 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 growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near- term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock, albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing. The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in May 2012. CANYON CAPITAL 2006-1: S&P Retains 'B+' Rating on Class E Notes --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class C and D notes from Canyon Capital CLO 2006-1 Ltd. In addition, S&P affirmed its ratings on the A1, A2, B, and E notes. At the same time, S&P removed its ratings on all the notes from CreditWatch, where it placed them with positive implications on Oct. 29, 2012 (see list). Canyon Capital CLO 2006-1 Ltd. is a collateralized loan obligation (CLO) transaction managed by Canyon Capital Advisors LLC. The upgrades of the class C and D notes reflect improvement in the credit quality of the transaction's underlying assets since S&P's last rating actions in February 2012. S&P affirmed its ratings on the class A1, A2, B, and E notes to reflect its belief that the credit support available is commensurate with the current ratings. According to the Dec. 5, 2012, trustee report, the transaction held $10.10 million in 'CCC' rated collateral, down from $12.45 million noted in the Feb. 7, 2012, trustee report, which S&P referenced for its February 2012 rating actions. In addition, the transaction held $2.97 million in defaulted obligations, down from $6.87 million in February 2012. The rating on the class E notes is driven by the application of the largest obligor default test, a supplemental stress test S&P introduced as part of its 2009 corporate criteria update. 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 ACTIONS Canyon Capital CLO 2006-1 Ltd Class Rating To From A1 AA+ (sf) AA+ (sf)/Watch Pos A2 AA+ (sf) AA+ (sf)/Watch Pos B AA+ (sf) AA+ (sf)/Watch Pos C AA- (sf) A (sf)/Watch Pos D BBB+ (sf) BBB (sf)/Watch Pos E B+ (sf) B+ (sf)/Watch Pos CANYON CAPITAL 2012-1: S&P Gives Prelim. BB Rating to Cl. E Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Canyon Capital CLO 2012-1 Ltd./Canyon Capital CLO 2012- 1 LLC's $304.00 million floating-rate notes (see list). The note issuance is collateralized loan obligation securitization backed by a revolving pool consisting primarily of broadly syndicated senior-secured loans. The preliminary ratings are based on information as of Jan. 8, 2013. 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 (not counting excess spread), and cash flow structure, which can withstand the default rate projected by Standard & Poor's CDO Evaluator model, as assessed by Standard & Poor's using the assumptions and methods outlined in its corporate collateralized debt obligation (CDO) criteria (see "Update To Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs," published Sept. 17, 2009). - The transaction's legal structure, which is expected to be bankruptcy remote. - The diversified collateral portfolio, which consists primarily of broadly syndicated speculative-grade senior secured term loans. - The collateral manager's experienced management team. - S&P's projections regarding the timely interest and ultimate principal payments on the preliminary rated notes, which it assessed using its cash flow analysis and assumptions commensurate with the assigned preliminary ratings under various interest-rate scenarios, including LIBOR ranging from 0.3105%-12.5967%. - The transaction's overcollateralization and interest coverage tests, a failure of which will lead to the diversion of interest and principal proceeds to reduce the balance of the rated notes outstanding. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at http://standardandpoorsdisclosure-17g7.com/1232.pdf. PRELIMINARY RATINGS ASSIGNED Canyon Capital CLO 2012-1 Ltd./Canyon Capital CLO 2012-1 LLC Class Rating Amount (mil. $) X AAA (sf) 3.00 A AAA (sf) 200.00 B-1 AA (sf) 41.00 B-2 AA (sf) 7.50 C (deferrable) A (sf) 24.00 D (deferrable) BBB (sf) 14.50 E (deferrable) BB (sf) 14.00 Subordinated notes NR 37.50 NR-Not rated. CENTERLINE 2007-1: Moody's Affirms 'C' Ratings on 2 Cert. Classes ----------------------------------------------------------------- Moody's Investors Service has affirmed the ratings of two classes of Certificates issued by Centerline 2007-1 Resecuritization Trust. The affirmations are due to the 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 and Re-Remic) transactions. Moody's rating action is as follows: Cl. A-1, Affirmed at C (sf); previously on Apr 12, 2011 Downgraded to C (sf) Cl. A-2, Affirmed at C (sf); previously on Apr 28, 2010 Downgraded to C (sf) RATINGS RATIONALE Centerline 2007-1 Resecuritization Trust is a static cash transaction backed by a portfolio of commercial mortgage backed securities (CMBS) (63.4% of the pool balance) and CRE CDO (36.6%). As of the December 20, 2012 Trustee report, the aggregate Certificate balance of the transaction, including preferred shares, has decreased to $283.1 million from $985.9 million at issuance, with $1.3 million paydown directed to the Class A-1 Certificates. The deal has experienced realized losses of $701.5 million, with partial realized losses to Class A-2. 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 assessments for the non-Moody's rated collateral. Moody's modeled a bottom-dollar WARF of 9,387 compared to 9,190 at last review. The current distribution of Moody's rated collateral and assessments for non-Moody's rated collateral is as follows: B1-B3 (3.2% compared to 6.4% at last review), and Caa1-C (96.8% compared to 93.6% at last review). Moody's modeled a WAL of 9.0 years compared to 9.8 years at last review. Moody's modeled a fixed WARR of 0.2% compared to 0.5% at last review. 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 March 22, 2012. The cash flow model, CDOEdge(R) v3.2.1.2, was used to analyze the cash flow waterfall and its effect on the capital structure of the deal. Changes in any one or combination of the key parameters may have rating implications on certain classes of rated notes. However, in many instances, a change in key parameter assumptions in certain stress scenarios may be offset by a change in one or more of the other key parameters. Rated notes are particularly sensitive to changes in recovery rate assumptions. However, in light of the performance indicators noted above, Moody's believes that it is unlikely that the ratings announced are sensitive to further change. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near- term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock; albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing. The methodologies used in this rating were "Moody's Approach to Rating SF CDOs" published in May 2012, and "Moody's Approach to Rating Commercial Real Estate CDOs" published in July 2011. CIFC FUNDING 2012-III: S&P Assigns 'B' Rating to Class B-3L Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to CIFC Funding 2012-III Ltd./CIFC Funding 2012-III LLC's $466.0 million floating- and fixed-rate notes. The note issuance is a collateralized loan obligation securitization backed by a revolving pool consisting primarily of broadly syndicated senior secured loans. The ratings reflect S&P's view of: - The credit enhancement provided to the rated notes through the subordination of cash flows that are payable to the subordinated notes. - The transaction's credit enhancement, which is sufficient to withstand the defaults applicable for the supplemental tests (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 (CDO) criteria (see "Update To Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs," published Sept. 17, 2009). - The transaction's legal structure, which is expected to be bankruptcy remote. - The diversified collateral portfolio, which consists primarily of broadly syndicated speculative-grade senior secured term loans. - The portfolio manager's experienced management team. - S&P's projections regarding the timely interest and ultimate principal payments on the rated notes, which it assessed using its cash flow analysis and assumptions commensurate with the assigned ratings under various interest rate scenarios, including LIBOR ranging from 0.34% to 12.87%. - The transaction's overcollateralization and interest coverage tests, a failure of which will lead to the diversion of interest and principal proceeds to reduce the balance of the rated notes outstanding. - The transaction's principal proceeds recapture feature, which requires reclassifying excess interest proceeds as principal proceeds in an amount equal to the principal proceeds used to make interest payments on the deferrable notes. - The transaction's reinvestment overcollateralization test, a failure of which will lead to the reclassification of up to 50% of excess interest proceeds that are available prior to paying uncapped administrative expenses and fees, subordinated portfolio management fees, portfolio manager incentive fees, and payments to the subordinated notes to principal proceeds for the purchase of additional collateral assets during the reinvestment period. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at http://standardandpoorsdisclosure-17g7.com/1231.pdf. RATINGS ASSIGNED CIFC Funding 2012-III Ltd./CIFC Funding 2012-III LLC Class Rating Amount (mil. $) A-1L AAA (sf) 320.0 A-2L AA (sf) 35.0 A-2F AA (sf) 11.0 A-3L (deferrable) A (sf) 27.0 A-3F (deferrable) A (sf) 14.0 B-1L (deferrable) BBB (sf) 23.0 B-2L (deferrable) BB- (sf) 26.0 B-3L (deferrable) B (sf) 10.0 Subordinated notes NR 50.1 NR-Not rated. CREDIT SUISSE 2004-C4: Moody's Cuts Rating on A-X Certs. to 'Ba3' ----------------------------------------------------------------- Moody's Investors Service is correcting the rating for Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2004-C4's Cl. A-Y (CUSIP: 22541SN61) to Aaa(sf) from Ba3(sf) and for Cl. A-X (CUSIP: 22541SN46) to Ba3(sf) from Aaa(sf). Due to an internal administrative error, as part of the rating action announced on February 22, 2012, Cl. A-Y was inadvertently downgraded to Ba3(sf) and Cl. A-X was inadvertently affirmed at Aaa(sf). Cl. A-Y should have been affirmed at Aaa(sf) and Cl. A-X should have been downgraded to Ba3(sf). The correct current ratings for these two Commercial Mortgage Pass-Through Certificates of CSFB Mortgage Securities Corp. 2004- C4 are as follows: Cl. A-Y, Aaa (sf), Affirmed at Aaa (sf) on February 22, 2012 Cl. A-X, Ba3 (sf), Downgraded to Ba3 (sf) on February 22, 2012. Moody's also removed Cl. A-SP, which was withdrawn on January 18, 2012, from the list of affected credit ratings associated with the same rating action. The list of affected securities from the February 22, 2012 rating action has been updated and may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF277364 CREDIT SUISSE 2004-C4: Moody's Affirms 'C' Ratings on 6 Certs. -------------------------------------------------------------- Moody's Investors Service affirmed the ratings of 17 classes of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2004-C4 as follows: Cl. A-5, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf) Cl. A-6, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf) Cl. A-J, Affirmed at Aa1 (sf); previously on Mar 9, 2011 Confirmed at Aa1 (sf) Cl. A-1-A, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf) Cl. A-X, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Cl. A-Y, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf) Cl. B, Affirmed at A3 (sf); previously on Feb 9, 2011 Downgraded to A3 (sf) Cl. C, Affirmed at Ba1 (sf); previously on Feb 9, 2011 Downgraded to Ba1 (sf) Cl. D, Affirmed at Ba3 (sf); previously on Feb 9, 2011 Downgraded to Ba3 (sf) Cl. E, Affirmed at B3 (sf); previously on Feb 9, 2011 Downgraded to B3 (sf) Cl. F, Affirmed at Caa3 (sf); previously on Feb 9, 2011 Downgraded to Caa3 (sf) Cl. G, Affirmed at C (sf); previously on Feb 9, 2011 Downgraded to C (sf) Cl. H, Affirmed at C (sf); previously on Feb 9, 2011 Downgraded to C (sf) Cl. J, Affirmed at C (sf); previously on Feb 3, 2010 Downgraded to C (sf) Cl. K, Affirmed at C (sf); previously on Feb 3, 2010 Downgraded to C (sf) Cl. L, Affirmed at C (sf); previously on Feb 3, 2010 Downgraded to C (sf) Cl. M, Affirmed at C (sf); previously on Feb 3, 2010 Downgraded to C (sf) Ratings Rationale The affirmations for the 15 principal and interest bonds are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. The rating of the IO Classes, Class A-X and A-Y, are consistent with the credit performance of their referenced classes and thus are affirmed. Moody's rating action reflects a base expected loss of 6.2% of the current pooled balance compared to 6.3% at last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan payoffs or a decline in subordination due to realized losses. Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near- term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock; albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing. The methodologies used in this rating were "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005, "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000 and "Moody's Approach to Rating Structured Finance Interest Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessment level, is incorporated for loans with similar credit assessments in the same transaction. Moody's review also utilized the IO calculator ver1.1, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 9, compared to 11 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 8.5 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 a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated January 20, 2012. Deal Performance As of the December 17, 2012 distribution date, the transaction's aggregate pooled certificate balance has decreased by 41% to $675 million from $1.1 billion at securitization. The Certificates are collateralized by 149 mortgage loans ranging in size from less than 1% to 12% of the pool, with the top ten loans representing 33% of the pool. Ten loans, representing 52% of the pool, have been defeased and are collateralized with U.S. Government Securities. The pool contains 77 residential cooperative loans, representing 21% of the pool, which have Aaa credit assessments. Twenty-four loans, representing 12% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of its 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 at a loss from the pool, resulting in an aggregate realized loss of $19 million (18% average loss severity). Five loans, representing 7% of the pool, are currently in special servicing. The largest specially serviced loan is the Wayzata Office Loan ($23 million -- 3.4% of the pool), which is secured by a 66,000 square foot (SF) office property located on Lake Minnetonka in Wayzata, Minnesota. The loan transferred to special servicing in 2010 due to a payment default and became real estate owned (REO) in January 2012. The property was only 40% leased as of August 2012. The property is currently being marketed for sale. The servicer has recognized a $10 million appraisal reduction for this loan and has not yet recognized appraisal reductions for any other specially serviced loans. Moody's has estimated an aggregate $22 million loss (66% average loss severity) for three of the five specially serviced loans. Moody's has assumed a high default probability for nine poorly performing loans representing 8% of the pool and has estimated a $10 million aggregate loss (18% expected loss based on a 50% probability default) from these troubled loans. Moody's was provided with full year 2011 and partial year 2012 operating results for 92% and 73% of the pool's non-defeased loans, respectively. Moody's weighted average conduit LTV is 89% compared to 97% at Moody's prior review. The conduit portion of the pool excludes specially serviced, troubled and defeased loans. Moody's net cash flow reflects a weighted average haircut of 11% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.1%. Moody's actual and stressed conduit DSCRs are 1.33X and 1.19X, respectively, compared to 1.30X and 1.12X 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 18% of the pool. The largest loan is the Brunswick Square Loan ($78 million -- 11.6%), which is secured by the borrower's interest in a 769,000 SF regional mall located in East Brunswick, New Jersey. The mall is anchored by Macy's and JC Penney. Both anchors own their space, which is not part of the collateral. The 302,000 SF of collateral was 98% leased as of September 2012 compared to 92% at last review. Comparable in-line tenant sales were $312 PSF for the trailing twelve months (TTM) ending September 2012 compared to $310 PSF for the TTM ending September 2011. The loan matures in August 2014. Moody's LTV and stressed DSCR are 106% and 0.89X, respectively, compared to 116% and 0.84X at last review. The second largest loan is the Lake Zurich Portfolio Loan ($29 million -- 4.3% of the pool), which is secured by two cross- collateralized and cross-defaulted retail centers located in Lake Zurich, Illinois. The two centers contain 363,000 SF. The portfolio was 88% leased as of August 2012 compared to 89% at last review. Both loans are full recourse to the sponsor. Moody's LTV and stressed DSCR are 98% and 1.02X, respectively, compared to 92% and 1.09X at last review. The third largest loan is the City Park Retail Loan ($17 million - - 2.6% of the pool), which is secured by a 75,000 SF retail property in Lincolnshire, Illinois. The loan has been on the servicer's watchlist for low DSCR since September 2010. The property was 81% leased as of September 2012 compared to 80% at 2011 year-end. Although the loan is current, the actual DSCR was only 0.66X as of September 2012. The loan matures in July 2014. Moody's has identified this as a troubled loan due to refinance concerns. Moody's LTV and stressed DSCR are 200% and 0.51X, respectively, compared to 145% and 0.71X at last review. CW CAPITAL: Moody's Affirms 'C' Ratings on Seven Note Classes ------------------------------------------------------------- Moody's Investors Service has affirmed the ratings of seven classes of Notes issued by CW Capital Cobalt III, Synthetic Ltd. The affirmations are due to the 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. Moody's rating action is as follows: Cl. A, Affirmed at C (sf); previously on Jan 18, 2012 Downgraded to C (sf) Cl. B, Affirmed at C (sf); previously on Feb 10, 2010 Downgraded to C (sf) Cl. C, Affirmed at C (sf); previously on Nov 12, 2009 Downgraded to C (sf) Cl. D, Affirmed at C (sf); previously on Nov 12, 2009 Downgraded to C (sf) Cl. E, Affirmed at C (sf); previously on Nov 12, 2009 Downgraded to C (sf) Cl. F, Affirmed at C (sf); previously on Nov 12, 2009 Downgraded to C (sf) Cl. G, Affirmed at C (sf); previously on Nov 12, 2009 Downgraded to C (sf) Ratings Rationale CW Capital Cobalt III, Synthetic Ltd. is a static synthetic transaction backed by a portfolio of credit default swaps on commercial mortgage backed securities (CMBS) (100.0% of the reference obligation balance). As of the January 3, 2013 Note Valuation report, the aggregate Note balance of the transaction, including preferred shares, has decreased to $497.9 million from $500.0 million at issuance. There are 13 reference obligations with a par balance of $78.9 million (18.6% of the current reference obligations balance) considered as defaulted securities as of the December 27, 2012 Trustee report. While there have been limited realized losses to date, Moody's does expect significant losses to occur on the defaulted securities once they are realized. Moody's has identified the following parameters as key indicators of the expected loss within CRE CDO transactions: weighted average rating factor (WARF), weighted average life (WAL), weighted average recovery rate (WARR), and Moody's asset correlation (MAC). These parameters are typically modeled as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's has completed updated assessments for the non-Moody's rated reference obligations. Moody's modeled a bottom-dollar WARF of 9,101 compared to 9,041 at last review. The current distribution of Moody's rated reference obligations and assessments for non-Moody's rated reference obligations is as follows: Ba1-Ba3 (2.3% compared to 2.2% at last review), B1-B3 (2.3% compared to 2.2% at last review), and Caa1-C (95.3% compared to 95.6% at last review). Moody's modeled a WAL of 5.1 years compared to 5.3 years at last review. Moody's modeled a variable WARR with a mean of 0.4% compared to 0.3% at last review. Moody's modeled a MAC of 0.0%, the same as that at last review. Moody's review incorporated CDOROM(R) v2.8, one of Moody's CDO rating models, which was released on March 22, 2012. The cash flow model, CDOEdge(R) v3.2.1.2, was used to analyze the cash flow waterfall and its effect on the capital structure of the deal. Changes in any one or combination of the key parameters may have rating implications on certain classes of rated notes. However, in many instances, a change in key parameter assumptions in certain stress scenarios may be offset by a change in one or more of the other key parameters. In general, the rated notes are particularly sensitive to credit changes within the reference obligations. However, in light of the performance indicators noted above, Moody's believes that it is unlikely that the ratings announced are sensitive to further change. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near- term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock; albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing. The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in May 2012. DIVERSIFIED ASSET: Moody's Raises Ratings on 2 Classes From Ba1 --------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of the following notes issued by Diversified Asset Securitization Holdings II, L.P.: U.S. $52,500,000 Class A-1 7.8725% Notes Due 2035 (current balance of $6,992,480.71), Upgraded to Baa2 (sf); previously on February 18, 2009 Downgraded to Ba1 (sf); U.S. $332,500,000 Class A-1L Floating Rate Notes Due 2035 (current balance of $44,285,723.83), Upgraded to Baa2 (sf); previously on February 18, 2009 Downgraded to Ba1 (sf). Ratings Rationale According to Moody's, the rating upgrades are primarily a result of deleveraging of the Class A-1 Notes and Class A-1L Notes and an increase in the transaction's overcollateralization ratios since the last rating action in June 2010. Moody's notes that the Class A-1 Notes and Class A-1L Notes have been paid down by approximately 60.3% or $78 million since the last rating action. Based on the latest trustee report dated December 17, 2012, the Class A and Class B overcollateralization ratios are reported at 128.34% and 93.11%, respectively, versus June 2010 levels of 112.20% and 92.56% respectively. Diversified Asset Securitization Holdings II, L.P., issued in September 2000, is a collateralized debt obligation backed primarily by a portfolio of RMBS, CMBS, and other types of ABS securities originated from 1997 to 2000. The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in May 2012. 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-1: +3 Class A-1L: +3 Class A-2: 0 Class B: 0 Moody's non-investment grade rated assets notched down by 2 rating notches: Class A-1: -3 Class A-1L: -3 Class A-2: 0 Class B: 0 Sources of additional performance uncertainties are described below: 1) Amortizations: The main source of uncertainty in this transaction is whether amortizations will continue and at what pace. The rate of prepayments in the underlying portfolio may have significant impact on the notes' ratings. 2) Recovery of defaulted assets: Market value fluctuations in defaulted assets reported by the trustee and those assumed to be defaulted by Moody's may create volatility in the deal's overcollateralization levels. Further, the timing of recoveries and the manager's decision to work out versus sell defaulted assets create additional uncertainties. 3) Material exposure to unrated securities: Approximately 7% of the transaction collateral is constituted by manufactured housing loans-backed securities from several transactions serviced by a single servicer and which benefit from a parent corporate guaranty. In 2011, Moody's withdrew its ratings on the parent company due to insufficient or otherwise inadequate information, and in 2012 withdrew its ratings on the securities. Although Moody's assessed the potential for credit deterioration in the securities, the absence of ratings introduces uncertainty in the eventual credit performance of the securities, and as a consequence, in the credit quality and performance of the SF CDO's rated notes. DLJ COMMERCIAL 1999-CG3: Moody's Affirms Caa3 Rating on S Certs. ---------------------------------------------------------------- Moody's Investors Service affirmed the ratings of two classes of DLJ Commercial Mortgage Corp., Commercial Mortgage Pass-Through Certificates, Series 1999-CG3 as follows: Cl. S, Affirmed at Caa3 (sf); previously on Feb 22, 2012 Downgraded to Caa3 (sf) Cl. B-4, Affirmed at Caa2 (sf); previously on Jan 20, 2012 Upgraded to Caa2 (sf) Ratings Rationale The affirmation of the principal class is due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. The rating of the IO Class, Class S is consistent with the performance of its referenced classes and is thus affirmed. Moody's rating action reflects a base expected loss of $1.4 million or 6.3% of the current balance compared to $12.4 million or 30% at last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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. Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near- term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock; albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing. 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 CMBS Large Loan/Single Borrower Transactions" published in July 2000, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessment level, is incorporated for loans with similar credit assessments in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1 which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point . For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 4 compared to 7 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 8.5 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 January 20, 2012. Deal Performance As of the December 10, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 98% to $21.8 million from $899.3 million at securitization. The Certificates are collateralized by nine mortgage loans ranging in size from 4% to 31% of the pool. Two loans, representing 21% of the pool, have defeased and are secured by U.S. Government securities. Two loans, representing 37% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of its ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Thirty-five loans have been liquidated from the pool, resulting in an aggregate realized loss of $44.9 million (27% loss severity overall). Currently three loans, representing 32% of the pool, are in special servicing. The largest specially serviced loan is the American Crossing Shopping Center Loan ($4.7 million -- 22% of the pool), which is secured by a 72,800 square foot retail center located in Albuquerque, New Mexico. The loan was transferred to special servicing in September 2009 due to maturity default and forebearance agreements were in place until September 2012. The second-largest specially-serviced loan is the TYIF Park Condominiums Loan ($1.4 million -- 6.6% share of the pool), which is secured by a 43 unit garden style, multifamily property located in Houston, Texas. The third-largest specially-serviced loan is the Whitfield Village Apartments Loan ($830,000 -- 3.8% share of the pool), which is secured by a 48 unit garden style multifamily property located in Sarasota, Florida. Moody's estimates an aggregate $877,528 loss for the specially serviced loans (62% expected loss on average). Moody's was provided with full year 2011 and partial year financials for 100% of the pool, excluding specially serviced and defeased loans. Excluding specially serviced loans, Moody's weighted average LTV is 78% compared to 75% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 16% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.3%. Excluding special serviced loans, Moody's actual and stressed DSCRs are 0.99X and 1.51X, respectively, compared to 0.98X and 1.47X 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 42% of the pool balance. The largest loan is The Regency Apartments Loan ($6.8 million -- 31.3% of the pool), which is secured by a 186-unit multifamily property located in Fayetteville, North Carolina, just south of the Fort Bragg military base. As of June 2012, the property was 64% leased compared to 82% at last review. The borrower indicated that the reason for the drop in occupancy is due to high turnover since the property is located in a military town. Moody's LTV and stressed DSCR are 93% and 1.05X, respectively, compared 84% and 1.17X at last review. The second largest loan is the Manor Court Apartments Loan ($1.2 million -- 5.5% of the pool), which is secured by a 74 unit apartment complex located in North Miami, Florida. As of June 2012, the property was 97% leased compared to 96% at last review. Performance has improved due to substantial decreases in operating expenses, specifically repairs and maintenance, since 2009. Moody's LTV and stressed DSCR are 41% and 2.37X respectively, compared to 44% and 2.22X at last review. The third largest loan is the Moon Glow Apartments Loan ($1.2 million -- 5.5% of the pool), which is secured by a 92 unit apartment complex located in Columbus, Ohio. As of October 2012, the property was 96% leased compared to 99% at last review. Moody's LTV and stressed DSCR are 66% and 1.48X respectively, compared to 69% and 1.42X at last review. EMPORIA II: Fitch Raises Rating on $14.5-Mil. Class E Notes to 'B' ------------------------------------------------------------------ Fitch Ratings has affirmed four and upgraded three classes of notes issued by Emporia Preferred Funding II, Ltd./Corp. (Emporia II): -- $78,828,384 class A-1 notes at 'AAAsf'; Outlook Stable; -- $25,987,379 class A-2 notes at 'AAAsf'; Outlook Stable; -- $103,949,517 class A-3 notes at 'AAAsf'; Outlook Stable; -- $30,000,000 class B notes at 'AAsf'; Outlook Stable; -- $22,000,000 class C notes upgraded to 'Asf' from 'BBBsf'; Outlook to Stable from Positive; -- $22,000,000 class D notes upgraded to 'BBsf' from 'Bsf'; Outlook Positive; -- $14,500,000 class E notes upgraded to 'Bsf' from 'CCCsf'; assigns Outlook Positive. The rating actions reflect the overall stability in credit quality and increasing credit enhancement levels following amortization of the underlying loan portfolio. Since January 2012, $24.2 million in principal proceeds was received to pay down principal on the class A-1, A-2 and A-3 notes (collectively, class A). The amount of performing assets Fitch considers rated 'CCC+' or below has decreased to 6.7% from 7.9% in January 2012. Fitch currently considers the weighted average rating of the $281.4 million (as of Dec. 2, 2012 trustee report) performing portfolio to be 'B/B-', within the same rating category as the portfolio in January 2012. This review was conducted under the framework described in the report 'Global Rating Criteria for Corporate CDOs' using the Portfolio Credit Model (PCM) for projecting future default and recovery levels for the underlying portfolio. These default and recovery levels were then utilized in Fitch's cash flow model under various default timing and interest rate stress scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in CDOs'. While Fitch's cash flow analysis indicates higher passing rating levels for the class B, C, D and E notes, the current ratings appropriately reflect the risk profile of the remaining portfolio. These classes of notes remain subordinate to the class A notes and will not receive any principal proceeds until the more senior tranches are paid in full. Based on the maturity profile of the remaining portfolio, class A is not expected to pay in full within the next year. Since the class C, D and E notes receive interest and principal subordinate to satisfaction of the class A/B coverage tests, Fitch applied a ratings cap to these classes. The application of a cap under Fitch's 'Criteria for Rating Caps in Global Structured Finance Transactions' reflects the additional risk to the class C, D and E notes given their ability to defer interest payments. Emporia II is a cash flow collateralized loan obligation (CLO) that closed on June 21, 2006 and is managed by Ivy Hill Asset Management, a portfolio management company of Ares Capital Corporation. Emporia II has a portfolio primarily composed of U.S. middle market loans, approximately 94.7% of which are senior secured positions and approximately 5.3% of which are second lien loans and structured finance assets. The transaction exited its reinvestment period in July 2012. EMPORIA III: Fitch Hikes Rating on $18-Mil. Class E Notes to 'B' ---------------------------------------------------------------- Fitch Ratings has affirmed four and upgraded three classes of notes issued by Emporia Preferred Funding III, Ltd./Corp. (Emporia III): -- $100,000,000 class A-1 notes at 'AAAsf'; Outlook Stable; -- $40,000,000 class A-2 notes at 'AAAsf'; Outlook Stable; -- $132,580,000 class A-3 notes at 'AAAsf'; Outlook Stable; -- $26,845,000 class B notes at 'AAsf'; Outlook Stable; -- $37,170,000 class C notes upgraded to 'Asf' from 'BBBsf'; Outlook Stable; -- $20,650,000 class D notes upgraded to 'BBsf' from 'Bsf'; Outlook to Positive from Stable; -- $18,585,000 class E notes upgraded to 'Bsf' from 'CCCsf'; assigns Outlook Positive. The rating actions reflect the increased stability in credit quality of the underlying loan portfolio. The amount of performing assets Fitch considers rated 'CCC+' or below has decreased to 6.2% from 9.9% in January 2012. Fitch currently considers the weighted average rating of the $340.7 million (as of Dec. 2, 2012 trustee report) performing portfolio to be 'B/B-', within the same rating category as the portfolio in January 2012. This review was conducted under the framework described in the report 'Global Rating Criteria for Corporate CDOs' using the Portfolio Credit Model (PCM) for projecting future default and recovery levels for the underlying portfolio. These default and recovery levels were then utilized in Fitch's cash flow model under various default timing and interest rate stress scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in CDOs'. While Fitch's cash flow analysis indicates higher passing rating levels for the class B, C, D and E notes, the current ratings appropriately reflect the risk profile of the remaining portfolio. These classes of notes remain subordinate to the class A-1, A-2 and A-3 notes (collectively, class A) and will not receive any principal proceeds until the more senior tranches are paid in full. Based on the maturity profile of the remaining portfolio, class A is not expected to pay in full within the next one to two years. Since the class C, D and E notes receive interest and principal subordinate to satisfaction of the class A/B coverage tests, Fitch applied a ratings cap to these classes. The application of a cap under Fitch's 'Criteria for Rating Caps in Global Structured Finance Transactions' reflects the additional risk to the class C, D and E notes given their ability to defer interest payments. Emporia III is a cash flow collateralized loan obligation (CLO) that closed on March 15, 2007 and is managed by Ivy Hill Asset Management, a portfolio management company of Ares Capital Corporation. Emporia III has a revolving portfolio primarily composed of U.S. middle market loans, approximately 93.7% of which are senior secured positions and approximately 6.3% of which are second lien loans and structured finance assets. The transaction remains in its reinvestment period through April 2013. FOXE BASIN: S&P Lowers Rating on Class D Notes to 'CC(sf)' ---------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the class D notes from Foxe Basin CLO 2003 Ltd. In addition, S&P affirmed its ratings on the B and C notes. S&P also removed its rating on the class B notes from CreditWatch positive implications (see list). Foxe Basin CLO 2003 Ltd. is a collateralized loan obligation (CLO) transaction managed by GSO Capital Partners L.P. The downgrade reflects the increased concentration risk of the portfolio. Based on the Dec. 5, 2012, trustee report, the pool consisted of fewer than 15 performing obligors, with the largest obligor accounting for 12.92% of the pool. Further, the class D notes deferred their interest on the Dec. 17, 2012, payment date. S&P affirmed its ratings on class B and C notes to reflect its belief that the credit support available is commensurate with the current ratings. Since the last rating actions in January 2011, the transaction has paid down the class A note holders in full, while the class B noteholders have paid down by $21 million. 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 ACTIONS Foxe Basin CLO 2003 Ltd. Class Rating To From B A+(sf) A+(sf)/Watch Pos C CCC-(sf) CCC-(sf) D CC(sf) CCC-(sf) FRASER SULLIVAN: Moody's Hikes Rating on Class D Notes From 'Ba1' ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of the following notes issued by Fraser Sullivan CLO V Ltd.: U.S.$13,500,000 Class A-2 Senior Secured Floating Rate Notes due 2021, Upgraded to Aaa (sf); previously September 23, 2011 Upgraded to Aa1 (sf); U.S.$30,100,000 Class B Senior Secured Deferrable Floating Rate Notes due 2021, Upgraded to Aa2 (sf); previously September 23, 2011 Upgraded to A1 (sf); U.S.$15,000,000 Class C Senior Secured Deferrable Floating Rate Notes due 2021, Upgraded to A2 (sf); previously September 23, 2011 Upgraded to A3 (sf); U.S.$19,000,000 Class D Senior Secured Deferrable Floating Rate Notes due 2021, Upgraded to Baa3 (sf); previously September 23, 2011 Upgraded to Ba1 (sf). Ratings Rationale According to Moody's, the rating actions taken on the notes reflect the benefit of the short period of time remaining before the end of the deal's reinvestment period in February 2013. In consideration of the reinvestment restrictions applicable during the amortization period, and therefore limited ability to effect significant changes to the current collateral pool, Moody's analyzed the deal assuming a higher likelihood that the collateral pool characteristics will continue to maintain a positive buffer relative to certain covenant requirements. In particular, the deal is assumed to benefit from higher spread levels compared to the levels assumed at the last rating action in September 2011. The modeled spread was assumed to be 3.8% versus 3.4% at the last rating action. Moody's also notes that the transaction's reported collateral quality and overcollateralization ratio are stable since the last rating action. Due to the impact of revised and updated key assumptions referenced in "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool to have a performing par and principal proceeds balance of $403.6, no defaulted par, a weighted average default probability of 19.61% (implying a WARF of 2754), a weighted average recovery rate upon default of 50.64%, and a diversity score of 45. 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. Fraser Sullivan CLO V Ltd., issued in February 2011, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. The principal methodology used in this rating was "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in June 2011. In addition to the base case analysis described above, Moody's also performed sensitivity analyses to test the impact on all rated notes of various default probabilities. Below is a summary of the impact of different default probabilities (expressed in terms of WARF levels) on all rated notes (shown in terms of the number of notches' difference versus the current model output, where a positive difference corresponds to lower expected loss), assuming that all other factors are held equal: Moody's Adjusted WARF -- 20% (2203) Class A1: 0 Class A2: 0 Class B: +2 Class C: +2 Class D: +3 Moody's Adjusted WARF + 20% (3305) Class A1: 0 Class A2: -1 Class B: -2 Class C: -2 Class D: -1 Moody's notes that this transaction is subject to a high level of macroeconomic uncertainty, as evidenced by 1) uncertainties of credit conditions in the general economy and 2) the large concentration of upcoming speculative-grade debt maturities which may create challenges for issuers to refinance. CLO notes' performance may also be impacted by 1) the manager's investment strategy and behavior and 2) divergence in legal interpretation of CLO documentation by different transactional parties due to embedded ambiguities. Sources of additional performance uncertainties are described below: 1) Deleveraging: The main source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will commense and at what pace. Deleveraging may accelerate due to high prepayment levels in the loan market and/or collateral sales by the manager, which may have significant impact on the notes' ratings. GOLDEN STATE: Fitch Lowers Rating on Five Bond Classes to 'Bsf' --------------------------------------------------------------- Fitch Ratings affirms seven classes and downgrades five classes of tobacco settlement asset-backed bonds from Golden State Tobacco Securitization Corporation, series 2007-1. See the full list of rating actions at the end of this release. For 2012, the aggregate MSA payment was 1.97% higher than the amount in 2011. Fitch published updated Tobacco Settlement ABS Criteria on July 16, 2012, which included a change in the base case assumption for the MSA payment from +1% to 0%. The rating scale was recalibrated to reflect this change, and as a result there were several downgrades. The turbo and capital appreciation bonds were put on Rating Watch Negative in July 2012 with the expectation that the change in the base case assumption could lead to downgrades. Buckeye Tobacco Settlement Financing Authority, 2007 (Ohio), along with Golden State Tobacco Securitization Corporation, UNITED STATES Series 2007-1 and Nassau County Tobacco Settlement Corporation, Tobacco Settlement Asset-Backed Bonds, Series 2006, were not reviewed with the other ABS tobacco settlement bonds in August 2012 because the reserve accounts of these transactions were below the minimum required levels and required additional analysis which was completed for this review. Fitch uses its breakeven model to analyze tobacco performance. The breakeven model assesses how much the MSA payment received by the trust could decline for each bond to pay at the legal final maturity date. The amount of the latest MSA payment that the transaction has received, the capital structure, the reserve account, and the bond's legal final dates are the key inputs to the model. Since the life of these transactions is typically long and the cash flows can be unpredictable, qualitative adjustments may be taken to avoid rating volatility by requiring two years of consecutive model outputs in order to downgrade to the model implied output. However, if more than one-notch difference exists between the current rating and the model implied rating, the bond will be downgraded to one-notch above the model output. Tobacco ratings are capped at 'BBB+sf', based on Fitch's opinion of the strength of the tobacco industry. All bonds with model outputs 'bbb+' and below carry a Negative Outlook to address concern over a future deterioration in cash flows. Fitch affirms these ratings: Senior Series 2007A-1 Senior Current Interest Serial Bonds -- $6,395,000 due June 1, 2013 at 'BBB+sf'; Outlook Stable; -- $11,655,000 due June 1, 2013 at 'BBB+sf'; Outlook Stable; -- $20,570,000 due June 1, 2014 at 'BBB+sf'; Outlook Stable; -- $23,190,000 due June 1, 2015 at 'BBB+sf'; Outlook Stable; -- $28,875,000 due June 1, 2016 at 'BBB+sf'; Outlook Stable; -- $5,140,000 due June 1, 2017 at 'BBB+sf'; Outlook Stable; -- $27,255,000 due June 1, 2017 at 'BBB+sf'; Outlook Stable; Fitch downgrades the following ratings: Series 2007A-1 Senior Current Interest Turbo Term Bonds -- $863,100,000 due 2027 to 'Bsf' from 'BB-sf'; removed from Negative Watch and assigned a Negative Outlook; -- $610,525,000 due 2033 to 'Bsf' from 'BB-sf'; removed from Negative Watch and assigned a Negative Outlook; -- $1,250,000,000 due 2047 to 'Bsf' from 'BB-sf'; removed from Negative Watch and assigned a Negative Outlook; -- $693,575,000 due 2047 to 'Bsf' from 'BB-sf'; removed from Negative Watch and assigned a Negative Outlook; Series 2007A-2 Senior Convertible Turbo Term Bonds -- $389,192,591.40 due June 1, 2037 to 'Bsf' from 'BB-sf'; removed from Negative Watch and assigned a Negative Outlook. GREENWICH CAPITAL: Moody's Keeps Caa3 Rating on N-SO Securities --------------------------------------------------------------- Moody's Investors Service affirmed the ratings of ten classes of Greenwich Capital Commercial Funding Corp. Series 2004-FL2 as follows: Cl. C, Affirmed at Aaa (sf); previously on Dec 14, 2006 Upgraded to Aaa (sf) Cl. D, Affirmed at Aaa (sf); previously on Dec 14, 2006 Upgraded to Aaa (sf) Cl. E, Affirmed at Aaa (sf); previously on Dec 14, 2006 Upgraded to Aaa (sf) Cl. F, Affirmed at Aa1 (sf); previously on Jul 20, 2011 Upgraded to Aa1 (sf) Cl. G, Affirmed at A3 (sf); previously on Mar 7, 2012 Downgraded to A3 (sf) Cl. H, Affirmed at Baa3 (sf); previously on Mar 7, 2012 Downgraded to Baa3 (sf) Cl. J, Affirmed at B1 (sf); previously on Mar 7, 2012 Downgraded to B1 (sf) Cl. K, Affirmed at B3 (sf); previously on Mar 7, 2012 Downgraded to B3 (sf) Cl. L, Affirmed at Caa2 (sf); previously on Mar 7, 2012 Downgraded to Caa2 (sf) Cl. N-SO, Affirmed at Caa3 (sf); previously on Mar 7, 2012 Downgraded to Caa3 (sf) Ratings Rationale The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio and Moody's stressed debt service coverage ratio (DSCR) for the one remaining loan in the pool, the Southfield Town Center Loan, remaining within acceptable ranges. The Southfield Town Center Loan, which was transferred to special servicing in October 2012, had a final maturity date of November 5, 2012. As the transaction moves closer to the final rated distribution date in November 2019 without loan resolution the ratings will be lowered in accordance with Moody's methodology "Rating Caps for CMBS in the Tail Period" published October 27, 2011. Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan payoffs or a decline in subordination due to realized losses. Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near- term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock; albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing. The methodologies used in this rating were "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000, and "Rating Caps for CMBS in the Tail Period" published in October 2011. Moody's review incorporated the use of the excel-based Large Loan Model v 8.5. 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 a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated March 7, 2012. Deal Performance As of the January 8, 2013 Distribution Report, the transaction's aggregate certificate balance has decreased by approximately 84% to $151.3 million from $921.7 million at securitization due to the payoff of 15 loans in the pool and scheduled amortization. Currently the mortgage pool consists of one loan, the Southfield Town Center Loan. The loan is secured by a five building 2.1 million square foot office complex situated on 35 acres in Southfield, Michigan. The trust debt, which consists of $143.9 million of pooled debt and $7.3 million of non-pooled, or rake, debt (Class N-SO), is senior to approximately $64.8 million of non-trust mortgage debt and $25.0 million of mezzanine debt. The loan, which matured on November 5, 2012, was transferred to special servicing on October 4, 2012 based on a letter from the Borrower stating that they would not be able to pay off the loan at maturity. The special servicer and Borrower are currently negotiating a forbearance agreement. There has been a $375,036 loss to the trust, affecting Class L, and accumulated interest shortfalls total $90,451, also affecting Class L. As of November 2012, Southfield Town Center had over 200 tenants and was approximately 70% leased, the same as at Moody's last review. The three largest tenants are Fifth Third Bank (105,041 square feet; lease expiration in 2016), Alix Partners (58,120 square feet; lease expiration in 2018) and Microsoft (57,364 square feet; lease expiration in 2017 and 2018. These three tenants lease about 10% of the total net rentable area. Although occupancy has not significantly changed since securitization, when it was 73%, property performance has been hurt by declining rents, rent concessions given both to retain tenants and to attract new tenants, and a high market vacancy with little improvement forecasted over the next several years. Moody's loan to value (LTV) ratio for the trust debt is slightly over 100%. Moody's credit assessment for the pooled balance is Caa2, the same as at last review. GMAC COMMERCIAL 1997-C2: Moody's Hikes G Certs. Rating to 'Ba1' --------------------------------------------------------------- Moody's Investors Service upgraded the rating of one class and affirmed two classes of GMAC Commercial Mortgage Securities, Inc., Mortgage Pass-Through Certificates, Series 1997-C2 as follows: Cl. G, Upgraded to Ba1 (sf); previously on Mar 2, 2011 Upgraded to B2 (sf) Cl. H, Affirmed at C (sf); previously on Sep 14, 2005 Downgraded to C (sf) Cl. X, Affirmed at Caa3 (sf); previously on Feb 22, 2012 Downgraded to Caa3 (sf) Ratings Rationale The upgrade is due to the significant increase in subordination due to loan payoffs and amortization and overall stable pool performance. The pool has paid down by 59% since Moody's last review. The affirmation of the principle class is due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. The rating of the IO class, Class X, is consistent with the credit quality of its referenced classes and thus is affirmed. Moody's rating action reflects a base expected loss of 3.1% ($697,000) of the current balance. At last full review, Moody's cumulative base expected loss was 1.5% ($793,000). Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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 growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near- term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock; albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing. 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 CMBS Large Loan/Single Borrower Transactions" published in July 2000, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessment level, is incorporated for loans with similar credit assessments in the same transaction. Moody's review also utilized the IO calculator ver1.1, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 4 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 8.5 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 a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated February 23, 2012. Deal Performance As of the December 17, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 98% to $22.4 million from $1.1 billion at securitization. The Certificates are collateralized by three mortgage loans remaining in the pool, representing 54% of the pool, and one defeased loan, representing 46% of the pool. The defeased loan is collateralized with U.S. Government securities. Fifteen loans have been liquidated from the pool, resulting in an aggregate realized loss of $57.5 million (20.2% loss severity overall). Currently, there are no loans on the watchlist or in special servicing. Moody's was provided with full year 2011 and partial year 2012 operating results for 66% and 33%, respectively, of the conduit loans. Moody's weighted average LTV is 89% compared to 69% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 27% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 10.0%. Moody's actual and stressed DSCRs are 0.75X and 1.29X, respectively, compared to 1.26X and 1.57X 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 three conduit loans represent 54% of the deal balance. The largest loan is Kmart - Laredo Loan ($6.1 million -- 27.3% of the pool), which is secured by a 112,000 square foot (SF) single- tenant retail property located in Laredo, Texas. The property is 100% leased to Kmart through October 2022. Performance continues to remain stable. The loan amortizes 100% during its term and is co-terminus with the lease maturity. Moody's LTV and stressed DSCR are 85% and 1.27X, respectively. The second largest loan is the Kmart - Lafayette Loan ($5.1 million -- 23.1% of the pool), which is secured by a 119,000 SF retail property located in Lafayette, Indiana, which is 100% leased to Kmart through October 2022. The property is part of a larger strip center which is not part the collateral. The loan amortizes 100% during its term and is co-terminus with the lease maturity. Performance continues to remain stable. Moody's LTV and stressed DSCR are 101% and 1.07X, respectively. The last loan is the CVS Drugstore Loan ($839,000 -- 3.7% of the pool), which is secured by a 9,400 SF single-tenant retail property located in located in a suburban retail corridor in Media, Pennsylvania, 12 miles east of Philadelphia. The property is 100% leased to CVS through January 2018. The loan amortizes 100% during its term and is co-terminus with the lease maturity. Performance continues to remain stable. Moody's LTV and stressed DSCR are 39% and 2.76X, respectively. GMAC COMMERCIAL 2000-C3: Moody's Cuts Ratings on 2 Certs. to 'C' ---------------------------------------------------------------- Moody's Investors Service upgraded the rating of one class, affirmed one class and downgraded four classes of GMAC Commercial Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2000-C3 as follows: Cl. F, Upgraded to Aaa (sf); previously on May 10, 2012 Confirmed at Aa2 (sf) Cl. H, Affirmed at Baa2 (sf); previously on May 10, 2012 Confirmed at Baa2 (sf) Cl. J, Downgraded to Caa1 (sf); previously on May 10, 2012 Confirmed at B3 (sf) Cl. K, Downgraded to C (sf); previously on May 10, 2012 Confirmed at Caa2 (sf) Cl. L, Downgraded to C (sf); previously on May 10, 2012 Confirmed at Ca (sf) Cl. X, Downgraded to Caa2 (sf); previously on May 10, 2012 Confirmed at Caa1 (sf) Ratings Rationale The upgrade is due to increased credit support from loan payoffs and amortization. The pool has paid down by 41% since Moody's prior review. The downgrades to the principal and interest classes are due to increased realized losses and higher anticipated losses from troubled loans and loans in special servicing. The downgrade of the IO Class, Class X, is a result of the credit performance of its referenced classes. The affirmation is 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 class is sufficient to maintain their current ratings. Moody's rating action reflects a base expected loss of 12.8% of the current balance. At last review, Moody's cumulative base expected loss was 12.1%. The deal has paid down 41% since last review and Moody's cumulative base expected loss plus realized losses is 3.9% of the original pooled balance compared to 3.3% at last review. Moody's provides a current list of base losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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 growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near- term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock; albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing. 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 Structured Finance Interest-Only Securities" published in February 2012 and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessment level, is incorporated for loans with similar credit assessments in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 3 compared to 6 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 8.5 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 a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated May 10, 2012. Deal Performance As of the December 17, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 95% to $64.8 million from $1.3 billion at securitization. The Certificates are collateralized by seven mortgage loans ranging in size from 1% to 24% of the pool, with the non-defeased loans representing 58% of the pool. Two loans, representing 42% of the pool, have defeased and are secured by U.S. Government securities. Two loans, representing 9% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of its ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Thirty-one loans have been liquidated from the pool, resulting in an aggregate realized loss of $41.7 million (28% loss severity on average). One loan, representing 19% of the pool, is currently in special servicing. The specially serviced loan is the Valley Creek Office Property Loan ($12.1 million -- 18.7% of the pool), which is secured by a 128,000 square foot (SF) office building located in Golden Valley, Minnesota. The loan transferred to special servicing in March 2011 due to imminent maturity default as a result of a decrease in rental revenue. The loan became real estate owned (REO) in March 2012. As of April 2012 the property was 74% leased compared to 82% in December 2010 and occupancy has consistently decreased since 2008. Based on recent lease renewals, occupancy may further decrease to approximately 70% in early 2013. At this time, the special servicer indicated a third party has been hired to manage and lease the property. Moody's has assumed a high default probability for one poorly performing loan representing 8% of the pool and has estimated an aggregate $7.7 million loss for specially serviced and troubled loans (44% expected loss on average). Moody's was provided with full year 2011 and partial year 2012 operating results for 100% of the pool's non-specially serviced and non-defeased loans. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 76% compared to 93% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 13% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.3%. Excluding special serviced and troubled loans, Moody's actual and stressed DSCRs are 1.10X and 1.31X, respectively, compared to 0.99X and 1.17X 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 39% of the pool balance. The largest loan is the A-C Development Portfolio Loan ($15.8 million -- 24.3% of the pool), which is secured by four grocery anchored retail centers located in South Carolina and Georgia. The anchor in each center is Piggly Wiggly, which leases 78% of the portfolio net rentable area (NRA) on multiple leases that expire in 2018 and 2019. Property performance improved slightly between year-end 2011 and year-end 2010. The loan failed to pay off on its September 1, 2010 anticipated repayment date (ARD) and now has a provision for a lockbox and 2% higher interest rate. Moody's LTV and stressed DSCR are 80% and 1.22X, respectively, compared to 81% and 1.20X at last review. The second loan is the Courtyard by Marriott Loan ($5.3 million -- 8.2% of the pool), which is secured by a 113-room hotel located in Round Rock, Texas. The year-end 2011 occupancy and revenue per available room (RevPAR) were 52.3% and $49.6, respectively, compared to 52.6% and $50.38 in 2010. This loan has been on the master servicer's watchlist due to lower occupancy caused by decrease travel to the area and its location in a highly competitive market with several other nearby hotels. The loan is benefitting from amortization and a modification in 2004 extended the maturity date to September 2025. Due to the low occupancy and a large decrease in performance from securitization, Moody's views this as troubled a loan. Moody's LTV and stressed DSCR are 136% and 0.92X, respectively, compared to 137% and 0.91X at last review. The third largest loan is the Waterford at Summit View Apartments Loan ($4.3 million -- 6.6% of the pool), which represents a 132- unit multi-family property located in Swatara Township, Pennsylvania. Occupancy was reported at 92% as of September 2012 compared to 95% as of December 2011. Property performance is expected to decline slightly in 2012, as compared to 2011, due to an increase in operating expenses. The loan is benefitting from amortization and matures in November 2015. Moody's LTV and stressed DSCR are 65% and 1.50x, respectively, compared to 65% and 1.51x at last review. GSR MORTGAGE 2004-9: Moody's Cuts Rating on Cl. 4A1 Secs. to Ba2 ---------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of three tranches from one RMBS transaction backed by Prime loans, and issued by GSR Mortgage Loan Trust 2004-9. Complete rating actions are as follows: Issuer: GSR Mortgage Loan Trust 2004-9 Cl. 3A1, Downgraded to Ba2 (sf); previously on Mar 21, 2012 Upgraded to Baa2 (sf) Cl. 3A2, Downgraded to Ba3 (sf); previously on Mar 21, 2012 Upgraded to Ba1 (sf) Cl. 4A1, Downgraded to Ba2 (sf); previously on Mar 21, 2012 Confirmed at Ba1 (sf) Ratings Rationale The actions are a result of the recent performance of Prime jumbo pools originated before 2005 and reflect Moody's updated loss expectations on the pools. The downgrades are a result of deteriorating performance and structural features resulting in higher expected losses for certain bonds than previously anticipated. The methodologies used in this rating were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "Pre-2005 US RMBS Surveillance Methodology" published in January 2012. The methodology used in rating interest-only securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications and 2) small pool volatility Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility To project losses on prime jumbo pools with fewer than 100 loans, Moody's first calculates an annualized delinquency rate based on vintage, number of loans remaining in the pool and the level of current delinquencies in the pool. For prime jumbo pools originated before 2005, Moody's first applies a baseline delinquency rate of 3.0%. Once the loan count in a pool falls below 76, this rate of delinquency is increased by 1% for every loan fewer than 76. For example, for a pool with 75 loans, the adjusted rate of new delinquency would be 3.03%. In addition, if current delinquency levels in a small pool is low, future delinquencies are expected to reflect this trend. To account for that, the rate calculated above is multiplied by a factor ranging from 0.75 to 2.5 for current delinquencies ranging from less than 2.5% to greater than 10% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the methodology publication. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in September 2011 to 7.8% in December 2012. Moody's forecasts a further drop to 7.5% by 2014. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of the review actions associated with this announcement may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF312867 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF243269 GSR MORTGAGE 2006-9F: Moody's Cuts Rating on Cl. 5A-4 Secs. to C ---------------------------------------------------------------- Moody's Investors Service has upgraded 23 tranches and downgraded 17 tranches from six RMBS transactions issued by Goldman Sachs and MASTR Asset Securitization Trust. The collateral backing these deals primarily consist of first-lien, fixed Jumbo residential mortgages. The actions impact approximately $304 millions of RMBS issued from 2005 to 2007. Complete rating actions are as follows: Issuer: GSR Mortgage Loan Trust 2005-6F Cl. 1A-1, Upgraded to Ba1 (sf); previously on Apr 27, 2010 Downgraded to B1 (sf) Cl. 1A-2, Upgraded to Ba1 (sf); previously on Apr 27, 2010 Downgraded to B1 (sf) Cl. 1A-3, Upgraded to Ba1 (sf); previously on Apr 27, 2010 Downgraded to B1 (sf) Cl. 1A-4, Upgraded to Ba1 (sf); previously on Apr 27, 2010 Downgraded to B1 (sf) Cl. 3A-13, Upgraded to Ba1 (sf); previously on Apr 27, 2010 Downgraded to B1 (sf) Cl. 3A-15, Upgraded to Ba1 (sf); previously on Apr 27, 2010 Downgraded to B1 (sf) Cl. 3A-17, Upgraded to B1 (sf); previously on Apr 27, 2010 Downgraded to B3 (sf) Issuer: GSR Mortgage Loan Trust 2005-7F Cl. 1A-1, Upgraded to Baa3 (sf); previously on Apr 27, 2010 Downgraded to Ba3 (sf) Cl. 1A-2, Upgraded to Ba2 (sf); previously on Jan 20, 2012 Confirmed at B1 (sf) Cl. 2A-5, Upgraded to Ba3 (sf); previously on Apr 27, 2010 Downgraded to B1 (sf) Cl. 2A-6, Upgraded to Ba2 (sf); previously on Apr 27, 2010 Downgraded to B1 (sf) Cl. 2A-7, Upgraded to B2 (sf); previously on Jan 20, 2012 Upgraded to B3 (sf) Cl. 3A-1, Upgraded to Ba3 (sf); previously on Apr 27, 2010 Downgraded to B1 (sf) Cl. 3A-2, Upgraded to Ba2 (sf); previously on Apr 27, 2010 Downgraded to Ba3 (sf) Cl. 3A-3, Upgraded to Ba3 (sf); previously on Apr 27, 2010 Downgraded to B1 (sf) Cl. 3A-4, Upgraded to Ba2 (sf); previously on Apr 27, 2010 Downgraded to Ba3 (sf) Cl. 3A-5, Upgraded to Ba3 (sf); previously on Apr 27, 2010 Downgraded to B1 (sf) Cl. 3A-6, Upgraded to B2 (sf); previously on Apr 27, 2010 Downgraded to B3 (sf) Cl. 3A-9, Upgraded to Ba3 (sf); previously on Apr 27, 2010 Downgraded to B1 (sf) Cl. 3A-10, Upgraded to Ba3 (sf); previously on Apr 27, 2010 Downgraded to B1 (sf) Cl. 3A-11, Upgraded to B2 (sf); previously on Jan 20, 2012 Upgraded to B3 (sf) Cl. 3A-12, Upgraded to B2 (sf); previously on Jan 20, 2012 Upgraded to B3 (sf) Issuer: GSR Mortgage Loan Trust 2006-8F Cl. 1A-1, Downgraded to Caa1 (sf); previously on Apr 27, 2010 Confirmed at B3 (sf) Cl. A-X, Downgraded to Caa1 (sf); previously on Apr 27, 2010 Confirmed at B3 (sf) Cl. 2A-1, Downgraded to Caa1 (sf); previously on Apr 27, 2010 Confirmed at B3 (sf) Cl. 3A-3, Downgraded to Caa2 (sf); previously on Apr 27, 2010 Downgraded to Caa1 (sf) Cl. 3A-5, Downgraded to Caa2 (sf); previously on Aug 3, 2012 Downgraded to Caa1 (sf) Issuer: GSR Mortgage Loan Trust 2006-9F Cl. 1A-1, Downgraded to Caa2 (sf); previously on Apr 27, 2010 Confirmed at B3 (sf) Cl. A-X, Downgraded to Caa2 (sf); previously on Apr 27, 2010 Confirmed at B3 (sf) Cl. 5A-1, Downgraded to Caa2 (sf); previously on Apr 27, 2010 Downgraded to Caa1 (sf) Cl. 5A-2, Downgraded to Caa2 (sf); previously on Apr 27, 2010 Downgraded to Caa1 (sf) Cl. 5A-3, Downgraded to Caa2 (sf); previously on Apr 27, 2010 Downgraded to Caa1 (sf) Cl. 5A-4, Downgraded to C (sf); previously on Jul 1, 2009 Downgraded to Ca (sf) Cl. 6A-1, Downgraded to Caa3 (sf); previously on Apr 27, 2010 Downgraded to Caa2 (sf) Cl. 6A-2, Downgraded to Caa3 (sf); previously on Apr 27, 2010 Downgraded to Caa2 (sf) Cl. 7A-1, Downgraded to Caa1 (sf); previously on Apr 27, 2010 Confirmed at B3 (sf) Cl. 8A-1, Downgraded to Caa1 (sf); previously on Apr 27, 2010 Confirmed at B3 (sf) Cl. 9A-1, Downgraded to Caa1 (sf); previously on Apr 27, 2010 Confirmed at B3 (sf) Issuer: GSR Mortgage Loan Trust 2007-1F Cl. 1A-1, Downgraded to Caa1 (sf); previously on Aug 3, 2012 Upgraded to B3 (sf) Issuer: MASTR Asset Securitization Trust 2006-1 Cl. 1-A-2, Upgraded to Ba1 (sf); previously on Sep 20, 2012 Confirmed at B1 (sf) Ratings Rationale These actions reflect recent performance of the underlying pools and Moody's updated loss expectations on the pools. The actions also reflect correction of an error in the Structured Finance Workstation (SFW) cash flow model used by Moody's in rating these transactions, specifically in how the model handled interest shortfall allocation among different sub-pools in transactions with a double-ratio strip. Double-ratio strip transactions are deals where a pool of collateral with varied mortgage rates supports two (or more) groups of senior bonds with fixed coupon rates, one with a high coupon rate and one with a low coupon rate. To support this feature, the pool is divided into subgroups. All underlying loans with rates at or below the bond with the lower coupon are placed in one subgroup and all loans with rates higher than the bond with the higher coupon are placed in another subgroup. Loans with a net loan rate between the two rates are hypothetically split and allocated in different proportions to the two sub-pools so that the weighted average rate of each sub-pool matches the rate on the respective bonds. In the past, Moody's model commingled the principal and interest collections from these sub-pools before allocating funds to the respective senior bonds, first as interest and then as principal. Under normal circumstances, this simplifying assumption works fine. However, in the current environment of large rate modifications, the interest and principal collections are not enough to pay the scheduled interest and principal on the senior bonds. Therefore, interest is first being paid in full to all senior bonds and the remaining funds are distributed as principal, resulting in a principal shortfall. Commingling funds results in allocating the principal shortfall pro-rata to the bonds. This pro-rata allocation is inaccurate because the underlying loans that were modified were not split pro-rata into the sub-pools. Higher rate loans, which are more prone to rate modification, by design back the sub-pools with higher target rates. Allocating the principal shortfall pro-rata is thus detrimental to bonds backed by the lower target-rate sub- pool and excessively beneficial to bonds backed by the higher target-rate sub-pool. Moody's updated modeling first allocates interest shortfalls by scaling the actual interest collected compared to the target interest that is to be received under normal circumstances, before distributing the available funds. This approach thus keeps track of the level of principal shortfall resulting from each sub-pool, and discriminates between the bonds backed by the different net rate sub-pools. However, the actions taken are driven by performance of the individual pools. The change in the model did not result in a rating movement. The methodologies used in this rating were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. The methodology used in rating Interest- Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications and 2) small pool volatility Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility The above mentioned approach is also adjusted slightly when estimating losses on pools left with a small number of loans to account for the volatile nature of small pools. Even if a few loans in a small pool become delinquent, there could be a large increase in the overall pool delinquency level due to the concentration risk. To project losses on pools with fewer than 100 loans, Moody's first estimates a "baseline" average rate of new delinquencies for the pool that varies from 3% to 10% on average. The baseline rates are higher than the average rate of new delinquencies for larger pools for the respective vintages. Once the baseline rate is set, further adjustments are made based on 1) the number of loans remaining in the pool and 2) the level of current delinquencies in the pool. The volatility of pool performance increases as the number of loans remaining in the pool decreases. Once the loan count in a pool falls below 75, the rate of delinquency is increased by 1% for every loan less than 75. For example, for a pool with 74 loans with a base rate of new delinquency of 3.00%, the adjusted rate of new delinquency would be 3.03%. In addition, if current delinquency levels in a small pool are low, future delinquencies are expected to reflect this trend. To account for that, the rate calculated above is multiplied by a factor ranging from 0.75 to 2.5 for current delinquencies ranging from less than 2.5% to greater than 10% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the "2005 -- 2008 US RMBS Surveillance Methodology" publication. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in September 2011 to 7.8% in December 2012. Moody's forecasts a further drop to 7.5% by 2014. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF312694 A list of updated estimated pool losses and sensitivity analysis is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF196023 IMPAC CMB 2005-2: Moody's Cuts Rating on 1-M-1 Tranche to 'Caa2' ---------------------------------------------------------------- Moody's Investors Service has downgraded three tranches issued by Impac CMB Trust Series 2005-2 Collateralized Asset-Backed Bonds, Series 2005-2. The collateral backing the deal primarily consists of first-lien, Alt-A residential mortgages. The actions impact approximately $169 million of RMBS issued in 2005. Complete rating actions are as follows: Issuer: Impac CMB Trust Series 2005-2 Collateralized Asset-Backed Bonds, Series 2005-2 Cl. 1-A-1, Downgraded to Baa1 (sf); previously on May 11, 2010 Downgraded to A1 (sf) Cl. 1-A-2, Downgraded to Ba2 (sf); previously on May 11, 2010 Downgraded to Baa3 (sf) Cl. 1-M-1, Downgraded to Caa2 (sf); previously on May 11, 2010 Downgraded to B2 (sf) RATINGS RATIONALE The actions are a result of the recent performance of the underlying Alt-A pool and reflect Moody's updated loss expectations on the pool. The downgrades are a result of deteriorating performance and structural features resulting in higher expected losses for certain bonds than previously anticipated. The methodologies used in this rating were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. The methodology used in rating Interest- Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications. Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 7.8% in December 2012. Moody's forecasts a further drop to 7.5% by 2014. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF313999 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://v3.moodys.com/page/viewresearchdoc.aspx?docid=PBS_SF198174 JP MORGAN 2004-S2: Moody's Cuts Ratings on 2 RMBS Tranches to Ca ---------------------------------------------------------------- Moody's Investors Service has downgraded 19 tranches from two RMBS transactions issued by J.P. Morgan Mortgage Trust 2004-S2 and WaMu Mortgage Pass-Through Certificates, Series 2004-S2. The collateral backing these deals primarily consist of first-lien, fixed Jumbo residential mortgages. The actions impact approximately $135.6 millions of RMBS issued in 2004. Complete rating actions are as follows: Issuer: J.P. Morgan Mortgage Trust 2004-S2 Cl. 1-A-3, Downgraded to Baa3 (sf); previously on May 10, 2012 Upgraded to Baa1 (sf) Cl. 1-A-7, Downgraded to Baa3 (sf); previously on May 10, 2012 Upgraded to Baa1 (sf) Cl. 5-A-1, Downgraded to Ba1 (sf); previously on May 10, 2012 Confirmed at Baa2 (sf) Cl. 6-A-1, Downgraded to Ba2 (sf); previously on May 10, 2012 Confirmed at Baa3 (sf) Cl. 6-A-P, Downgraded to Ba2 (sf); previously on Apr 29, 2011 Downgraded to Ba1 (sf) Cl. 3-B-1, Downgraded to Ca (sf); previously on May 10, 2012 Downgraded to Caa3 (sf) Cl. 2-B-2, Downgraded to Ca (sf); previously on Apr 29, 2011 Downgraded to Caa3 (sf) Cl. 1-B-2, Downgraded to Caa3 (sf); previously on May 10, 2012 Upgraded to Caa1 (sf) Cl. 4-A-1, Downgraded to Ba2 (sf); previously on May 10, 2012 Confirmed at Ba1 (sf) Cl. 4-A-2, Downgraded to Ba2 (sf); previously on May 10, 2012 Downgraded to Ba1 (sf) Cl. 4-A-3, Downgraded to B1 (sf); previously on May 10, 2012 Confirmed at Ba1 (sf) Cl. 4-A-4, Downgraded to Ba3 (sf); previously on May 10, 2012 Confirmed at Baa3 (sf) Cl. 4-A-5, Downgraded to Ba3 (sf); previously on May 10, 2012 Confirmed at Baa3 (sf) Cl. 4-A-6, Downgraded to Ba1 (sf); previously on May 10, 2012 Confirmed at Baa3 (sf) Cl. 4-A-P, Downgraded to B1 (sf); previously on Apr 29, 2011 Downgraded to Ba2 (sf) Issuer: WaMu Mortgage Pass-Through Certificates, Series 2004-S2 Cl. 2-A-5, Downgraded to Baa1 (sf); previously on Jun 4, 2012 Confirmed at A2 (sf) Cl. 2-A-6, Downgraded to Baa3 (sf); previously on Jun 4, 2012 Confirmed at Baa2 (sf) Cl. 3-A-2, Downgraded to Baa1 (sf); previously on Jun 4, 2012 Upgraded to A1 (sf) Cl. 3-A-3, Downgraded to Baa1 (sf); previously on Jun 4, 2012 Upgraded to A1 (sf) Ratings Rationale These actions reflect recent performance of the underlying pools and Moody's updated loss expectations on the pools. The actions also reflect correction of an error in the Structured Finance Workstation (SFW) cash flow model used by Moody's in rating these transactions, specifically in how the model handled interest shortfall allocation among different sub-pools in transactions with a double-ratio strip. Double-ratio strip transactions are deals where a pool of collateral with a varied mortgage rates supports two (or more) groups of senior bonds with fixed coupon rates, one with a high coupon rate and one with a low coupon rate. To support this feature, the pool is divided into subgroups. All underlying loans with rates at or below the bond with the lower coupon are placed in one subgroup and all loans with rates higher than the bond with the higher coupon are placed in another subgroup. Loans with a net loan rate between the two rates are hypothetically split and allocated in different proportions to the two sub-pools so that the weighted average rate of each sub-pool matches the rate on the respective bonds. In the past, Moody's model commingled the principal and interest collections from these sub-pools before allocating funds to the respective senior bonds, first as interest and then as principal. Under normal circumstances, this simplifying assumption works fine. However, in the current environment of large rate modifications, the interest and principal collections are not enough to pay the scheduled interest and principal on the senior bonds. Therefore, interest is first being paid in full to all senior bonds and the remaining funds are distributed as principal, resulting in a principal shortfall. Commingling funds results in allocating the principal shortfall pro-rata to the bonds. This pro-rata allocation is inaccurate because the underlying loans that were modified were not split pro-rata into the sub-pools. Higher rate loans, which are more prone to rate modification, by design back the sub-pools with higher target rates. Allocating the principal shortfall pro-rata is thus detrimental to bonds backed by the lower target-rate sub- pool and beneficial to bonds backed by the higher target-rate sub- pool. Moody's updated modeling first allocates interest shortfalls by scaling the actual interest collected compared to the target interest that is to be received under normal circumstances, before distributing the available funds. This approach thus keeps track of the level of principal shortfall resulting from each sub-pool, and discriminates between the bonds backed by the different net rate sub-pools. However, the actions taken are driven by performance of the individual pools. The correction in the model did not result in a rating change. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "Pre-2005 US RMBS Surveillance Methodology" published in January 2012. The methodology used in rating Interest-Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications and 2) small pool volatility Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility The above mentioned approach is also adjusted slightly when estimating losses on pools left with a small number of loans to account for the volatile nature of small pools. Even if a few loans in a small pool become delinquent, there could be a large increase in the overall pool delinquency level due to the concentration risk. To project losses on pools with fewer than 100 loans, Moody's first estimates a "baseline" average rate of new delinquencies for the pool that varies from 3% to 10% on average. The baseline rates are higher than the average rate of new delinquencies for larger pools for the respective vintages. Once the baseline rate is set, further adjustments are made based on 1) the number of loans remaining in the pool and 2) the level of current delinquencies in the pool. The volatility of pool performance increases as the number of loans remaining in the pool decreases. Once the loan count in a pool falls below 75, the rate of delinquency is increased by 1% for every loan less than 75. For example, for a pool with 74 loans with a base rate of new delinquency of 3.00%, the adjusted rate of new delinquency would be 3.03%. In addition, if current delinquency levels in a small pool are low, future delinquencies are expected to reflect this trend. To account for that, the rate calculated above is multiplied by a factor ranging from 0.75 to 2.5 for current delinquencies ranging from less than 2.5% to greater than 10% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the "Pre-2005 US RMBS Surveillance Methodology" publication. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in September 2011 to 7.8% in December 2012. Moody's forecasts a further drop to 7.5% by 2014. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF312673 A list of updated estimated pool losses and sensitivity analysis is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF243269 LB-UBS 2003-C3: Moody's Affirms 'Caa2' Rating on Class S Certs. --------------------------------------------------------------- Moody's Investors Service upgraded the ratings of four classes and affirmed 13 classes of LB-UBS Commercial Mortgage Trust 2003-C3, Commercial Mortgage Pass-Through Certificates, Series 2003-C3 as follows: Cl. A-4, Affirmed at Aaa (sf); previously on Jun 30, 2003 Definitive Rating Assigned Aaa (sf) Cl. B, Affirmed at Aaa (sf); previously on Apr 20, 2006 Upgraded to Aaa (sf) Cl. C, Affirmed at Aaa (sf); previously on Apr 20, 2006 Upgraded to Aaa (sf) Cl. D, Affirmed at Aaa (sf); previously on Jun 17, 2009 Upgraded to Aaa (sf) Cl. E, Upgraded to Aaa (sf); previously on Jun 17, 2009 Upgraded to Aa1 (sf) Cl. F, Upgraded to Aa1 (sf); previously on Jun 17, 2009 Upgraded to Aa2 (sf) Cl. G, Upgraded to Aa3 (sf); previously on Jun 17, 2009 Upgraded to A1 (sf) Cl. H, Upgraded to A2 (sf); previously on Jun 17, 2009 Upgraded to A3 (sf) Cl. J, Affirmed at Baa1 (sf); previously on Jun 17, 2009 Upgraded to Baa1 (sf) Cl. K, Affirmed at Baa3 (sf); previously on Jun 30, 2003 Definitive Rating Assigned Baa3 (sf) Cl. L, Affirmed at Ba1 (sf); previously on Jun 30, 2003 Definitive Rating Assigned Ba1 (sf) Cl. M, Affirmed at Ba2 (sf); previously on Jun 30, 2003 Definitive Rating Assigned Ba2 (sf) Cl. N, Affirmed at B1 (sf); previously on Jan 20, 2012 Downgraded to B1 (sf) Cl. P, Affirmed at B2 (sf); previously on Jan 20, 2012 Downgraded to B2 (sf) Cl. Q, Affirmed at B3 (sf); previously on Jan 20, 2012 Downgraded to B3 (sf) Cl. S, Affirmed at Caa2 (sf); previously on Jan 20, 2012 Downgraded to Caa2 (sf) Cl. X-CL, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Ratings Rationale The upgrades are due primarily to paydowns from maturing and liquidated loans and overall stable pool performance. The pool has paid down by 32% since Moody's prior review. The upgrades also reflect Moody's assumption that many of the maturing loans in the pool are well-positioned for refinance. The affirmations of the principal classes are due to key parameters, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. The rating of the IO Class, Class X-CL, is consistent with the credit performance of its referenced classes and thus is affirmed. Moody's rating action reflects a base expected loss of approximately 1.9% of the current deal balance. At last review, Moody's base expected loss was approximately 2.6%. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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 growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near- term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock; albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing. The methodologies used in this rating were "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005, "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000 and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's review incorporated the use of the Excel-based CMBS Conduit Model v 2.61 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 assessment 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 assessments in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1 which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point . For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 10 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 8.5 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 a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated January 20, 2012. Deal Performance As of the December 17, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 60% to $540 million from $1.34 billion at securitization. The Certificates are collateralized by 67 mortgage loans ranging in size from less than 1% to 17% of the pool, with the top ten loans (excluding defeasance) representing 58% of the pool. The pool includes two loans with investment-grade credit assessments, representing 36% of the pool. Sixteen loans, representing approximately 22% of the pool, are defeased and are collateralized by U.S. Government securities. Twenty-two loans, representing 17% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of its ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Ten loans have liquidated from the pool, resulting in an aggregate realized loss of $11 million (39% average loan loss severity). Currently, one loan, representing less than 1% of the pool, is in special servicing. Moody's has assumed a high default probability for three poorly- performing loans representing 2% of the pool. Moody's analysis attributes to the specially serviced and troubled loans an aggregate $3.8 million loss (22% expected loss severity overall). Moody's was provided with full-year 2011 and partial year 2012 operating results for 96% and 76% of the performing pool, respectively. Excluding the specially serviced and troubled loans, Moody's weighted average LTV is 80% compared to 90% at last full review. Moody's net cash flow reflects a weighted average haircut of 11.6% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.8%. Excluding the specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.41X and 1.37X, respectively, compared to 1.27X and 1.22X 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 assessment is the Polaris Fashion Place Loan ($101 million -- 19% of the pool). The loan is secured by a 1.6 million square foot regional mall located in Columbus, Ohio. Mall anchors include Sears, Macy's, JCPenney, Von Maur, The Great Indoors, and Saks Fifth Avenue. The mall has been a consistent strong performer, and the property continues to improve with the economic recovery. October 2012 inline occupancy was 100%, up slightly from 99% at Moody's last review. In 2011 comp inline sales at the mall were up 10% from the prior year. Glimcher Realty Trust is the loan sponsor. The property is also encumbered by a $25 million B-Note, which is held outside the trust. Moody's credit assessment and stressed DSCR are A1 and 1.78X, respectively, compared to A2 and 1.65X at last review. The second largest loan with a credit assessment is the Pembroke Lakes Mall Loan ($93 million -- 17% of the pool). The loan is secured by a 1.1 million square foot regional mall in the Fort Lauderdale, Florida area. The mall anchors are Macy's, J.C. Penney, Dillard's, Sears, Dillard's Men, and Macy's Home Store. Mall performance has remained stable for the past several years. Inline occupancy was 88% as of September 2012, down slightly from 89% in September 2011. The property is also encumbered by a $27 million B-Note, which is held outside the trust. The mall sponsor is Chicago-based mall REIT General Growth Properties, Inc. This mall loan was not included in the REIT's 2009 bankruptcy proceedings. Moody's current credit assessment and stressed DSCR are Aaa and 2.31X, respectively, compared to Aaa and 2.14X at last review. The top three performing conduit loans represent 14% of the pool. The largest loan is the Broadcasting Square Loan ($43 million -- 8% of the pool), which is secured by a 470,000 square foot retail power center located in Reading, Pennsylvania. Retailers at the center include Weiss Markets, Dick's Sporting Goods, and Babies 'R Us. Target is the shadow anchor. Occupancy as of September 2012 was 99%, the same as at Moody's last review. Moody's current LTV and stressed DSCR are 74% and 1.46X, respectively, compared to 76% and 1.43X at last review. The second largest loan is a pair of cross-collateralized mortgages ($18 million -- 3% of the pool), which are secured, respectively, by the Maple View Shopping Center in Grayslake, Illinois and the Crystal Lake Shopping Center in Crystal Lake, Illinois. Maple View is a grocery-anchored center (Jewel Food Stores; parent company Supervalu, Inc.) with a June 2012 reported occupancy of 92%. Crystal Lake is anchored by movie theater operator Regal Cinemas, and was 98% occupied as of June 2012 reporting. Moody's current LTV and stressed DSCR are 71% and 1.41X, respectively, compared to 72% and 1.05X at last review. The third largest loan is the Lynnfield Office Park Loan ($15 million -- 3% of the pool), which is secured by a 280,000 square foot office property located in Memphis, Tennessee. The largest tenant is First Tennessee Bank (43% of property net rentable area; lease expiration July 2018; Moody's senior unsecured rating Baa1, negative outlook). Occupancy was 81% as of June 2012 reporting, essentially unchanged from Moody's last review. Moody's current LTV and stressed DSCR are 98% and, 1.13X respectively, compared to 109% and 1.01X at last review. LB-UBS 2005-C7: S&P Lowers Rating on Class SP-7 Notes to 'B-' ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on five "SP" raked certificate classes from LB-UBS Commercial Mortgage Trust 2005-C7, a U.S. commercial mortgage-backed securities (CMBS) transaction. At the same time, Standard & Poor's removed one of these ratings from CreditWatch with negative implications and three from CreditWatch developing. In addition, Standard & Poor's affirmed its ratings on two "SP" raked certificate classes from the same transaction and removed both ratings from CreditWatch developing (see list). The CreditWatch resolutions are related to CreditWatch placements that S&P initiated on Sept. 5, 2012. "The rating actions follow our revaluation of the Station Place I office building securing the fixed-rate note, which provides 100% of the cash flow for the class "SP" raked certificates in the transaction. The actions follow our review of the loan structure and our recently updated criteria for rating U.S. and Canadian CMBS transactions, which was the primary driver of the rating actions. Our adjusted valuation on the office property yielded a stressed loan-to-value ratio of 98.0% on the whole-loan balance," S&P said. The property is secured by an 11-story, 707,483-square-foot office building in Washington, D.C., that is 99.6% leased to the U.S. Securities and Exchange Commission through April 2019. This loan has a whole-loan balance of $218.2 million, divided into two portions: a senior component totaling $155.2 million and a subordinate nonpooled component with a balance of $63.0 million. The trust's portion of the pooled balance is $13.8 million (0.8% of the pooled trust balance), and the $63.0 million nonpooled portion is raked to the "SP" certificates. The pooled portion of the loan in LB-UBS 2005-C7 fully amortizes by 2015, while the "SP" rake certificates that receive no principal amortization mature in 2025. A full discussion of the methodologies employed in the property-level analysis can be found in "CMBS Global Property Evaluation Methodology," published on Sept. 5, 2012. The rating actions follow a detailed review of the performance of the collateral supporting the relevant securities and transaction structures. This review was similar to the review S&P conducted before placing 744 U.S. and Canadian CMBS ratings on CreditWatch following the release of S&P updated ratings criteria for these transactions, but it was more detailed with respect to collateral and transaction performance. For more information on the analytic process S&P used for those CreditWatch placements, refer to "The Application Of Standard & Poor's Revised U.S. And Canadian CMBS Criteria For The Sept. 5, 2012, CreditWatch Actions," Sept. 5, 2012. 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 17-g7 Disclosure Reports included in this credit rating report are available at http://standardandpoorsdisclosure-17g7.com RATINGS LOWERED AND REMOVED FROM CREDITWATCH LB-UBS Commercial Mortgage Trust 2005-C7 Rating Class To From Credit enhancement(%) SP-2 A+ (sf) AA(sf)/Watch Dev N/A SP-3 A- (sf) A(sf)/Watch Dev N/A SP-4 BBB+(sf) A-(sf)/Watch Dev N/A SP-7 B- (sf) BB (sf)/Watch Neg N/A RATING LOWERED LB-UBS Commercial Mortgage Trust 2005-C7 Rating Class To From Credit enhancement(%) SP-1 AA (sf) AAA(sf) N/A RATINGS AFFIRMED AND REMOVED FROM CREDITWATCH LB-UBS Commercial Mortgage Trust 2005-C7 Rating Rating Class To From Credit enhancement(%) SP-5 BBB(sf) BBB(sf)/Watch Dev N/A SP-6 BB+(sf) BB+(sf)/Watch Dev N/A LEHMAN MORTGAGE 2007-5: Moody's Ups Rating on 2-A4 Notes to Caa3 ---------------------------------------------------------------- Moody's Investors Service has upgraded the rating on the Cl. 2-A4 bond from Lehman Mortgage Trust 2007-5. The collateral backing this deal primarily consists of first-lien, fixed Alt-A residential mortgages. Complete rating actions are as follows: Issuer: Lehman Mortgage Trust 2007-5 Cl. 2-A4, Upgraded to Caa3 (sf); previously on Jan 14, 2011 Downgraded to C (sf) Ratings Rationale The rating action reflects a correction in Moody's interpretation of the discrepancy in loss allocation rules between the Prospectus Supplement and the Pooling and Servicing Agreement (PSA). The Prospectus Supplement allows for the Cl. 2-A4 bond to act as a support for Cl. 2-A3, while the PSA provides for the Cl. 2-A2 bond to act as a support instead. Wells Fargo, the trustee, has confirmed that it is following the PSA. Cl. 2-A2 is an interest- only (IO) class. As a result, Cl. 2-A3 does not benefit from any additional support and is receiving its pro-rata share of losses along with Cl. 2-A4. Moody's has adjusted the rating of the Cl. 2- A4 bond accordingly. The methodologies used in this rating was "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. The methodology used in rating Interest- Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications. Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. When assigning the final ratings to bonds, in addition to the approach described above, Moody's considered the volatility of the projected losses and timeline of the expected defaults. The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 8.5% in December 2011 to 7.8% in December 2012. Moody's expects housing prices to gradually rise towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact transaction performance. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF312669 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://v3.moodys.com/page/viewresearchdoc.aspx?docid=PBS_SF198174 MADISON SQUARE 2004-1: Fitch Cuts Ratings on 2 Note Classes to CC ----------------------------------------------------------------- Fitch Ratings has downgraded two and affirmed three classes issued by Madison Square 2004-1. Key Rating Drivers: Since Fitch's last rating action in January 2012, approximately 25.6% of the underlying collateral has been downgraded. Currently, 94.4% of the portfolio has a Fitch derived rating below investment grade and 87.6% has a rating in the 'CCC' category and below, compared to 91.3% and 69.4%, respectively, at the last rating action. Over this period, the transaction has received $32.6 million in pay downs resulting in the full repayment of the class L and M notes and $7.1 million in pay downs to the class N notes. This transaction was analyzed under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model (PCM) for projecting future default levels for the underlying portfolio. Fitch also analyzed the structure's sensitivity to the assets that are distressed, experiencing interest shortfalls, and those with near-term maturities. Additionally, a deterministic analysis was performed where the recovery estimate on the distressed collateral was modeled in accordance with the principal waterfall. An asset by asset analysis was then performed for the remaining assets to determine the collateral coverage for the remaining liabilities. Based on this analysis, the credit enhancement levels for the class N and O notes are consistent with the ratings indicated below. For the class P through S notes, Fitch analyzed each class' sensitivity to the default of the distressed assets ('CCC' and below). Given the high probability of default of the underlying assets and the expected limited recovery prospects upon default, the class P and Q notes have been downgraded to 'CCsf', indicating that default is probable. Similarly, the class S notes have been affirmed at 'Csf', indicating that default is inevitable. The Stable Outlook on the class N notes reflects Fitch's view that the notes will continue to delever. The Negative Outlook on the class O notes reflects the risk of adverse selection as the portfolio continues to amortize. Madison Square 2004-1 is a commercial mortgage backed security (CMBS) B-piece resecuritization that closed March 31, 2004. The transaction is collateralized by 18 assets from six obligors from the 1997 through 1999 vintages. Fitch has taken these following actions as indicated: -- $21,953,742 class N notes affirmed at 'A+sf'; Outlook to Stable from Negative; -- $29,028,000 class O notes affirmed at 'BBsf'; Outlook Negative; -- $39,819,972 class P notes downgraded to 'CCsf' from 'Bsf'; -- $21,072,640 class Q notes downgraded to 'CCSf' from 'Bsf'; -- $16,248,438 class S notes affirmed at 'Csf'. MARQUETTE PARK: Moody's Hikes Rating on Class D Notes to 'Ba2' -------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of the following notes issued by Marquette Park CLO Ltd: U.S.$26,000,000 Class B Second Priority Deferrable Floating Rate Notes Due July 2020, Upgraded to Aa2 (sf); previously on June 30, 2011 Upgraded to A2 (sf); U.S.$9,250,000 Class C Third Priority Deferrable Floating Rate Notes Due July 2020, Upgraded to A3 (sf); previously on June 30, 2011 Upgraded to Baa3 (sf); and U.S.$8,750,000 Class D Fourth Priority Deferrable Floating Rate Notes Due July 2020, Upgraded to Ba2 (sf); previously on June 30, 2011 Upgraded to Ba3 (sf). Ratings Rationale According to Moody's, the rating actions taken on the notes are primarily a result of deleveraging of the senior notes and an increase in the transaction's overcollateralization ratios since the rating action in June 2011. Moody's notes that the Class A Notes have been paid down by approximately 27% or $60.7 million since the last rating action. Based on the latest trustee report dated November 30, 2012, the Class A, Class B, Class C, and Class D overcollateralization ratios are reported at 135.12%, 116.44%, 110.98%, and 106.26%, respectively, versus June 2011 levels of 124.44%, 111.43%, 107.44%, and 103.91%, respectively. Additionally, Moody's notes that the WARF has been stable since the last rating action. Due to the impact of revised and updated key assumptions referenced in "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool to have a performing par and principal proceeds balance of $219 million, defaulted par of $2.3 million, a weighted average default probability of 14.41% (implying a WARF of 2464), a weighted average recovery rate upon default of 50.20%, and a diversity score of 63. 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. Marquette Park CLO Ltd., issued in December 2005, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. The principal methodology used in this rating was "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in June 2011. In addition to the base case analysis described above, Moody's also performed sensitivity analyses to test the impact on all rated notes of various default probabilities. Below is a summary of the impact of different default probabilities (expressed in terms of WARF levels) on all rated notes (shown in terms of the number of notches' difference versus the current model output, where a positive difference corresponds to lower expected loss), assuming that all other factors are held equal: Moody's Adjusted WARF -- 20% (1971) Class A: 0 Class B: +1 Class C: +3 Class D: +2 Moody's Adjusted WARF + 20% (2957) Class A: 0 Class B: -2 Class C: -2 Class D: 0 Moody's notes that this transaction is subject to a high level of macroeconomic uncertainty, as evidenced by 1) uncertainties of credit conditions in the general economy and 2) the large concentration of upcoming speculative-grade debt maturities which may create challenges for issuers to refinance. CLO notes' performance may also be impacted by 1) the manager's investment strategy and behavior and 2) divergence in legal interpretation of CLO documentation by different transactional parties due to embedded ambiguities. Sources of additional performance uncertainties are described below: 1) Deleveraging: The main source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging may accelerate due to high prepayment levels in the loan market and/or collateral sales by the manager, which may have significant impact on the notes' ratings. 2) Recovery of defaulted assets: Market value fluctuations in defaulted assets reported by the trustee and those assumed to be defaulted by Moody's may create volatility in the deal's overcollateralization levels. Further, the timing of recoveries and the manager's decision to work out versus sell defaulted assets create additional uncertainties. Moody's analyzed defaulted recoveries assuming the lower of the market price and the recovery rate in order to account for potential volatility in market prices. MID-STATE CAPITAL 2004-1: Moody's Hikes B Tranche Rating to 'B2' ---------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of three tranches from two RMBS transactions issued by Mid-State from 2000 and 2004. The collateral backing these transactions consists primarily of stick-built single family homes. Issuer: Mid-State Capital Corporation 2004-1 Trust Cl. M-2, Upgraded to Ba1 (sf); previously on Jun 3, 2009 Downgraded to Ba3 (sf) Cl. B, Upgraded to B2 (sf); previously on Jun 3, 2009 Downgraded to Caa3 (sf) Issuer: Mid-State Trust VIII Notes, Upgraded to Ba3 (sf); previously on Jun 1, 2011 Confirmed at B2 (sf) Underlying Rating: Upgraded to Ba3 (sf); previously on Jun 1, 2011 Confirmed at B2 (sf) Financial Guarantor: Ambac Assurance Corporation (Segregated Account - Unrated) Ratings Rationale The actions are a result of the recent performance of these pools and reflect Moody's updated loss expectations on the pools. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and " US Manufactured Housing Loan ABS Surveillance Methodology" published in December 2012. Moody's adjusts the methodologies noted above for bonds that financial guarantors insure. Bonds Insured by Financial Guarantors The Notes issued by Mid-State Trust VIII are wrapped by Ambac Assurance Corp. (Segregated Account -- Not Rated). The credit quality of RMBS that a financial guarantor insures reflect the higher of the credit quality of the guarantor or the RMBS without the benefit of the guarantee. As a result, the rating on the security is the higher of 1) the guarantor's financial strength rating and 2) the current underlying rating, which is what the rating of the security would be absent consideration of the guaranty. The principal methodology Moody's uses in determining the underlying rating is the same methodology for rating securities that do not have financial guaranty, described earlier. Securities wrapped by Ambac Assurance Corporation are rated at their underlying rating without consideration of Ambac's guaranty. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in September 2011 to 7.7% in November 2012. Moody's forecasts a further drop to 7.5% by 2014. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers, updated estimated pool losses, and sensitivity analysis may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF312512 MERRILL LYNCH 2006-CA: Moody's Hikes Rating on L Certs. to Caa2 --------------------------------------------------------------- Moody's Investors Service upgraded the ratings of seven classes and affirmed eight classes of Merrill Lynch Financial Assets Inc., Commercial Mortgage Pass-Through Certificates, Series 2006-Canada 20 as follows: Cl. A-2, Affirmed at Aaa (sf); previously on Oct 27, 2006 Definitive Rating Assigned Aaa (sf) Cl. A-3, Affirmed at Aaa (sf); previously on Oct 27, 2006 Definitive Rating Assigned Aaa (sf) Cl. B, Affirmed at Aa1 (sf); previously on Jan 20, 2012 Upgraded to Aa1 (sf) Cl. C, Affirmed at A1 (sf); previously on Jan 20, 2012 Upgraded to A1 (sf) Cl. D, Affirmed at Baa2 (sf); previously on Jan 20, 2012 Upgraded to Baa2 (sf) Cl. E, Upgraded to Baa3 (sf); previously on Oct 1, 2009 Downgraded to Ba2 (sf) Cl. F, Upgraded to Ba2 (sf); previously on Oct 1, 2009 Downgraded to B1 (sf) Cl. G, Upgraded to B1 (sf); previously on Oct 1, 2009 Downgraded to B3 (sf) Cl. H, Upgraded to B2 (sf); previously on Oct 1, 2009 Downgraded to Caa1 (sf) Cl. J, Upgraded to B3 (sf); previously on Oct 1, 2009 Downgraded to Caa2 (sf) Cl. K, Upgraded to Caa1 (sf); previously on Oct 1, 2009 Downgraded to Caa3 (sf) Cl. L, Upgraded to Caa2 (sf); previously on Oct 1, 2009 Downgraded to Ca (sf) Cl. XP-1, Affirmed at Aaa (sf); previously on Oct 27, 2006 Definitive Rating Assigned Aaa (sf) Cl. XP-2, Affirmed at Aaa (sf); previously on Oct 27, 2006 Definitive Rating Assigned Aaa (sf) Cl. XC, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Ratings Rationale The upgrades are due to lower anticipated expected losses, higher subordination due to amortization and payoffs 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. The ratings of the three IO Classes are consistent with the credit performance of their respective referenced classes and thus are affirmed. Moody's rating action reflects a base expected loss of 1.8% of the current balance. At last review, Moody's base expected loss was 2.4%. Moody's provides a current list of base losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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 growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near- term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock; albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing. The methodologies used in this rating were "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005, "Moody's Approach to Rating Canadian CMBS" published in May 2000 and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessment level, is incorporated for loans with similar credit assessments in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 21 compared to 22 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 a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated January 20, 2012. Deal Performance As of the December 12, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 28% to $426.7 million from $595.3 million at securitization. The Certificates are collateralized by 49 mortgage loans ranging in size from less than 1% to 9% of the pool, with the top ten non-defeased loans representing 60% of the pool. There is one loan in the pool with an investment-grade credit assessment, representing 6% of the pool. Five loans, representing 5% of the pool, have defeased and are collateralized with Canadian Government securities. Five loans, representing 6% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of its 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. Currently, there is one loan in special servicing, representing approximately 6% of the pool. The Marriott Pooled Senior Loan ($24.5 million -- 5.7% of pool), is secured by five Marriott flagged hotels in the Greater Toronto area. The loan represents a 50% pari passu interest in a $49.0 million first mortgage loan. The property is also encumbered with a $23.0 million B Note. The loan was transferred to the special servicer in August 2009 for payment delinquency but is now current. There is a forbearance agreement in place, which expires in February 2013. The Project Improvement Plan (PIP) for the hotels has been completed. The pool's performance has been stable since last review. The properties have been marketed for sale and satisfactory bids have been received. Moody's does not estimate any loss on this loan. Moody's was provided with full year 2011 and a partial year 2012 operating results for 90% and 30% of the pool, respectively. Moody's weighted average LTV is 82% compared to 79% at last review. Moody's net cash flow reflects a weighted average haircut of 14% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.3%. Moody's actual and stressed DSCRs are 1.49X and 1.30X, respectively, compared to 1.60X and 1.33X 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 a credit assessment is the Westview Village Manufactured Home Loan ($26.6 million -- 6.2% of the pool), which is secured by a 1,060 pad manufactured housing community located in Edmonton, Alberta. The property was 99% leased as of March 2012, and has maintained an occupancy around 100% since securitization. Property performance has improved slightly since last review due to increased rental revenues and amortization. Moody's credit assessment and stressed DSCR are Aa3 and 1.95X, respectively, compared to A1 and 1.72X at last review. The top three performing conduit loans represent 23% of the pool balance. The largest conduit loan is the Station Tower Loan ($37.8 million -- 8.9% of the pool), which is secured by a 218,000 square foot (SF) Class A office building located in Surrey, a suburb of Vancouver, British Colombia. As of April 2012, the property was 99% leased, the same as last review. Performance has been stable and the loan is benefiting from amortization. Moody's LTV and stressed DSCR are 68% and 1.35X, respectively, compared to 70% and 1.31X at last review. The second largest conduit loan is the Heritage Square Loan ($35.7 million -- 8.4% of the pool), which is secured by a 316,000 SF Class A office building located in the Acadia suburb of Calgary, Alberta. As of December 2011, the property was 98% leased, the same as last review. The largest tenant is AMEC, which is a leading global engineering, project management and consultancy company. AMEC leases 63% of the net rentable area (NRA) through August 2013. Property's performance has declined slightly since last review due to higher expenses. Moody's LTV and stressed DSCR are 54% and 1.94X, respectively, compared to 52% and 2.0X at last review. The third largest conduit loan is the Conundrum Commerce City Portfolio Loan ($26.1 million -- 6.1% of the pool), which is secured by a portfolio of five industrial buildings and one office property in Ottawa, Ontario. The collateral consists of approximately 384,000 SF. As of December 2011, the portfolio was 91% leased, essentially the same as last review. Performance has been stable. Moody's LTV and stressed DSCR are 85% and 1.15X, respectively, compared to 86% and 1.13X at last review. MERRILL LYNCH 2007-CA: Moody's Affirms Caa3 Rating on Cl. L Certs. ------------------------------------------------------------------ Moody's Investors Service affirmed the ratings of 15 classes of Merrill Lynch Financial Assets Inc., Commercial Mortgage Pass- Through Certificates, Series 2007-Canada 21 as follows: Cl. A-1, Affirmed at Aaa (sf); previously on Jan 30, 2007 Definitive Rating Assigned Aaa (sf) Cl. A-2, Affirmed at Aaa (sf); previously on Jan 30, 2007 Definitive Rating Assigned Aaa (sf) Cl. B, Affirmed at Aa2 (sf); previously on Jan 30, 2007 Definitive Rating Assigned Aa2 (sf) Cl. C, Affirmed at A2 (sf); previously on Jan 30, 2007 Definitive Rating Assigned A2 (sf) Cl. D, Affirmed at Baa2 (sf); previously on Jan 30, 2007 Definitive Rating Assigned Baa2 (sf) Cl. E, Affirmed at Baa3 (sf); previously on Jan 30, 2007 Definitive Rating Assigned Baa3 (sf) Cl. F, Affirmed at Ba2 (sf); previously on Jan 20, 2012 Downgraded to Ba2 (sf) Cl. G, Affirmed at B1 (sf); previously on Jan 20, 2012 Downgraded to B1 (sf) Cl. H, Affirmed at B2 (sf); previously on Jan 20, 2012 Downgraded to B2 (sf) Cl. J, Affirmed at B3 (sf); previously on Jan 20, 2012 Downgraded to B3 (sf) Cl. K, Affirmed at Caa2 (sf); previously on Jan 20, 2012 Downgraded to Caa2 (sf) Cl. L, Affirmed at Caa3 (sf); previously on Jan 20, 2012 Downgraded to Caa3 (sf) Cl. XP-1, Affirmed at Aaa (sf); previously on Jan 30, 2007 Definitive Rating Assigned Aaa (sf) Cl. XP-2, Affirmed at Aaa (sf); previously on Jan 30, 2007 Definitive Rating Assigned Aaa (sf) Cl. XC, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Ratings Rationale The affirmations of the principal classes are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. The ratings of the IO Classes are consistent with the performance of their referenced classes and are thus affirmed. Moody's rating action reflects a base expected loss of $8.9 million or 2.9% of the current balance compared to $11.1 million or 3.3% at last review. Moody's provides a current list of base losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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 growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near- term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock; albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing. 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 Structured Finance Interest- Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessment level, is incorporated for loans with similar credit assessments in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1 which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point . For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 20 compared to 22 at Moody's prior review. Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST(R) (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated January 20, 2012. Deal Performance As of the December 12, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 20% to $306.6 million from $385.2 million at securitization. The Certificates are collateralized by 33 mortgage loans ranging in size from less than 1% to 13% of the pool, with the top ten loans representing 59% of the pool. Six 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 its 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. Additionally, there are no loans in special servicing. Moody's has assumed a high default probability for two poorly performing loans representing 8% of the pool and has estimated a $4.0 million aggregate loss (17% expected loss based on a 50% probability default) from these troubled loans. Moody's was provided with full year 2011 operating results for 70% of the pool. Excluding troubled loans, Moody's weighted average LTV is 83% compared to 88% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 9% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.3%. Excluding troubled loans, Moody's actual and stressed DSCRs are 1.55X and 1.29X, respectively, compared to 1.49X and 1.20X 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 26% of the pool balance. The largest loan is the GTA Industrial Portfolio Loan ($38.8 million - - 12.6% of the pool) which is secured by eight industrial properties located in the greater Toronto area. As of March 2012, the portfolio was 89% leased compared to 97% at last review. Moody's LTV and stressed DSCR are 78% and 1.29X, respectively, compared to 85% and 1.18X at last review. The second largest loan is the McFarlane Tower Loan ($23.8 million -- 7.7% of the pool), which is secured by an 18-story, 236,000 square foot (SF) office building located in the Downtown West submarket of Calgary, Alberta. As of October 2012, the property was 97% leased compared to 91% leased at last review. Performance has improved over the loan term. Moody's LTV and stressed DSCR are 83% and 1.28X, respectively, compared to 83% and 1.26X at last review. The third largest loan is the 550 - 11th Avenue Office Building Loan ($18.5 million -- 6.0% of the pool), which is secured by an 11-story, 97,000 SF office property located in the financial district of downtown Calgary, Alberta. As of July 2012, the property was 100% leased compared to 97% leased at last review. Performance has improved due to a decrease in vacancy. Moody's LTV and stressed DSCR are 98% and 1.04X, respectively, compared to 131% and 0.79X at last review. MORGAN STANLEY 2013-C7: Moody's Rates Class G Certs. '(P)B2' ------------------------------------------------------------ Moody's Investors Service has assigned provisional ratings to fifteen classes of CMBS securities, issued by Morgan Stanley Bank of America Merrill Lynch Trust 2013-C7 Commercial Mortgage Pass- Through Certificates. Cl. A-1, Assigned (P)Aaa (sf) Cl. A-2, Assigned (P)Aaa (sf) Cl. A-AB, Assigned (P)Aaa (sf) Cl. A-3, Assigned (P)Aaa (sf) Cl. A-4, Assigned (P)Aaa (sf) Cl. X-A, Assigned (P)Aaa (sf) Cl. A-S, Assigned (P)Aaa (sf) Cl. B, Assigned (P)Aa3 (sf) Cl. PST, Assigned (P)A1 (sf) Cl. C, Assigned (P)A3 (sf) Cl. X-B, Assigned (P)Aa3 (sf) Cl. D, Assigned (P)Baa3 (sf) Cl. E, Assigned (P)Ba2 (sf) Cl. F, Assigned (P)Ba3 (sf) Cl. G, Assigned (P)B2 (sf) RATINGS RATIONALE The Certificates are collateralized by 64 fixed rate loans secured by 123 properties. The ratings are based on the collateral and the structure of the transaction. Moody's CMBS ratings methodology combines both commercial real estate and structured finance analysis. Based on commercial real estate analysis, Moody's determines the credit quality of each mortgage loan and calculates an expected loss on a loan specific basis. Under structured finance, the credit enhancement for each certificate typically depends on the expected frequency, severity, and timing of future losses. Moody's also considers a range of qualitative issues as well as the transaction's structural and legal aspects. The credit risk of loans is determined primarily by two factors: 1) Moody's assessment of the probability of default, which is largely driven by each loan's DSCR, and 2) Moody's assessment of the severity of loss upon a default, which is largely driven by each loan's LTV ratio. The Moody's Actual DSCR of 1.69X is greater than the 2007 conduit/fusion transaction average of 1.31X. The Moody's Stressed DSCR of 1.03X is greater than the 2007 conduit/fusion transaction average of 0.92X. Moody's Trust LTV ratio of 100.4% is lower than the 2007 conduit/fusion transaction average of 110.6%. Moody's also considers both loan level diversity and property level diversity when selecting a ratings approach. With respect to loan level diversity, the pool's loan level (includes cross collateralized and cross defaulted loans) Herfindahl Index is 22. The transaction's loan level diversity is similar to Herfindahl scores found in most multi-borrower transactions issued since 2009. With respect to property level diversity, the pool's property level Herfindahl Index is 24. The transaction's property diversity profile is similar to the indices calculated in most multi-borrower transactions issued since 2009. Moody's also grades properties on a scale of 1 to 5 (best to worst) and considers those grades when assessing the likelihood of debt payment. The factors considered include property age, quality of construction, location, market, and tenancy. The pool's weighted average property quality grade is 2.01, which is lower than the indices calculated in most multi-borrower transactions since 2009. 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 Structured Finance Interest- Only Securities" published in February 2012. Moody's analysis employs the excel-based CMBS Conduit Model v2.61 which derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level DSCR and LTV ratios. Major adjustments to determining proceeds include loan structure, property type, sponsorship and diversity. Moody's analysis also uses the CMBS IO calculator version 1.1 which references the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The V Score for this transaction is assessed as Low/Medium, the same as the V score assigned to the U.S. Conduit and CMBS sector. This reflects typical volatility with respect to the critical assumptions used in the rating process as well as an average disclosure of securitization collateral and ongoing performance. Moody's V Scores provide a relative assessment of the quality of available credit information and the potential variability around the various inputs to a rating determination. The V Score ranks transactions by the potential for significant rating changes owing to uncertainty around the assumptions due to data quality, historical performance, the level of disclosure, transaction complexity, the modeling, and the transaction governance that underlie the ratings. V Scores apply to the entire transaction (rather than individual tranches). Moody's Parameter Sensitivities: If Moody's value of the collateral used in determining the initial rating were decreased by 5%, 14%, and 22%, the model-indicated rating for the currently rated junior Aaa class would be Aa1, Aa2, Aa3, respectively. Parameter Sensitivities are not intended to measure how the rating of the security might migrate over time; rather they are designed to provide a quantitative calculation of how the initial rating might change if key input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged. Parameter Sensitivities only reflect the ratings impact of each scenario from a quantitative/model-indicated standpoint. Qualitative factors are also taken into consideration in the ratings process, so the actual ratings that would be assigned in each case could vary from the information presented in the Parameter Sensitivity analysis. NASSAU COUNTY: Fitch Cuts Ratings on Seven Bonds to 'B-sf' ---------------------------------------------------------- Fitch Ratings downgrades seven classes from Nassau County Tobacco Settlement Corporation (New York), tobacco settlement asset-backed bonds, series 2006. For 2012, the aggregate MSA payment was 1.97% higher than the amount in 2011. Fitch published updated Tobacco Settlement ABS Criteria on July 16, 2012, which included a change in the base case assumption for the MSA payment from +1% to 0%. The rating scale was recalibrated to reflect this change, and as a result there were several downgrades. The turbo and capital appreciation bonds were put on Rating Watch Negative in July 2012 with the expectation that the change in the base case assumption could lead to downgrades. Buckeye Tobacco Settlement Financing Authority, 2007 (Ohio), along with Golden State Tobacco Securitization Corporation, UNITED STATES Series 2007-1 and Nassau County Tobacco Settlement Corporation, Tobacco Settlement Asset-Backed Bonds, Series 2006, were not reviewed with the other ABS tobacco settlement bonds in August 2012 because the reserve accounts of these transactions were below the minimum required levels and required additional analysis which was completed for this review. Fitch uses its breakeven model to analyze tobacco performance. The breakeven model assesses how much the MSA payment received by the trust could decline for each bond to pay at the legal final maturity date. The amount of the latest MSA payment that the transaction has received, the capital structure, the reserve account, and the bond's legal final dates are the key inputs to the model. Since the life of these transactions is typically long and the cash flows can be unpredictable, qualitative adjustments may be taken to avoid rating volatility by requiring two years of consecutive model outputs in order to downgrade to the model implied output. However, if more than one notch difference exists between the current rating and the model implied rating, the bond will be downgraded to one notch above the model output. Tobacco ratings are capped at 'BBB+sf', based on Fitch's opinion of the strength of the tobacco industry. All bonds with model outputs 'bbb+' and below are on Outlook Negative to address concern over a future deterioration in cash flows. Fitch downgrades these ratings: -- $42,645,000 series 2006A-1 taxable senior current interest bonds due June 1, 2021 downgraded to 'BB+sf' from 'BBBsf'; removed from Negative Watch and assigned a Negative Outlook; -- $37,905,609 series 2006A-2 senior convertible bonds due June 1, 2026 downgraded to 'Bsf' from 'BB+'; removed from Negative Watch and assigned a Negative Outlook; -- $97,005,000 series 2006A-3 senior current interest bonds due June 1, 2035 downgraded to 'Bsf' from 'BB+sf'; removed from Negative Watch and assigned a Negative Outlook; -- $194,535,000 series 2006A-3 senior current interest bonds due June 1, 2046 downgraded to 'Bsf' from 'BB+sf'; removed from Negative Watch and assigned a Negative Outlook; -- $10,670,013 series 2006B first subordinate capital appreciation bonds due June 1, 2046 downgraded to 'B-sf' from 'BB-sf'; removed from Negative Watch and assigned a Negative Outlook; -- $9,867,332 series 2006C second subordinate capital appreciation bonds due June 1, 2046 downgraded to 'B-sf' from 'B+sf', removed from Negative Watch and assigned a Negative Outlook; -- $37,604,290 series 2006D third subordinate capital appreciation bonds due June 1, 2060 downgraded to 'B-sf' from 'B+sf'; removed from Negative Watch and assigned a Negative Outlook. NEUBERGER BERMAN: S&P Affirms 'BB' Rating on Class E Notes ---------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on Neuberger Berman CLO XII Ltd./Neuberger Berman CLO XII LLC's $357.85 million floating-rate notes following the transaction's effective date as of Nov. 16, 2012. Most U.S. cash flow collateralized debt obligations (CLOs) close before purchasing the full amount of their targeted level of portfolio collateral. On the closing date, the collateral manager typically covenants to purchase the remaining collateral within the guidelines specified in the transaction documents to reach the target level of portfolio collateral. Typically, the CLO transaction documents specify a date by which the targeted level of portfolio collateral must be reached. The "effective date" for a CLO transaction is usually the earlier of the date on which the transaction acquires the target level of portfolio collateral, or the date defined in the transaction documents. Most transaction documents contain provisions directing the trustee to request the rating agencies that have issued ratings upon closing to affirm the ratings issued on the closing date after reviewing the effective date portfolio (typically referred to as an "effective date rating affirmation"). "An effective date rating affirmation reflects our opinion that the portfolio collateral purchased by the issuer, as reported to us by the trustee and collateral manager, in combination with the transaction's structure, provides sufficient credit support to maintain the ratings that we assigned on the transaction's closing date. The effective date reports provide a summary of certain information that we used in our analysis and the results of our review based on the information presented to us," S&P said. "We believe the transaction may see some benefit from allowing a window of time after the closing date for the collateral manager to acquire the remaining assets for a CLO transaction. This window of time is typically referred to as a "ramp-up period because some CLO transactions may acquire most of their assets from the new issue leveraged loan market, the ramp-up period may give collateral managers the flexibility to acquire a more diverse portfolio of assets," S&P added. For a CLO that has not purchased its full target level of portfolio collateral by the closing date, our ratings on the closing date and prior to our effective date review are generally based on the application of our criteria to a combination of purchased collateral, collateral committed to be purchased, and the indicative portfolio of assets provided to us by the collateral manager, and may also reflect our assumptions about the transaction's investment guidelines. This is because not all assets in the portfolio have been purchased. "When we receive a request to issue an effective date rating affirmation, we perform quantitative and qualitative analysis of the transaction in accordance with our criteria to assess whether the initial ratings remain consistent with the credit enhancement based on the effective date collateral portfolio. Our analysis relies on the use of CDO Evaluator to estimate a scenario default rate at each rating level based on the effective date portfolio, full cash flow modeling to determine the appropriate percentile break-even default rate at each rating level, the application of our supplemental tests, and the analytical judgment of a rating committee. (For more information on our criteria and our analytical tools, see "Update To Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs," published Sept. 17, 2009.)," S*P added In S&P's published effective date report, S&P discussed the analysis of the information provided by the transaction's trustee and collateral manager in support of their request for effective date rating affirmation. In most instances, S&P intends to publish an effective date report each time S&P issue an effective date rating affirmation on a publicly rated U.S. cash flow CLO. "On an ongoing basis after we issue an effective date rating affirmation, we will periodically review whether, in our view, the current ratings on the notes remain consistent with the credit quality of the assets, the credit enhancement available to support the notes, and other factors, and take rating actions as we deem necessary," S&P added. 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 AFFIRMED Neuberger Berman CLO XII Ltd./Neuberger Berman CLO XII LLC Class Rating Amount (mil. $) X AAA (sf) 2.00 A AAA (sf) 252.00 B (deferrable) AA (sf) 42.75 C (deferrable) A (sf) 27.10 D (deferrable) BBB (sf) 15.50 E (deferrable) BB (sf) 18.50 Subordinated notes NR 42.15 NR-Not rated. RAIT CRE I: S&P Lowers Rating on 2 Note Classes to 'CCC-' --------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 17 classes from RAIT CRE CDO I, Ltd. and RAIT Preferred Funding II, Ltd., both commercial real estate collateralized debt obligation (CRE CDO) transactions. At the same time, Standard & Poor's affirmed the ratings on five classes. In addition, Standard & Poor's removed all of these ratings from CreditWatch with negative implications. "The downgrades and affirmations reflect our analysis of the transactions' liability structures and the credit characteristics of the underlying collateral using our criteria for global CDOs of pooled structured finance assets. We also considered the amount of defaulted assets in the transactions and their expected recoveries in our analysis," S&P said. "The global CDOs of pooled structured finance assets criteria, which we published on Feb. 21, 2012, include revisions to our assumptions on correlations, recovery rates, and default patterns and timings of the collateral. Specifically, correlations on commercial real estate assets increased to 70%. The criteria also include supplemental stress tests (largest obligor default test and largest industry default test) in our analysis," S&P added. RAIT CRE CDO I LTD. According to the Dec. 20, 2012, trustee report, the transaction's collateral totaled $988.7 million, which includes $20.5 million of unfunded future advances. The transaction's liabilities totaled $962.0 million. The liability balance at issuance was originally $985.5 million. The transaction's current asset pool consists of 53 whole loans/senior participations ($664.6 million, 67.2%), 73 subordinate loans/subordinate participations/preferred equity ($293.6 million, 29.7%), one REIT security ($10.0 million, 1.0%), and unfunded future advances ($20.5 million, 2.1%). The trustee report noted nine defaulted assets ($23.5 million, 2.4%) in the collateral pool. We expect minimal recoveries on the defaulted loans, all of which are subordinate positions. We based our recovery analysis on information provided by the collateral manager, the special servicer, and third-party data providers. RAIT PREFERRED FUNDING II LTD. According to the Nov. 26, 2012, trustee report, the transaction's collateral totaled $829.6 million, which includes $27.2 million of unfunded future advances. The transaction's liabilities totaled $828.0 million. The liability balance at issuance was originally $828.0 million. The transaction's current asset pool consists of 60 whole loans/senior participations ($717.8 million, 86.5%), 16 subordinate loans/subordinate participations/preferred equity ($84.6 million, 10.2%), and unfunded future advances ($27.2 million, 3.3%). The trustee report noted two defaulted assets ($18.9 million, 2.3%) in the collateral pool. We expect minimal recoveries on the defaulted loans, both of which are subordinate positions. S&P based the recovery analysis on information provided by the collateral manager, the special servicer, and third-party data providers. "We applied asset-specific recovery rates in our analysis of the performing loans in both transactions using our updated methodology and assumptions for rating U.S. and Canadian CMBS and our global property evaluation methodology, both published Sept. 5, 2012. We also considered qualitative factors such as the near-term maturities of the loans, refinancing prospects, and loan modifications," S&P noted. According to the trustee reports, both transactions are passing their principal coverage tests and interest coverage tests. In addition, our analysis considers the prior cancellations of subordinate notes in both transactions. According to the Sept. 20, 2010, trustee reports, as well as notices from the trustee, Wells Fargo Bank N.A., certain subordinate notes were canceled before they were repaid through the transaction's payment waterfall. Our ratings reflect our assessment of any risks and credit stability considerations regarding the subordinate note cancellations. For details, please refer to S&P's Oct. 14, 2010, publication regarding these transactions. S&P will continue to review whether, in their view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as S&P deems necessary. 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 AND REMOVED FROM CREDITWATCH RAIT CRE CDO I Ltd. Class To From A1A BB- (sf) BBB- (sf)/Watch Neg A1B BB- (sf) BBB- (sf)/Watch Neg A2 B- (sf) BB+ (sf)/Watch Neg B CCC+ (sf) B+ (sf)/Watch Neg C CCC+ (sf) B+ (sf)/Watch Neg D CCC (sf) B (sf)/Watch Neg E CCC (sf) B- (sf)/Watch Neg F CCC (sf) B- (sf)/Watch Neg G CCC- (sf) CCC+ (sf)/Watch Neg H CCC- (sf) CCC+ (sf)/Watch Neg RAIT Preferred Funding II Ltd. Class To From A2 B+ (sf) BB+ (sf)/Watch Neg B CCC+ (sf) B+ (sf)/Watch Neg C CCC+ (sf) B (sf)/Watch Neg D CCC+ (sf) B- (sf)/Watch Neg E CCC (sf) CCC+ (sf)/Watch Neg F CCC (sf) CCC+ (sf)/Watch Neg G CCC- (sf) CCC (sf)/Watch Neg RATINGS AFFIRMED AND REMOVED FROM CREDITWATCH RAIT CRE CDO I Ltd. Class To From J CCC- (sf) CCC- (sf)/Watch Neg RAIT Preferred Funding II, Ltd. Class To From A1R BB+ (sf) BB+ (sf)/Watch Neg A1T BB+ (sf) BB+ (sf)/Watch Neg H CCC- (sf) CCC- (sf)/Watch Neg J CCC- (sf) CCC- (sf)/Watch Neg SANTANDER DRIVE 2013-1: S&P Assigns BB+(sf) to Class E Sub. Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Santander Drive Auto Receivables Trust 2013-1's $1,292.37 million automobile receivables-backed notes series 2013-1. The note issuance is an asset-backed securities transaction backed by subprime auto loan receivables. The preliminary ratings are based on information as of Jan. 7, 2013. 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 availability of 50.45%, 44.92%, 37.22%, 31.93%, and 28.47% of credit support for the class A, B, C, D, and E notes, respectively, based on stress cash flow scenarios (including excess spread), which provide coverage of more than 3.5x, 3.0x, 2.3x, 1.75x, and 1.6x our 13.50%-14.50% expected cumulative net loss. - The timely interest and principal payments made under stressed cash flow modeling scenarios appropriate to the assigned preliminary ratings. - S&P's expectation that under a moderate ('BBB') stress scenario, all else being equal, our ratings on the class A, B, and C notes will remain within one rating category of the assigned preliminary ratings during the first year, and its ratings on the class D and E notes will remain within two rating categories of the assigned preliminary ratings, which is within the outer bounds of our credit stability criteria (see "Methodology: Credit Stability Criteria," published May 3, 2010). - The originator/servicer's history in the subprime/specialty auto finance business. Our analysis of six years of static pool data on Santander Consumer USA Inc.'s lending programs. - The transaction's payment/credit enhancement 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 Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at http://standardandpoorsdisclosure-17g7.com/1221.pdf. PRELIMINARY RATINGS ASSIGNED Santander Drive Auto Receivables Trust 2013-1 Class Rating Type Interest Amount rate(i) (mil. $)(i) A-1 A-1+ (sf) Senior Fixed 184.00 A-2 AAA (sf) Senior Fixed 355.00 A-3 AAA (sf) Senior Fixed 294.33 B AA (sf) Subordinate Fixed 137.71 C A (sf) Subordinate Fixed 164.49 D BBB (sf) Subordinate Fixed 109.47 E BB+ (sf) Subordinate Fixed 42.37 (i) The interest rates and actual sizes of these tranches will be determined on the pricing date. SEQUOIA MORTGAGE 2013-1: Fitch Expects to Rate B-4 Certs. 'BBsf' ---------------------------------------------------------------- Fitch Ratings expects to rate Sequoia Mortgage Trust 2013-1 as detailed below. Fitch's stress and rating sensitivity analysis are discussed in the presale report titled 'Sequoia Mortgage Trust 2013-1', dated Jan. 8, 2013, which is available on Fitch's web site, 'www.fitchratings.com'. Fitch expects to assign the following ratings: -- $151,646,000 class 1-A1 certificate 'AAAsf'; Outlook Stable; -- $217,189,000 class 2-A1 certificate 'AAAsf'; Outlook Stable; -- $151,646,000 class 1-AX notional certificate 'AAAsf'; Outlook Stable; -- $217,189,000 class 2-AX notional certificate 'AAAsf'; Outlook Stable; -- $10,146,000 class B-1 certificate 'AAsf'; Outlook Stable; -- $6,764,000 class B-2 certificate 'Asf'; Outlook Stable; -- $4,576,000 class B-3 certificate 'BBBsf'; Outlook Stable; -- $3,382,000 non-offered class B-4 certificate 'BBsf'; Outlook Stable; The non-offered class B-5 certificate will not be rated. SCHOONER TRUST 2005-3: Moody's Affirms B3 Rating on Cl. L Certs. ---------------------------------------------------------------- Moody's Investors Service affirmed the ratings of 15 classes of Schooner Trust Commercial Mortgage Pass-Through Certificates, Series 2005-3 as follows: Cl. A-1, Affirmed at Aaa (sf); previously on Jul 19, 2005 Definitive Rating Assigned Aaa (sf) Cl. A-2, Affirmed at Aaa (sf); previously on Jul 19, 2005 Definitive Rating Assigned Aaa (sf) Cl. B, Affirmed at Aa2 (sf); previously on Jul 19, 2005 Definitive Rating Assigned Aa2 (sf) Cl. C, Affirmed at A2 (sf); previously on Jul 19, 2005 Definitive Rating Assigned A2 (sf) Cl. D-1, Affirmed at Baa2 (sf); previously on Jul 19, 2005 Definitive Rating Assigned Baa2 (sf) Cl. D-2, Affirmed at Baa2 (sf); previously on Jul 19, 2005 Definitive Rating Assigned Baa2 (sf) Cl. E, Affirmed at Baa3 (sf); previously on Jul 19, 2005 Definitive Rating Assigned Baa3 (sf) Cl. F, Affirmed at Ba1 (sf); previously on Jul 19, 2005 Definitive Rating Assigned Ba1 (sf) Cl. G, Affirmed at Ba2 (sf); previously on Jul 19, 2005 Definitive Rating Assigned Ba2 (sf) Cl. H, Affirmed at Ba3 (sf); previously on Jul 19, 2005 Definitive Rating Assigned Ba3 (sf) Cl. J, Affirmed at B1 (sf); previously on Jul 19, 2005 Definitive Rating Assigned B1 (sf) Cl. K, Affirmed at B2 (sf); previously on Jul 19, 2005 Definitive Rating Assigned B2 (sf) Cl. L, Affirmed at B3 (sf); previously on Jul 19, 2005 Definitive Rating Assigned B3 (sf) Cl. XC-1, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Cl. XC-2, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (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 base expected loss of 1.2% of the current balance compared to 1.4% at last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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 growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near- term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock; albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing. The methodologies used in this rating were Moody's Approach to Rating Fusion Transactions", published on April 19, 2005, "Moody's Approach to Rating Canadian CMBS", published in May 2000 and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessment level, is incorporated for loans with similar credit assessment in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1 which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point . For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 29 compared to 32 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 a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated January 20, 2012. Deal Performance As of the December 12th, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 24% to $301.2 million from $395.9 million at securitization. The Certificates are collateralized by 82 mortgage loans ranging in size from less than 1% to 7% of the pool, with the top ten loans representing 45% of the pool. There are 13 fully defeased loans, representing 10% of the pool, that are securitized by Canadian Government securities. Eight loans are on the master servicer's watch list, representing approximately 11% of the pool. The watch list includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of its ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. To date, the pool has not experienced any losses to date and there are presently no loans in special servicing. Excluding defeased loans, Moody's was provided with full year 2011 operating results for 95% of the pool. Excluding defeased loans, Moody's weighted average conduit LTV is 68%, essentially the same as at Moody's prior review. Moody's net cash flow (NCF) reflects a weighted average haircut of 12% to the most recently available net operating income. Excluding defeased loans, Moody's actual and stressed conduit DSCRs are 1.50X and 1.57X, respectively, compared to 1.54X and 1.53X at last review. Moody's actual DSCR is based on Moody's net cash flow and the loans actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The loan with a credit assessment is the Vaughan Industrial Portfolio ($5.4 million -- 1.9% of the pool), which is secured by ten industrial buildings located in Vaughan, Ontario. As of December 2011, the portfolio was 86% leased compared to 85% at last review. At securitization, the portfolio comprisedof 17 properties, but seven have been released through defeasance. At securitization, the loan was structured with a 15-year amortization schedule and has amortized an additional 9% since last review. In addition, the loan is full recourse to the sponsor. Moody's current credit assessment and stressed DSCR are Aa2 and 2.97X, the same as at last review. The top three performing conduit loans represent 19% of the pool balance. The largest loan is the Portsmouth Place Loan ($20.9 million -- 6.9% of the pool), which is secured by a 400-unit multi-family building located in Kingston, Ontario. As of February 2012, the property was 99% leased compared to 100% at last review. Moody's LTV and stressed DSCR are 70% and 1.20X, essentially the same as at last review. The second largest loan is the Corner Brook Plaza Loan ($18.1 million -- 6.0% of the pool), which is secured by a 233,347 square foot shopping center located in Corner Brook, Newfoundland. As of February 2012, the property was 98% leased compared to 96% at last review. The loan was structured with a 25-year amortization schedule at origination and has amoritized an additional 3% since last review. Moody's LTV and stressed DSCR are 64% and 1.61X, respectively, compared to 69% and 1.50X at last review. The third largest loan is the Metro Self Storage Portfolio ($17.6 million -- 5.8% of the pool), which is secured by two cross- collateralized/cross-defaulted loans. The collateral is a portfolio of seven self-storage properties located in Halifax and Turo, Nova Scotia. As of August 2011, the portfolio was 76% leased, the same as at last review. The loan amortizes on a 20- year schedule and has amortized an additional 4% since last review. Moody's LTV and stressed DSCR are 59% and 1.69X, respectively, compared to 62% and 1.61X at last review. SCHOONER TRUST 2005-4: Moody's Affirms B3 Rating on Cl. L Certs. ---------------------------------------------------------------- Moody's Investors Service affirmed the ratings of 14 classes of Schooner Trust Commercial Mortgage Pass-Through Certificates, Series 2005-4 as follows: Cl. A-1, Affirmed at Aaa (sf); previously on Oct 27, 2005 Definitive Rating Assigned Aaa (sf) Cl. A-2, Affirmed at Aaa (sf); previously on Oct 27, 2005 Definitive Rating Assigned Aaa (sf) Cl. B, Affirmed at Aa1 (sf); previously on Mar 2, 2011 Upgraded to Aa1 (sf) Cl. C, Affirmed at A1 (sf); previously on Mar 2, 2011 Upgraded to A1 (sf) Cl. D, Affirmed at Baa2 (sf); previously on Oct 27, 2005 Definitive Rating Assigned Baa2 (sf) Cl. E, Affirmed at Baa3 (sf); previously on Oct 27, 2005 Definitive Rating Assigned Baa3 (sf) Cl. F, Affirmed at Ba1 (sf); previously on Oct 27, 2005 Definitive Rating Assigned Ba1 (sf) Cl. G, Affirmed at Ba2 (sf); previously on Oct 27, 2005 Definitive Rating Assigned Ba2 (sf) Cl. H, Affirmed at Ba3 (sf); previously on Oct 27, 2005 Definitive Rating Assigned Ba3 (sf) Cl. J, Affirmed at B1 (sf); previously on Oct 27, 2005 Definitive Rating Assigned B1 (sf) Cl. K, Affirmed at B2 (sf); previously on Oct 27, 2005 Definitive Rating Assigned B2 (sf) Cl. L, Affirmed at B3 (sf); previously on Oct 27, 2005 Definitive Rating Assigned B3 (sf) Cl. XC-1, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Cl. XC-2, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (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 base expected loss of 1.8% of the current balance. At last full review, Moody's base expected loss was 1.5%. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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 growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near- term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock; albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing. 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 Structured Finance Interest- Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessment level, is incorporated for loans with similar credit assessments in the same transaction. Moody's review also utilized the IO calculator ver1.1, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 21 compared to 22 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 22, 2012. Deal Performance As of the December 17, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 35% to $359.7 million from $551.15 million at securitization. The Certificates are collateralized by 59 mortgage loans ranging in size from less than 1% to 10% of the pool, with the top ten loans representing 58% of the pool. One loan, representing 4% of the pool, is defeased and collateralized with Canadian Government securities, the same as at last review. Six loans, representing 16% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of its ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. The pool has not experienced any losses since securitization and currently there are no loans in special servicing. Moody's has assumed a high default probability for three poorly performing loans representing 5% of the pool and has estimated a $828,000 loss (15% expected loss based on a 50% probability default) from these troubled loans. Moody's was provided with full year 2011 operating results for 80% of the pool. Excluding troubled loans, Moody's weighted average LTV is 71% compared to 75% at last full review. Moody's net cash flow reflects a weighted average haircut of 11% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 8.7%. Excluding troubled loans, Moody's actual and stressed DSCRs are 1.56X and 1.46X, respectively, compared to 1.44X and 1.38X 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 25% of the pool balance. The largest loan is the Southland Mall Loan ($37.3 million -- 10.4% of the pool) which is secured by a 437,762 square foot (SF) anchored retail center located in Regina, Saskatchewan. This property lost its largest tenant, Wal-Mart (34% of net rentable area (NRA)) in January 2010. The borrower has been in negotiations with potential anchor tenants for nearly two years. Due to declined performance and uncertainty around the timing of a replacement tenant for the Wal-Mart space, the loan was placed on the watchlist. In October 2012, the property manger agreed to lease 31% NRA to a new anchor through 2027, thus stabilizing the occupancy at 92%. Moody's analysis reflects the property's stabilized occupancy. Moody's LTV and stressed DSCR are 64% and 1.53X, respectively, compared to 72% and 1.48X at last review. The second largest loan is 66 Slater Street Loan ($27.5 million -- 7.6% of the pool) which is secured by a 22-story 255,144 SF Class B office building located a few blocks from the Parliament in downtown Ottawa, Ontario. The tenant base is dominated by the Canadian Government, which leases over 90% of the NRA. The loan is full recourse to the borrower. Moody's analysis incorporated a stressed cash flow due to concerns about near term lease expirations. Moody's LTV and stressed DSCR are 80% and 1.21X, respectively, compared to 74% and 1.31X at last review. The third largest loan is the Nordel Crossing Shopping Centre Loan ($25.5 million -- 7.1% of the pool), which is secured by a 133,000 SF grocery-anchored retail center located in Surrey -- a suburb of Vancouver, British Columbia. As of December 2011, the property was 99% leased, the same as at last review. Major tenants include Save-on-Foods (33% of the NRA; lease expiration in August 2024) and Shopper's Drug Mart (14% of the NRA; lease expiration in September 2019). Property performance has been stable. Moody's LTV and stressed DSCR are 81% and 1.11X, respectively, compared to 82% and 1.10X at last review. SIERRA CLO II: S&P Raises Rating on Class B-2L Notes to 'BB+' ------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1L, A-1LV, A-2L, A-3L, B-1L, and B-2L notes from Sierra CLO II Ltd., a collateralized loan obligation (CLO) transaction currently managed by Apidos Capital Management LLC. At the same time, S&P affirmed its rating on the class X notes (see list). "Today's rating actions follow our performance review of Sierra CLO II Ltd. and reflect an improvement in credit quality available to support the notes since our February 2011 rating actions, when we raised our ratings on six classes of notes. For our analysis, we observed $7.89 million in defaulted assets, down from $9.47 million noted in the Dec. 10, 2010, trustee report, which we referenced for our February 2011 rating actions. Furthermore, assets from obligors rated in the 'CCC' category were reported at $9.4 million in November 2012, compared with $19.0 million in December 2010. Also, we observed that overcollateralization (O/C) ratios were relatively stable during this period, with increases of approximately 0.5% on average," S&P said. Another positive factor in S&P's analysis is the increase in the weighted-average spread to 3.8% from 3.0% since its last rating action. The transaction is expected to end its reinvestment period on Jan. 22, 2013. S&P affirmed its rating on the class X notes to reflect its belief that the credit support available is commensurate with the current rating. "Our review of this transaction included a cash flow analysis to estimate future performance, based on the portfolio and transaction as reflected in the aforementioned trustee report. In line with our criteria, our cash flow scenarios applied forward- looking assumptions on the expected default timing, pattern, and recoveries under various interest rate and macroeconomic scenarios. In addition, our analysis considered the transaction's ability to pay timely interest and/or ultimate principal to each of the rated tranches. The results of the cash flow analysis demonstrated, in our view, that all of the rated outstanding classes have adequate credit enhancement available at the rating levels associated with this rating action," S&P said. "We will continue to review our ratings on the notes and assess whether, in our view, the ratings remain consistent with the credit enhancement available to support them and take rating actions as we deem necessary," S&P added. 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 Sierra CLO II Ltd. Rating Class To From A-1L AAA (sf) AA+ (sf) A-1LV AAA (sf) AA+ (sf) A-2L AA+ (sf) AA- (sf) A-3L A+ (sf) A (sf) B-1L BBB+ (sf) BBB (sf) B-2L BB+ (sf) BB (sf) RATING AFFIRMED Sierra CLO II Ltd. Class Rating X AAA (sf) TRAINER WORTHAM: Fitch Raises Rating on Class A-1 Notes to 'CCsf' ----------------------------------------------------------------- Fitch Ratings has upgraded one class, affirmed 216 classes, and downgraded three classes from 37 structured finance collateralized debt obligations (SF CDOs) with exposure to various structured finance assets. The individual rating actions for each rated CDO are detailed in the report 'Fitch Takes Various Rating Actions on 37 SF CDOs', dated Jan. 8, 2013. It can be found on Fitch's website at 'www.fitchratings.com' by performing a title search or by using the link below. For further information and transaction research, please refer to 'www.fitchratings.com'. This review was conducted under the framework described in the reports 'Global Structured Finance Rating Criteria' and 'Global Rating Criteria for Structured Finance CDOs'. None of the transactions has been analyzed within a cash flow model framework, as the impact of structural features and excess spread, or conversely, principal proceeds being used to pay CDO liabilities and hedge payments, was determined to be minimal in the context of these CDO ratings. The rating of the class A-1 notes of Trainer Wortham First Republic CBO V Ltd. has been upgraded to 'CCsf' from 'Csf' to reflect improved credit enhancement (CE) levels as a result of continued deleveraging of the capital structure. The notes have received approximately $15.6 million in paydowns since the last review through principal amortization and excess spread due to a failing class A/B coverage test. For transactions where expected losses from distressed and defaulted assets in the portfolio (rated 'CCsf' and lower) already significantly exceed the credit enhancement (CE) level of the most senior class of notes, the probability of default for all classes of notes can be evaluated without factoring potential further losses from the remaining portion of the portfolios. Therefore, these transactions were not modeled using the Structured Finance Portfolio Credit Model (SF PCM). For nine transactions where expected losses from distressed assets did not significantly exceed the CE level of the senior class of notes, Fitch used the SF PCM to project future losses from the transaction's entire portfolio and compared credit enhancement of the classes to those loss rates. The three classes downgraded to 'Dsf' and 24 classes affirmed at 'Dsf' are non-deferrable classes that have and are expected to continue to experience interest payment shortfalls. Fitch does not assign Outlooks to classes rated 'CCCsf' and below. WACHOVIA BANK 2002-C1: Moody's Cuts Rating on IO-I Secs. to Caa3 ---------------------------------------------------------------- Moody's Investors Service affirmed the rating of one class and downgraded one class of WBCMT Commercial Mortgage Securities, Inc., Series 2002-C1 as follows: Cl. N, Affirmed at B3 (sf); previously on May 23, 2002 Definitive Rating Assigned B3 (sf) Cl. IO-I, Downgraded to Caa3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Ratings Rationale The affirmation of the principal class is 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 class is sufficient to maintain its current rating. The rating of the IO Class, Class XC-1 is downgraded due to the credit quality of its references classes. Moody's rating action reflects a base expected loss of 16.7% of the current balance compared to 2.8% at last review. The significant increase in base expected loss on a percentage basis is due to the deal paying down 95% since last review. The current base expected loss represents $2.6 million compared to $12.6 million at last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 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 growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near- term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock; albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing. The methodologies used in this rating were "Moody's Approach to Rating Conduit Transactions", published in September 2000, "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012 and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessment level, is incorporated for loans with similar credit assessments in the same transaction. Moody's review also incorporated the CMBS IO calculator ver1.1, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 4 compared to 25 at Moody's prior review. In cases where the Herf falls below 20, Moody's also employs the large loan/single borrower methodology. This methodology uses the excel-based Large Loan Model v 8.5 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 a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated January 20, 2012. Deal Performance As of the December 17, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 98% to $15.4 million from $950.0 million at securitization. The pool has paid down 95% since last review. The Certificates are collateralized by eight mortgage loans ranging in size from less than 1% to 31% of the pool. One loan representing 31% of the pool has defeased and is secured by U.S. Government Securities. One loan, representing 8% of the pool is on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of its ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Nineteen loans have been liquidated from the pool, resulting in approximately a $14.1 million loss (15% loss severity overall). Currently three loans, representing 53% of the pool, are in special servicing. The largest specially serviced loan is the Ahwatukee Hills Plaza Loan ($3.7 million -- 24.0% of the pool). The loan is secured by a 32,000 square foot (SF) retail property located in Phoenix, Arizona. The loan transferred to special servicing on March 15, 2012 as the result of maturity default. The loan matured on March 11, 2012. The loan is currently being monitored while discussions are being held with the borrower regarding a potential maturity extension. An appraisal dated May 2012 valued the property at $3.7 million. The second largest specially serviced loan is the Cotton Building ($2.8 million - 18.0% of the pool). The loan is secured by a 34,000 SF retail property located in Phoenix, Arizona. The loan transferred to special servicing on February 6, 2012 as the result of maturity default. The loan matured on February 1, 2012. The largest tenant is Staples (71% of the Net Rentable Area (NRA); lease expiration July 2015). Negotiations with the borrower continue to be dual tracked with foreclosure action. An appraisal dated March 2012 valued the property at $4.5 million. The third largest specially serviced loan is the Eastern Marketplace Loan ($1.7 million - 10.9% of the pool). The loan is secured by an 11,000 SF retail property located in Henderson, Nevada. The loan transferred to special servicing on February 6, 2012 as the result of maturity default. The loan matured on February 1, 2012. An appraisal dated March 2012 valued the property at $1.8 million. Moody's estimates an aggregate $2.3 million loss for the specially serviced loans (42% expected loss on average). Moody's was provided with full year 2011 financials for 100% and partial year 2012 for 70% of the pool's non-specially serviced and non-defeased loans. Excluding specially serviced loans, Moody's weighted average LTV is 64% compared to 76% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 9% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.7%. Excluding specially serviced loans, Moody's actual and stressed DSCRs are 1.20X and 2.06X, respectively, compared to 1.37X and 1.40X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The top three conduit loans represent 15.1% of the pool. The largest conduit loan is the Rivergreen Office Park ($1.2 million - - 7.7% of the pool), which is secured by a 21,400 SF office property located in Corvallis, Oregon, which is 80 miles south of Portland. The loan was placed on the watchlist in June 2012 as the result of a decline in occupancy. The vacant space has since been leased. As of September 2012 the property was 100% leased. The loan is fully amortizing and matures in August 2019. Moody's LTV and stressed DSCR are 55% and 2.03X, respectively, compared to 49% and 2.25X at last review. The second largest conduit loan is the Walgreens Arlington Texas Loan ($762,988 -- 4.9% of the pool), which is secured by 14,500 SF single tenant retail property located in Arlington, Texas. The property is 100% leased to Walgreens Co. until February 2077. The loan is fully amortizing and matures in March 2022. Moody's LTV and stressed DSCR are 41% and 2.52X, respectively, compared to 34% and 3.05X at last review. The third largest conduit loan is the 2120 Jimmy Durante Boulevard Loan ($383,588 -- 2.5% of the pool), which is secured by a 17,100 SF industrial property located in Del Mar, California. As of September 2012 the property was 94% leased. The loan is fully amortizing and matures in May 2019. Moody's LTV and stressed DSCR are 21% and 5.25X, respectively, compared to 22% and 5.12X at last review. WACHOVIA BANK 2003-C8: S&P Cuts Rating on 5 Note Classes to 'CCC-' ------------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on four classes from two Wachovia Bank Commercial Mortgage Trust U.S. commercial mortgage-backed securities (CMBS) transactions and removed them from CreditWatch with positive implications. In addition, S&P lowered its ratings on eight classes from one of the two U.S. CMBS transactions and removed three of these ratings from CreditWatch with negative implications. Concurrently, S&P affirmed its ratings on 19 classes from these two transactions (see list). The CreditWatch resolutions are related to CreditWatch placements that S&P initiated on Sept. 5, 2012. The upgrades reflect S&P's expected available credit enhancement for the affected tranches, which S&P believes is greater than their most recent estimate of necessary credit enhancement for the most recent rating levels. The upgrades also reflect S&P's views regarding the current and future performance of the collateral supporting the respective transactions. "The downgrades reflect our expected available credit enhancement for the affected tranches, which we believe is less than our most recent estimate of necessary credit enhancement for the most recent rating levels. The downgrades also reflect our views regarding the current and future performance of the collateral supporting the respective transactions," S&P said. "We lowered our ratings on classes H through O from Wachovia Bank Commercial Mortgage Trust's Series 2003-C8 (WBCMT 2003-C8) primarily due to interest shortfalls experienced by these classes and the timing of when we expect the interest shortfalls to be repaid. In addition, our analysis considered the July 18, 2012, appraisal value of $26.3 million on the specially serviced Regency Square Mall loan, which has a total whole-loan balance of $84.6 million. The whole-loan balance is divided into two pari passu pieces, of which $42.3 million makes up 9.6% of WBCMT 2003- C8's balance. The other pari passu piece is in Wachovia Bank Commercial Mortgage Trust's Series 2003-C7. The loan currently has a reported payment status of late but less than 30 days delinquent. Based on discussions with the special servicer, we expect an appraisal reduction amount to be implemented if the loan continues to be delinquent, resulting in additional interest shortfalls to affect the trust. We downgraded class G from WBCMT 2003-C8 due to reduced liquidity available to this class resulting from continued interest shortfalls," S&P added. "The affirmations of the principal and interest certificates reflect our expected available credit enhancement for the affected tranches, which we believe will remain consistent with the most recent estimate of necessary credit enhancement for the current rating levels. The affirmed ratings also acknowledge our expectations regarding the current and future performance of the collateral supporting the respective transaction. Our rating actions on the two WBCMT transactions also considered the magnitude of near-term maturing non-defeased performing loans (74.1% in Wachovia Bank Commercial Mortgage Trust's Series 2003-C6 [WBCMT 2003-C6] and 55.6% in WBCMT 2003-C8) as well as consideration of liquidity available to these classes," S&P noted. S&P affirmed its ratings on the interest-only (IO) certificates based on our current criteria for rating IO securities. "The rating actions follow a detailed review of the performance of the collateral supporting the relevant securities and transaction structures. This review was similar to the review we conducted before placing 744 U.S. and Canadian CMBS ratings on CreditWatch following the release of our updated ratings criteria for these transactions but was more detailed with respect to collateral and transaction performance. For more information on the analytic process we used for those CreditWatch placements, refer to "The Application Of Standard & Poor's Revised U.S. And Canadian CMBS Criteria For The Sept. 5, 2012, CreditWatch Actions," published Sept. 5, 2012. 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 17-g7 Disclosure Reports included in this credit rating report are available at http://standardandpoorsdisclosure-17g7.com. RATING AND CREDITWATCH ACTIONS Wachovia Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates Series 2003-C6 Class To From Credit enhancement (%) A-4 AAA (sf) AAA (sf) 41.82 B AAA (sf) AAA (sf) 34.82 C AAA (sf) AAA (sf) 31.74 D AAA (sf) AA+ (sf)/Watch Pos 25.86 E AA+ (sf) AA (sf)/Watch Pos 22.49 F A+ (sf) A+ (sf) 18.29 G A (sf) A (sf) 15.21 H A- (sf) A- (sf) 12.13 J BBB- (sf) BBB- (sf) 8.77 K BB (sf) BB (sf) 6.53 L BB- (sf) BB- (sf) 5.41 M B+ (sf) B+ (sf) 4.29 N B (sf) B (sf) 3.17 O B- (sf) B- (sf) 2.33 IO AAA (sf) AAA (sf) N/A Wachovia Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates Series 2003-C8 Class To From Credit enhancement (%) A-3 AAA (sf) AAA (sf) 38.04 A-4 AAA (sf) AAA (sf) 38.04 B AAA (sf) AA+ (sf)/Watch Pos 31.43 C AA+ (sf) AA (sf)/Watch Pos 28.39 D AA- (sf) AA- (sf) 22.05 E A+ (sf) A+ (sf) 19.02 F A- (sf) A- (sf) 15.44 G BB+ (sf) BBB (sf) 12.68 H B- (sf) BB+ (sf) 9.10 J CCC (sf) BB (sf) 7.44 K CCC- (sf) BB- (sf) 6.06 L CCC- (sf) B+ (sf)/Watch Neg 4.96 M CCC- (sf) B (sf)/Watch Neg 4.41 N CCC- (sf) B- (sf)/Watch Neg 3.31 O CCC- (sf) CCC+ (sf) 2.76 X-C AAA (sf) AAA (sf) N/A N/A--Not applicable. WACHOVIA BANK 2006-C25: Fitch Cuts Rating on $6.7MM Certs to 'Dsf' ------------------------------------------------------------------ Fitch Ratings has downgraded 12 classes and affirmed 11 classes of Wachovia Bank Commercial Mortgage Trust 2006-C25 (WBCMT 2006-C25) commercial mortgage pass-through certificates. Key Rating Drivers The downgrades reflect an increase in Fitch expected losses across the pool, largely attributed to increased losses on specially serviced assets based on recent valuations obtained by the special servicer. Fitch modeled losses of 10% of the remaining pool; expected losses on the original pool balance total 10.3%, including losses already incurred. The pool has experienced $50.5 million (1.8% of the original pool balance) in realized losses to date. Fitch has designated 36 loans (35.6%) as Fitch Loans of Concern, which includes 11 specially serviced assets (8.7%). As of the December 2012 distribution date, the pool's aggregate principal balance has been reduced by 14.4% to $2.45 billion from $2.86 billion at issuance. Per the servicer reporting, one loan (0.1% of the pool) has defeased since issuance. Interest shortfalls are currently affecting classes G through S. The largest contributor to lossesis an real estate owned (REO) portfolio of 10 office properties and one retail property located in Cincinnati, OH (3.3% of the pool balance). The asset was transferred to special servicing in July 2011 due to imminent monetary default. A deed-in-lieu transaction closed in June 2012. While most recent portfolio occupancy was reported at 82%, significant tenant roll was imminent. The properties are expected to be marketed for sale in the first half of this year. The next largest contributor to losses is secured by a 650,000 square foot (sf) office property located in Jacksonville, FL (3.5%). The loan was modified by the special servicer in August 2011 after the largest tenant vacated the property. While the borrower had a replacement tenant lined up, which has since taken occupancy; the loan was bifurcated into an A/B structure with the borrower also infusing new equity to fund related leasing costs. The b-note is subordinate to this borrower equity. The third largest contributor to losses is an office property located in the Buckhead sub-market of Atlanta, GA (2.7%). Recent historical sub-market performance has been weak. As of September 2012, occupancy at the property was reported at 75% with 7% roll expected through 2013. The property is considered overleveraged. Fitch downgrades these classes and assigns or revises Rating Outlooks and Recovery Estimates (REs) as indicated: -- $218.3 million class A-J to 'BBsf' from 'Asf', Outlook Stable; -- $10.7 million class B to 'BBsf' from 'BBBsf', Outlook to Negative from Stable; -- $35.8 million class C to 'Bsf' from 'BBB-sf', Outlook to Negative from Stable; -- $32.2 million class D to 'CCCsf' from 'BBsf', RE 100%; -- $17.9 million class E to 'CCCsf' from 'BBsf', RE 0%; -- $32.2 million class F to 'CCsf' from 'CCCsf', RE 0%; -- $32.2 million class G to 'CCsf' from 'CCCsf', RE 0%; -- $32.2 million class H to 'Csf' from 'CCCsf', RE 0%; -- $32.2 million class J to 'Csf' from 'CCsf', RE 0%; -- $32.2 million class K to 'Csf' from 'CCsf', RE 0%; -- $6.7 million class P to 'Dsf' from 'Csf', RE 0%; -- $0 class Q to 'Dsf' from 'Csf', RE 0%. Fitch affirms these classes as indicated: -- $32.1 million class A-3 at 'AAAsf', Outlook Stable; -- $7.7 million class A-PB1 at 'AAAsf', Outlook Stable; -- $75.8 million class A-PB2 at 'AAAsf', Outlook Stable; -- $723.7 million class A-4 at 'AAAsf', Outlook Stable; -- $500 million class A-5 at 'AAAsf', Outlook Stable; -- $303.5 million class A-1A at 'AAAsf', Outlook Stable; -- $286.2 million class A-M at 'AAAsf', Outlook Stable; -- $10.7 million class L at 'Csf', RE 0%; -- $10.7 million class M at 'Csf', RE 0%; -- $10.7 million class N at 'Csf', RE 0%; -- $7.2 million class O at 'Csf', RE 0%. Fitch previously withdrew the rating on the interest-only class IO certificates. Classes A-1 and A-2 are paid in full. WACHOVIA BANK 2006-WHALE7: Moody's Affirms 'C' Ratings on 2 Certs ----------------------------------------------------------------- Moody's Investors Service upgraded the ratings of three pooled classes and affirmed the ratings of seven classes of Wachovia Bank Commercial Mortgage Pass-Through Certificates, Series 2006-WHALE 7. Moody's rating action is as follows: Cl. A-2, Upgraded to Aaa (sf); previously on Aug 30, 2012 Upgraded to A2 (sf) Cl. X-1B, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Cl. B, Upgraded to Aa3 (sf); previously on Aug 30, 2012 Upgraded to Baa1 (sf) Cl. C, Upgraded to Baa1 (sf); previously on Aug 30, 2012 Upgraded to Ba1 (sf) Cl. WA, Affirmed at C (sf); previously on Mar 19, 2009 Downgraded to C (sf) Cl. MB-1, Affirmed at B2 (sf); previously on Oct 27, 2011 Downgraded to B2 (sf) Cl. MB-2, Affirmed at B3 (sf); previously on Oct 27, 2011 Downgraded to B3 (sf) Cl. MB-3, Affirmed at Caa1 (sf); previously on Oct 27, 2011 Downgraded to Caa1 (sf) Cl. MB-4, Affirmed at Caa2 (sf); previously on Oct 27, 2011 Downgraded to Caa2 (sf) Cl. CM, Affirmed at C (sf); previously on Dec 9, 2010 Downgraded to C (sf) Ratings Rationale The upgrades are due to decrease in leverage as a result of loan pay offs. 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. The rating of the IO Class, Class X-1B, is consistent with the expected credit performance of its referenced classes and thus is affirmed. Moody's does not rate pooled classes D, E, F, G, H, J, K and L which provide additional credit support for the more senior classes. Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan payoffs or a decline in subordination due to realized losses. Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near- term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock; albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing. The methodologies used in this rating were "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based Large Loan Model v 8.5. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. The CMBS IO calculator ver1.1 uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point . For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and Remittance Statements. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated August 30, 2012. Deal Performance As of the December 17, 2012 Payment Date, the transaction's aggregate certificate balance decreased by 47% from last review to approximately $1.09 Billion. The Certificates are collateralized by five floating rate whole loans and senior interests in whole loans. The loans range in size from 3% to 65% of the pooled balance. The pool's Herfindahl Index is 2 compared to 3 at last review. Moody's weighted average pooled LTV ratio is over 100% compared to 90% at last review. Moody's weighted average stressed DSCR for pooled trust debt is 1.06X compared to 1.31X at last review. Total outstanding Advances for this transaction is $22.7 million, and interest shortfalls totaling $140,615 affect the rake classes associated with the 4000 MacArthur Boulevard Loan (MB-1, MB02, MB- 3 and MB-4) have been incurred to the trust as of the current distribution date. Generally, interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal subordinate entitlement reductions (ASERs) and extraordinary trust expenses. There have been no pooled losses to date. The largest loan in the pool is secured by a fee and leasehold interests in The Boca Resort Hotel Pool Loan ($607 million, or 65% of pooled balance plus $148 million of rake bonds within the trust), secured by five hotel properties and one golf course located in Boca Raton, Ft. Lauderdale and Naples, FL. The sponsor is The Blackstone Group. Moody's does not rate the four rake bonds associated with this loan (Classes BH-1, BH-2, BH-3 and BH-4). There is additional debt in the form of non-trust junior component and mezzanine debt outside the trust. The loan matured in August 2011, and a forbearance agreement has been executed between the borrower and the servicer. As part of the agreement, principal paydowns have been made, and forbearance period will continue through August 2013. Net cash flow for year- end 2011 was $58 Million, and NCF for the trailing twelve month period ending June 2012 was also $58 Million. Moody's weighted average LTV for the pooled portion is 106%, and including rakes is 132%. Moody's current credit assessment for the pooled portion is Caa1, same as last review. The second largest loan in the pool, the Jameson Inn Loan ($161 million, or 15% of pooled balance), has been in special servicing since July 2011, and matured in August 2011. The senior loan is currently in bankruptcy; however, Moody's expects an exit in the near future. The new sponsor, Colony Capital LLC, will partner with Aimbridge Hospitality as the new operator, and plans to reflag the properties as Quality Inns and Baymont Suites. The 103 limited service hotel portfolio totals 6,617 guestrooms and are located in 12 states across southeastern and midwestern US. The portflio's NCF has continued to slide since 2009, albeit slowly. The portfolio achieved NCF of $22.1 million in 2011, and NCF for the trailing twelve month period ending August 2012 was $21.5 million. Moody's current credit assessment for this loan is Caa2. The third largest loan in the pool, the Westin Aruba Resort & Spa Loan ($97 million, or 9% of pooled balance plus $3.3 million of rake bond within the trust), has been in special servicing since November 2008, and matured in April 2009. In May 2009, the trust foreclosed on the Deed of Pledges of the parent entity of the borrower and the borrower to minimize Aruba specific tax implications. In addition to the outstanding advances totaling $23 million, certain legal and tax issues still remain unresolved. The property's performance showed positive momentum in 2011 over those of 2010. Full year 2011 EBITDA was $3.1 million, up for $2.3 million achieved in 2010. However, EBITDA for the first ten months of 2012 was $0.8 million, down by 63% from $2.1 million achieved during the same period in 2011. The current credit assessment for this loan is C. * Moody's Takes Rating Actions on $186-Mil. Alt-A RMBS Tranches --------------------------------------------------------------- Moody's Investors Service has upgraded 10 tranches and downgraded 20 tranches from 3 RMBS transactions issued by CSMC, CSAB, and Banc of America Funding. The collateral backing these deals primarily consists of first-lien, fixed Alt-A residential mortgages. The actions impact approximately $186 million of RMBS issued in 2007. Complete rating actions are as follows: Issuer: Banc of America Funding 2007--5 Trust Cl. 3-A-2, Downgraded to Ca (sf); previously on Nov 5, 2010 Confirmed at Caa3 (sf) Cl. 5-A-1, Downgraded to Caa1 (sf); previously on Nov 5, 2010 Downgraded to B2 (sf) Cl. 6-A-1, Downgraded to Caa1 (sf); previously on Nov 5, 2010 Downgraded to B1 (sf) Issuer: CSAB Mortgage-Backed Trust Series 2007-1 Cl. 2-A-2, Upgraded to Caa3 (sf); previously on Nov 19, 2010 Downgraded to Ca (sf) Cl. 2-A-3, Upgraded to Caa3 (sf); previously on Nov 19, 2010 Downgraded to Ca (sf) Cl. 2-A-4, Upgraded to Caa3 (sf); previously on Nov 19, 2010 Downgraded to Ca (sf) Cl. 2-A-5, Upgraded to Caa3 (sf); previously on Nov 19, 2010 Downgraded to Ca (sf) Cl. 2-A-6, Upgraded to Caa3 (sf); previously on Nov 19, 2010 Downgraded to Ca (sf) Cl. D-P, Upgraded to Caa3 (sf); previously on Nov 19, 2010 Downgraded to C (sf) Cl. D-X, Downgraded to Ca (sf); previously on Feb 22, 2012 Upgraded to Caa3 (sf) Issuer: CSMC Mortgage-Backed Trust Series 2007-3 Cl. 2-A-1, Downgraded to Caa3 (sf); previously on Oct 12, 2010 Downgraded to Caa2 (sf) Cl. 2-A-2, Downgraded to Caa3 (sf); previously on Oct 12, 2010 Downgraded to Caa2 (sf) Cl. 2-A-4, Downgraded to Caa3 (sf); previously on Oct 12, 2010 Downgraded to Caa2 (sf) Cl. 2-A-10, Downgraded to Caa3 (sf); previously on Oct 12, 2010 Downgraded to Caa2 (sf) Cl. 2-A-12, Downgraded to Caa3 (sf); previously on Oct 12, 2010 Downgraded to Caa2 (sf) Cl. 2-A-13, Downgraded to Caa3 (sf); previously on Oct 12, 2010 Downgraded to Caa2 (sf) Cl. 2-A-15, Downgraded to Caa3 (sf); previously on Oct 12, 2010 Downgraded to Caa2 (sf) Cl. 2-A-16, Downgraded to Caa3 (sf); previously on Oct 12, 2010 Downgraded to Caa2 (sf) Cl. 2-A-17, Downgraded to Caa3 (sf); previously on Oct 12, 2010 Downgraded to Caa2 (sf) Cl. 2-A-18, Downgraded to Caa3 (sf); previously on Oct 12, 2010 Downgraded to Caa2 (sf) Cl. 2-A-19, Downgraded to Caa3 (sf); previously on Oct 12, 2010 Downgraded to Caa2 (sf) Cl. 3-A-2, Upgraded to Caa2 (sf); previously on Oct 12, 2010 Downgraded to Caa3 (sf) Cl. 3-A-4, Upgraded to Caa2 (sf); previously on Oct 12, 2010 Downgraded to Caa3 (sf) Cl. 4-A-1, Downgraded to Caa1 (sf); previously on Oct 12, 2010 Downgraded to B3 (sf) Cl. 4-A-2, Downgraded to C (sf); previously on Oct 12, 2010 Confirmed at Ca (sf) Cl. 4-A-3, Upgraded to Ba2 (sf); previously on Oct 12, 2010 Upgraded to B3 (sf) Cl. 4-A-7, Upgraded to Ba2 (sf); previously on Feb 22, 2012 Upgraded to B3 (sf) Cl. 4-A-14, Downgraded to C (sf); previously on Oct 12, 2010 Confirmed at Ca (sf) Cl. A-X, Downgraded to Caa1 (sf); previously on Feb 22, 2012 Upgraded to B3 (sf) Cl. A-P, Downgraded to Caa2 (sf); previously on Oct 12, 2010 Confirmed at Caa1 (sf) Ratings Rationale These actions reflect recent performance of the underlying pools and Moody's updated loss expectations on the pools. The actions also reflect correction of an error in the Structured Finance Workstation (SFW) cash flow model used by Moody's in rating these transactions, specifically in how the model handled interest shortfall allocation among different sub-pools in transactions with a double-ratio strip. Double-ratio strip transactions are deals where a pool of collateral with a variable weighted average net mortgage rate supports two (or more) groups of senior bonds with fixed coupon rates, one with a high coupon rate and one with a low coupon rate. To support this feature, the pool is divided into subgroups. All underlying loans with rates at or below the bond with the lower coupon are placed in one subgroup and all loans with rates higher than the bond with the higher coupon are placed in another subgroup. Loans with a net loan rate between the two rates are hypothetically split and allocated in different proportions to the two sub-pools so that the weighted average rate of each sub-pool matches the rate on the respective bonds. In the past, Moody's model commingled the principal and interest collections from these sub-pools before allocating funds to the respective senior bonds, first as interest and then as principal. Under normal circumstances, this simplifying assumption works fine. However, in the current environment of large rate modifications, the interest and principal collections are not enough to pay the scheduled interest and principal on the senior bonds. Therefore, interest is first being paid in full to all senior bonds and the remaining funds are distributed as principal, resulting in a principal shortfall. Commingling funds results in allocating the principal shortfall pro-rata to the bonds. This pro-rata allocation is inaccurate because the underlying loans that were modified were not split pro-rata into the sub-pools. Higher rate loans, which are more prone to rate modification, by design back the sub-pools with higher target rates. Allocating the principal shortfall pro-rata is thus detrimental to bonds backed by the lower target-rate sub- pool and excessively beneficial to bonds backed by the higher target-rate sub-pool. Moody's updated modeling first allocates interest shortfalls by scaling the actual interest collected compared to the target interest that is to be received under normal circumstances, before distributing the available funds. This approach thus keeps track of the level of principal shortfall resulting from each sub-pool, and discriminates between the bonds backed by the different net rate sub-pools. The actions taken are driven by performance of the individual pools and less by the modeling update. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 - 2008 US RMBS Surveillance Methodology" published in July 2011. The methodology used in rating Interest- Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications and 2) small pool volatility Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility The above RMBS approach only applies to structures with at least 40 loans and pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. For pools with loans less than 100, Moody's adjusts its projections of loss to account for the higher loss volatility of such pools. For small pools, a few loans becoming delinquent would greatly increase the pools' delinquency rate. To project losses on Alt-A pools with fewer than 100 loans, Moody's first calculates an annualized delinquency rate based on vintage, number of loans remaining in the pool and the level of current delinquencies in the pool. For Alt-A pools, Moody's first applies a baseline delinquency rate of 10% for 2005, 19% for 2006 and 21% for 2007. Once the loan count in a pool falls below 76, this rate of delinquency is increased by 1% for every loan fewer than 76. For example, for a 2005 pool with 75 loans, the adjusted rate of new delinquency is 10.1%. Further, to account for the actual rate of delinquencies in a small pool, Moody's multiplies the rate calculated above by a factor ranging from 0.20 to 2.0 for current delinquencies that range from less than 2.5% to greater than 50% respectively. Moody's then uses this final adjusted rate of new delinquency to project delinquencies and losses for the remaining life of the pool under the approach described in the methodology publication. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in September 2011 to 7.8% in December 2012. Moody's forecasts a further drop to 7.5% by 2014. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF314001 A list of updated estimated pool losses and sensitivity analysis is being posted on an ongoing basis for the duration of this review period and may be found at: http://v3.moodys.com/page/viewresearchdoc.aspx?docid=PBS_SF198174 * S&P Takes Various Rating Actions on 37 Classes From 5 CMBS Deals ------------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on 11 classes from three U.S. commercial mortgage-backed securities (CMBS) transactions and removed eight of these ratings from CreditWatch with positive implications. Concurrently, S&P lowered its ratings on three classes from one U.S. CMBS transaction and removed them from CreditWatch with negative implications. Furthermore, S&P affirmed its ratings on 22 classes from five U.S. CMBS transactions and removed one rating from CreditWatch with negative implications. Lastly, S&P withdrew its 'AA- (sf)' rating on class B-4 from DLJ Commercial Mortgage Corp.'s series 1998-CF1 (DLJ 1998-CF1) (see list). The CreditWatch resolutions are related to CreditWatch placements that S&P initiated on Sept. 5, 2012. The upgrades reflect Standard & Poor's expected available credit enhancement for the affected tranches, which S&P believe is greater than its most recent estimate of necessary credit enhancement for the most recent rating levels. The upgrades also reflect S&P's views regarding the current and future performance of the collateral supporting the respective transactions. "The downgrades reflect our views regarding the current and future performance of the collateral supporting the respective transactions. As a result, our expected available credit enhancement for the affected tranches is less than our most recent estimate of necessary credit enhancement for the most recent rating levels. The lowered ratings also take into consideration the liquidity for each class and acknowledge our expectations regarding the current and future performance of the collateral supporting the respective transactions" S&P said. "The affirmations of the principal and interest certificates primarily reflect our expected available credit enhancement for the affected tranches, which we believe will remain consistent with the most recent estimate of necessary credit enhancement for the current rating levels. The affirmed ratings also take into consideration the liquidity for each class and acknowledge our expectations regarding the current and future performance of the collateral supporting the respective transactions," S&P added. The affirmations of S&P's ratings on the interest-only (IO) certificates reflect its current criteria for rating IO securities. The withdrawal of our 'AA- (sf)' rating on class B-4 from DLJ 1998-CF1 follows the full repayment of the class' principal balance, as noted in the Dec. 17, 2012, trustee remittance report. The rating actions follow a detailed review of the performance of the collateral supporting the relevant securities and transaction structures. This review was similar to the review S&P conducted before placing 744 U.S. and Canadian CMBS ratings on CreditWatch following the release of its updated ratings criteria for these transactions, but was more detailed with respect to collateral and transaction performance. For more information on the analytic process S&P used for those CreditWatch placements, refer to "The Application Of Standard & Poor's Revised U.S. And Canadian CMBS Criteria For The Sept. 5, 2012, CreditWatch Actions," published Sept. 5, 2012. 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 17-g7 Disclosure Reports included in this credit rating report are available at http://standardandpoorsdisclosure-17g7.com RATING AND CREDITWATCH ACTIONS Bank of America N.A.-First Union National Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2001-3 Rating Class To From Credit Enhancement (%) G AAA (sf) AA- (sf)/Watch Pos 88.37 H AAA (sf) A (sf)/Watch Pos 74.30 J A+ (sf) BBB+ (sf) 60.23 K B+ (sf) B+ (sf) 30.68 L B- (sf) B- (sf) 22.24 M CCC- (sf) CCC- (sf) 13.79 XC AAA (sf) AAA (sf) N/A DLJ Commercial Mortgage Corp. Commercial mortgage pass-through certificates series 1998-CF1 Rating Class To From Credit Enhancement (%) B-4 NR AA- (sf) N/A B-5 BBB+ (sf) BBB+ (sf) 65.94 B-6 B+ (sf) B+ (sf)/Watch Neg 25.16 GE Commercial Mortgage Corp. Commercial mortgage pass-through certificates series 2004-C1 Rating Class To From Credit Enhancement (%) A-3 AAA (sf) AAA (sf) 27.74 A-1A AAA (sf) AAA (sf) 27.74 B AAA (sf) AA+ (sf)/Watch Pos 22.18 C AAA (sf) AA (sf)/Watch Pos 19.86 D AAA (sf) A+ (sf)/Watch Pos 15.45 E A+ (sf) A- (sf) 13.37 F A- (sf) BBB+ (sf) 10.35 G BBB (sf) BBB (sf) 8.50 H BBB- (sf) BBB- (sf) 5.95 J BB (sf) BB (sf) 4.56 K BB- (sf) BB- (sf) 3.17 L B (sf) B (sf) 2.24 M CCC+ (sf) CCC+ (sf) 1.08 N CCC (sf) CCC (sf) 0.38 X-1 AAA (sf) AAA (sf) N/A GMAC Commercial Mortgage Securities Inc. Commercial mortgage pass-through certificates series 2002-C2 Rating Class To From Credit Enhancement (%) K AAA (sf) BB+ (sf)/Watch Pos 97.11 L A+ (sf) BB- (sf)/Watch Pos 77.49 M BB+ (sf) B (sf)/Watch Pos 57.87 N CCC+ (sf) CCC+ (sf) 25.17 O CCC (sf) CCC (sf) 12.09 GMAC Commercial Mortgage Securities Inc. Commercial mortgage pass-through certificates series 2004-C2 Rating Class To From Credit Enhancement (%) A-1A AAA (sf) AAA (sf) 9.23 A-3 AAA (sf) AAA (sf) 9.23 A-4 AAA (sf) AAA (sf) 9.23 B BBB+ (sf) AA (sf)/Watch Neg 5.07 C BB+ (sf) A+ (sf)/Watch Neg 3.37 D CCC- (sf) BB+ (sf)/Watch Neg 0.35 X-1 AAA (sf) AAA (sf) N/A NR- Not rated. N/A- Not applicable. * S&P Lowers Rating on Four CDO Transactions to 'D' --------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings to 'D (sf)' on four classes from four U.S. synthetic corporate collateralized debt obligation (CDO) transactions (see list). The lowered ratings follow losses due to credit events, which caused the rated notes to incur principal losses. 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 and Repackaged Securities Ltd. Series 2006-1 Rating Class To From Notes D (sf) CCC- (sf) Eirles Two Ltd. Series 241 Rating Class To From D (sf) CCC- (sf) Lorally CDO Ltd. Series 2006-1 Rating Class To From Tranche B D (sf) CCC- (sf) UBS AG US$10 mil (Jersey Branch), SALS 2007-3 Notes due June 20, 2014 Series 4695 Rating Class To From Notes D (sf) CCC- (sf) * S&P Lowers Rating on 59 Classes From 17 U.S. RMBS Deals --------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 59 classes from 17 U.S. residential mortgage-backed securities (RMBS) transactions and removed 48 of them from CreditWatch with negative implications and seven of them from CreditWatch with developing implications. S&P also raised its ratings on eight classes from three transactions and removed four of them from CreditWatch positive and two of them from CreditWatch developing. In addition, S&P affirmed its ratings on 62 classes from 20 transactions and removed nine of them from CreditWatch negative and four of them from CreditWatch developing. S&P also withdrew its ratings on 10 classes from three transactions, one of which S&P withdrew after lowering it. S&P's ratings on these 10 classes were on CreditWatch negative. The transactions in this review were issued between 2002 and 2007 and are backed primarily by adjustable- and fixed-rate Alt-A and Neg-am mortgage loans secured primarily by first liens on one- to four-family residential properties. "On Aug. 15, 2012, we placed our ratings on 83 classes from 21 transactions within this review on CreditWatch negative, positive, or developing, along with ratings from a group of other RMBS securities after implementing our recently revised criteria for surveilling pre-2009 U.S. RMBS ratings. Ratings that we placed on CreditWatch negative accounted for approximately 57% of the actions, CreditWatch developing accounted for approximately 36%, and CreditWatch positive accounted for approximately 7%. We completed our review using the new methodology and assumptions and today's rating actions resolve some of the CreditWatch placements," S&P said. An overview of the directional change of the CreditWatch resolutions is as follows: 3 or fewer More than 3 From Affirmations notches notches Up Down Up Down Watch Pos 0 1 0 3 0 Watch Neg 9 0 19 0 29 Watch Dev 4 1 4 1 3 The high number of CreditWatch negative placements reflected S&P's projection that remaining losses for most of the transactions in this review will increase. S&P may have also placed its ratings on CreditWatch negative for certain structures that had reduced forecasted losses due to an increased multiple of loss coverage for certain investment-grade rated tranches as set forth in its revised criteria. Increases in projected losses resulted from one or more of the following factors: -- An increase in our default and loss multiples at higher investment-grade rating levels; -- A substantial portion of nondelinquent loans now categorized as reperforming (many of these loans have been modified) with a default frequency of between 30% and 45%; -- Increased roll-rates for 30- and 60-day delinquent loans; and -- An overall continued elevated level of observed loss severities. S&P used deal or shelf-specific loss severities for the majority of the transactions within this review: 64% of the Alt-A and 44% of the Neg-am structures had loss severities that were greater than the default loss severity for its respective cohort. No. deals/Structures Shelf Name reviewed Credit Suisse First Boston Mtg Sec. Corp. (CSF0) 1/2 Alternative Loan Trust (CWA0) 1/1 Deutsche Alt-A Securities Mortgage Loan Tr (DAA0) 2/3 Deutsche Alt-B Securities Mortgage Loan Tr (DAB0) 1/1 DSLA Mortgage Loan Trust (DSLA) 1/1 Greenpoint Mortgage Funding Trust (GPM0) 1/1 Impac CMB Trust (IMHE) 2/3 MortgageIT Trust (MIT0) 1/1 Merrill Lynch Mortgage Investors Trust (MLM0) 2/2 Morgan Stanley Mortgage Loan Trust (MSM0) 1/3 Residential Asset Securitization Trust (RAS0) 1/1 RALI Trust (RFC0) 2/2 Structured Asset Mortgage Investments II Tr (SAMI) 2/3 Structured Adjustable Rate Mortgage Loan Tr (SAR0) 2/3 Terwin Mortgage Trust (TWM0) 1/1 WaMu Mortgage Pass-Through Certificates Tr (WMS0) 2/3 Shelf No. IG No. Non-IG No. IG to No. Down/up Name affirmed affirmed non-IG >3 notches CSF0 4 1 0 0/0 CWA0 0 2 8 8/0 DAA0 0 4 0 1/0 DAB0 2 0 0 0/0 DSLA 0 2 2 2/0 GPM0 0 4 0 0/0 IMHE 0 0 1 2/0 MIT0 0 2 0 0/1 MLM0 0 3 1 1/3 MSM0 0 10 5 5/0 RAS0 1 6 0 0/0 RFC0 0 2 2 3/0 SAMI 0 4 3 3/0 SAR0 5 4 1 0/0 TWM0 1 0 2 5/0 WMS0 0 5 2 2/0 IG -- Investment Grade The tables below detail information by vintage and on each reviewed shelf as of November 2012. Structure Count Vintage Alt-A Neg-Am 2002 2 2003 1 2004 5 1 2005 6 3 2006 5 3 2007 3 2 Total DQ (%) Vintage Alt-A Neg-Am 2002 15.81 2003 14.32 2004 11.50 22.73 2005 22.26 33.82 2006 31.51 30.11 2007 38.95 43.09 Severe Delinquencies (%) Vintage Alt-A Neg-Am 2002 8.45 2003 9.36 2004 10.16 15.85 2005 17.20 29.03 2006 27.21 24.76 2007 35.16 38.57 Losses And Delinquencies* Shelf Avg. pool Cum. loss Serious DQ Total DQ Name factor (%) avg. (%) avg. (%) avg. (%) CSF0 10.95 2.31 19.75 21.61 CWA0 24.19 1.03 11.30 14.28 DAA0 38.74 21.03 35.16 38.95 DAB0 34.87 22.01 31.07 35.40 DSLA 11.02 3.89 15.85 22.73 GPM0 26.22 9.55 24.11 26.10 IMHE 5.61 0.41 3.12 4.77 MIT0 36.88 12.80 8.82 13.66 MLM0 30.22 10.24 20.10 26.65 MSM0 33.69 12.13 28.70 32.28 RAS0 42.82 4.06 16.37 25.58 RFC0 3.76 0.56 8.45 15.81 SAMI 26.86 15.85 35.39 40.00 SAR0 5.84 1.45 13.72 16.58 TWM0 17.69 11.72 18.90 23.62 WMS0 37.83 13.00 24.76 30.11 * Cumulative losses represent the percentage of the original pool balance, and total and severe delinquencies represent the percentage of the current pool balance. In line with the factors described above, S&P revised its remaining loss projections for all of the transactions in this review from its previous projections. A majority of these transactions had increased loss projections and as a result, 42% of the rating actions in this review were downgrades and most of the remaining actions were affirmations. "Despite the increase in remaining projected losses for a majority of the transactions, we upgraded eight classes from three transactions. The upgrades reflect sufficient credit enhancement to support projected losses at the respective rating level. Some of these classes are the most senior tranches outstanding in their respective transactions. Our decisions on these classes primarily reflected the structural mechanics of these transactions, namely situations where cumulative loss triggers embedded in the deals have failed, causing principal to be distributed sequentially, which helps prevent credit support erosion and increases the likelihood that these tranches will receive their full share of principal payments prior to the realization of our projected losses. Other classes have been upgraded due to an extended loss curve that increases the amount of excess spread available for credit support in our projections. Lastly, the upgrades of some senior classes that receive principal and interest from a particular loan group were the result of projections of better group level performance," S&P said. S&P affirmed its ratings on 62 classes from 20 transactions and removed nine of them from CreditWatch negative and four of them from CreditWatch developing. S&P rates 44 of these classes 'CCC (sf)' or 'CC (sf)'. S&P believes that the projected credit support for these classes will remain insufficient to cover the revised projected losses. Conversely, the affirmations for classes with ratings above 'CCC' reflect our opinion that the credit support for these classes will remain sufficient to cover the revised projected losses. "We lowered our ratings on 59 classes from 17 transactions. Of the lowered ratings, we downgraded 27 classes out of investment- grade, including seven that we downgraded to 'CCC (sf)' and one with a rating that we subsequently withdrew. Another 23 ratings remain at investment-grade after being lowered. The remaining downgraded classes already had speculative-grade ratings prior to the actions. We downgraded one class to 'D (sf)' due to observed principal write-downs," S&P said. Senior tranches accounted for the bulk of the lowered ratings (51); the remaining downgrades affected mezzanine classes. Contrary to the characteristics that distinguished the upgrades and affirmations highlighted above, these downgraded tranches generally did not exhibit either a high priority in payment or a short projected life. The downgrades were primarily due to significantly greater lifetime loss projections driven by increased loss severities and loans classified as reperforming, which caused an increase in S&P's projected default rates on nondelinquent loans. Also, ratings that S&P lowered but remain at investment-grade were primarily driven by the increased stress multiples applied to ratings 'A (sf)' and above. "We withdrew our ratings on six classes from two transactions in accordance with our interest-only criteria because the referenced classes no longer sustained ratings above 'A+ (sf)'. In addition, we withdrew our ratings on classes 3-A, 3-M-1, 3-M-2, and 3-B from Impac CMB Trust 2004-3 because the related structure had less than 20 loans outstanding. Prior to withdrawal, the rating on class 3- B from this transaction was lowered to 'B- (sf)' due to tail risk associated with the loan group of the respective class. We address tail risk in transactions by conducting additional loan- level analysis that stresses the loan concentration risk within the applicable transactions," S&P noted. "In accordance with our counterparty criteria, we considered any applicable hedges related to these securities when performing these rating actions and resolving the CreditWatch placements," S&P noted. Subordination, overcollateralization (when available), and excess interest as applicable generally provide credit support for these Alt-A and Neg-am transactions. Some classes may also benefit from bond insurance. In these cases, the long-term rating on the class reflects the higher of the rating on the bond insurer and the underlying credit rating on the security without the benefit of such bond insurance. 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 * S&P Lowers Rating on 2 Sec. Classes from 4 CMBS Deals to 'CCC-' ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its rating on one class from one U.S. commercial mortgage-backed securities (CMBS) transaction and removed it from CreditWatch with positive implications. In addition, S&P lowered its ratings on 15 classes from three U.S. CMBS transactions and removed 12 of these ratings from CreditWatch with negative implications. Concurrently, S&P affirmed its ratings on 11 classes from two U.S. CMBS transactions. S&P also withdrew its 'BBB+ (sf)' rating on the class B certificates from Banc of America Commercial Mortgage Inc.'s series 2002-PB2 (BACM 2002-PB2), a U.S. CMBS transaction, and removed it from CreditWatch with positive implications (see list). The CreditWatch resolutions are related to CreditWatch placements that S&P initiated on Sept. 5, 2012. "The upgrade of class C from BACM 2002-PB2 reflects Standard & Poor's expected available credit enhancement for the affected tranch, which we believe is greater than our most recent estimate of necessary credit enhancement for the most recent rating levels. The upgrade also reflects our views regarding the current and future performance of the collateral supporting the respective transactions. Our rating action considered five ($136.6 million, 87.3%) of the seven remaining assets in the pool that are with the special servicer, current and potential interest shortfalls related to the specially serviced assets, as well as liquidity available to this class. According to the Dec. 11, 2012, trustee remittance report, interest shortfalls from interest not advanced due to the master servicer's nonrecoverable determination or appraisal subordinate entitlement reduction amounts totaling $731,834 were in effect for four of the five specially serviced assets ($136.6 million, 87.3%)," S&P said. "The downgrades reflect our expected available credit enhancement for the affected tranches, which we believe is less than our most recent estimate of necessary credit enhancement for the most recent rating levels. The downgrades also reflect our views regarding the current and future performance of the collateral supporting the respective transactions as well as liquidity support available to the trust. The downgrades of the class E and F certificates from JPMorgan Chase Commercial Mortgage Securities Corp.'s series 2004-CIBC10 (JPMC 2004-CIBC10) are due to reduced liquidity available to these classes and the potential for these classes to experience interest shortfalls in the near future from the specially serviced assets, particularly, the Continental Plaza real estate owned asset. Our analysis considered that the asset has a trust balance of $88.0 million (7.5%) and a total reported exposure of $104.5 million. An updated appraisal dated Nov. 18, 2011, valued the property at $48.3 million. An appraisal reduction amount of $56.6 million is currently in effect and we expect interest shortfalls stemming from this asset to continue to affect the trust in the near term. We expect additional interest shortfalls related to this asset to affect the trust if the appraisal value of the property continues to decline and the exposure balance continues to increase," S&P added. "The affirmations of the principal and interest certificates reflect our expected available credit enhancement for the affected tranches, which we believe will remain consistent with the most recent estimate of necessary credit enhancement for the current rating levels. The affirmed ratings also acknowledge our expectations regarding the current and future performance of the collateral supporting the respective transactions" S&P noted. S&P affirmed its ratings on the interest-only (IO) certificates based on its current criteria for rating IO securities. S&P withdrew its rating on the class B principal and interest certificates from BACM 2002-PB2 and removed it from CreditWatch with positive implications, following the full repayment of the class' principal balance as detailed in the Dec. 11, 2012, trustee remittance report. "The rating actions follow a detailed review of the performance of the collateral supporting the relevant securities and transaction structures. This review was similar to the review we conducted before placing 744 U.S. and Canadian CMBS ratings on CreditWatch following the release of our updated ratings criteria for these transactions, but was more detailed with respect to collateral and transaction performance. For more information on the analytic process we used for those CreditWatch placements, refer to "The Application Of Standard & Poor's Revised U.S. And Canadian CMBS Criteria For The Sept. 5, 2012, CreditWatch Actions," published Sept. 5, 2012, 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 17-g7 Disclosure Reports included in this credit rating report are available at http://standardandpoorsdisclosure-17g7.com RATING AND CREDITWATCH ACTIONS JPMorgan Chase Commercial Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2004-CIBC10 Rating Class To From Credit enhancement (%) A-5 AAA (sf) AAA (sf) 29.95 A-6 AAA (sf) AAA (sf) 29.95 A-1A AAA (sf) AAA (sf) 29.95 A-J AAA (sf) AAA (sf) 19.93 B A (sf) AA (sf)/Watch Neg 14.71 C A- (sf) AA- (sf)/Watch Neg 13.25 D BBB (sf) A+ (sf)/Watch Neg 12.00 E B+ (sf) BBB (sf) 10.54 F CCC- (sf) B+ (sf) 8.66 X-1 AAA (sf) AAA (sf) N/A JPMorgan Chase Commercial Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2003-LN1 Rating Class To From Credit enhancement (%) A-1 AAA (sf) AAA (sf) 19.90 A-2 AAA (sf) AAA (sf) 19.90 A-1A AAA (sf) AAA (sf) 19.90 B AAA (sf) AAA (sf) 15.77 C AA+ (sf) AA+ (sf) 14.16 D AA- (sf) AA (sf)/Watch Neg 10.57 E A- (sf) A+ (sf)/Watch Neg 8.77 F BBB-(sf) BBB (sf)/Watch Neg 6.80 G BB (sf) BB+ (sf)/Watch Neg 5.18 H B (sf) BB- (sf)/Watch Neg 3.21 J B- (sf) B+ (sf)/Watch Neg 2.49 K CCC (sf) B (sf)/Watch Neg 1.05 L CCC- (sf) CCC+ (sf) 0.33 X-1 AAA (sf) AAA (sf) N/A JPMorgan Chase Commercial Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2004-PNC1 Rating Class To From Credit enhancement (%) B AA- (sf) AA+ (sf)/Watch Neg 11.13 C A (sf) AA- (sf)/Watch Neg 9.26 Banc of America Commercial Mortgage Inc. Commercial mortgage pass-through certificates series 2002-PB2 Rating Class To From Credit enhancement (%) B NR BBB+ (sf)/Watch Pos N/A C BB+ (sf) B+ (sf)/Watch Pos 97.13 NR - Not rated. N/A - Not applicable. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers" public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com/ On Thursdays, the TCR delivers a list of recently filed Chapter 11 cases involving less than $1,000,000 in assets and liabilities delivered to nation's bankruptcy courts. The list includes links to freely downloadable images of these small-dollar petitions in Acrobat PDF format. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. The Sunday TCR delivers securitization rating news from the week then-ending. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors" Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine Tumanda, Howard C. Tolentino, Joseph Medel C. Martirez, Carmel Paderog, Meriam Fernandez, Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Sheryl Joy P. Olano, Ivy B. Magdadaro, Carlo Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2013. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $975 for 6 months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Peter A. Chapman at 215-945-7000 or Nina Novak at 202-241-8200. *** End of Transmission ***