/raid1/www/Hosts/bankrupt/TCR_Public/131013.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, October 13, 2013, Vol. 17, No. 284
Headlines
ACA CLO 2006-1: S&P Affirms 'BBsf' Rating to Class D Notes
ACT 2005-RR: S&P Lowers Rating on CLASS A-1FL Certificates to 'D'
APIDOS CDO I: S&P Raises Rating on Class D Notes to 'BB+'
ARBOR REALTY 2005-1: Moody's Affirms Ratings on 9 Note Classes
ARBOR REALTY 2006-1: Moody's Affirms Caa3 Ratings on 5 Notes
ARES XXVIII: S&P Assigns Preliminary BB Rating to Class E Notes
ATHERTON FRANCHISE: Fitch Affirms 'D' Ratings on 3 Note Classes
AVENUE CLO III: S&P Raises Rating on Class B2L Notes to 'BB+'
CEDARWOODS CRE II: Moody's Affirms Ratings on 8 Note Classes
CITIGROUP 2007-C6: Fitch Affirms 'C' Ratings on 12 Cert. Classes
COMM 2012-CCRE3: Fitch Affirms 'B' Rating on Cl. G Certificates
COMM 2013-CCRE11: DBRS Assigns 'BB' Rating to Class E Certificates
COMM 2013-CCRE11: Fitch Assigns 'B' Rating to Class F Certs
COMM MORTGAGE 2005-FL10: Fitch Affirms 'D' Rating on Cl. M Notes
EMPORIA PREFERRED II: Moody's Affirms Ba3 Rating on $14.5MM Notes
FIRST NLC 2005-1: Moody's Hikes Cl. A Securities Rating to 'Caa1'
GALLATIN CLO II: S&P Raises Rating on Class B-2L Notes to 'BB+'
GREENWICH CAPITAL 2007-GG9: Fitch Cuts Rating on 2 Certs to 'Csf'
GS MORTGAGE 2006-RR3: Moody's Affirms Caa3 Ratings on 3 Notes
HELIOS SERIES I: Moody's Hikes Rating on $27MM Notes to 'Ba2(sf)'
IVY HILL VII: Moody's Rates $28MM Floating Notes '(P)Ba2(sf)'
JP MORGAN 2007-LDP12: Moody's Affirms Ba3 Rating on Class X Certs
JP MORGAN 2013-C15: Fitch to Rate Class F Certificates at 'B'
MERRILL LYNCH 2005-CA: DBRS Confirms 'BB' Rating at Cl. F Certs
MORGAN STANLEY 2002-IQ3: S&P Raises Rating on Class F Notes to B+
MORGAN STANLEY 2003-TOP11: Moody's Cuts Cl. J Certs Rating to 'C'
MORGAN STANLEY 2006-HQ8: Moody's Cuts Ratings on 2 Cert. Classes
MORGAN STANLEY 2013-C12: Moody's Rates Class F Notes 'B1(sf)'
MOUNTAIN CAPITAL V: Moody's Affirms 'Ba3' Rating on $10.5MM Notes
MUIR GROVE: Moody's Ups $13.75MM Class D Notes to 'Ba1(sf)'
N-STAR REAL IV: Moody's Affirms Caa3 Ratings on 2 Notes
NEUBERGER BERMAN XV: S&P Assigns 'BBsf' Rating on Class E Notes
NOMURA 2007-2: Fitch Lowers Ratings on Class E & F Notes to 'C'
PREFERRED TERM XVI: Moody's Hikes Ratings on 2 Notes to 'Ba3(sf)'
REALT 2005-2: DBRS Confirms 'BBsf' Rating on Cl. F Certificates
ROCK 1-CRE CDO 2006: Moody's Hikes Ratings on Cl. F Notes to B2
SCHOONER TRUST 2004-CCF1: S&P Affirms BB Rating on Class G Notes
SCHOONER TRUST 2007-8: DBRS Confirms 'BB' Rating on Class F Certs
SOLOSO CDO 2007-1: Moody's Hikes Ratings of $311.9MM of Notes
SPRINGLEAF MORTGAGE 2013-3: S&P Assigns BB Rating on Cl. B-1 Notes
STRUCTURED ASSET 2006-RF4: Moody's Cuts Rating on Six Tranches
THL CREDIT 2013-1: S&P Affirms 'BB' Rating on $23.8MM Cl. D Notes
TIAA REAL 2003-1: Fitch Affirms 'C' Rating on Class E Notes
WHITEHORSE VII: S&P Assigns 'B' Rating on $8.8MM Class B-3L Notes
WRIGHTWOOD CAPITAL 2005-1: Moody's Affirms Caa3 Ratings on 4 Notes
* Fitch Says Losses & Defaults Minimal for Canadian CMBS
* Moody's Hikes Ratings on $222MM of RMBS from Various Issuers
* Moody's Takes Action on $293MM FNA/VA RMBS by Various Issuers
* Moody's Takes Action on $280MM of Subprime RMBS Issued 2000-2006
* Moody's Takes Action on $269MM of Securities Issued 1995-2002
* Moody's Takes Action on $202MM of Subprime RMBS Issued 1998-2006
* Moody's Takes Action on $143MM of Subprime RMBS Issued 2002-2004
* Moody's Cuts Rating on $133MM Prime Jumbo RMBS Issued 2004-2006
*********
ACA CLO 2006-1: S&P Affirms 'BBsf' Rating to Class D Notes
----------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
A-1, A-2, B, and C notes from ACA CLO 2006-1 Ltd., a U.S.
collateralized loan obligation transaction managed by Apidos
Capital Management LLC. At the same time, S&P affirmed its rating
on the class D notes. In addition, S&P removed its ratings on the
class A-2, B, and C notes from CreditWatch, where S&P placed them
with positive implications on Sept. 5, 2013.
The actions incorporate three factors: the deleveraging of the
senior notes, the improved credit quality, and the potential
market value risk of the long-dated assets in the transaction.
After the July 25, 2013, payment date, the class A-1 notes have
paid down $139.41 million in principal, down to approximately
41.57% of their original balance since S&P's April 2012 rating
actions, which were based on the March 2012 trustee report. The
outstanding balance of the class A-1 notes is approximately 41.57%
of its original balance. The transaction's overall
overcollateralization (O/C) ratio tests have also benefited from
the principal paydowns; for example, the class A O/C test has
increased to 149.00% from 123.88%.
S&P also noted that the credit quality of the underlying portfolio
has improved over the same period. According to the September
2013 trustee report, the transaction held $1.49 million in
defaulted assets compared with $4.93 million noted in the March
2012 trustee report.
S&P also noted that the transaction held $9.40 million of long-
dated assets that mature after the transaction's stated maturity.
S&P's analysis considered the potential market value or
settlement-related risks arising from the potential liquidation of
the remaining securities on the transaction's legal final maturity
date.
The affirmation reflects S&P's belief that the credit support
available is commensurate with the current rating level.
Standard & Poor's will continue to review whether, in its view,
the ratings assigned to the notes remain consistent with the
credit enhancement available to support them and take rating
actions as it deems necessary.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
RATING AND CREDITWATCH ACTIONS
Class Rating
To From
A-1 AAA (sf) AA+ (sf)
A-2 AAA (sf) AA (sf)/Watch Pos
B AA+ (sf) A (sf)/Watch Pos
C A- (sf) BBB (sf)/Watch Pos
D BB (sf) BB (sf)
ACT 2005-RR: S&P Lowers Rating on CLASS A-1FL Certificates to 'D'
-----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its rating on the Class
A-1FL certificates from ACT 2005-RR Depositor Corp., a U.S.
resecuritized real estate mortgage investment conduit (re-REMIC)
transaction, to 'D (sf)' from 'CCC- (sf)'.
The downgrade reflects the principal losses the class has
experienced, as noted in the Sept. 23, 2013, trustee report.
According to the trustee report, the Class A-1FL certificates had
a principal loss of $3.6 million while receiving a principal
paydown of $8.7 million, which reduced the class balance to
$173.2 million from $185.5 million in the previous period. Class
A-2, which Moody's e downgraded to 'D (sf)' on July 28, 2011, had
an $8.8 million principal loss this period, which reduced the
class's balance to zero. Both classes' losses stemmed from
principal losses in the underlying CMBS collateral.
In the current period, CMBS collateral that experienced principal
losses include Classes S and T from LB-UBS Commercial Mortgage
Trust Series 2003-C1, which had a principal loss of $5.5 million.
In addition, Class P from Wachovia Bank Commercial Mortgage Trust
Series 2004-C14 experienced a principal loss of $6.6 million.
APIDOS CDO I: S&P Raises Rating on Class D Notes to 'BB+'
---------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
B, C, and D notes from Apidos CDO I, a U.S. collateralized loan
obligation transaction managed by Apidos Capital Management LLC,
and removed them from CreditWatch where S&P placed them with
positive implications on Sept. 5, 2013. At the same time, S&P
affirmed its ratings on the class A-1 and A-2 notes.
The upgrades reflect large paydowns to the class A-1 notes since
S&P's November 2012 rating actions. The affirmations reflect
S&P's belief that the credit support available is commensurate
with the current rating levels.
Apidos CDO I's reinvestment period ended on July 18, 2011. Since
S&P's November 2012 rating actions, the class A-1 notes have paid
down more than $101 million and have a current outstanding balance
of $47.33 million, or 17.86% of their original balance. These
paydowns are due to scheduled and unscheduled prepayments received
on the underlying collateral.
As a result of the paydowns, the overcollateralization (O/C)
ratios have improved significantly. The senior O/C ratio, the
class A-2 O/C, has improved by 59.59% while the subordinate class
D O/C ratio has improved by 6.67%.
The upgrades were capped for the class D notes partly due to
significant exposure to the market value risks associated with
long-dated securities. According to the Aug. 19, 2013, trustee
report, the transaction currently holds $11.47 million in
collateral maturing after the transaction's legal final maturity.
The rating on the class D notes was also constrained by S&P's top
obligor test at 'BB+ (sf)'.
Standard & Poor's will continue to review whether, in its view,
the ratings assigned to the notes remain consistent with the
credit enhancement available to support them and take rating
actions as it deems necessary.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
RATING ACTIONS
Apidos CDO I
Rating
Class To From
A-1 AAA (sf) AAA (sf)
A-2 AAA (sf) AAA (sf)
B AA+ (sf) AA- (sf)/Watch Pos
C A+ (sf) BBB+ (sf)/Watch Pos
D BB+ (sf) B+ (sf)/Watch Pos
ARBOR REALTY 2005-1: Moody's Affirms Ratings on 9 Note Classes
--------------------------------------------------------------
Moody's has affirmed the ratings of nine classes of notes issued
by Arbor Realty Mortgage Securities 2005-1, 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 CLO) transactions.
Moody's rating action is as follows:
Cl. A, Affirmed Aaa (sf); previously on Apr 7, 2009 Confirmed at
Aaa (sf)
Cl. A-2, Affirmed Aa3 (sf); previously on Apr 7, 2009 Downgraded
to Aa3 (sf)
Cl. B, Affirmed Baa2 (sf); previously on Apr 7, 2009 Downgraded to
Baa2 (sf)
Cl. C, Affirmed Ba3 (sf); previously on Dec 1, 2010 Downgraded to
Ba3 (sf)
Cl. D, Affirmed B1 (sf); previously on Dec 1, 2010 Downgraded to
B1 (sf)
Cl. E, Affirmed B2 (sf); previously on Dec 1, 2010 Downgraded to
B2 (sf)
Cl. F, Affirmed B3 (sf); previously on Dec 1, 2010 Downgraded to
B3 (sf)
Cl. G, Affirmed Caa2 (sf); previously on Dec 1, 2010 Downgraded to
Caa2 (sf)
Cl. H, Affirmed Caa3 (sf); previously on Dec 1, 2010 Downgraded to
Caa3 (sf)
Ratings Rationale:
Arbor Realty Mortgage Securities 2005-1, Ltd. is a currently
static (reinvestment period ended in April 2011) cash transaction
backed by: i) whole loans (54.4% of the pool balance); ii) b-notes
(27.6%); and iii) mezzanine interests (18.0%). As of the August
30, 2013 Trustee report, the aggregate note balance of the
transaction, including preferred shares, has decreased to $414.1
million from $475.0 million at issuance, with the paydown
currently directed to the senior most outstanding class of notes
as a result of regular amortization, and the sale of defaulted and
certain credit risk assets.
There are two assets with a par balance of $31.0 million (7.9% of
the current pool balance) that are considered defaulted securities
as of the August 30, 2013 Trustee report. While there have been
realized losses on the underlying collateral to date, Moody's does
expect moderate losses to occur on the defaulted assets 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 have completed updated assessments for the non-Moody's
rated collateral. Moody's modeled a bottom-dollar WARF of 7,566
compared to 7,796 at last review. The current distribution of
Moody's rated collateral and assessments for non-Moody's rated
collateral is as follows: Aaa-Aa3 (0.7% compared to 0.1% at last
review), Ba1-Ba3 (1.0% compared to 1.0% at last review), B1-B3
(7.8% compared to 7.4% at last review), and Caa1-C (90.5% compared
to 91.5% at last review).
Moody's modeled a WAL of 2.3 years compared to 3.1 years at last
review. The current WAL is based on the assumption about
extensions on the underlying collateral.
Moody's modeled a fixed WARR of 31.1% compared to 31.8% at last
review.
Moody's modeled a MAC of 99.9%, 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 25, 2013.
The cash flow model, CDOEdge(R)v3.2.1.2, released on May 16, 2013,
was used to analyze the cash flow waterfall and its effect on the
capital structure of the deal.
Moody's analysis encompasses the assessment of stress scenarios.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. Rated notes are particularly sensitive to
changes in recovery rate assumptions. Holding all other key
parameters static, changing the recovery rate assumption down from
31.1% to 21.1% or up to 41.1% would result in a modeled rating
movement on the rated tranches of 0 to 7 notches downward and 0 to
5 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment given the weak pace of
recovery in the 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.
ARBOR REALTY 2006-1: Moody's Affirms Caa3 Ratings on 5 Notes
------------------------------------------------------------
Moody's has affirmed the ratings of ten classes of notes issued by
Arbor Realty Mortgage Securities 2006-1. 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 CLO) transactions.
Moody's rating action is as follows:
Cl. A-1A, Affirmed Aa3 (sf); previously on Dec 1, 2010 Downgraded
to Aa3 (sf)
Cl. A-1AR, Affirmed Aa3 (sf); previously on Dec 1, 2010 Downgraded
to Aa3 (sf)
Cl. A-2, Affirmed Ba2 (sf); previously on Dec 1, 2010 Downgraded
to Ba2 (sf)
Cl. B, Affirmed B2 (sf); previously on Dec 1, 2010 Downgraded to
B2 (sf)
Cl. C, Affirmed Caa2 (sf); previously on Dec 1, 2010 Downgraded to
Caa2 (sf)
Cl. D, Affirmed Caa3 (sf); previously on Dec 1, 2010 Downgraded to
Caa3 (sf)
Cl. E, Affirmed Caa3 (sf); previously on Dec 1, 2010 Downgraded to
Caa3 (sf)
Cl. F, Affirmed Caa3 (sf); previously on Dec 1, 2010 Downgraded to
Caa3 (sf)
Cl. G, Affirmed Caa3 (sf); previously on Dec 1, 2010 Downgraded to
Caa3 (sf)
Cl. H, Affirmed Caa3 (sf); previously on Apr 7, 2009 Downgraded to
Caa3 (sf)
Ratings Rationale:
Arbor Realty Mortgage Securities 2006-1 is a currently static
(reinvestment period ended in January 2012) cash transaction
backed by: i) whole loans (82.1% of the pool balance); ii) b-notes
(9.0%); and iii)mezzanine interests (8.9%). As of the September
30, 2013 Trustee report, the aggregate note balance of the
transaction, including preferred shares, has decreased to $493.9
million from $600.0 million at issuance, with the paydown
currently directed to the senior most outstanding class of notes
as a result of regular amortization , and the sale of defaulted
and certain credit risk assets.
There are two assets with a par balance of $40.0 million (9.2% of
the current pool balance) that are considered defaulted as of the
September 30, 2013 Trustee report. While there have been realized
losses on the underlying collateral to date, Moody's does expect
moderate losses to occur on the defaulted assets 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 have completed updated assessments for the non-Moody's
rated collateral. Moody's modeled a bottom-dollar WARF of 7,590
compared to 7,074 at last review. The current distribution of
Moody's rated collateral and assessments for non-Moody's rated
collateral is as follows: Aaa-Aa3 (2.5% compared to 3.4% at last
review), A1-A3 (2.1% compared to 4.5% at last review), Baa1-Baa3
(1.1% compared to 0.0% at last review), Ba1-Ba3 (0.2% compared to
0.7% at last review), B1-B3 (15.1% compared to 12.7% at last
review), and Caa1-C (79.0% compared to 78.7% at last review).
Moody's modeled a WAL of 5.5 years compared to 6.2 years at last
review. The current WAL is based on the assumption about
extensions on the underlying collateral.
Moody's modeled a fixed WARR of 44.5% compared to 46.2% at last
review.
Moody's modeled a MAC of 99.9%, 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 25, 2013.
The cash flow model, CDOEdge(R)v3.2.1.2, released on May 16, 2013,
was used to analyze the cash flow waterfall and its effect on the
capital structure of the deal.
Moody's analysis encompasses the assessment of stress scenarios.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. Rated notes are particularly sensitive to
changes in recovery rate assumptions. Holding all other key
parameters static, changing the recovery rate assumption down from
44.5% to 34.5% or up to 54.5% would result in a modeled rating
movement on the rated tranches of 0 to 5 notches downward and 0 to
7 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment given the weak pace of
recovery in the 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.
ARES XXVIII: S&P Assigns Preliminary BB Rating to Class E Notes
---------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
ratings to Ares XXVIII CLO Ltd./Ares XXVIII CLO LLC's
$474.75 million floating-rate notes.
The note issuance is a collateralized loan obligation
securitization backed by a revolving pool consisting primarily of
broadly syndicated senior secured loans.
The preliminary ratings are based on information as of Oct. 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 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.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
-- The diversified collateral portfolio, which consists
primarily of broadly syndicated speculative-grade senior
secured term loans.
-- The asset manager's experienced management team.
-- S&P's projections regarding the timely interest and ultimate
principal payments on the preliminary rated notes, which S&P
assessed using its cash flow analysis and assumptions
commensurate with the assigned preliminary ratings under
various interest-rate scenarios, including LIBOR ranging
from 0.26%-11.57%.
-- The transaction's overcollateralization and interest
coverage tests, a failure of which will lead to the
diversion of interest and principal proceeds to reduce the
balance of the rated notes outstanding.
-- The transaction's reinvestment overcollateralization test, a
failure of which will lead to the reclassification of up to
50% of available excess interest proceeds into principal
proceeds to purchase additional collateral assets during the
reinvestment period that are available before paying
uncapped administrative expenses and fees, deferred asset
management fees, and collateral manager incentive fees.
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/1864.pdf
PRELIMINARY RATINGS ASSIGNED
Ares XXVIII CLO Ltd./Ares XXVIII CLO LLC
Class Rating Amount
(mil. $)
A AAA (sf) 310.00
B-1 AA (sf) 57.50
B-2 AA (sf) 10.00
C-1 (deferrable) A (sf) 26.00
C-2 (deferrable) A (sf) 10.00
D (deferrable) BBB (sf) 26.00
E (deferrable) BB (sf) 22.25
F (deferrable) B (sf) 13.00
Equity NR 43.75
NR-Not rated.
ATHERTON FRANCHISE: Fitch Affirms 'D' Ratings on 3 Note Classes
---------------------------------------------------------------
Fitch Ratings affirmed Atherton Franchise Loan Funding, LLC Series
1999-A as follows:
-- Class C at 'CCCsf/RE 100%';
-- Class D at 'D/RE 0%';
-- Class E at 'D/RE 0%';
-- Class F at 'D/RE 0%'.
Key Rating Drivers
The affirmation of class C at 'CCCsf'/RE100% reflects the credit
enhancement and net loss coverage available to the class. While
Fitch currently expects 100% recovery, the class has a high degree
of sensitivity to the largest obligor concentration. As a result,
default on the notes is possible. Fitch affirmed classes D, E, and
F at 'Dsf' RE0% as zero principal is expected to be paid to these
classes.
Rating Sensitivities
Any significant unexpected performance deterioration may result in
negative rating actions on class C notes. Conversely, any material
prepayments may result in positive rating actions for class C.
AVENUE CLO III: S&P Raises Rating on Class B2L Notes to 'BB+'
-------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on four
classes of notes from Avenue CLO III Ltd., a U.S. cash flow
collateralized loan obligation (CLO) transaction, and removed them
from CreditWatch with positive implications, where we had placed
them on Sept. 5, 2013. At the same time, S&P affirmed its rating
on one class of notes from the same transaction.
The transaction's reinvestment period ended in June 2012. It is
currently in its amortization phase and is paying down the notes.
The upgrades reflect the $203.9 million and $5.6 million partial
paydowns of the class A1L and B2L notes, respectively, since S&P's
May 2012 rating actions. The paydown to the class B2L notes is
due to a failure of the additional collateral deposit requirement
in previous payment periods. As a result of these paydowns, each
class' overcollateralization ratios increased.
The affirmations reflect the sufficient credit support available
to the notes at the current rating levels.
S&P's rating on the class B1L notes is limited by its largest-
obligor default test, which addresses potential exposure
concentration to certain obligors in the transaction's portfolio.
S&P will continue to review whether the ratings currently assigned
to the notes remain consistent with the credit enhancement
available to support them and take rating actions as it deems
necessary.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
RATING AND CREDITWATCH ACTIONS
Avenue CLO III Ltd.
Rating
Class To From
A2L AAA (sf) AA+ (sf)/Watch Pos
A3L AA+ (sf) A+ (sf)/Watch Pos
B1L A+ (sf) BB+ (sf)/Watch Pos
B2L BB+ (sf) CCC- (sf)/Watch Pos
RATING AFFIRMED
Avenue CLO III Ltd.
Class Rating
A1L AAA (sf)
CEDARWOODS CRE II: Moody's Affirms Ratings on 8 Note Classes
------------------------------------------------------------
Moody's Investors Service has affirmed the ratings of eight
classes of notes issued by Cedarwoods CRE CDO II, 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 and
Re-remic) transactions.
Moody's rating action is as follows:
Cl. A-1, Affirmed B2 (sf); previously on Nov 9, 2012 Downgraded to
B2 (sf)
Cl. A-2, Affirmed Caa2 (sf); previously on Nov 9, 2012 Downgraded
to Caa2 (sf)
Cl. A-3, Affirmed Caa3 (sf); previously on Nov 9, 2012 Downgraded
to Caa3 (sf)
Cl. B, Affirmed Caa3 (sf); previously on Nov 9, 2012 Downgraded to
Caa3 (sf)
Cl. C, Affirmed Caa3 (sf); previously on Jan 18, 2012 Confirmed at
Caa3 (sf)
Cl. D, Affirmed Caa3 (sf); previously on Jan 18, 2012 Confirmed at
Caa3 (sf)
Cl. E, Affirmed Caa3 (sf); previously on Jan 18, 2012 Confirmed at
Caa3 (sf)
Cl. F, Affirmed Caa3 (sf); previously on Jan 18, 2012 Confirmed at
Caa3 (sf)
Ratings Rationale:
Cedarwoods CRE CDO II, Ltd. is a static (the reinvestment period
ended in February 2012) cash transaction backed by a portfolio of:
i) commercial mortgage backed securities (CMBS) (78.6% of the pool
balance); ii) commercial real estate collateralized debt
obligations (CRE CDO) and Re-remic securities (17.5%); iii) real
estate investment trust (REIT) debt (3.3%); and iv) rake bonds
(0.6%). As of the September 19, 2013 Note Valuation report, the
aggregate note balance of the transaction, including preferred
shares, has decreased to $539.9 million from $600.0 million at
issuance, as a result of the paydown directed to the senior most
outstanding class of notes from the combination of principal
repayment of collateral and the failing of certain par value
tests.
There are 29 assets with a par balance of $164.1 million (26.9% of
the current pool balance) that are considered defaulted as of the
September 19, 2013 Trustee report. Moody's does expect significant
losses to occur on the defaulted assets 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 have completed updated assessments for the non-Moody's
rated collateral. Moody's modeled a bottom-dollar WARF of 5,428
compared to 5,189 at last review. The current distribution of
Moody's rated collateral and assessments for non-Moody's rated
collateral is as follows: Aaa-Aa3 (0.4% compared to 2.4% at last
review), A1-A3 (6.9% compared to 6.8% at last review), Baa1-Baa3
(12% compared to 12.7% at last review), Ba1-Ba3 (10.3% compared to
11.4% at last review), B1-B3 (12.3% compared to 12% at last
review), and Caa1-Ca/C (58.1% compared to 54.8% at last review).
Moody's modeled to a WAL of 3.2 years compared to 4.2 years at
last review. The current WAL is based on the assumption about
extensions on the underlying collateral.
Moody's modeled a fixed WARR of 10.6% compared to 11.9% at last
review.
Moody's modeled a MAC of 11.4% compared to 10.7% at last review.
Moody's review incorporated CDOROM(R)v2.8, one of Moody's CDO
rating models, which was released on March 25, 2013.
The cash flow model, CDOEdge(R)v3.2.1.2, released on May 16, 2013,
was used to analyze the cash flow waterfall and its effect on the
capital structure of the deal.
Moody's analysis encompasses the assessment of stress scenarios.
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. Holding all
other key parameters static, changing the recovery rate assumption
down from 10.6% to 0.6% or up to 20.6% would result in the modeled
rating movement on the rated tranches of 0 to 1 notches downward
and 0 to 3 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment given the weak pace of
recovery in the 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.
CITIGROUP 2007-C6: Fitch Affirms 'C' Ratings on 12 Cert. Classes
----------------------------------------------------------------
Fitch Ratings has downgraded 2 classes and affirmed 23 classes of
Citigroup Commercial Mortgage Trust's commercial mortgage pass-
through certificates, series 2007-C6.
Key Rating Drivers
The downgrades reflect an increase in Fitch modeled losses across
the pool. Fitch modeled losses of 16.7% of the remaining pool and
15.7% of the original pool (including losses of 1.4% incurred to
date), compared to 14.3% (of the original pool balance) modeled at
the previous rating action. The increase is predominantly due to
declining pool performance and increased expected losses on
special serviced loans. There are currently 41 specially serviced
loans (14%).
As of the September 2013 distribution date, the pool's aggregate
principal balance was $4.1 billion, down from $4.8 billion at
issuance. There is one defeased loan (0.03%). There are cumulative
interest shortfalls in the amount of $32.7 million currently
affecting classes G through S.
Fitch has identified 106 loans (35.8%) as Fitch Loans of Concern,
which includes 41 specially serviced loans (14%). Eleven loans
within the top 15 have Fitch loan to values (LTVs) in excess of
90%, including one loan in special servicing, which can impact a
loan's ability to refinance at maturity.
The largest contributor to modeled losses was Moreno Valley Mall
(2% of the pool). The collateral consists of 472,844 square feet
(sf) of a 1.1 million sf regional mall in Moreno Valley, CA, just
east of Riverside, CA. The mall is anchored by J.C. Penney, Macys,
and Sears, which are not part of the collateral. The loan was
originally transferred to special servicing as part of the GGP
bankruptcy and was modified. The loan re-defaulted and became REO
through a deed in lieu of foreclosure in February 2011. Recent
leasing efforts have resulted in increased occupancy at the mall.
In-line occupancy at the property is 88.8% as of October 2013,
65.8% without temporary tenants, whereas it was 82% occupied on
Sept. 30, 2012, including temporary tenants.
The second largest contributor to losses was the Hyde Park
Apartment Portfolio, representing 3% of the outstanding pool
balance. The loan is secured by 43 properties, consisting of 951
units. The latest reported debt service coverage ratio (DSCR) was
0.80x, as of March 30, 2013, with occupancy of 83.2%. The borrower
completed $26 million of renovations in 2011, updating kitchens,
baths, walls, ceilings and floor coverings, as well as improving
common areas. The servicer has noted several deferred maintenance
issues in their latest watchlist commentary.
The third largest contributor to losses was the Southeast
Apartment Portfolio (0.9% of the pool). The loan is collateralized
by seven multifamily properties located in South Carolina and
Georgia. The portfolio, which is REO, had an average occupancy of
91%, as of Sept. 1, 2013.
Rating Sensitivity
Rating Outlooks on classes A1-A through A-4 are expected to remain
Stable due to sufficient credit enhancement. Continued
deterioration of the specially serviced assets may lead to further
downgrades to the class A-M notes. Downgrades to the distressed
classes (those rated below 'B') are expected as losses are
realized on specially serviced loans.
Fitch has downgraded the following classes:
-- $425.6 million class A-M to 'BBB-sf' from 'BBBsf'; Outlook
to Negative from Stable;
-- $50 million class A-MFL to 'BBB-sf' from 'BBBsf'; Outlook to
Negative from Stable.
Fitch has affirmed the following classes:
-- $243.9 million class A-3 at 'AAAsf'; Outlook Stable;
-- $126.3 million class A-3B at 'AAAsf'; Outlook Stable;
-- $100.3 million class A-SB at 'AAAsf'; Outlook Stable;
-- $1,573 million class A-4 at 'AAAsf'; Outlook Stable;
-- $200 million class A-4FL at 'AAAsf'; Outlook Stable;
-- $464 million class A-1A at 'AAAsf'; Outlook Stable;
-- $248.3 million class A-J at 'CCCsf'; RE 50%;
-- $150 million class A-JFL at 'CCCsf'; RE 50%;
-- $23.8 million class B at 'CCsf'; RE 0%;
-- $71.3 million class C at 'CCsf'; RE 0%;
-- $35.7 million class D at 'CCsf'; RE 0%;
-- $29.7 million class E at 'Csf'; RE 0%;
-- $35.7 million class F at 'Csf'; RE 0%;
-- $47.6 million class G at 'Csf'; RE 0%.
-- $53.5 million class H at 'Csf'; RE 0%;
-- $65.4 million class J at 'Csf'; RE 0%;
-- $53.5 million class K at 'Csf'; RE 0%;
-- $11.9 million class L at 'Csf'; RE 0%;
-- $11.9 million class M at 'Csf'; RE 0%;
-- $17.8 million class N at 'Csf'; RE 0%;
-- $11.9 million class O at 'Csf'; RE 0%;
-- $5.9 million class P at 'Csf'; RE 0%;
-- $5.9 million class Q at 'Csf'; RE 0%.
Fitch does not rate class S. Class A-1 and A-2 notes are paid in
full. The rating on class X was previously withdrawn.
COMM 2012-CCRE3: Fitch Affirms 'B' Rating on Cl. G Certificates
---------------------------------------------------------------
Fitch Ratings has affirmed 13 classes of COMM 2012-CCRE3
commercial mortgage pass-through certificates.
Key Rating Drivers
The affirmations are due to stable performance of the underlying
pool. As of the September 2013 distribution date, the pool's
aggregate principal balance has been reduced by 0.8% to $1.24
billion from $1.25 billion at issuance. Fitch has not designated
any loans as Fitch Loans of Concern, and no loans are in special
servicing. Full year 2012 financials were available for 37 (85.7%)
of the remaining 50 loans in the pool.
The largest loan of the pool (10.2% of the pool) is secured by two
office properties totaling 923,277 square foot (sf) located in
Midtown Manhattan in New York, NY. 260 Madison consists of 488,476
sf of office space, 20,517 sf of retail space and an additional
parking garage. 261 Madison is 351,283 sf of office space, 16,514
sf of retail space and a 17,148 sf parking garage. As per the
property's rent roll, the occupancy was slightly higher at 92.3%
as of the second-quarter 2013 than the 89.6% at issuance.
The second largest loan (8.6%) is secured by the Crossgates Mall,
a 1.7 million sf (1.3 million sf collateral) three-story enclosed
mall located in Albany, NY. The property is anchored by Macy's
(non-collateral), JC Penney, Dick's Sporting Goods, Burlington
Coat Factory and Forever21 and includes an 18 screen Regal Cinema.
The servicer reported occupancy was 97% as of the second-quarter
2013 compared to 90.3% at issuance.
The third largest loan (8.5%) is secured by Solano Mall, a 1
million sf (561,015 sf collateral) regional mall located in
Fairfield, CA, 35 miles northwest of San Francisco. The property's
anchors, which are not part of the collateral, are Macy's, JC
Penney and Sears. Major tenants include Edwards Cinema, Best Buy
and Forever21. As per the property's first-quarter rent roll the
occupancy was 94.8% compared to the 94.4% at issuance.
Rating Sensitivity
The Rating Outlooks for all classes remain Stable due to the
relatively stable performance of the pool since issuance.
Fitch affirms the following classes and maintains Outlooks as
indicated:
-- $58.1 million class A-1 at 'AAAsf'; Outlook Stable;
-- $155.4 million class A-2 at 'AAAsf'; Outlook Stable;
-- $75.8 million class A-SB at 'AAAsf'; Outlook Stable;
-- $576.3 million class A-3 at 'AAAsf'; Outlook Stable;
-- $38 million class A-M at 'AAAsf'; Outlook Stable;
-- $24 million class B at 'AA-sf'; Outlook Stable;
-- $8.5 million class C at 'Asf'; Outlook Stable;
-- $150 million class PEZ at 'Asf'; Outlook Stable;
-- $26.6 million class D at 'A-sf'; Outlook Stable;
-- $43.8 million class E at 'BBB-sf'; Outlook Stable;
-- $21.9 million class F at 'BBsf'; Outlook Stable;
-- $20.3 million class G at 'Bsf'; Outlook Stable;
-- $985.4 million* class X-A at 'AAAsf'; Outlook Stable.
* Notional amount and interest only.
Fitch does not rate the class H and X-B certificates.
COMM 2013-CCRE11: DBRS Assigns 'BB' Rating to Class E Certificates
------------------------------------------------------------------
DBRS has assigned final ratings to the following classes of
Commercial Mortgage Pass-Through Certificates, Series 2013-CCRE11,
issued by COMM 2013-CCRE11 Mortgage Trust. The trends are Stable.
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-C at AAA (sf)
-- Class A-M at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)
Classes X-B, X-C, C, D, E and F will be privately placed pursuant
to Rule 144A.
The Class X-A, X-B and X-C balances are notional. DBRS ratings on
interest-only certificates address the likelihood of receiving
interest based on the notional amount outstanding. DBRS considers
the interest-only certificate's position within the transaction
payment waterfall when determining the appropriate rating.
The collateral consists of 46 fixed-rate loans secured by 82
commercial, multifamily and manufactured housing properties. The
transaction has a balance of $1,269,818,466. The pool exhibits a
DBRS weighted-average term debt service coverage ratio (DSCR) and
debt yield of 1.65 times (x) and 10.0%, respectively, based on the
senior trust balances. The DBRS sample included 25 loans,
representing 84.9% of the pool. Three loans, representing 16.1%
of the pool, were shadow-rated investment grade by DBRS.
Properties representing 31.3% of the pool are located in urban
markets with increased liquidity, greater than transactions in the
recent past that typically have urban concentrations of 15% to
20%. In addition, loans secured by properties located in tertiary
and rural markets represent only 10.4%.
The pool is concentrated by loan size as the top ten loans
represent 63.7% of the overall pool balance. The pool has a
concentration level similar to a pool of 19 equal-sized loans. At
44.9% of the pool, the transaction has a high concentration of 12
loans with DBRS Refi DSCRs below 1.00x based on the trust balance.
However, these DSCRs are based on a weighted-average stressed
refinance constant of 9.9%, which implies an interest rate of
9.3%, amortizing on a 30-year schedule. This represents a
significant stress of 4.1% over the weighted-average contractual
interest rate of the loans in the pool.
The ratings assigned to the Certificates by DBRS are based
exclusively on the credit provided by the transaction structure
and underlying trust assets. All classes will be subject to
ongoing surveillance, which could result in upgrades or downgrades
by DBRS after the date of issuance.
COMM 2013-CCRE11: Fitch Assigns 'B' Rating to Class F Certs
-----------------------------------------------------------
Fitch Ratings has assigned the following ratings and outlooks to
Deutsche Bank Securities, Inc.'s COMM 2013-CCRE11 commercial
mortgage pass-through certificates:
-- $42,296,000 class A-1 'AAAsf'; Outlook Stable;
-- $90,000,000 class A-2 'AAAsf'; Outlook Stable;
-- $70,309,000 class A-SB 'AAAsf'; Outlook Stable;
-- $275,000,000 class A-3 'AAAsf'; Outlook Stable;
-- $411,267,000 class A-4 'AAAsf'; Outlook Stable;
-- $1,003,156,000a class X-A 'AAAsf'; Outlook Stable;
-- $114,284,000 class A-M 'AAAsf'; Outlook Stable;
-- $76,189,000 class B 'AAsf'; Outlook Stable;
-- $186,130,000a, b class X-B 'BBB-sf'; Outlook Stable;
-- $46,031,000b class C 'Asf'; Outlook Stable;
-- $63,910,000b class D 'BBB-sf'; Outlook Stable;
-- $20,216,000b class E 'BBsf'; Outlook Stable;
-- $17,460,000b class F 'Bsf'; Outlook Stable.
(a) Notional amount and interest-only.
(b) Privately placed pursuant to rule 144A.
Fitch does not rate the $80,532,466 interest-only class X-C or the
$42,856,466 class G. Three classes (A-3FL, A-3FX, and PEZ) have
been withdrawn from the deal structure and one class balance (A-3)
has been updated since Fitch issued its expected ratings on Sept.
26, 2013. The classes above reflect the final ratings and deal
structure.
The certificates represent the beneficial ownership interest in
the trust, primary assets of which are 46 fixed-rate loans secured
by 82 commercial properties having an aggregate principal balance
of approximately $1.270 billion, as of the cutoff date. The loans
were contributed to the trust by Cantor Commercial Real Estate
Lending, L.P., and German American Capital Corporation.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 82.2% of the properties
by balance, cash flow analysis on 87.7%, and asset summary reviews
on 92.1% of the pool.
Key Rating Drivers
Average Leverage: The pool's Fitch debt service coverage ratio
(DSCR) and loan to value (LTV) are 1.24x and 97.5%, respectively,
in-line with the 2013 and 2012 averages of 1.36x and 99.8%, and
1.24x and 97.2%, respectively.
High Quality Assets: Seven of the top 10 loans, totaling 38.2% of
the pool, are secured by high-quality assets receiving a Fitch
property quality grade of 'B+' or better.
Pool Concentration: The pool is more concentrated by loan size
than average transactions in 2012 and 2013. The top 10 loans
represent 63.7% of the pool, higher than the 2013 and 2012 average
concentrations of 54.3% and 54.2%, respectively. The loan
concentration index (LCI) is 517, representing one of the more
concentrated conduit pools by loan size.
Credit Opinion Loans: Two loans (9.1% of the pool) have
investment-grade credit opinions. One Wilshire (6.3% of the pool)
has an investment-grade credit opinion of 'BBBsf' and 200-206 East
87th Street Leased Fee (2.8% of the pool) has an investment-grade
credit opinion of 'BBB-sf'.
Rating Sensitivities
For this transaction, Fitch's net cash flow (NCF) was 3.6% below
the most recent reported net operating income (NOI) (for
properties that NOI was provided, excluding properties that were
stabilizing during this period). Unanticipated further declines in
property-level NCF could result in higher defaults and loss
severity on defaulted loans and could result in potential rating
actions on the certificates. Fitch evaluated the sensitivity of
the ratings assigned to the COMM 2013-CCRE11 certificates and
found that the transaction exhibits average sensitivity to further
declines in NCF. In a scenario in which NCF declined a further 20%
from Fitch's NCF, a downgrade of the junior 'AAAsf' certificates
to 'Asf' could result. In a more severe scenario, in which NCF
declined a further 30% from Fitch's NCF, a downgrade of the junior
'AAAsf' certificates to 'BBBsf' could result. The presale report
includes a detailed explanation of additional stresses and
sensitivities on pages 75 - 76.
The Master Servicer will be Midland Loan Services, a Division of
PNC Bank, N.A., rated 'CMS1' by Fitch. The Special Servicer will
be Situs Holdings, LLC, rated 'CSS2' by Fitch.
COMM MORTGAGE 2005-FL10: Fitch Affirms 'D' Rating on Cl. M Notes
----------------------------------------------------------------
Fitch Ratings has affirmed four classes of COMM Mortgage Trust
2005-FL10.
Key Rating Drivers
As of the September 2013 remittance, the pool has paid down by 98%
since issuance, with only one loan remaining.
The affirmations of the distressed ratings are due to continued
high credit risk associated with the remaining loan. The remaining
loan, Berkshire Mall (100%), is secured by 589,146 square feet
(sf) of a 715,146-sf regional mall located in Lanesboro, MA, about
40 miles east of Albany, NY. The collateral consists of 192,793 sf
of in-line space and 396,353 sf of anchor/major tenant space. The
non-collateral anchor space (Target) totals approximately 126,000
sf. The property has suffered from a tertiary location and weak
in-line/junior anchor occupancy.
As of June 2013, the mall was 79% occupied with servicer-reported
DSCR of 1.86x. The borrower has recently extended the terms of
several anchor tenants on a short-term basis; however, the
property continues to face rollover risk as 17% of leases are
expected to expire in 2014.
In March 2012, a two-year forbearance through March 2014 was
executed after the borrower was unable to refinance the loan at
its extended maturity. Per the forbearance agreement, the borrower
contributed $250,000 in new equity to a rollover reserve. In
addition, the loan is subject to hard cash management requiring
excess cash flow be applied to an excess cash flow reserve (up to
$300,000), then to a rollover reserve (up to $4 million), and then
to amortize the loan. As of Sept. 25, 2013, the loan had
approximately $3.7 million in total reserves. After being in
special servicing since February 2010, the loan was returned to
the master servicer in September 2012 and was current as of the
most recent remittance.
Rating Sensitivities
The ratings of the remaining distressed classes (those rated below
'Bsf') are subject to further downgrades as losses are realized.
Fitch anticipates significant losses based on current valuations
of the asset and uncertainty related to the refinance of the loan.
Fitch has affirmed the following classes and revises the Recovery
Estimates (RE) as indicated:
-- $6.4 million class J at 'CCCsf'; RE 100%;
-- $19.8 million class K at 'Csf'; RE 75%;
-- $6.5 million class L at 'Csf'; RE 0%;
-- $4.3 million class M at 'Dsf'; RE 0%.
The following classes originally rated by Fitch have paid in full:
A-1, A-J1, A-J2, X-1, MOAX-1, MOAX-2, MOAX-3, B, C, D, E, F, MOA-
1, MOA-2, N-PC, O-PC, P-PC, Q-PC, N-DEL and O-DEL.
Fitch does not rate the class A-J3, G, H and MOA-3 certificates.
In addition, Fitch previously withdrew the ratings on the
interest-only classes X-2-DB, X-2-NOM, X-2-SG, X-3-DB, X-3-NOM and
X-3-SG.
EMPORIA PREFERRED II: Moody's Affirms Ba3 Rating on $14.5MM Notes
-----------------------------------------------------------------
Moody's Investors Service announced that it has upgraded the
rating of the following notes issued by Emporia Preferred Funding
II, Ltd:
U.S.$22,000,000 Class C Floating Rate Notes Due October 18, 2018,
Upgraded to Aa2 (sf); previously on April 26, 2013 Upgraded to A1
(sf)
Moody's also affirmed the ratings of the following notes:
U.S. $91,000,000 Class A-1 Floating Rate Notes Due October 18,
2018 (current outstanding balance of $37,732,206.34), Affirmed Aaa
(sf); previously on April 26, 2013 Affirmed Aaa (sf)
U.S. $30,000,000 Class A-2 Floating Rate Notes Due October 18,
2018 (current outstanding balance of $12,439,188.91), Affirmed Aaa
(sf); previously on April 26, 2013 Affirmed Aaa (sf)
U.S. $120,000,000 Class A-3 Floating Rate Notes Due October 18,
2018 (current outstanding balance of $49,756,755.63), Affirmed Aaa
(sf); previously on April 26, 2013 Affirmed Aaa (sf)
U.S. $30,000,000 Class B Floating Rate Notes Due October 18, 2018,
Affirmed Aaa (sf); previously on April 26, 2013 Upgraded to Aaa
(sf)
U.S. $22,000,000 Class D Floating Rate Notes Due October 18, 2018,
Affirmed Ba1 (sf); previously on April 26, 2013 Affirmed Ba1 (sf)
U.S. $14,500,000 Class E Floating Rate Notes Due October 18, 2018,
Affirmed Ba3 (sf); previously on April 26, 2013 Affirmed 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 April 2013. Moody's notes that the Class A
Notes have been paid down by approximately 24% or $31.4 million
since the last rating action. Based on the latest trustee report
dated September 2, 2013, the Class A/B, Class C, Class D and Class
E overcollateralization ratios are reported at 153.8%, 131.5%,
114.9%, and 106.0%, respectively, versus April 2013 levels of
138.1%, 123.3%, 111.4% and 104.8%, respectively.
Notwithstanding benefits of the deleveraging, Moody's notes that
the weighted average spread of the underlying portfolio has
declined since the last rating action. Based on the September 2013
trustee report, the weighted average spread is currently 4.35%
compared to 4.68% in April 2013. Further, a material proportion of
the collateral pool includes debt obligations whose credit quality
has been assessed through Moody's Credit Estimates ("CEs").
Moody's analysis reflects the application of certain adjustments
with respect to the default probabilities associated with CEs.
Specifically, the default probability adjustments include (1) a 1
notch-equivalent assumed downgrade for CEs updated between 12-15
months ago, which affected 9.2% of the collateral; and (2)
assuming an equivalent of Caa3 for CEs that were not updated
within the last 15 months, which affected 5.3% of the collateral.
Moody's also notes that the underlying portfolio includes a number
of investments in securities that mature after the maturity date
of the notes. Based on the September 2013 trustee report,
securities that mature after the maturity date of the notes
currently make up approximately 7.75% of the underlying portfolio.
These investments potentially expose the notes to market risk in
the event of liquidation at the time of the notes' maturity.
Moody's notes that the key model inputs used by Moody's in its
analysis, such as par, weighted average rating factor, diversity
score, and weighted average recovery rate, are based on its
published methodology and 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 $199.7 million, defaulted par of $1.4 million,
a weighted average default probability of 24.86% (implying a WARF
of 3606), a weighted average recovery rate upon default of 51.96%,
and a diversity score of 31. 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.
Emporia Preferred Funding II, Ltd., issued in June 2006, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans, with significant exposure to middle market
loans.
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 Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2013.
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% (2885)
Class A-1: 0
Class A-2: 0
Class A-3: 0
Class B: 0
Class C: +1
Class D: +1
Class E: +1
Moody's Adjusted WARF + 20% (4327)
Class A-1: 0
Class A-2: 0
Class A-3: 0
Class B: 0
Class C: -2
Class D: -1
Class E: -1
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of 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.
3) Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation risk
on those assets. Moody's assumes an asset's terminal value upon
liquidation at maturity to be equal to the lower of an assumed
liquidation value (depending on the extent to which the asset's
maturity lags that of the liabilities) and the asset's current
market value.
4) Exposure to credit estimates: The deal is exposed to a large
number of securities whose default probabilities are assessed
through credit estimates. In the event that Moody's is not
provided the necessary information to update the credit estimates
in a timely fashion, the transaction may be impacted by any
default probability adjustments Moody's may assume in lieu of
updated credit estimates.
FIRST NLC 2005-1: Moody's Hikes Cl. A Securities Rating to 'Caa1'
-----------------------------------------------------------------
Moody's Investors Service has upgraded the rating of Class A,
issued by First NLC Trust 2005-1.
Complete rating action is as follows:
Issuer: First NLC Trust 2005-1
Cl. A, Upgraded to Caa1 (sf); previously on Apr 6, 2010 Downgraded
to Caa3 (sf)
Ratings Rationale
The rating action reflects the recent performance of the
underlying pool and Moody's updated expected loss on the pools. In
addition, the rating action reflects correction of errors in the
Structured Finance Workstation (SFW) cash flow model previously
used by Moody's in rating this transaction. In prior rating
actions, the excess spread waterfall in the transaction was
incorrectly modeled, which resulted in understating the amount of
excess spread benefit to the transaction. This has now been
corrected, and the rating action reflects the change.
The principal methodology used in this rating was "US RMBS
Surveillance Methodology" published in June 2013.
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 8.1% in August 2012 to 7.3% in August 2013.
Moody's forecasts an unemployment central range of 7.0% to 8.0%
for 2013. Moody's expects housing prices to continue to rise in
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 the performance of these transactions.
GALLATIN 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-2L, A-3L, B-1L, and B-2L notes from Gallatin CLO II 2005-1 Ltd.,
a U.S. collateralized loan obligation transaction managed by
UrsaMine Credit Advisors, and removed the ratings from CreditWatch
where they were placed with positive implications on Sept. 5,
2013. Simultaneously, S&P affirmed its 'AAA (sf)' rating on the
class A-1L notes from the same transaction.
The transaction is past its reinvestment period and upgrades
mainly reflect the continued paydowns to the class A-1L notes and
a subsequent increase in the overcollateralization (O/C) available
to support the notes since S&P's January 2013 rating actions.
Since that time, the transaction has further paid down the class
A-1L notes by approximately $169.77 million. These paydowns have
brought down the class A-1L notes to 2.94% of their original
balance after the Aug. 15, 2013 distribution date, down from
49.48% in January 2013.
The class A-1L notes' lower balance improved the O/C. As per the
September 2013 monthly trustee report, the trustee reported the
following O/C ratios:
-- The senior class A-2L O/C ratio was 290.82%, compared with a
reported ratio of 142.20% in the December 2012 trustee
report, which S&P used for its January 2013 rating actions;
-- The class A-3L O/C ratio was 186.87%, compared with a
reported ratio of 126.96% in December 2012;
-- The class B-1L O/C ratio was 137.66%, compared with a
reported ratio of 114.67% in December 2012; and
-- The class B-2L O/C ratio was 120.32%, compared with a
reported ratio of 108.66% in December 2012.
In addition, the transaction currently has no defaults in its
portfolio (versus $7.1 million par in December 2012).
The upgrades also reflect the increased credit support to the
notes at the previous rating levels. The affirmation reflects the
availability of adequate credit support at the current rating
level.
The ratings on the class B-1L and B-2L notes were affected by the
application of S&P's largest-obligor default test, one of two
supplemental tests that S&P introduced as part of its revised
corporate collateralized debt obligation (CDO) criteria. S&P
applies the supplemental tests to address event risk and model
risk that may be present in rated transactions. The largest-
obligor default test assesses whether a CDO tranche has sufficient
credit enhancement (excluding excess spread) to withstand
specified combinations of underlying asset defaults based on the
ratings on the underlying assets, with a flat recovery.
Standard & Poor's will continue to review whether, in its view,
the ratings assigned to the notes remain consistent with the
credit enhancement available to support them, and will take rating
actions as it deems necessary.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties, and enforcement mechanisms available to investors and
a description of how they differ from the representations,
warranties, and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
RATING AND CREDITWATCH ACTIONS
Gallatin CLO II 2005-1 Ltd.
Rating
Class To From
A-1L AAA (sf) AAA (sf)
A-2L AAA (sf) AA+ (sf)/Watch Pos
A-3L AAA (sf) AA- (sf)/Watch Pos
B-1L A+ (sf) BBB+ (sf)/Watch Pos
B-2L BB+ (sf) BB (sf)/Watch Pos
TRANSACTION INFORMATION
Issuer: Gallatin CLO II 2005-1 Ltd.
Co-issuer: Gallatin CLO II 2005-1 (Delaware) Corp.
Collateral manager: UrsaMine Credit Advisors
Trustee: Bank of New York Mellon (The)
Transaction type: Cash flow CDO
CDO-Collateralized debt obligation.
GREENWICH CAPITAL 2007-GG9: Fitch Cuts Rating on 2 Certs to 'Csf'
-----------------------------------------------------------------
Fitch Ratings has downgraded two distressed classes of Greenwich
Capital Commercial Funding Corp. (GCCFC) commercial mortgage pass-
through certificates series 2007-GG9 due to realized losses and
further certainty of losses on the assets in special servicing.
The remaining classes were affirmed due to stable loss
expectations since Fitch's last review.
Key Rating Drivers
Fitch modeled losses of 15.6% of the remaining pool; expected
losses on the original pool balance total 15.8%, including $140.1
million (2.1% of the original pool balance) in realized losses to
date. Fitch has designated 94 loans (60% of the pool) as Fitch
Loans of Concern, which includes 31 specially serviced assets
(22.8%).
As of the September 2013 distribution date, the pool's aggregate
principal balance has been reduced by 14.2% to $5.64 billion from
$6.58 billion at issuance. No loans are defeased. Interest
shortfalls are currently affecting classes E through S.
The largest contributor to expected losses is the specially-
serviced Schron Industrial Portfolio (5.4%). The loan is secured
by a portfolio of 36 industrial properties located in Nassau and
Suffolk Counties on Long Island, NY. The loan transferred to the
special servicer in December 2010 for imminent default. The loan
was modified in 2012 and remains specially serviced. The loan was
split into an A/B structure, with an A-note balance of $220
million and a subordinate B-note balance of $85 million and a
scheduled maturity date of December 2016.
The next largest contributor to expected losses is the specially-
serviced Hyatt Regency- Bethesda loan (2.5%), which is secured by
a 390 room full-service hotel. The loan transferred to special
servicing in December 2009 due to imminent default. The trust took
title to the property in February 2013. The special servicer is
expected to market the property for sale.
The third largest contributor to loss is the specially serviced
Peachtree Center (3.7%) in Atlanta, GA. The collateral consists of
six office buildings totaling 2.4 million square feet (sf), three
parking garages and a 134,024 sf retail center. The loan
transferred to special servicing in February 2010 due to imminent
default. A loan modification has closed with the loan split into a
springing A/B structure consisting of a $140 million A-note and a
$67.6 million B-note. The YE 2012 NCF DSCR was 0.97x based on the
modified loan terms. The bi-furcated loan is scheduled to mature
in June 2015.
Rating Sensitivity
Rating Outlooks on classes A-2 through A-1A remain Stable due to
increasing credit enhancement and continued paydown. Rating
Outlooks on classes A-M and A-MFX are Negative as further
collateral underperformance may lead to a downgrade. Should cash
flows deteriorate further on the performing loans, or if realized
losses exceed current expectations on the specially serviced
loans, downgrades of these classes are possible. In addition,
interest shortfalls have increased significantly since Fitch's
last rating action.
Fitch has downgraded the following classes:
-- $57.5 million class F to 'Csf' from 'CCsf'; RE 0%;
-- $57.5 million class G to 'Csf' from 'CCsf'; RE 0%.
Fitch has affirmed the following classes:
-- $706.5 million class A-2 at 'AAAsf'; Outlook Stable;
-- $86 million class A-3 at 'AAAsf'; Outlook Stable;
-- $65.8 million class A-AB at 'AAAsf'; Outlook Stable;
-- $2.7 billion class A-4 at 'AAAsf'; Outlook Stable;
-- $279.9 million class A-1A at 'AAAsf'; Outlook Stable;
-- $557.6 million class A-M at 'BBBsf'; Outlook Negative;
-- $100 million class A-MFX at 'BBBsf'; Outlook Negative;
-- $575.4 million class A-J at 'CCCsf'; RE 60%;
-- $32.9 million class B at 'CCsf'; RE 0%;
-- $98.6 million class C at 'CCsf'; RE 0%;
-- $41.1 million class D at 'CCsf'; RE 0%;
-- $41.1 million class E at 'CCsf'; RE 0%;
-- $82.2 million class H at 'Csf'; RE 0%;
-- $65.8 million class J at 'Csf'; RE 0%;
-- $65.8 million class K at 'Csf'; RE 0%;
-- $32.9 million class L at 'Csf'; RE 0%;
-- $16.4 million class M at 'Csf'; RE 0%;
-- $7.6 million class N at 'Dsf'; RE 0%;
-- $0 class O at 'Dsf'; RE 0%;
-- $0 class P at 'Dsf'; RE 0%;
-- $0 class Q at 'Dsf'; RE 0%.
Fitch does not rate the class S certificates. Fitch previously
withdrew the rating on the interest-only class X certificates.
GS MORTGAGE 2006-RR3: Moody's Affirms Caa3 Ratings on 3 Notes
-------------------------------------------------------------
Moody's has affirmed the ratings of three classes of certificates
issued by GS Mortgage Securities Corporation II, Commercial
Mortgage Pass-Through Certificates, Series 2006-RR3 ("GSMS 2006-
RR3") 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 and Re-Remic)
transactions.
Moody's rating action is as follows:
Cl. A1-S, Affirmed Caa3 (sf); previously on Mar 16, 2011
Downgraded to Caa3 (sf)
Cl. A1-P, Affirmed Caa3 (sf); previously on Mar 16, 2011
Downgraded to Caa3 (sf)
Cl. X, Affirmed Caa3 (sf); previously on Mar 16, 2011 Downgraded
to Caa3 (sf)
Ratings Rationale:
GSMS 2006-RR3 is a static Re-Remic transaction backed by a
portfolio of commercial mortgage backed securities (CMBS) (100.0%
of the pool balance). All of the CMBS assets were securitized
between 2004 and 2006. The aggregate certificate balance of the
transaction has decreased to $495.3 million compared to $727.8
million at issuance as a result of writedowns to the underlying
CMBS collateral.
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 have completed updated assessments for the non-Moody's
rated collateral. Moody's modeled a bottom-dollar WARF of 6,731
(compared to 6,578 at last review). The current distribution of
Moody's rated collateral and assessments for non-Moody's rated
collateral is as follows: Aaa-Aa3 (2.7% compared to 0.0% at last
review), A1-A3 (0.0% compared to 2.6% at last review), Baa1-Baa3
(4.2% compared to 12.5% at last review), Ba1-Ba3 (11.1% compared
to 10.4% at last review), B1-B3 (20.9% compared to 11.1% at last
review), and Caa1-C (61.1% compared to 63.4% at last review).
Moody's modeled a WAL of 3.0 years, compared to 3.5 years at last
review. The current WAL is based on the assumption about
extensions on the underlying collateral assets.
Moody's modeled a fixed WARR of 3.9%, compared to 4.7% at last
review.
Moody's modeled a MAC of 100%, the same as at last review.
Moody's review incorporated CDOROM(R)v2.8, one of Moody's CDO
rating models, which was released on March 25, 2013.
The cash flow model, CDOEdge(R)v3.2.1.2, released on May 16, 2013,
was used to analyze the cash flow waterfall and its effect on the
capital structure of the deal.
Moody's review incorporated the CMBS IO calculator ver1.0 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 ver1.0 would provide both a
Baa3 (sf) and Ba1 (sf) IO indication for consideration by the
rating committee.
Moody's analysis encompasses the assessment of stress scenarios.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. Rated notes are particularly sensitive to
changes in recovery rate assumptions. Holding all other key
parameters static, changing the recovery rate assumption up to
13.9% from 3.9% would result in no rating movement on the rated
tranches.
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 in the 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.
HELIOS SERIES I: Moody's Hikes Rating on $27MM Notes to 'Ba2(sf)'
-----------------------------------------------------------------
Moody's Investors Service announced that it has upgraded the
rating of the following notes issued by Helios Series I Multi-
Asset CBO, Ltd.:
U.S. $27,000,000 Class B Floating Rate Notes, Due 2036 (current
outstanding balance of $23,588,120), Upgraded to Ba2 (sf);
previously on December 21, 2012 Upgraded to B1 (sf).
Ratings Rationale:
According to Moody's, the rating upgrades are primarily a result
of deleveraging of the Class B Notes and an increase in the
transaction's overcollateralization ratio since the last rating
action in December 2012. Moody's notes that the Class B Notes have
been paid down by approximately 12% or $3.2 million since the last
rating action. Based on Moody's calculation, the Class A/B
overcollateralization (OC) ratio is at 130.0% versus the December
2012 level of 118.4%.
Moody's also notes that the deal has benefited from an improvement
in the credit quality of the underlying portfolio since December
2012. Based on Moody's calculation, the weighted average rating
factor is currently 800 compared to 1129 in December 2012.
Helios Series I Multi-Asset CBO, Ltd., issued in December 2001, is
a collateralized debt obligation backed primarily by a portfolio
of RMBS and CMBS originated from 1999 to 2001.
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
CDOROMv2.8-9 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. 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 Baa3 and below rated assets notched up by 2 rating
notches:
Class B: +2
Class C: 0
Moody's Baa3 and below rated assets notched down by 2 rating
notches:
Class B: -2
Class C: 0
IVY HILL VII: Moody's Rates $28MM Floating Notes '(P)Ba2(sf)'
-------------------------------------------------------------
Moody's Investors Service announced that it has assigned the
following provisional ratings to notes to be issued by Ivy Hill
Middle Market Credit Fund VII, Ltd. (the "Issuer" or "Ivy Hill
VII"):
US$185,250,000 Class A Senior Floating Rate Notes due 2025 (the
"Class A Notes"), Assigned (P)Aaa (sf)
US$56,000,000 Class B Senior Floating Rate Notes due 2025 (the
"Class B Notes"), Assigned (P)Aa2 (sf)
US$22,250,000 Class C Deferrable Mezzanine Floating Rate Notes due
2025 (the "Class C Notes"), Assigned (P)A2 (sf)
US$17,500,000 Class D Deferrable Mezzanine Floating Rate Notes due
2025 (the "Class D Notes"), Assigned (P)Baa2 (sf)
US$28,000,000 Class E Deferrable Mezzanine Floating Rate Notes due
2025 (the "Class E Notes"), Assigned (P)Ba2 (sf)
Moody's issues provisional ratings in advance of the final sale of
financial instruments, but these ratings only represent Moody's
preliminary credit opinions. Upon a conclusive review of a
transaction and associated documentation, Moody's will endeavor to
assign definitive ratings. A definitive rating (if any) may differ
from a provisional rating.
Ratings Rationale:
Moody's provisional ratings of the notes address the expected
losses posed to noteholders. The provisional ratings reflect the
risks due to defaults on the underlying portfolio of loans, the
transaction's legal structure, and the characteristics of the
underlying assets.
Ivy Hill VII is a managed cash flow CLO. The issued notes will be
collateralized primarily by small to medium enterprise and broadly
syndicated first lien senior secured corporate loans. At least 95%
of the portfolio must be invested in first lien senior secured
loans and eligible investments and up to 5% of the portfolio may
consist of second lien loans, senior unsecured loans and senior
secured bonds. The underlying collateral pool is expected to be
approximately 90% ramped as of the closing date. The Issuer will
acquire a majority of the assets from another CLO.
Ivy Hill Asset Management, L.P. (the "Manager"), a wholly-owned
portfolio company of Ares Capital Corporation, will direct the
selection, acquisition and disposition of collateral on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's four year
reinvestment period. Thereafter, no reinvestment is permitted and
principal proceeds will be used to pay down the notes in
accordance with the priority of payments.
In addition to the notes rated by Moody's, the Issuer will issue
subordinated notes. The transaction incorporates interest and par
coverage tests which, if triggered, divert interest and principal
proceeds to pay down the notes sequentially.
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 Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2013.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount of $350,000,000
Diversity of 43
WARF of 3200
Weighted Average Spread of 4.25%
Weighted Average Coupon of 7.00%
Weighted Average Recovery Rate of 46.50%
Weighted Average Life of 8 years
The notes' performance is subject to uncertainty. The notes'
performance is sensitive to the performance of the underlying
portfolio, which in turn depends on economic and credit conditions
that may change. The Manager's investment decisions and management
of the transaction will also affect the notes' performance.
Together with the set of modeling assumptions above, Moody's
conducted an additional sensitivity analysis, which was an
important component in determining the ratings assigned to the
notes. This sensitivity analysis includes increased default
probability relative to the base case.
Below is a summary of the impact of an increase in default
probability (expressed in terms of WARF level) on the notes (shown
in terms of the number of notch difference versus the current
model output, whereby a negative difference corresponds to higher
expected losses), assuming that all other factors are held equal:
Percentage Change in WARF Impact in Rating Notches
WARF + 15% (3200 to 3680) Class A Notes: 0
Class B Notes: -1
Class C Notes: -1
Class D Notes: -1
Class E Notes: -1
WARF + 30% (3200 to 4160) Class A Notes: -1
Class B Notes: -2
Class C Notes: -3
Class D Notes: -2
Class E Notes: -2
The V Score for this transaction is Medium/High. This V Score has
been assigned in a manner similar to the Medium/High V score
assigned for the global cash flow CLO sector, as described in the
special report titled "V Scores and Parameter Sensitivities in the
Global Cash Flow CLO Sector," (the "CLO V Score Report") dated
July 6, 2009, available on www.moodys.com. A significant portion
of the underlying collateral assets for this transaction are SME
corporate loans, which receive Moody's credit estimates, rather
than publicly rated corporate loans. This distinction is an
important factor in the determination of this transaction's V
Score, since loans publicly rated by Moody's are the basis for the
CLO V Score Report.
Several scores for sub-categories of the V Score differ from the
CLO sector benchmark scores. The scores for the quality of
historical data for U.S. SME loans and for disclosure of
collateral pool characteristics and collateral performance reflect
higher volatility. This results from the lack of a centralized
default database for SME loans, as well as obligor-level
information for SME loans being more limited and less frequently
provided to Moody's than that for publicly rated companies.
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.
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations," published in
May 2013.
JP MORGAN 2007-LDP12: Moody's Affirms Ba3 Rating on Class X Certs
-----------------------------------------------------------------
Moody's Investors Service affirmed the ratings of seven classes of
J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP12
Commercial Mortgage Pass-Through Certificates, Series 2007-LDP12
as follows:
Cl. A-2, Affirmed Aaa (sf); previously on Sep 10, 2007
Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Sep 10, 2007
Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Sep 10, 2007
Definitive Rating Assigned Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Sep 10, 2007
Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed Aaa (sf); previously on Sep 10, 2007
Definitive Rating Assigned Aaa (sf)
Cl. X, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded
to Ba3 (sf)
Cl. A-M, Affirmed Baa1 (sf); previously on Oct 11, 2012
Downgraded to Baa1 (sf)
Ratings Rationale
The affirmations of the six investment-grade P&I 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. The
rating of the Interest Only Class, Class X, is consistent with the
expected credit performance of its referenced classes and thus is
affirmed.
Based on Moody's current base expected loss, the credit
enhancement levels for the affirmed classes are sufficient to
maintain their current ratings. Depending on the timing of loan
payoffs and the severity and timing of losses from specially
serviced loans, the credit enhancement level for rated 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 rating action reflects a base expected loss of 9.1% of the
current balance compared to 11.7% at last review. Realized losses
have increased from 2.7% of the original balance to 4.7% since the
prior 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.
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.
The principal methodology used in this rating was "Moody's
Approach to Rating U.S. CMBS Conduit Transactions" published in
September 2000.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.64 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 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 37 compared to 41 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 October 11, 2012.
Please see the ratings tab on the issuer / entity page on
moodys.com for the last rating action and the ratings history.
Deal Performance
As of the September 16, 2013 distribution date, the transaction's
aggregate pooled certificate balance has decreased by 22% to $2.0
billion from $2.5 billion at securitization. The Certificates are
collateralized by 138 mortgage loans ranging in size from less
than 1% to 8% of the pool, with the top ten loans representing 42%
of the pool. One loan, representing less than 1% of the pool, has
defeased and is collateralized with U.S. Government Securities.
Twenty-six loans, representing 21% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, Moody's reviews the
watchlist to assess which loans have material issues that could
impact performance.
Twenty-three loans have been liquidated at a loss from the pool,
resulting in an aggregate realized loss of $117.2 million (34%
average loss severity). Fourteen loans, representing 14% of the
pool, are currently in special servicing. The largest specially
serviced loan is the Overlook III Loan ($66.7 million -- 3.4% of
the pool). The loan is secured by a 438,710 square foot (SF)
office property located in Atlanta, Georgia. The loan transferred
to special servicing in October 2012 due to imminent payment
default. The property was 69.5% occupied as of July 2013.
The second largest specially serviced loan is the 7000 Central
Park Loan $65.0 Million -- 3.3% of the pool). The loan is secured
by a 415,000 SF office property located in Atlanta, Georgia. The
loan transferred to special servicing in June 2012 due to imminent
maturity default. The property was unable to service its debt and
the borrower had submitted various workout proposals. The
remaining specially serviced loans are secured by retail, office,
industrial and hotel properties. The Master Servicer has
recognized an aggregate $60.8 million appraisal reduction for
eight of the 14 specially serviced loans. Moody's estimates an
aggregate $77.3 million loss (33% expected loss) for all 12 of the
specially serviced loans.
Moody's has assumed a high default probability for nine poorly
performing loans representing 7% of the pool and has estimated a
$24.5 million aggregate loss (18% expected loss based on a 53%
probability default) from these troubled loans.
Moody's was provided with full year 2012 and partial year 2013
operating results for 94% and 76% of the conduit pool,
respectively. The conduit portion of the pool excludes specially
serviced, troubled and defeased loans. Moody's weighted average
conduit LTV is 111% compared to 108% 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 9.4%.
Moody's actual and stressed conduit DSCRs are 1.35X and 0.96X,
respectively, compared to 1.42X and 0.99X 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 20% of the pool
balance. The largest loan is the Plaza El Segundo Loan ($162.0
million -- 8.3% of the pool), which is secured by a 382,000 SF
power/lifestyle community center located in El Segundo,
California. Major tenants include Whole Foods, Best Buy, and
Dick's Sporting Goods. The property was 99% leased as of June
2013, compared to 92% at last review. Moody's LTV and stressed
DSCR are 126% and 0.75X, respectively, compared to 129% and 0.73X
at last full review.
The second largest loan is the Sawgrass Mills Loan ($150.0 million
-- 7.6% of the pool), which is a pari-passu interest in an $850.0
million first mortgage loan. The loan is secured by the borrower's
interest in a 2.0 million SF mall located in Sunrise, Florida. The
mall's major tenants include Burlington Coat Factory, J.C. Penney,
and Regal Cinema. The property was 96% leased as of December 2012,
the same as at last review. The loan is interest-only for its
entire seven-year term maturing in July 2014. Financial
performance declined since last review and looming major tenant
lease expirations increase near-term leasing risk. Moody's LTV and
stressed DSCR are 99% and 0.90X, respectively, compared to 93% and
0.96X, at last full review.
The third largest loan is the 111 Massachusetts Avenue Loan ($88.8
million -- 4.5% of the pool), which is secured by a 255,000 SF
office property located in Washington, DC. The property was 95%
leased as of July 2013, the same as at last review. Most of the
space is leased to GSA tenants with lease expirations in 2015 and
2016. Moody's LTV and stressed DSCR are 107% and 0.86X,
respectively, compared to 111% and 0.83X at last full review.
JP MORGAN 2013-C15: Fitch to Rate Class F Certificates at 'B'
-------------------------------------------------------------
Fitch Ratings has issued a presale report on the J.P. Morgan Chase
Commercial Mortgage Securities Trust, Series 2013-C15 commercial
mortgage pass-through certificates.
Fitch expects to rate the transaction and assign Outlooks as
follows:
-- $63,681,000 class A-1 'AAAsf'; Outlook Stable;
-- $365,321,000 class A-2 'AAAsf'; Outlook Stable;
-- $21,444,000 class A-3 'AAAsf'; Outlook Stable;
-- $110,000,000 class A-4 'AAAsf'; Outlook Stable;
-- $206,902,000 class A-5 'AAAsf'; Outlook Stable;
-- $67,687,000 class A-SB 'AAAsf'; Outlook Stable;
-- $93,942,000 class A-S 'AAAsf'; Outlook Stable;
-- $928,977,000b class X-A 'AAAsf'; Outlook Stable;
-- $76,047,000b class X-B 'AA-sf'; Outlook Stable;
-- $76,047,000 class B 'AA-sf'; Outlook Stable;
-- $44,734,000 class C 'A-sf'; Outlook Stable;
-- $59,646,000a class D 'BBB-sf'; Outlook Stable;
-- $23,858,000a class E 'BBsf'; Outlook Stable;
-- $11,929,000a class F 'Bsf'; Outlook Stable.
a Privately placed pursuant to Rule 144A.
b Notional amount and interest only.
The expected ratings are based on information provided by the
issuer as of Oct. 2, 2013. Fitch does not expect to rate the
$47,716,349 non-rated class or the $83,503,349 class X-C.
The certificates represent the beneficial ownership in the trust,
primary assets of which are 68 loans secured by 151 commercial
properties having an aggregate principal balance of approximately
$1.193 billion as of the cutoff date. The loans were contributed
to the trust by JPMorgan Chase Bank, National Association,
Barclays Bank PLC, Starwood Mortgage Funding LLC, and KeyBank
National Association.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 76.1% of the properties
by balance, cash flow analysis of 86.1%, and asset summary reviews
on 86.1% of the pool.
The transaction has a Fitch stressed debt service coverage ratio
(DSCR) of 1.17x, a Fitch stressed loan-to-value (LTV) of 101.7%,
and a Fitch debt yield of 9.08%. Fitch's aggregate net cash flow
represents a variance of 7.15% to issuer cash flows.
Key Rating Drivers
Fitch Leverage: The Fitch DSCR of 1.17x is below the average 2012
and first-half 2013 of 1.24x and 1.36x, respectively. The Fitch
LTV of 101.7% is higher than the 2012 and first-half 2013 averages
of 97.2% and 99.8%, respectively.
Subordinate Debt: Eight loans (21.4%) have subordinate debt,
including the largest loan, Veritas Multifamily Portfolio, which
has a B note as well as two layers of preferred equity. Three
other loans in the top 10 (369 Lexington Avenue, Regency Park
Apartments, and 2 West 46th Street) all have mezzanine debt.
Concentration in Michigan: The pool has an above average
concentration of properties in Michigan with 13 properties (9.1%),
atypical of CMBS 2.0 transactions. The properties are generally
stable performers and considered best in class assets. The largest
concentration in this pool is Texas (17.3%), followed by
California (15.4%) and Nevada (10.1%).
Multifamily Concentration: Multifamily properties comprise 20.4%
of the portfolio, which is greater than the first-half 2013
concentration of 8.9%. This consists largely of the largest loan
in the pool, Veritas Multifamily Portfolio (10%). Additionally,
5.7% of the pool is backed by manufactured housing communities.
The largest property types are retail (28.8%) and office (28.2%
Rating Sensitivities
Fitch performed two model-based break-even analyses to determine
the level of cash flow and value deterioration the pool could
withstand prior to $1 of loss being experienced by the 'BBB-sf'
and 'AAAsf' rated classes. Fitch found that the JPMBB 2013-C15
pool could withstand a 40.08% decline in value (based on appraised
values at issuance) and an approximately 17.17% decrease to the
most recent actual cash flow prior to experiencing a $1 of loss to
the 'BBB-sf' rated class. Additionally, Fitch found that the pool
could withstand a 49.82% decline in value and an approximately
30.64% decrease in the most recent actual cash flow prior to
experiencing $1 of loss to any 'AAAsf' rated class.
Key Rating Drivers and Rating Sensitivities are further described
in the accompanying pre-sale report.
The master servicer will be Wells Fargo Bank, National
Association, rated 'CMS1-' by Fitch. The special servicer will be
LNR Partners LLC, rated 'CSS1-' by Fitch.
MERRILL LYNCH 2005-CA: DBRS Confirms 'BB' Rating at Cl. F Certs
---------------------------------------------------------------
DBRS Inc. has confirmed the ratings of all classes of Merrill
Lynch Financial Assets Inc., Series 2005-Canada 15 Commercial
Mortgage Pass-Through Certificates, Series 2005-Canada 15 as
follows:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class XC-1 at AAA (sf)
-- Class XC-2 at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class D-1 at BBB (high) (sf)
-- Class D-2 at BBB (high) (sf)
-- Class E-1 at BBB (sf)
-- Class E-2 at BBB (sf)
-- Class F at BB (high) (sf)
-- Class G at BB (sf)
-- Class H at BB (low) (sf)
-- Class J at B (high) (sf)
-- Class K at B (sf)
-- Class L at B (low) (sf)
All the trends are Stable.
The rating confirmations reflect the performance of the remaining
loans in the pool and the high single-tenant concentration in
relation to the improvement in credit enhancement to the bonds
resulting from a collateral reduction of approximately 38.7% since
issuance. As of the September 2013 remittance report, 16 loans
have paid out of the pool since issuance, leaving 42 loans
remaining in the transaction. The transaction also benefits from
defeasance collateral, as six loans, representing 27.1% of the
current pool balance, are fully defeased. Overall pool
performance remains stable as the largest 15 loans in the
transaction, excluding defeasance collateral, have a weighted-
average debt service coverage ratio and weighted-average debt
yield of 1.68 times (x) and 14.0%, respectively.
As of the October 2013 remittance report, there are four loans on
the servicer's watchlist, representing 9.0% of the current pool
balance. The DBRS analysis considered that a few of these loans
have an elevated probability of default as a result of these
performance issues. There are no loans in special servicing.
The transaction has specific exposure to RONA inc. (RONA) as nine
loans in the pool are secured by a RONA home and garden retail
store. The loans are not cross-collateralized or cross-defaulted
and represent 24.2% of the current pool balance. The properties
are located in various cities throughout Ontario and Qu.bec, and
the RONA leases are not scheduled to expire until November 2019,
five years past the respective loan maturities. H&R Real Estate
Investment Trust (H&R REIT; rated BBB with a Stable trend by DBRS)
serves as the non-recourse sponsor for each loan secured by a RONA
store. In June 2013, RONA announced 11 store closings throughout
Ontario and British Columbia, scheduled to occur in October and
December 2013. The Windsor, Ontario, property that secures
Prospectus ID#17 in this transaction was included in this closure
list. This loan represents 3.0% of the current pool balance.
DBRS is awaiting information from the servicer in regards to H&R
REIT's strategy with the subject property as the loan has an
upcoming maturity in 2014. The loan is expected to remain current
through maturity because of the long-term nature of the lease to
RONA, even though RONA will no longer be occupying the space.
DBRS downgraded its rating of RONA in March 2013 to BB (high) with
a Negative trend.
As part of its review, DBRS analyzed the largest 15 loans in the
pool, the three loans on the servicer's watchlist and the loans
secured by RONA retail properties, which comprise approximately
77.1% of the current pool balance.
MORGAN STANLEY 2002-IQ3: S&P Raises Rating on Class F Notes to B+
-----------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on four
classes of commercial mortgage pass-through certificates from
Morgan Stanley Dean Witter Capital I Trust 2002-IQ3, a U.S.
commercial mortgage-backed securities (CMBS) transaction.
The upgrades follow S&P's analysis of the transaction, which
included a review of the credit characteristics of all of the
remaining loans in the pool, the transaction structure, and the
liquidity available to the trust.
The upgrades also reflect the current and expected available
credit enhancement for these classes, which S&P believes is
greater than its most recent estimate of necessary credit
enhancement for the respective rating levels. In addition, the
upgraded classes reflect S&P's views of the current and future
performance of the transaction's collateral, and the trust
balance's deleveraging, or debt reduction.
While available credit enhancement levels may suggest further
positive rating movements for the remaining classes, S&P also
considered the historical interest shortfalls, the fact that the
largest loan in the pool, Magnolia Ridge Apartments ($8.3 million,
16.4%) is with the special servicer, CWCapital Asset Management
LLC, and the number and magnitude of loans on the master
servicer's, Berkadia Commercial Mortgage LLC's, watchlist
(20 loans; $11.7 million, 23.1%).
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 RAISED
Morgan Stanley Dean Witter Capital I Trust 2002-IQ3
Commercial mortgage pass-through certificates 2002-IQ3
Rating Rating
Class To From Credit enhancement (%)
C AA+ (sf) A- (sf) 71.57
D AA (sf) BBB+(sf) 67.09
E BBB+(sf) B+ (sf) 40.19
F B+ (sf) CCC (sf) 20.01
MORGAN STANLEY 2003-TOP11: Moody's Cuts Cl. J Certs Rating to 'C'
-----------------------------------------------------------------
Moody's Investors Service affirmed the ratings of 10 classes and
downgraded three classes of Morgan Stanley Capital I Inc.,
Commercial Mortgage Pass-Through Certificates, Series 2003-TOP11
as follows:
Cl. A-4, Affirmed Aaa (sf); previously on Aug 20, 2003 Definitive
Rating Assigned Aaa (sf)
Cl. B, Affirmed Aaa (sf); previously on Jan 28, 2011 Upgraded to
Aaa (sf)
Cl. C, Affirmed Aa2 (sf); previously on Nov 3, 2011 Upgraded to
Aa2 (sf)
Cl. D, Affirmed A1 (sf); previously on Nov 3, 2011 Upgraded to A1
(sf)
Cl. E, Affirmed Baa3 (sf); previously on Oct 12, 2012 Downgraded
to Baa3 (sf)
Cl. F, Affirmed Ba1 (sf); previously on Oct 12, 2012 Downgraded
to Ba1 (sf)
Cl. G, Affirmed B1 (sf); previously on Oct 12, 2012 Downgraded to
B1 (sf)
Cl. H, Downgraded to Caa2 (sf); previously on Oct 12, 2012
Downgraded to Caa1 (sf)
Cl. J, Downgraded to C (sf); previously on Oct 12, 2012
Downgraded to Caa3 (sf)
Cl. K, Affirmed C (sf); previously on Oct 12, 2012 Downgraded to
C (sf)
Cl. L, Affirmed C (sf); previously on Oct 12, 2012 Downgraded to
C (sf)
Cl. M, Affirmed C (sf); previously on Jan 28, 2011 Downgraded to
C (sf)
Cl. X-1, Downgraded to B2 (sf); previously on Feb 22, 2012
Downgraded to Ba3 (sf)
Ratings Rationale
The affirmations of the P&I investment-grade 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. The
affirmations of the below-investment grade P&I classes are
consistent with Moody's expected loss and thus are affirmed. The
downgrades to two P&I classes are due to higher than expected
realized and anticipated losses from specially serviced loans.
The interest-only class, Class X-1, is downgraded to align its
rating with the expected credit performance of its referenced
classes.
Based on Moody's current base expected loss, the credit
enhancement levels for the affirmed classes are sufficient to
maintain their current ratings. Depending on the timing of loan
payoffs and the severity and timing of losses from specially
serviced loans, the credit enhancement level for rated 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 rating action reflects a base expected loss of 8.0% of the
current balance compared to 4.5% at last review. Realized losses
have increased from 0.4% of the original balance to 1.1% since the
prior 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.
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.
The methodologies used in this rating were "Moody's Approach to
Rating Fusion U.S. CMBS Transactions" published in April 2005, and
"Moody's Approach to Rating CMBS Large Loan/Single Borrower
Transactions" published in July 2000.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.64 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 uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 5 compared to 41 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 8.6 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 October 12, 2012.
Deal Performance
As of the September 13, 2013 distribution date, the transaction's
aggregate pooled certificate balance has decreased by 88% to
$139.1 million from $1.2 billion at securitization. The
Certificates are collateralized by 29 mortgage loans ranging in
size from less than 1% to 40% of the pool, with the top ten loans
representing 80% of the pool. Two loans, representing 3% of the
pool, have been defeased and are collateralized with U.S.
Government Securities. One loan, representing 40% of the pool, has
an investment grade credit assessment.
Three loans, representing 41% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, Moody's reviews the
watchlist to assess which loans have material issues that could
impact performance.
Ten loans have been liquidated from the pool, resulting in an
aggregate realized loss of $13.3 million (28% loss severity on
average). Six loans, representing 29% of the pool, are currently
in special servicing.
The largest specially serviced loan is the Crown Point Corporate
Center Loan ($15 million -- 2.2% of the pool), which is secured by
a 129,000 square foot (SF) office property located in
Gaithersburg, Maryland. The loan transferred to special servicing
in November 2011 due to payment default. The property became real
estate owned (REO) in July 2012 after the borrower surrendered it
via a deed-in-lieu of foreclosure. As of July 2013, the property
was 62% leased. A December 2012 appraisal valued the property at
$6.1 million.
The second largest specially serviced loan is the Bisso Corporate
Center Loan ($12.8 million -- 9.2% of the pool). The loan is
secured by an industrial office property comprised of two
buildings located in Concord, CA. The property was built in 1982
and renovated in 2000. The loan transferred to special servicing
in May 2013 due to maturity default. As of July 2013, the property
was 57% leased with occupancy expected to drop to 29%. The sole
tenant is currently Verizon Wireless, occupying 29% of the net
rentable area (NRA). The borrower has executed a Letter of Intent
with Verizon Wireless for the remaining vacant space, which would
bring occupancy to 100%.
The third largest specially serviced loan is the 9200 Edmonston
Road Loan ($4.2 million --3.0% of the pool). The loan transferred
to special servicing in May 2013 due to maturity default. The loan
matured in May 2013. The loan is secured by a single-tenant
property which is 100% occupied by the GSA. The lease expired in
January 2013, and they are currently on a month-to-month lease,
while they decide if they will vacate the property or if they will
renew for potentially for less space. As a result, the borrower
has requested a one-year extension in order to reach a resolution
with the current tenant. The remaining specially serviced loans
are secured by retail and industrial properties. The servicer has
recognized an aggregate $8.4 million appraisal reduction for three
of the six specially serviced loans. Moody's analysis estimates a
$10.1 million aggregate loss (44% expected loss) for four of the
specially serviced loans.
Moody's was provided with full year 2012 and partial year 2013
operating results for 93% and 55% of the pool's non-specially
serviced and non-defeased loans, respectively. Excluding specially
serviced and troubled loans, Moody's weighted average conduit LTV
is 65% compared to 61% at Moody's prior review. Moody's net cash
flow reflects a weighted average haircut of 17% to the most
recently available net operating income. Moody's value reflects a
weighted average capitalization rate of 9.8%.
Excluding special serviced and troubled loans, Moody's actual and
stressed conduit DSCRs are 1.41X and 2.30X, respectively, compared
to 1.98X and 1.99X at last review. Moody's actual DSCR is based on
Moody's net cash flow (NCF) and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
The loan with an investment-grade credit assessment is the Center
Tower Loan ($55.4 million -- 39.9%), which is secured by a 462,200
SF office building located in Costa Mesa, California in Orange
County. The property is currently on the watchlist for low
occupancy. As of July 2013, the property was 76% leased compared
to 73% at last review. The loan has benefited from amortization
and has paid down 25% since securitization. Moody's credit
assessment and stressed DSCR are A3 and 1.66X, respectively,
compared to A3 and 1.69X at last review.
The top three conduit loans represent 11% of the pool. The largest
loan is the 801 Jubilee Loan ($6.4 million -- 4.6% of the pool).
The loan is secured by an industrial property located in Peabody,
Massachusetts. As of December 2012, the property was 100% leased,
the same as at last review. The loan is 100% leased to Higher
Linear Foods, which is a Nova Scotia processor and marketer of
frozen seafood's and pasta, until December 2019. Moody's utilized
a Lit/Dark analysis to reflect potential cash flow volatility due
to the single tenant exposure at the property. The loan is
benefiting from amortization. Moody's LTV and stressed DSCR are
66% and 1.64X.
The second largest loan is the Golden Springs Business Center
($4.6 million -- 3.3% of the pool). The loan is secured by an
industrial property located in Santa Fe Springs, California, in
Los Angeles County. As of July 2013, the property was 100% leased,
the same as at last review. The loan is fully amortizing. Moody's
LTV and stressed DSCR are 23% and >4.0X, respectively, compared to
26% and 3.83X, at last review.
The third largest loan is the All Size Storage Loan ($3.9 million
-- 2.8% of the pool). The loan is secured by a self storage
property with approximately 658 storage units located in San
Clemente, California, located in Orange County. As of July 2013,
the storage facility had an occupancy of 82%. The loan is
benefiting from amortization. Moody's LTV and stressed DSCR are
45% and 2.26X, respectively, compared to 52% and 1.99X at last
review.
MORGAN STANLEY 2006-HQ8: Moody's Cuts Ratings on 2 Cert. Classes
----------------------------------------------------------------
Moody's Investors Service downgraded the ratings of two classes
and affirmed 13 classes of Morgan Stanley I Trust 2006-HQ8
Commercial Mortgage Pass-Through Certificates, Series 2006-HQ8 as
follows:
Cl. A-AB, Affirmed Aaa (sf); previously on Mar 28, 2006 Definitive
Rating Assigned Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Mar 28, 2006 Definitive
Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed Aaa (sf); previously on Mar 28, 2006 Definitive
Rating Assigned Aaa (sf)
Cl. A-M, Affirmed Aaa (sf); previously on Dec 2, 2010 Confirmed at
Aaa (sf)
Cl. A-J, Affirmed Baa3 (sf); previously on Oct 11, 2012 Downgraded
to Baa3 (sf)
Cl. B, Affirmed Ba1 (sf); previously on Oct 11, 2012 Downgraded to
Ba1 (sf)
Cl. C, Affirmed Ba2 (sf); previously on Oct 11, 2012 Downgraded to
Ba2 (sf)
Cl. D, Downgraded to B3 (sf); previously on Oct 11, 2012
Downgraded to B1 (sf)
Cl. E, Downgraded to Caa1 (sf); previously on Oct 11, 2012
Downgraded to B2 (sf)
Cl. F, Affirmed Caa2 (sf); previously on Oct 11, 2012 Downgraded
to Caa2 (sf)
Cl. G, Affirmed Caa3 (sf); previously on Oct 11, 2012 Downgraded
to Caa3 (sf)
Cl. H, Affirmed C (sf); previously on Oct 11, 2012 Downgraded to C
(sf)
Cl. J, Affirmed C (sf); previously on Oct 11, 2012 Downgraded to C
(sf)
Cl. K, Affirmed C (sf); previously on Oct 11, 2012 Downgraded to C
(sf)
Cl. X, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded to
Ba3 (sf)
Ratings Rationale:
The downgrades are due to higher than anticipated realized and
anticipated losses from specially serviced and troubled loans.
The affirmations of the investment grade P&I 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. The
ratings of the below-investment grade P&I classes are consistent
with Moody's expected loss and thus are affirmed. The rating of
the IO Class, Class X-1, is consistent with the expected credit
performance of its referenced classes and thus is affirmed.
Based on Moody's current base expected loss, the credit
enhancement levels for the affirmed classes are sufficient to
maintain their current ratings. Depending on the timing of loan
payoffs and the severity and timing of losses from specially
serviced loans, the credit enhancement levels for rated 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 rating action reflects a base expected loss of 7.2% of the
current balance compared to 7.9% at last review. Moody's base
expected loss plus realized losses is now 10.0% of the original
pooled balance compared to 9.4% at last review.
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.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.64 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 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 52 compared to 56 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 October 11, 2012.
Deal Performance:
As of the September 13, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 24% to $2.07
billion from $2.73 billion at securitization. The Certificates are
collateralized by 220 mortgage loans ranging in size from less
than 1% to 8% of the pool. Eight loans, representing 1% of the
pool, have defeased and are secured by U.S. Government securities.
Forty-nine loans, representing approximately 25% of the pool, are
on the master servicer's watchlist. The watchlist includes loans
which meet certain portfolio review guidelines established as part
of the CRE Finance Council (CREFC) monthly reporting package. As
part of Moody's ongoing monitoring of a transaction, Moody's
reviews the watchlist to assess which loans have material issues
that could impact performance.
Thirty-four loans have been liquidated from the pool since
securitization, of which 31 loans generated an aggregate realized
loss totaling $123.9 million (average loss severity of 53%). There
are 15 loans, representing 9% of the pool, currently in special
servicing. The largest specially serviced loan is the Marketplace
at Northglenn Loan ($59.2 million -- 2.9% of the pool), which is
secured by a 439,000 square foot (SF) retail power center in
Northglenn, a suburb of Denver, Colorado. The loan transferred to
special servicing in August 2011 for imminent default. Foreclosure
occurred in March 2012 and the asset became REO effective July
2012. As of July 2013, the property was 72% leased compared to 85%
at last review. In May 2013, the Master Servicer recognized an
appraisal reduction of $17.7 million.
The second largest specially serviced loan is the Roseville
Portfolio Roll-Up Loan ($40.5 million -- 2.0% of the pool), which
is secured by a mixed-use portfolio of three assets, totaling
212,000 SF, in Roseville, California. The loan transferred to
special servicing in December 2008 due to payment default. The
asset became REO effective April 2012. As of July 2013, the
portfolio was 40% leased. In June 2013, the Master Servicer
recognized an appraisal reduction of $33.4 million.
The remaining specially serviced loans are a mix of multi-family,
office, retail, industrial and self-storage properties. Moody's
has estimated an aggrgate $85.6 million loss (49% expected loss)
for 13 of the 15 specially serviced loans.
Moody's has assumed a high default probability for 16 poorly
performing loans, representing 4% of the pool. Moody's has
estimated a $13.6 million loss (16% expected loss based on a 50%
probability default) from these troubled loans.
Based on the most recent remittance statement, Classes H through S
have experienced $7.27 million in cumulative interest shortfalls.
Interest shortfalls are caused by special servicing fees,
including workout and liquidation fees, ASERs, extraordinary trust
expenses and loan modifications.
Moody's was provided with full year 2011 and 2012 operating
results for 99% and 97% of the performing loans. Excluding
specially serviced and troubled loans, Moody's weighted average
conduit LTV is 102% compared to 103% at last full review.
Excluding the Ritz-Carrolton Hotel Loan, Moody's net cash flow
reflects a weighted average haircut of 11.5% to the most recently
available net operating income. Moody's value reflects a weighted
average capitalization rate of 9.4%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed conduit DSCRs are 1.27X and 1.03X, respectively,
compared to 1.41X and 1.04X, respectively, at last full 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 18% of the pool
balance. The largest loan is the Ritz-Carlton Hotel Portfolio Loan
($161.6 million -- 7.5% of the pool), which represents an 87%
participation interest in a $185.8 million loan. The loan is
encumbered with a $39.0 million B-note held outside the trust. At
securitization, the portfolio consisted of five Ritz-Carlton
Hotels, totaling 1,218 rooms, located in New York (2), Boston (1)
and Washington D.C. (2). The two NYC hotels have ground leases
through 2069 and 2075. In 2007 the Boston property was released,
reducing the portfolio to 945 rooms. The master servicer reported
that earlier this year the St. Regis Hotel in Washington D.C. was
substituted for the Ritz Battery Park asset, which was released.
The portfolio now consists of 829 rooms. Based on the FY 2012
financials, the portfolio's occupancy rate and revenue per
available room (RevPAR) were 73% and $362 compared to 75% and $364
the previous year. However, the portfolio's expenses have
significantly increased due to higher operating expenses,
specifically real estate taxes and ground rent. Based on a
stabilized value, Moody's LTV and stressed DSCR are 112% and
0.91X, respectively, compared to 89% and 1.16X at last review.
The second largest loan is the COPT Office Portfolio Loan ($108.5
million -- 5.3% of the pool), which is secured by ten crossed
suburban office properties totaling 597,482 SF and located in
Columbia and Annapolis Junction, Maryland. As March 2013, the
portfolio was 84% leased compared to 87% in December 2012 and 86%
in June 2012. The largest tenants are Booz Allen (approximately
22% of the net rentable area (NRA); lease expiration in December
2015); Northrop Gruman (17% of the NRA; lease expiration in July
2019) and L-3 Communication (8.0% of the NRA; lease expiration in
August 2015. Performance has remained stable; however, 51% of the
NRA will roll between 2015 and 2016. The loan is interest-only for
its entire ten-year term and matures in January 2016. Moody's LTV
and stressed DSCR are 113% and 0.88X, respectively, compared to
114% and 0.88X at last review.
The third largest loan is the Flournoy Portfolio Loan ($91.4
million -- 4.4% of the pool), which is secured by four multifamily
properties with a total of 1,397 units located in Texas (2),
Tennessee, and Kansas. As of December 2012, the portfolio was 93%
leased, essentially the same at the prior review. Performance has
improved due to higher base revenues. The loan is benefiting from
amortization and is scheduled to mature in January 2016. Moody's
LTV and stressed DSCR are 100% and 0.95X, respectively, compared
to 115% and 0.83X at last review.
MORGAN STANLEY 2013-C12: Moody's Rates Class F Notes 'B1(sf)'
-------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to
thirteen classes of CMBS securities, issued by Morgan Stanley Bank
of America Merrill Lynch Trust 2013-C12.
CMBS Classes
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-SB, 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. D, Assigned (P)Baa3 (sf)
Cl. E, Assigned (P)Ba2 (sf)
Cl. F, Assigned (P)B1 (sf)
* Reflects Interest Only Class
** Reflects Exchangeable Certificates
Ratings Rationale:
The Certificates are collateralized by 72 fixed rate loans secured
by 93 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 1.52X is greater than the 2007
conduit/fusion transaction average of 1.31X. The Moody's Stressed
DSCR of 1.02X is greater than the 2007 conduit/fusion transaction
average of 0.92X.
Moody's Trust LTV ratio of 102.3% 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 29. The transaction's loan level diversity is
at the higher end of the band of Herfindahl scores found in most
multi-borrower transactions issued since 2009. With respect to
property level diversity, the pool's property level Herfindahl
Index is 30. The transaction's property diversity profile is
higher than the indices calculated in most multi-borrower
transactions issued since 2009.
Moody's also grades properties on a scale of 1 to 5 (best to
worst) and considers those grades when assessing the likelihood of
debt payment. The factors considered include property age, quality
of construction, location, market, and tenancy. The pool's
weighted average property quality grade is 2.2, which is lower
than the indices calculated in most multi-borrower transactions
since 2009.
This deal has a super-senior Aaa class with 30% credit
enhancement. Although the additional enhancement offered to the
senior most certificate holders provides additional protection
against pool loss, the super-senior structure is credit negative
for the certificate that supports the super-senior class. If the
support certificate were to take a loss, the loss would have the
potential to be quite large on a percentage basis. Thin tranches
need more subordination to reduce the probability of default in
recognition that their loss-given default is higher. This
adjustment helps keep expected loss in balance and consistent
across deals. The transaction was structured with additional
subordination at class A-S to mitigate the potential increased
severity to class A-S.
Moody's analysis employs the excel-based CMBS Conduit Model v2.62
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 1.0 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%, 17%, and 30%, the model-indicated rating for the currently
rated junior (P) Aaa (sf) class would be (P) Aa1 (sf), (P) Aa2
(sf), and (P) A1 (sf), 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.
MOUNTAIN CAPITAL V: Moody's Affirms 'Ba3' Rating on $10.5MM Notes
-----------------------------------------------------------------
Moody's Investors Service announced that it has upgraded the
ratings of the following notes issued by Mountain Capital CLO V
LTD:
U.S. $19,000,000 Class A-3L Floating Rate Notes Due September
2018, Upgraded to Aa1 (sf); previously on June 14, 2013 Upgraded
to Aa3 (sf);
U.S. $11,000,000 Class B-1L Floating Rate Notes Due September
2018, Upgraded to Baa1 (sf); previously on June 14, 2013 Upgraded
to Baa2 (sf).
Moody's also affirmed the ratings of the following notes:
U.S. $191,000,000 Class A-1L Floating Rate Notes Due September
2018 (current outstanding balance of $69,945,517.29), Affirmed Aaa
(sf); previously on June 14, 2013 Affirmed Aaa (sf);
U.S. $30,000,000 Class A-1LA Floating Rate Notes Due September
2018 (current outstanding balance of $9,084,827.60), Affirmed Aaa
(sf); previously on June 14, 2013 Affirmed Aaa (sf);
U.S. $3,000,000 Class A-1LB Floating Rate Notes Due September
2018, Affirmed Aaa (sf); previously on June 14, 2013 Affirmed Aaa
(sf);
U.S. $15,000,000 Class A-2L Floating Rate Notes Due September
2018, Affirmed Aaa (sf); previously on June 14, 2013 Upgraded to
Aaa (sf);
U.S. $10,500,000 Class B-2L Floating Rate Notes Due September
2018, Affirmed Ba3 (sf); previously on June 14, 2013 Affirmed 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 2013. Moody's notes that the Class A-1L
and Class A-1LA Notes have been paid down by approximately 29.8%
and 32.8% or $57.0 million and $9.8 million since the rating
action date. Based on the latest trustee report dated September 9,
2013, the Senior Class A, Class A, Class B-1L and Class B-2L
overcollateralization ratios are reported at 142.2%, 122.2%,
113.0%, and 106.0%, versus May 2013 levels of 129.4%, 116.0%,
109.4% and 104.2%, respectively.
Moody's notes that the underlying portfolio includes a number of
investments in securities that mature after the maturity date of
the notes. Based on the Moody's calculations, securities that
mature after the maturity date of the notes currently make up
approximately 5.8% of the underlying portfolio. These investments
potentially expose the notes to market risk in the event of
liquidation at the time of the notes' maturity. Moody's notes that
since the last rating action, an additional $3.7 million of assets
became long-dated due to amendments that extended some loan
maturities. Notwithstanding the increase in the
overcollateralization ratio of the Class B-2L Notes, Moody's
affirmed the rating of the Class B-2L Notes due in part to the
market risk posed by the exposure to these long-dated assets.
Moody's notes that the key model inputs used by Moody's in its
analysis, such as par, weighted average rating factor, diversity
score, and weighted average recovery rate, are based on its
published methodology and 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 $145.3 million, defaulted par of $3.3 million,
a weighted average default probability of 18.2% (implying a WARF
of 2868), a weighted average recovery rate upon default of 52.3%,
and a diversity score of 43. 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.
Mountain Capital CLO V LTD., issued in June 2006, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
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 Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2013.
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% (2295)
Class A-1L: 0
Class A-1LA: 0
Class A-1LB: 0
Class A-2L: 0
Class A-3L: +1
Class B-1L: +2
Class B-2L: +1
Moody's Adjusted WARF + 20% (3442)
Class A-1L: 0
Class A-1LA: 0
Class A-1LB: 0
Class A-2L: 0
Class A-3L: -2
Class B-1L: -1
Class B-2L: -1
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of 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.
3) Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation risk
on those assets. Moody's assumes an asset's terminal value upon
liquidation at maturity to be equal to the lower of an assumed
liquidation value (depending on the extent to which the asset's
maturity lags that of the liabilities) and the asset's current
market value. The deal continues to experience an increased
exposure resulted from Amendments to Extend maturities of loan
agreements.
MUIR GROVE: Moody's Ups $13.75MM Class D Notes to 'Ba1(sf)'
-----------------------------------------------------------
Moody's Investors Service announced that it has upgraded the
ratings of the following notes issued by Muir Grove CLO, Ltd.:
U.S.$372,500,000 Class A Floating Rate Notes Due March 25, 2020,
Upgraded to Aaa (sf); previously on July 29, 2011 Upgraded to Aa1
(sf)
U.S.$31,250,000 Class B Floating Rate Notes Due March 25, 2020,
Upgraded to Aa3 (sf); previously on July 29, 2011 Upgraded to A2
(sf)
U.S.$ 22,500,000 Class C Deferrable Floating Rate Notes Due March
25, 2020, Upgraded to Baa1 (sf); previously on July 29, 2011
Upgraded to Baa3 (sf)
U.S.$ 13,750,000 Class D Deferrable Floating Rate Notes Due March
25, 2020, Upgraded to Ba1 (sf); previously on July 29, 2011
Upgraded to Ba2 (sf)
Moody's also affirmed the ratings of the following notes:
U.S. $20,000,000 Class E Deferrable Floating Rate Notes Due March
2020 (current outstanding balance of $ 15,381,829.01), Affirmed
Ba3 (sf); previously on July 29, 2011 Upgraded to Ba3 (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 October 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 lower WARF, and higher spread compared
to the levels in October 2012. Moody's modeled a WARF and spread
of 2578 and 3.28%, respectively, compared to 2852 and 3.13%,
respectively, in October 2012. Moody's also notes that the
transaction's reported overcollateralization ratios are stable
since October 2012.
Moody's notes that the key model inputs used by Moody's in its
analysis, such as par, weighted average rating factor, diversity
score, and weighted average recovery rate, are based on its
published methodology and 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 $466.3 million, defaulted par of $11.0
million, a weighted average default probability of 19.12%
(implying a WARF of 2578), a weighted average recovery rate upon
default of 51.70%, and a diversity score of 75. 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.
Muir Grove CLO, Ltd., issued in September 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
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 Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2013
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% (2063)
Class A: 0
Class B: +3
Class C: +2
Class D: +1
Class E: +1
Moody's Adjusted WARF + 20% (3094)
Class A: -1
Class B: -2
Class C: -2
Class D: -1
Class E: -1
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of 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 commence 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.
N-STAR REAL IV: Moody's Affirms Caa3 Ratings on 2 Notes
-------------------------------------------------------
Moody's has affirmed the rating of seven classes of notes issued
by N-Star Real Estate CDO IV, Ltd. The affirmations are due to key
transaction parameters performing within levels commensurate with
the existing ratings levels. The rating action is the result of
Moody's on-going surveillance of commercial real estate
collateralized debt obligation (CRE CDO CLO) transactions.
Moody's rating action is as follows:
Cl. A, Affirmed A1 (sf); previously on Dec 15, 2010 Downgraded to
A1 (sf)
Cl. B, Affirmed Baa3 (sf); previously on Dec 15, 2010 Downgraded
to Baa3 (sf)
Cl. C, Affirmed Ba3 (sf); previously on Dec 15, 2010 Downgraded to
Ba3 (sf)
Cl. D, Affirmed B3 (sf); previously on Dec 15, 2010 Downgraded to
B3 (sf)
Cl. E, Affirmed Caa2 (sf); previously on Dec 15, 2010 Downgraded
to Caa2 (sf)
Cl. F, Affirmed Caa3 (sf); previously on Dec 15, 2010 Downgraded
to Caa3 (sf)
Cl. G, Affirmed Caa3 (sf); previously on Apr 7, 2009 Downgraded to
Caa3 (sf)
Ratings Rationale:
N-Star Real Estate CDO IV, Ltd. is a currently static (the
reinvestment period ended in July, 2010) cash transaction backed
by: i) whole loans (45.1% of the current pool balance); ii)
mezzanine loans (25.8%); iii) b-notes (14.1%); iv) CRE CDOs
(8.2%); v) commercial mortgage backed securities (CMBS) (4.7%);
and vi)real estate investment trust (REIT) debt (2.2%). As of the
September 27, 2013 Trustee report, the aggregate note balance of
the transaction, including income shares, has decreased to $284.2
million from $400.0 million at issuance, as a result of regular
amortization of collateral and recoveries from defaults. The
decrease in the balance is also due to previously executed partial
cancellations of the Class C and D Notes totaling $17.5 million.
In general, holding all key parameters static, the junior note
cancellations results in slightly higher expected losses and
longer weighted average lives on the senior notes, while producing
slightly lower expected losses on the mezzanine and junior notes.
However, this does not cause, in and of itself, a downgrade or
upgrade of any outstanding classes of notes.
There are nine assets with a par balance of $59.1 million (17.1%
of the current pool balance) that are considered defaulted as of
the September 27, 2013 Trustee report. While there have been
limited realized losses on the underlying collateral 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 have completed updated assessments for the non-Moody's
rated collateral. Moody's modeled a bottom-dollar WARF of 7,260
compared to 8,165 at last review. The current distribution of
Moody's rated collateral and assessments for non-Moody's rated
collateral is as follows: Aaa-Aa3 (0.9% compared to 0.8% at last
review), A1-A3 (4.3% compared to 4.0% at last review), Ba1-Ba3
(1.7% compared to 0.0% at last review), B1-B3 (0.0% compared to
8.4% at last review), and Caa1-C (93.1% compared to 86.8% at last
review).
Moody's modeled a WAL of 4.0 years, compared to 4.5 years at last
review. The current WAL is based on assumptions about extensions
on the underlying collateral.
Moody's modeled a fixed WARR of 26.4% compared to 29.9% at last
review.
Moody's modeled a MAC of 100.0%, same as last review.
Moody's review incorporated CDOROM(R)v2.8, one of Moody's CDO
rating models, which was released on March 25, 2013.
The cash flow model, CDOEdge(R)v3.2.1.2, released on May 16, 2013,
was used to analyze the cash flow waterfall and its effect on the
capital structure of the deal.
Moody's analysis encompasses the assessment of stress scenarios.
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 are
particularly sensitive to changes in recovery rate assumptions.
Holding all other key parameters static, changing the recovery
rate assumption up from 26.4% to 36.4% or down to 16.4% would
result in average rating movement on the rated tranches of 0 to 11
notches upward and 0 to 8 notches downward 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.
NEUBERGER BERMAN XV: S&P Assigns 'BBsf' Rating on Class E Notes
---------------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to
Neuberger Berman CLO XV Ltd./Neuberger Berman CLO XV LLC's
$376.25 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
(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.
-- 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 rated notes, which S&P assessed
using its cash flow analysis and assumptions commensurate
with the assigned ratings under various interest-rate
scenarios, including LIBOR ranging from 0.2600%-13.8391%.
-- 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
rated notes' outstanding balance.
-- The transaction's interest diversion test, a failure of
which will lead to the reclassification of up to 50% of the
excess interest proceeds that are available before paying
uncapped administrative expenses and fees, subordinated
hedge termination payments, collateral manager subordinated
and incentive fees, and subordinated note payments, to
principal proceeds during the reinvestment period to
purchase additional collateral assets and, after the
reinvestment period, up to 100% of the excess interest
proceeds to pay down the notes according to the note payment
sequence.
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/1822.pdf
RATINGS ASSIGNED
Neuberger Berman CLO XV Ltd./Neuberger Berman CLO XV LLC
Class Rating Amount
(Mil. $)
X AAA (sf) 1.25
A-1 AAA (sf) 105.00
A-2 AAA (sf) 150.00
B-1 AA (sf) 20.00
B-2 AA (sf) 25.00
C (deferrable) A (sf) 29.00
D (deferrable) BBB (sf) 20.75
E (deferrable) BB (sf) 17.75
F (deferrable) B (sf) 7.50
Subordinated notes NR 35.965
NR--Not rated.
NOMURA 2007-2: Fitch Lowers Ratings on Class E & F Notes to 'C'
---------------------------------------------------------------
Fitch Ratings has upgraded two, downgraded two, and affirmed 12
classes of Nomura CRE CDO 2007-2, Ltd. /LLC (Nomura 2007-2)
reflecting Fitch's base case loss expectation of 32.8%. Fitch's
performance expectation incorporates prospective views regarding
commercial real estate market value and cash flow declines.
Key Rating Drivers
The upgrades to classes A-1 and A-R reflect significant paydown to
these classes as well as better than expected recoveries on
several assets. Since the last rating action and as of the August
2013 trustee report, the transaction has paid down by $201.1
million from the disposal of several assets as well as scheduled
amortization and interest diversion (21.2% of the original deal
balance). Realized losses were approximately $57.2 million over
the same period. Prior to the CDO exiting its reinvestment period
in February 2013, the asset manager added 11 new assets, which
have a significantly lower weighted average modeled loss than the
pool average. Since last review, the percentage of defaulted
assets and Fitch Loans of Concern have decreased to 27.7% and
2.3%, respectively, compared to 36.3% and 11.1%. The Fitch derived
weighted average rating of the rated securities has declined to
'CC/C' from 'B-/CCC+' as three securities were removed and one
security's rating was revised to 'D' from 'C'.
Nomura 2007-2 is a commercial CRE CDO managed by C-III Investment
Management LLC. Per Fitch categorizations, the CDO is
substantially invested as follows: whole loans/A-note (58.9%), B-
notes (13.6%), commercial mortgage-backed securities (CMBS: 2.4%),
CRE CDO (5.6%), CRE mezzanine loans (3.0%), and principal cash
(16.4%).
As of the August 2013 trustee report, the CDO is failing all
overcollateralization tests. Classes D and below are not receiving
any interest payments. Interest is being capitalized on these
classes; total capitalized interest to date is $18.3 million.
Under Fitch's methodology, approximately 64.6% of the portfolio is
modeled to default in the base case stress scenario, defined as
the 'B' stress. In this scenario, the modeled average cash flow
decline is 7.0% from, generally, either year end 2012 or trailing
12-month second quarter 2013. Fitch modeled above average
recoveries of 49.3% due to the high percentage of senior debt.
The largest component of Fitch's base case loss expectation is a
B-note (9.5%) originally secured by a portfolio of 20 office
properties located in Washington, D.C. and Seattle, WA. The senior
loan and B-note were both transferred to special servicing in
April 2010 for imminent default. The portfolio was returned to the
Master Servicer on May 7, 2012 and contained 13 properties. As
part of the third modification, the borrower will deposit all
excess cash flow into a reserve which will be distributed pro-
rata. Given the post-default waterfall, the B-note will not
receive any payments until the A-notes are paid in full. Fitch
modeled a full loss on this B-note position.
The next largest component of Fitch's base case loss expectation
is a defaulted B-note (2.8%) secured by a 263,979 square foot (sf)
office property located in Anaheim, CA. No recovery is
anticipated, and Fitch modeled a full loss on the position.
The third largest component of Fitch's base case loss expectation
is an A- note (4.9%) secured by a 353 room hotel property located
in Honolulu, HI. The property is significantly underperforming its
peers, and does not generate enough cash flow to service its debt.
While a $5 million interest reserve was created from which the
Borrower is paying interest, Fitch modeled a significant loss on
this overleveraged position.
This transaction was analyzed according to the 'Surveillance
Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate
Transactions', which applies stresses to property cash flows and
debt service coverage ratio tests to project future default levels
for the underlying portfolio. Recoveries are based on stressed
cash flows and Fitch's long-term capitalization rates. The default
levels were then compared to the breakeven levels generated by
Fitch's cash flow model of the CDO under the various default
timing and interest rate stress scenarios, as described in the
report 'Global Rating Criteria for Structured Finance CDOs'. The
breakeven rates for classes A-1 and A-R are generally consistent
with the ratings listed below.
The Stable Outlook on classes A-1 and A-R generally reflect the
classes' seniority in the capital stack and expectation of
continued further paydown over the near term.
The ratings for classes A-2 through O are based on a deterministic
analysis that considers Fitch's base case loss expectation for the
pool and the current percentage of defaulted assets and Fitch
Loans of Concern factoring in anticipated recoveries relative to
each classes credit enhancement.
Rating Sensitivities
If the collateral continues to repay at higher than expected
recoveries, senior classes may be upgraded. The junior classes are
subject to further downgrade should realized losses begin to
increase.
Fitch upgrades and assigns Outlooks to the following classes as
indicated:
-- $279.2 million class A-1 to 'Bsf', from 'CCCsf'; Outlook
Stable;
-- $44.4 million class A-R to 'Bsf', from 'CCCsf'; Outlook
Stable;
Fitch downgrades the following classes as indicated:
-- $21.1 million class E to 'Csf' from 'CCsf'; RE 0%;
-- $22.5 million class F to 'Csf' from 'CCsf'; RE 0%;
Fitch affirms the following classes as indicated:
-- $60.7 million class A-2 at 'CCCsf'; RE 15%;
-- $70.5 million class B at 'CCCsf'; RE 0%;
-- $26.6 million class C at 'CCCsf'; RE 0%;
-- $28.0 million class D at 'CCsf'; RE 0%;
-- $26.1 million class G at 'Csf'; RE 0%;
-- $21.3 million class H at 'Csf'; RE 0%;
-- $26.8 million class J at 'Csf'; RE 0%;
-- $26.1 million class K at 'Csf'; RE 0%;
-- $10.3 million Class L at 'Csf'; RE 0%;
-- $6.8 million Class M at 'Csf'; RE 0%;
-- $10.0 million Class N at 'Csf'; RE 0%;
-- $16.8 million Class O at 'Csf'; RE 0%.
PREFERRED TERM XVI: Moody's Hikes Ratings on 2 Notes to 'Ba3(sf)'
-----------------------------------------------------------------
Moody's Investors Service announced that it has upgraded the
ratings of the following notes issued by Preferred Term Securities
XVI, Ltd:
U.S. $327,250,000 Floating Rate Class A-1 Senior Notes Due 2035
(current balance of $234,004,730), Upgraded to Baa3 (sf);
previously on August 5, 2013 Upgraded to Ba1 (sf) and Placed Under
Review for Possible Upgrade
U.S. $69,900,000 Floating Rate Class A-2 Senior Notes Due 2035,
Upgraded to Ba3 (sf); previously on August 5, 2013 B3 (sf) Placed
Under Review for Possible Upgrade
U.S. $12,000,000 Fixed/Floating Rate Class A-3 Senior Notes Due
2035, Upgraded to Ba3 (sf); previously on August 5, 2013 B3 (sf)
Placed Under Review for Possible Upgrade
In addition, Moody's upgraded the rating on the following
combination note issued by PreTSL Combination Trust I (for PreTSL
XVI).
U.S. $5,000,000 Combination Certificates, Series P XVI-1 (current
Moody's Ratable Balance of $1,684,711), Upgraded to Baa1 (sf);
previously on April 21, 2011 Upgraded to Ba2 (sf)
Ratings Rationale:
According to Moody's, the rating actions taken on the notes are
primarily a result of deleveraging of the Class A-1 Senior Notes
and an increase in the transaction's overcollateralization ratios.
Moody's notes that the Class A-1 Senior Notes have been paid down
by approximately 11.5% or $30.5 million since September 2012, due
to disbursement of principal proceeds from redemptions of
underlying assets and diversion of excess interest proceeds. As a
result of this deleveraging, the Class A-1 notes' par coverage
improved to 145.92%, as calculated by Moody's. Based on the latest
trustee report dated September 23, 2013, the Senior Principal
Coverage Ratio, Class B Mezzanine Principal Coverage Ratio and
Class C Mezzanine Principal Coverage Ratio are reported at 108.61%
(limit 128%), 89.67% (limit 115%) and 73.42% (limit 107%),
respectively, versus September 2012 levels of 87.32%, 73.48% and
61.24% respectively. Going forward, the Class A-1 Notes will
continue to benefit from the diversion of excess interest and the
proceeds from potential future redemptions of any assets in the
collateral pool.
Moody's also notes that $34.6 million of assets that were
previously deferring interest in the past 6 months have cured
their interest deferrals and are now performing assets.
In taking the forgoing actions, Moody's also announced that it had
concluded its review of its ratings on the issuer's Class A and B
notes announced on August 5, 2013. At that time, Moody's placed
certain of the issuer's ratings on review primarily as a result of
substantial deleveraging of senior notes and increases in par
coverage ratios.
Moody's notes that the key model inputs used by Moody's in its
analysis, such as par, weighted average rating factor, and
weighted average recovery rate, are based on its published
methodology and 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 including the treasury strip of $341.68 million,
defaulted/deferring par of $219 million, a weighted average
default probability of 26.62% (implying a WARF of 1383, Moody's
Asset Correlation of 21.08%, and a weighted average recovery rate
upon default of 8.9%. In addition to the quantitative factors that
are explicitly modeled, qualitative factors are part of rating
committee considerations. Moody's considers the structural
protections in the transaction, the risk of triggering an Event of
Default, recent deal performance under current market conditions,
the legal environment, and specific documentation features. All
information available to rating committees, including
macroeconomic forecasts, inputs from other Moody's analytical
groups, market factors, and judgments regarding the nature and
severity of credit stress on the transactions, may influence the
final rating decision.
Preferred Term Securities XVI, Ltd., issued on December 15, 2004,
is a collateral debt obligation backed by a portfolio of bank and
insurance trust preferred securities (the 'TRUP CDO').
The portfolio of this CDO is mainly comprised of trust preferred
securities (TruPS) issued by small to medium sized U.S. community
banks and insurance companies that are generally not publicly
rated by Moody's. To evaluate the credit quality of bank TruPS
without public ratings, Moody's uses RiskCalc model, an
econometric model developed by Moody's KMV, to derive their credit
scores. Moody's evaluation of the credit risk for a majority of
bank obligors in the pool relies on FDIC financial data reported
as of Q2-2013. For insurance TruPS without public ratings, Moody's
relies on the assessment of Moody's Insurance team based on the
credit analysis of the underlying insurance firms' annual
statutory financial reports.
Moody's also evaluates the sensitivity of the rated transaction to
the volatility of the credit estimates, as described in Moody's
Cross Sector Rating Methodology "Updated Approach to the Usage of
Credit Estimates in Rated Transactions" published in October 2009.
The transaction's portfolio was modeled using CDOROM v.2.8 to
develop the default distribution from which the Moody's Asset
Correlation parameter was obtained. This parameter was then used
as an input in a cash flow model using CDOEdge. CDOROM v.2.8 is
available on moodys.com under Products and Solutions -- Analytical
models, upon return of a signed free license agreement.
Moody's performed a number of sensitivity analyses of the results
to certain key factors driving the ratings. Moody's analyzed the
sensitivity of the model results to changes in the portfolio WARF
(representing an improvement or a deterioration in the credit
quality of the collateral pool), assuming that all other factors
are held equal. If the WARF is increased by 267 points from the
base case of 1383, the model-implied rating of the Class A-1
Senior Notes is one notch worse than the base case result.
Similarly, if the WARF is decreased by 183 points, the model-
implied rating of the Class A-1 Senior notes is one notch better
than the base case result.
In addition, Moody's also performed two additional sensitivity
analyses as described in the Special Comment "Sensitivity Analyses
on Deferral Cures and Default Timing for Monitoring TruPS CDOs"
published in August 2012. In the first, Moody's gave par credit to
banks that are deferring interest on their TruPS but satisfy
specific credit criteria and thus have a strong likelihood of
resuming interest payments. Under this sensitivity analysis,
Moody's gave par credit to $27 million of bank TruPS. In the
second sensitivity analysis, Moody's ran alternative default-
timing profile scenarios to reflect the lower likelihood of a
large spike in defaults. Below is a summary of the impact 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:
Sensitivity Analysis 1:
Class A-1: +2
Class A-2: +3
Class A-3: +3
Class B: 0
Class C: 0
Combo I: +1
Sensitivity Analysis 2:
Class A-1: +1
Class A-2: +2
Class A-3: +2
Class B: 0
Class C: 0
Combo I: +1
Moody's notes that this transaction is still subject to a high
level of macroeconomic uncertainty although Moody's outlook on the
banking sector has changed to stable from negative. The pace of
FDIC bank failures continues to decline in 2013 compared to the
last few years, and some of the previously deferring banks have
resumed interest payment on their trust preferred securities.
Moody's continues to have a stable outlook on the insurance
sector, other than the negative outlook on the U.S. life insurance
industry.
REALT 2005-2: DBRS Confirms 'BBsf' Rating on Cl. F Certificates
---------------------------------------------------------------
DBRS Inc. has upgraded one class of Real Estate Asset Liquidity
Trust, Commercial Mortgage Pass-Through Certificates, Series
2005-2, as follows:
-- Class B from AA (sf) to AA (high) (sf)
DBRS has also confirmed 13 classes in this transaction.
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class C at A (sf)
-- Class D-1 at BBB (sf)
-- Class D-2 at BBB (sf)
-- Class E-1 at BBB (low) (sf)
-- Class E-2 at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class G at BB (sf)
-- Class H at B (high) (sf)
-- Class J at B (low) (sf)
-- Class XC-1 at AAA (sf)
-- Class XC-2 at AAA (sf)
Classes F, G, H, and J were put on a Negative trend, while classes
A-1, A-2, C, D-1, D-2, E-1 and E-2 were confirmed with Stable
trends.
In addition, two classes were confirmed with no trends, as
follows:
-- Class K at CCC (sf)
-- Class L at CCC (sf)
The rating upgrade reflects the continued collateral reduction of
the pool, as a result of loan amortization and payoffs, in
addition to a number of large loans that continued to exhibit
strong performance. The assignment of Negative trends to Classes
F, G, H and J reflects the continued poor performance of the loans
on the servicer's watchlist.
As of the September 2013 remittance report, there are 61 of the 95
original loans remaining in the pool, with a collateral reduction
of 42.9% since issuance. The largest 15 loans in the pool have a
healthy weighted-average DSCR and debt yield of 1.57 times (x) and
13.5%, respectively, as of the September 2013 remittance report
and the most recent year-end NCF figures, with a weighted-average
net cash flow growth of 6.0% since issuance. The pool also
benefits from seven defeased loans, representing 4.6% of the
current pool balance.
There are 12 loans on the servicer's watchlist representing 19.7%
of the current pool balance; however, four loans, representing
5.7% of the current pool balance, are being monitored for issues
not related to property performance.
The largest loan on the watchlist is Prospectus ID#8 InnVest
Portfolio-Holiday Inn Select Oakville. This loan is secured by a
full-service hotel in Oakville, Ontario. The loan has been on the
watchlist for performance issues since 2007. In recent years, the
property displayed incremental improvements, increasing the DSCR
to 1.01x at YE2011, but experienced a setback in 2012 when an
electrical malfunction caused the property to close for two
months, decreasing the DSCR to 0.21x at YE2012. Despite the
setback, the loan has full recourse to a large Canadian hotel
operator, who has kept the loan current while on the servicer's
watchlist. DBRS will continue to monitor the loan closely.
Prospectus ID#14 Duncan Mill Road, representing 2.3% of the
current pool balance, is the fourth-largest loan on the servicer's
watchlist and is secured by a Class B office building in Toronto,
Ontario. The loan has been on the watchlist for the past several
years, and at one point was transferred to special servicing, due
to poor property performance and deferred maintenance issues.
Property performance started to decline when the occupancy rate
dropped to 40.0% in December 2011. The 2012 occupancy rate showed
a slight improvement, to 53.6%; however, it remained well below
the issuance level of 90.0%. Additionally, the property has a
history of deferred maintenance issues as a result of absent
management and was subsequently transferred to the special
servicer in June 2010. The deficiencies were remedied and the loan
returned to the master servicer in May 2012; however, a property
condition report noted an additional $4.9 million in repairs were
necessary through 2018. As of the September 2012 site inspection,
the property was reported to be in Fair condition overall, with
few issues still remaining. According to the servicer, the
remaining issues were expected to be remediated by the end of
2012, but a more thorough update and new property condition report
have not been provided. As a result of the poor property
performance, the DSCR has declined, fluctuating from 1.44x at
issuance to as low as -0.35x at YE2011, with a slight recovery in
2012, to 0.40x. Poor occupancy trends, coupled with a seemingly
absent property manager and borrower, make the possibility of
significant cash flow recovery unlikely in the near term. While
the borrower has continued to keep the loan current, DBRS believes
the loan to have continued term and refinance risk, given the poor
operating history and property condition issues. DBRS continues to
communicate with the servicer for updates on this property and
intends to update the monthly surveillance report as new
information becomes available.
Prospectus IDs #15 (InnVest Portfolio-Radisson Suites Toronto) and
#34 (InnVest Portfolio-Radisson London) are part of four crossed
loans in the InnVest Portfolio, along with Prospectus IDs #20 and
#24, and are on the watchlist for poor property performance. The
crossed InnVest Portfolio represents approximately 7.3% of the
current pool balance and is fully guaranteed by a large Canadian
hotel operator. The two watchlisted loans have resulted in a
decline in the weighted-average DSCR of 0.78x for the crossed
loans, which represents a 60% decline in cash flow over issuance
levels. Prospectus IDs #15 (InnVest Portfolio-Radisson Suites
Toronto) and #34 (InnVest Portfolio-Radisson London) continue to
struggle with low DSCRs of 0.53x and -0.64x, respectively. Based
on the August 2012 STR report, both properties are being
outperformed by their competitive set. Despite the property
performance issues, the sponsor has kept the loans current and
DBRS believes the leverage of the loans, on a per-key basis, to be
low.
There are a total of six loans shadow-rated investment grade by
DBRS remaining in the pool, representing 13.4% of the outstanding
balance.
ROCK 1-CRE CDO 2006: Moody's Hikes Ratings on Cl. F Notes to B2
---------------------------------------------------------------
Moody's has upgraded the ratings of seven classes of notes and
affirmed the ratings of eight classes of notes issued by ROCK 1 -
CRE CDO 2006, Ltd. The upgrades are due to steady pool performance
as evidenced by the Moody's weighted average rating factor (WARF)
and recovery rate (WARR), combined with rapid amortization of the
underlying assets. 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 CLO) transactions.
Moody's rating action is as follows:
Cl. A-1, Upgraded to Aaa (sf); previously on Dec 9, 2010
Downgraded to Aa1 (sf)
Cl. A-2, Upgraded to Aa3 (sf); previously on Apr 7, 2009
Downgraded to Baa1 (sf)
Cl. B, Upgraded to A3 (sf); previously on Apr 7, 2009 Downgraded
to Ba1 (sf)
Cl. C, Upgraded to Ba1 (sf); previously on Apr 7, 2009 Downgraded
to B2 (sf)
Cl. D, Upgraded to Ba3 (sf); previously on Apr 7, 2009 Downgraded
to B3 (sf)
Cl. E, Upgraded to B1 (sf); previously on Apr 7, 2009 Downgraded
to Caa1 (sf)
Cl. F, Upgraded to B2 (sf); previously on Apr 7, 2009 Downgraded
to Caa2 (sf)
Cl. G, Affirmed Caa2 (sf); previously on Apr 7, 2009 Downgraded to
Caa2 (sf)
Cl. H, Affirmed Caa3 (sf); previously on Apr 7, 2009 Downgraded to
Caa3 (sf)
Cl. J, Affirmed Caa3 (sf); previously on Apr 7, 2009 Downgraded to
Caa3 (sf)
Cl. K, Affirmed Caa3 (sf); previously on Apr 7, 2009 Downgraded to
Caa3 (sf)
Cl. L, Affirmed Caa3 (sf); previously on Apr 7, 2009 Downgraded to
Caa3 (sf)
Cl. M, Affirmed Caa3 (sf); previously on Apr 7, 2009 Downgraded to
Caa3 (sf)
Cl. N, Affirmed Caa3 (sf); previously on Apr 7, 2009 Downgraded to
Caa3 (sf)
Cl. O, Affirmed Caa3 (sf); previously on Apr 7, 2009 Downgraded to
Caa3 (sf)
Ratings Rationale:
ROCK 1 - CRE CDO 2006, Ltd. is a static cash transaction (the
reinvestment period ended in December 2012) backed by a portfolio
of: i) whole loans (39.8% of the pool balance); ii) commercial
mortgage backed securities (CMBS) (36.7%); and iii) CRE CDOs
(23.5%). As of the September 9, 2013 Trustee report, the aggregate
note balance of the transaction, including preferred shares was
$164.9 million, compared to $500 million at issuance, due to a
prior special amortization pro-rata pay condition, the par
balances of each class of notes were reduced. The transaction
currently pays on a senior sequential basis with the payments
directed to the senior most outstanding class of notes as a result
of regular amortization of the underlying collateral.
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 have completed updated assessments for the non-Moody's
rated collateral. Moody's modeled a bottom-dollar WARF of 2,403
compared to 2,435 at last review. The current distribution of
Moody's rated collateral and assessments for non-Moody's rated
collateral is as follows: Aaa-Aa3 (27.5% compared to 19.0% at last
review), A1-A3 (9.8% compared to 10.1% at last review), Baa1-Baa3
(5.2% compared to 11.9% at last review), Ba1-Ba3 (11.6% compared
to 11.9% at last review), B1-B3 (5.5% compared to 4.6% at last
review), and Caa1-C (40.4% compared to 42.5% at last review).
Moody's modeled a WAL of 3.5 years compared to 7.2 years at last
review. The current WAL is based upon assumptions made on
extensions on the underlying collateral. Additionally, the
decrease since last review is due in part to the reinvestment
period ending in December 2012.
Moody's modeled a fixed WARR of 50.2% compared to 47.6% at last
review.
Moody's modeled a MAC of 8.5% compared to 8.8% at last review.
Moody's review incorporated CDOROM(R)v2.8, one of Moody's CDO
rating models, which was released on March 25, 2013.
The cash flow model, CDOEdge(R)v3.2.1.2, which was released on May
16, 2013, was used to analyze the cash flow waterfall and its
effect on the capital structure of the deal.
Moody's analysis encompasses the assessment of stress scenarios.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. Rated notes are particularly sensitive to
changes in recovery rate assumptions. Holding all other key
parameters static, changing the recovery rate assumption down from
50.2% to 40.2% or up to 60.2% would result in a modeled rating
movement on the rated tranches of 0 to 5 notches downward and 0 to
7 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment given the weak pace of
recovery in the 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.
SCHOONER TRUST 2004-CCF1: S&P Affirms BB Rating on Class G Notes
----------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on six
classes of commercial mortgage pass-through certificates from
Schooner Trust's series 2004-CCF1, a Canadian commercial mortgage-
backed securities (CMBS) transaction. In addition, Standard &
Poor's affirmed its ratings on seven other classes from the same
transaction.
The rating actions follow S&P's analysis of the transaction,
primarily using its criteria for rating U.S. and Canadian CMBS
transactions. S&P's analysis included a review of the credit
characteristics of all of the remaining loans in the pool, the
transaction structure, and the liquidity available to the trust.
The upgrades reflect S&P's expected available credit enhancement
for these classes, which S&P believes is greater than its most
recent estimate of the necessary credit enhancement for the
respective rating levels. The upgrades also reflect S&P's views
regarding the current and future performance of the transaction's
collateral as well as the deleveraging of the trust balance. In
addition, S&P considered the six loans totaling C$32.2 million
(20.5%) that paid off in full subsequent to the Sept. 12, 2013,
trustee remittance report. To date, the trust has incurred
principal losses totaling 0.4% of the original certificate
balance, and no loans are currently reported with the special
servicer.
The affirmations of the principal and interest certificate classes
reflect S&P's expectation that the available credit enhancement
for these classes will be within its estimated necessary credit
enhancement required for the current outstanding ratings. The
affirmations also reflect S&P's review of the remaining loans'
credit characteristics and performance as well as the transaction-
level changes. S&P's analysis also considered, excluding the
defeased and paid off loans and the volume of performing loans
remaining that are scheduled to mature through Dec. 1, 2013
(15 loans, C$96.2 million, 61.3% of the trust balance).
S&P affirmed its ratings on the class IO-1 and IO-2 interest-only
(IO) certificates based on S&P's criteria for rating IO
securities.
Using servicer-provided financial information, S&P calculated a
Standard & Poor's adjusted debt service coverage (DSC) ratio of
1.76x and a Standard & Poor's loan-to-value (LTV) ratio of 44.3%
for 15 of the 29 remaining loans in the pool. The DSC and LTV
calculations exclude the eight defeased loans (C$28.5 million;
18.2%) and six loans (C$32.2 million; 20.5%) that were paid off in
full by their October 2013 maturity dates.
As of the Sept. 12, 2013, trustee remittance report, the
collateral pool had an aggregate trust balance of C$156.9 million,
down from C$474.0 million at issuance. The pool comprises 29
loans, down from 75 loans at issuance. To date, the transaction
has experienced principal losses totaling C$2.1 million,(0.4% of
the transaction's original certificate balance). The master
servicer, Midland Loan Services (Midland), provided financial
information for 96.1% of the nondefeased loans in the pool, of
which 88.6% represents full-year 2012 data, and the remainder was
partial-year 2012 or full-year 2011 data. Currently, no loans are
reported with the special servicer, which is also Midland. Midland
reported 21 loans (C$128.3 million; 81.8%) on its watchlist due to
the impending 2013 maturities. Details of the three largest loans
on the master servicer's watchlist are as follows:
The largest loan on Midland's watchlist consists of the four
cross-defaulted and cross-collateralized Holiday Inn loans
totaling C$22.0 million (14.0%). The four Holiday Inn loans are
secured by four full-service hotels totaling 630 rooms in
Kitchener, Sarnia, Cambridge, and Peterborough in the Ontario
province of Canada.
The four crossed loans appear on the master servicer's watchlist
due to their upcoming Nov. 1, 2013, maturities. The reported
combined DSC for the four loans was 1.33x for the year ended
Dec. 31, 2012. Midland informed S&P that it expects the four
loans to be paid off by their maturity date.
The Cherry Lane Shopping Centre loan (C$20.6 million, 13.2%), the
second-largest loan on the master servicer's watchlist, is secured
by a 236,171-sq.-ft. retail property in Penticton, British
Columbia. The loan appears on Midland's watchlist because of its
Dec. 1, 2013, maturity. According to Midland, the maturity date
was extended to Dec. 1, 2013, from Aug. 1, 2013, to allow the
borrower to sell the property and use the proceeds to pay off the
loan. The reported DSC for the year ended Dec. 31, 2012, was
2.18x. Occupancy was 97.4%, according to the Aug. 1, 2013, rent
roll.
The Merivale Place loan (C$13.7 million, 8.7%), the third-largest
loan in the master servicer's watchlist, is secured by a
147,207-sq.-ft. retail property in Ottawa, Ontario. The loan is
on Midland's watchlist due to its upcoming Dec. 1, 2013, maturity.
The reported DSC for the year ended Dec. 31, 2012, was 2.11x.
Occupancy at the property was 100%, according to the Jan. 1, 2012,
rent roll.
The remaining loans appear on Midland's watchlist due to their
impending 2013 maturities. Six of the loans (C$32.2 million,
20.5%) on the watchlist paid off subsequent to the September 2013
trustee remittance report.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties, and enforcement mechanisms available to investors and
a description of how they differ from the representations,
warranties, and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Reports
included in this credit rating report are available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS RAISED
Schooner Trust Commercial mortgage pass-through certificates
series 2004-CCF1
Rating
Class To From Credit enhancement (%)
B AAA (sf) AA (sf) 34.93
C AAA (sf) A (sf) 25.84
D-1 AA- (sf) BBB (sf) 17.91
D-2 AA- (sf) BBB (sf) 17.91
E A- (sf) BBB- (sf) 14.89
F BBB (sf) BB+ (sf) 12.63
RATINGS AFFIRMED
Schooner Trust
Commercial mortgage pass-through certificates series 2004-CCF1
Class Rating Credit enhancement (%)
A-2 AAA (sf) 40.98
G BB (sf) 10.36
H BB- (sf) 8.85
J B (sf) 4.70
K B- (sf) 3.19
IO-1 AAA (sf) N/A
IO-2 AAA (sf) N/A
N/A-Not applicable.
SCHOONER TRUST 2007-8: DBRS Confirms 'BB' Rating on Class F Certs
-----------------------------------------------------------------
DBRS Inc. has confirmed the ratings of all 15 classes of Schooner
Trust, Series 2007-8 Commercial Mortgage Pass-Through
Certificates, Series 2007-8 as follows:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-J at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class G at BB (sf)
-- Class H at BB (low) (sf)
-- Class J at B (high) (sf)
-- Class K at B (sf)
-- Class L at B (low) (sf)
-- Class XP at AAA (sf)
-- Class XC at AAA (sf)
All trends are Stable.
The rating confirmations reflect the performance of the loans
remaining in the transaction and the increased credit enhancement
resulting from a collateral reduction of approximately 20.0% since
issuance. As of the September 2013 remittance report, 14 loans
have paid out of the pool since issuance, leaving 54 loans
remaining in the transaction. Overall pool performance remains
stable as the largest 15 loans in the transaction have a weighted-
average debt service coverage ratio and weighted-average debt
yield remain stable at 1.46 times and 11.0%, respectively.
At issuance, DBRS shadow-rated one loan, representing 9.3% of the
current pool balance, as investment grade. DBRS has confirmed
that the performance of this individual loan remains consistent
with investment-grade loan characteristics.
There are currently three loans on the servicer's watchlist,
representing 4.4% of the pool balance. The DBRS analysis
considered that a few of these loans have an elevated probability
of default as a result of these performance issues. There are no
loans in special servicing.
As part of its review, DBRS analyzed the largest 15 loans in the
pool, the three loans on the servicer's watchlist and the shadow-
rated loan, which comprise approximately 70.7% of the current pool
balance.
SOLOSO CDO 2007-1: Moody's Hikes Ratings of $311.9MM of Notes
-------------------------------------------------------------
Moody's Investors Service announced that it has upgraded the
ratings of the following notes issued by Soloso CDO 2007-1, Ltd:
U.S. $263,000,000 Class A-1LA Floating Rate Notes due October
2037, (current balance of $228,864,289.19), Upgraded to Ba1 (sf);
previously on August 5, 2013 Upgraded to Ba3 (sf) and Placed Under
Review for Possible Upgrade
U.S. $83,000,000 Class A-1LB Floating Rate Notes due October 2037,
Upgraded to B2 (sf); previously on August 5, 2013 Caa2 (sf) Placed
Under Review for Possible Upgrade
Ratings Rationale:
According to Moody's, the rating actions taken on the notes are
primarily a result of deleveraging of the Class A-1LA notes, an
increase in the transaction's overcollateralization ratios as well
as improvement in the credit quality of the underlying portfolio.
The deleveraging is due to the diversion of interest proceeds
because of the failing senior overcollateralization ratio. Moody's
also notes that $28.8 million of assets that were previously
deferring interest have cured their interest deferrals and are now
performing assets.
Moody's notes that the Class A-1LA Notes have been paid down by
approximately 2.4% or $5.5 million since October 2012, due to the
diversion of interest proceeds. As a result of this deleveraging,
based on Moody's calculations the overcollateralization ratio has
improved to 138.8% for the Class A-1LA notes and 101.89% for the
Class A-1LB notes. According to the latest trustee report dated
July 8, 2013, the senior overcollateralization ratio is 107.5%
(limit 131.02%), versus the October 2012 level of 97.89%.
In taking the forgoing actions, Moody's also announced that it had
concluded its review of its ratings on the issuer's Class A-1L
notes announced on August 5, 2013. At that time, Moody's placed
certain of the issuer's ratings on review primarily as a result of
substantial deleveraging of senior notes and increases in par
coverage ratios.
Moody's notes that the key model inputs used by Moody's in its
analysis, such as par, weighted average rating factor, and
weighted average recovery rate are based on its published
methodology and 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 $254.4 million, defaulted/deferring par of
$317.8million, a weighted average default probability of 24.69%
(implying a WARF of 1083), Moody's Asset Correlation of 19.52%,
and a weighted average recovery rate upon default of 10.0%. In
addition to the quantitative factors that are explicitly modeled,
qualitative factors are part of rating committee considerations.
Moody's considers the structural protections in the transaction,
the risk of triggering an Event of Default, recent deal
performance under current market conditions, the legal
environment, and specific documentation features. All information
available to rating committees, including macroeconomic forecasts,
inputs from other Moody's analytical groups, market factors, and
judgments regarding the nature and severity of credit stress on
the transactions, may influence the final rating decision.
Soloso CDO 2007-1, Ltd, issued on June 28, 2007, is a
collateralized debt obligation backed by a portfolio of bank trust
preferred securities.
The portfolio of this CDO is mainly comprised of trust preferred
securities (TruPS) issued by small to medium sized U.S. community
banks that are generally not publicly rated by Moody's. To
evaluate the credit quality of bank TruPS without public ratings,
Moody's uses RiskCalc model, an econometric model developed by
Moody's KMV, to derive their credit scores. Moody's evaluation of
the credit risk for a majority of bank obligors in the pool relies
on FDIC financial data reported as of Q2-2013.
Moody's also evaluates the sensitivity of the rated transaction to
the volatility of the credit estimates, as described in Moody's
Cross Sector Rating Methodology "Updated Approach to the Usage of
Credit Estimates in Rated Transactions" published in October 2009.
The transaction's portfolio was modeled using CDOROM v.2.8.9 to
develop the default distribution from which the Moody's Asset
Correlation parameter was obtained. This parameter was then used
as an input in a cash flow model using CDOEdge. CDOROM v.2.8.9 is
available on moodys.com under Products and Solutions -- Analytical
models, upon return of a signed free license agreement.
Moody's performed a number of sensitivity analyses of the results
to certain key factors driving the ratings. Moody's analyzed the
sensitivity of the model results to changes in the portfolio WARF
(representing an improvement or a deterioration in the credit
quality of the collateral pool), assuming that all other factors
are held equal. If the WARF is increased by 372 points from the
base case of 1083, the model-implied rating of the A-1LA notes is
one notch worse than the base case result. Similarly, if the WARF
is decreased by 15 points, the model-implied rating of the A-1LA
notes is one notch better than the base case result.
In addition, Moody's also performed two additional sensitivity
analyses as described in the Special Comment "Sensitivity Analyses
on Deferral Cures and Default Timing for Monitoring TruPS CDOs"
published in August 2012. In the first sensitivity analysis,
Moody's gave par credit to banks that are deferring interest on
their TruPS but satisfy specific credit criteria and thus have a
strong likelihood of resuming interest payments. Under this
sensitivity analysis, Moody's gave par credit to $41.8 million of
bank TruPS. In the second sensitivity analysis, Moody's ran
alternative default-timing profile scenarios to reflect the lower
likelihood of a large spike in defaults. Below is a summary of the
impact 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:
Sensitivity Analysis 1:
Class A-1LA: +3
Class A-2LB: +3
Sensitivity Analysis 2:
Class A-1LA: +1
Class A-2LB: +0
Moody's notes that this transaction is still subject to a high
level of macroeconomic uncertainty although Moody's outlook on the
banking sector has changed to stable from negative. The pace of
FDIC bank failures continues to decline in 2013 compared to the
last four years, and some of the previously deferring banks have
resumed interest payment on their trust preferred securities.
SPRINGLEAF MORTGAGE 2013-3: S&P Assigns BB Rating on Cl. B-1 Notes
------------------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to
Springleaf Mortgage Loan Trust 2013-3's $344.268 million mortgage-
backed notes series 2013-3.
The note issuance is a residential mortgage-backed securities
transaction backed by residential mortgage loans.
The ratings reflect S&P's view of:
-- The loan's characteristics that are, from a credit
perspective, significantly more risky than S&P's
archetypical pool.
-- The operations and counterparty risks, including Springleaf
Finance Corp.'s decision to exit the origination business.
-- The financial ability of the representations and warranties
provider to meet potential repurchase claims in a 'AAA' or
'AA' rating scenario.
-- The credit enhancement provided by an excess interest cash
flow structure without step-down and an interest rate
reserve fund.
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/1854.pdf
RATINGS ASSIGNED
Springleaf Mortgage Loan Trust 2013-3
Class Rating Amount
(mil. $)
A AAA (sf) 186.645
M-1 AA (sf) 40.782
M-2 A+ (sf) 22.517
M-3 A- (sf) 27.021
M-4 BBB (sf) 16.013
M-5 A- (sf) 276.965
M-6 A- (sf) 90.320
M-7 AA (sf) 227.427
M-8 A- (sf) 49.538
M-9 A+ (sf) 249.944
B-1 BB (sf) 27.021
B-2 B (sf) 24.269
B-3 NR 154.871
B-3-A NR 38.7178
B-3-B NR 38.7178
B-3-C NR 38.7178
B-3-D NR 38.7178
B-3-E NR 77.4355
B-3-F NR 116.153
X-A (i) NR (ii)
X-M1 (i) NR (ii)
X-M2 (i) NR (ii)
C NR 1.251
R NR N/A
(i) Component of the class X notes.
(ii) Each of the class X note components' notional balance is
equal to the outstanding class balance of their respective
P&I notes.
NR - Not rated.
N/A - Not applicable.
P&I - Principal and interest.
STRUCTURED ASSET 2006-RF4: Moody's Cuts Rating on Six Tranches
--------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of six
tranches from Structured Asset Securities Corp 2006-RF4. The
collateral backing these deals consists of first-lien fixed and
adjustable rate mortgage loans insured by the Federal Housing
Administration (FHA) an agency of the U.S. Department of Urban
Development (HUD) or guaranteed by the Veterans Administration
(VA).
Complete rating actions are as follows:
Issuer: Structured Asset Securities Corp 2006-RF4
Cl. 1-A1, Downgraded to Caa1 (sf); previously on Jun 19, 2013 B3
(sf) Placed Under Review for Possible Downgrade
Cl. 1-AIO, Downgraded to Caa1 (sf); previously on Jun 19, 2013 B3
(sf) Placed Under Review for Possible Downgrade
Cl. 2-A1, Downgraded to Caa1 (sf); previously on Jun 19, 2013 B2
(sf) Placed Under Review for Possible Downgrade
Cl. 2-A2, Downgraded to Caa3 (sf); previously on Jun 19, 2013 B3
(sf) Placed Under Review for Possible Downgrade
Cl. 2-AX, Downgraded to Caa1 (sf); previously on Jun 19, 2013 B3
(sf) Placed Under Review for Possible Downgrade
Cl. 3-A1, Downgraded to Caa1 (sf); previously on Jun 19, 2013 B3
(sf) Placed Under Review for Possible Downgrade
Ratings Rationale:
The actions are a result of the recent performance of FHA-VA
portfolio and reflect Moody's updated loss expectations on these
pools and the structural nuances of the transactions. The
downgrades are a result of higher than expected losses and erosion
of credit enhancement supporting some of these bonds. The current
delinquent pipeline includes loans that have been in foreclosure
for over four years. Moody's believes the severity on some of
these loans could be much higher than the FHA-VA expected
severity.
A FHA guarantee covers 100% of a loan's outstanding principal and
a large portion of its outstanding interest and foreclosure-
related expenses in the event that the loan defaults. A VA
guarantee covers only a portion of the principal based on the
lesser of either the sum of the current loan amount, accrued and
unpaid interest, and foreclosure expenses, or the original loan
amount. HUD usually pays claims on defaulted FHA loans when
servicers submit the claims, but can impose significant penalties
on servicers if it finds irregularities in the claim process later
during the servicer audits. This can prompt servicers to push more
expenses to the trust that they deem reasonably incurred than
submit them to HUD and face significant penalty. The rating
actions consider the portion of a defaulted loan normally not
covered by the FHA or VA guarantee and other servicer expenses
they deemed reasonably incurred and passed on to the trust.
The methodology used in these ratings was "FHA-VA 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. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.
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
8.1% in August 2012 to 7.3% in August 2013. Moody's forecasts an
unemployment central range of 7.0% to 8.0% for the 2013 year.
Moody's expects house prices to continue to rise in 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.
THL CREDIT 2013-1: S&P Affirms 'BB' Rating on $23.8MM Cl. D Notes
-----------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on THL
Credit Wind River 2013-1 CLO Ltd./THL Credit Wind River 2013-1 CLO
LLC's $416.20 million fixed- and floating-rate notes following the
transaction's effective date as of July 19, 2013.
Most U.S. cash flow collateralized loan 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.
An effective date rating affirmation reflects S&P's opinion that
the portfolio collateral purchased by the issuer, as reported to
S&P by the trustee and collateral manager, in combination with the
transaction's structure, provides sufficient credit support to
maintain the ratings that S&P assigned on the transaction's
closing date. The effective date reports provide a summary of
certain information that S&P used in its analysis and the results
of its review based on the information presented to S&P.
S&P believes 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.
For a CLO that has not purchased its full target level of
portfolio collateral by the closing date, S&P's ratings on the
closing date and prior to its effective date review are generally
based on the application of its criteria to a combination of
purchased collateral, collateral committed to be purchased, and
the indicative portfolio of assets provided to S&P by the
collateral manager, and may also reflect its 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 S&P's criteria to assess
whether the initial ratings remain consistent with the credit
enhancement based on the effective date collateral portfolio.
S&P's 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 S&P's supplemental tests, and the
analytical judgment of a rating committee," S&P said.
"In our published effective date report, we discuss our 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, we intend to publish an
effective date report each time we issue an effective date rating
affirmation on a publicly rated U.S. cash flow CLO," S&P added.
On an ongoing basis after S&P issues an effective date rating
affirmation, it will periodically review whether, in its 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 it deems
necessary.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS AFFIRMED
THL Credit Wind River 2013-1 CLO Ltd./THL Credit Wind River 2013-1
CLO LLC
Class Rating Amount
(mil. $)
A-1 AAA (sf) 277.00
A-2A AA (sf) 29.30
A-2B AA (sf) 22.00
B (deferrable) A (sf) 38.90
C (deferrable) BBB (sf) 25.20
D (deferrable) BB (sf) 23.80
TIAA REAL 2003-1: Fitch Affirms 'C' Rating on Class E Notes
-----------------------------------------------------------
Fitch Ratings has affirmed four classes of TIAA Real Estate CDO
2003-1, Ltd.
Key Rating Drivers
The affirmations are due to increased credit enhancement to the
notes from principal paydowns. Since the last rating action in
October 2012, approximately 6.4% of the collateral has been
downgraded and 17.4% has been upgraded. Currently, 56.7% of the
portfolio has a Fitch derived rating below investment grade and
23.3% has a rating in the 'CCC' category and below, compared to
38.7% and 23.8%, respectively, at the last rating action. Since
the last rating action, the transaction has received $89.3 million
in principal paydown, which has resulted in the full repayment of
the class A-1MM and B 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. The default levels were then
compared to the breakeven levels generated by Fitch's cash flow
model of the CDO under the various default timing and interest
rate stress scenarios, as described in the same report. Fitch also
analyzed the structure's sensitivity to the assets that are
distressed, experiencing interest shortfalls, and those with near-
term maturities. The class B notes are generally passing at their
current rating level, accounting for increased concentration and
risk of adverse selection.
For the class D and E notes, Fitch analyzed the class' sensitivity
to the default of the distressed assets ('CCC' and below). Given
the high probability of default of these assets and expected
limited recovery prospects upon default, the class D notes have
been affirmed at 'CCCsf', indicating that default is possible.
Similarly, the class E notes have been affirmed at 'Csf',
indicating that default is inevitable.
Rating Sensitivity
The Negative Outlook on the class C notes reflects the potential
for adverse selection as the portfolio continues to delever.
Additional negative migration and defaults beyond those projected
by SF PCM as well as increasing concentration of weaker credit
quality assets could lead to downgrades for the transaction. TIAA
2003-1 is a static collateralized debt obligation (CDO) that
closed on Nov. 6, 2003. The current portfolio consists of 20 bonds
from 19 obligors, of which 81.4% are commercial mortgage backed
securities (CMBS), 11.7% are real estate investment trust (REIT)
debt securities, and 6.9% are structured finance CDOs.
Fitch has taken the following actions as indicated:
-- Class A-1MM notes marked 'PIF';
-- Class B-1 notes marked 'PIF';
-- Class B-2 notes marked 'PIF';
-- $12,836,193 class C-1 notes affirmed at 'Bsf'; Outlook
Negative;
-- $11,231,669 class C-2 notes affirmed at 'Bsf'; Outlook
Negative;
-- $13,500,000 class D notes affirmed at 'CCCsf';
-- $13,642,138 class E notes at affirmed 'Csf'.
WHITEHORSE VII: S&P Assigns 'B' Rating on $8.8MM Class B-3L Notes
-----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to
Whitehorse VII Ltd./Whitehorse VII LLC's $372.0 million floating-
rate notes.
The note issuance is a collateralized loan obligation
securitization backed by a revolving pool consisting primarily of
broadly syndicated senior secured loans.
The ratings reflect S&P's 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
Ratings Services' CDO Evaluator model, as assessed by
Standard & Poor's using the assumptions and methods outlined
in its corporate collateralized debt obligation criteria.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
-- The diversified collateral portfolio, which consists
primarily of broadly syndicated speculative-grade senior
secured term loans.
-- The portfolio manager's experienced management team.
-- S&P's projections regarding the timely interest and ulimate
principal payments on the rated notes, which S&P assessed
using its cash flow analysis and assumptions commensurate
with the assigned ratings under various interest-rate
scenarios, including LIBOR ranging from 0.2654%-12.8655%.
-- The transaction's overcollateralization and interest
coverage tests--a failure of which would lead to the
diversion of interest and principal proceeds to reduce the
rated notes' outstanding balance.
-- The transaction's reinvestment overcollateralization test--a
failure of which would lead to the reclassification of a
certain amount of excess interest proceeds that are
available before paying uncapped administrative expenses and
fees, subordinated hedge termination payments, portfolio
manager incentive fees, and subordinated note payments to
principal proceeds for the purchase of additional collateral
assets during the reinvestment period, and to reduce the
rated notes' outstanding balance, sequentially, after the
reinvestment period.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities.
The Standard & Poor's 17g-7 Disclosure Report included in this
credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com/1738.pdf
RATINGS ASSIGNED
Whitehorse VII Ltd./Whitehorse VII LLC
Class Rating Amount (mil. $)
A-1L AAA (sf) 238.80
A-2L AA (sf) 52.40
A-3L (deferrable) A (sf) 31.20
B-1L (deferrable) BBB (sf) 20.00
B-2L (deferrable) BB- (sf) 20.80
B-3L (deferrable) B (sf) 8.80
Subordinated notes NR 36.85
NR-Not rated.
WRIGHTWOOD CAPITAL 2005-1: Moody's Affirms Caa3 Ratings on 4 Notes
------------------------------------------------------------------
Moody's has affirmed the ratings of nine classes of notes issued
by Wrightwood Capital Real Estate CDO 2005-1, 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
CLO) transactions.
Moody's rating action is as follows:
Cl. A-1, Affirmed Aa3 (sf); previously on Apr 15, 2009 Downgraded
to Aa3 (sf)
Cl. A-R, Affirmed Aa3 (sf); previously on Apr 15, 2009 Downgraded
to Aa3 (sf)
Cl. B, Affirmed Ba3 (sf); previously on Dec 9, 2010 Downgraded to
Ba3 (sf)
Cl. C, Affirmed B2 (sf); previously on Dec 9, 2010 Downgraded to
B2 (sf)
Cl. D, Affirmed B3 (sf); previously on Dec 9, 2010 Downgraded to
B3 (sf)
Cl. E, Affirmed Caa3 (sf); previously on Nov 6, 2012 Downgraded to
Caa3 (sf)
Cl. F, Affirmed Caa3 (sf); previously on Nov 6, 2012 Downgraded to
Caa3 (sf)
Cl. G, Affirmed Caa3 (sf); previously on Apr 15, 2009 Downgraded
to Caa3 (sf)
Cl. H, Affirmed Caa3 (sf); previously on Apr 15, 2009 Downgraded
to Caa3 (sf)
Ratings Rationale:
Wrightwood Capital Real Estate CDO 2005-1, Ltd. is a static cash
transaction (reinvestment period ended August 2010) backed by a
portfolio of whole loans (100% of the pool balance). As of the
August 30, 2013 Trustee report, the aggregate note balance of the
transaction, including preferred shares was $534.9 million
compared to $650 million at issuance, with the paydown directed to
the senior most outstanding classes of notes, as a result of
regular amortization of the underlying collateral. The current
undrawn balance of the Class A-R is approximately $19.5 million
which, if drawn, would increase the aggregate note balance of the
transaction to $554.4 million.
There is one asset with a par balance of $13 million (2.6% of the
current pool balance) that is considered defaulted as of the
August 30, 2013 Trustee report. While there have been limited
implied losses to date, Moody's does expect moderate losses to
occur once they are realized.
Moody's has identified the following parameters as key indicators
of the expected loss within CRE CDO transactions: weighted average
rating factor (WARF), weighted average life (WAL), weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
These parameters are typically modeled as actual parameters for
static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's have completed updated assessments for the non-Moody's
rated collateral. Moody's modeled a bottom-dollar WARF of 8,255
compared to 7,546 at last review. The current distribution of
Moody's rated collateral and assessments for non-Moody's rated
collateral is as follows: Ba1-Ba3 (0% compared to 0.7% at last
review), and Caa1-C (100% compared to 99.3% at last review).
Moody's modeled a WAL of 3.1 years compared to 3.3 years at last
review. The current WAL is based upon assumptions made on
extensions.
Moody's modeled a fixed WARR of 56.4% compared to 56.1% at last
review.
Moody's modeled a MAC of 100%, the same as at last review.
Moody's review incorporated CDOROM(R)v2.8, one of Moody's CDO
rating models, which was released on March 25, 2013.
The cash flow model, CDOEdge(R)v3.2.1.2, which was released on May
16, 2013, was used to analyze the cash flow waterfall and its
effect on the capital structure of the deal.
Moody's analysis encompasses the assessment of stress scenarios.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. Rated notes are particularly sensitive to
changes in recovery rate assumptions. Holding all other key
parameters static, changing the recovery rate assumption down from
56.4% to 46.4% or up to 66.4% would result in a modeled rating
movement on the rated tranches of 0 to 4 notches downward and 0 to
10 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment given the weak pace of
recovery in the 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.
* Fitch Says Losses & Defaults Minimal for Canadian CMBS
--------------------------------------------------------
The default and loss history of outstanding Canadian CMBS
transactions seems to bode well for the increasing rate of new
deals coming to market, according to Fitch Ratings in a new
report.
With issuance of Canadian CMBS on the rise, Fitch researched the
performance of all Canadian CMBS transactions issued to date (70
transactions totaling $25.4 billion). Fitch found the rate of
default within these transactions to be low, with only 71 of the
nearly 3,700 loans either delinquent and/or transferred to a
special servicer. This represents a 1.9% cumulative default rate
(compared to 13.7% cumulative defaults for US CMBS as of the
second quarter of 2013).
'Thirty five of the 71 defaulted Canadian CMBS loans have not seen
any losses, while nine additional loans saw a loss of less than
1.5%,' said Director Gregg Katz.
While definitive conclusions of magnitude of loss severity
compared to the US cannot be made given the small data set,
overall losses as a percentage of the total amount of deals
securitized, are minute (less than 0.1%). What also augurs well
for future performance seems to lie within the broader Canadian
economy itself.
'Canadian building cycles tend to be less volatile than the US due
in part to less available financing from fewer banks and limited
CMBS issuance,' said Mr. Katz.
* Moody's Hikes Ratings on $222MM of RMBS from Various Issuers
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of eight
tranches from six transactions issued by various issuers, backed
by Subprime mortgage loans.
Complete rating actions are as follows:
Issuer: GSAMP Trust 2004-NC1
Cl. M-1, Upgraded to Ba3 (sf); previously on Mar 17, 2011
Downgraded to B3 (sf)
Issuer: Morgan Stanley ABS Capital I Inc. Trust 2003-NC5
Cl. M-1, Upgraded to Ba3 (sf); previously on Mar 15, 2011
Downgraded to B3 (sf)
Cl. M-2, Upgraded to Caa3 (sf); previously on Mar 15, 2011
Downgraded to Ca (sf)
Issuer: Morgan Stanley ABS Capital I Inc. Trust 2003-NC6
Cl. M-1, Upgraded to Ba1 (sf); previously on Mar 15, 2011
Downgraded to Ba3 (sf)
Cl. M-2, Upgraded to Caa1 (sf); previously on Mar 15, 2011
Downgraded to Caa3 (sf)
Issuer: Morgan Stanley ABS Capital I Inc. Trust 2004-HE5
Cl. M-1, Upgraded to Ba3 (sf); previously on Mar 15, 2011
Downgraded to B3 (sf)
Issuer: Morgan Stanley Dean Witter Capital I Inc. Trust 2003-NC3
Cl. M-1, Upgraded to B1 (sf); previously on Mar 15, 2011
Downgraded to B3 (sf)
Issuer: New Century Home Equity Loan Trust, Series 2004-1
Cl. M-1, Upgraded to B1 (sf); previously on Mar 18, 2011
Downgraded to B3 (sf)
Ratings Rationale:
The rating actions reflect the recent performance of the
underlying pools and Moody's updated expected losses on the pools.
The upgrades are due to improvement in collateral performance and/
or build-up in credit enhancement.
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 8.1% in August 2012 to 7.3% in August 2013. Moody's
forecasts an unemployment central range of 7.0% to 8.0% for 2013.
Moody's expects housing prices to continue to rise in 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 the performance of these transactions.
* Moody's Takes Action on $293MM FNA/VA RMBS by Various Issuers
---------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 24
tranches from seven transactions issued by various issuers. The
collateral backing these deals consists of first-lien fixed and
adjustable rate mortgage loans insured by the Federal Housing
Administration (FHA) an agency of the U.S. Department of Urban
Development (HUD) or guaranteed by the Veterans Administration
(VA).
Complete rating actions are as follows:
Issuer: CWMBS Reperforming Loan REMIC Trust Certificates, Series
2005-R1
Cl. 1A-S, Downgraded to B3 (sf); previously on Jun 19, 2013 B1
(sf) Placed Under Review for Possible Downgrade
Cl. 1A-F1, Downgraded to B3 (sf); previously on Jun 19, 2013 B1
(sf) Placed Under Review for Possible Downgrade
Cl. 1A-F2, Downgraded to B3 (sf); previously on Jun 19, 2013 B1
(sf) Placed Under Review for Possible Downgrade
Cl. 2A-1, Downgraded to B3 (sf); previously on Jun 19, 2013 B1
(sf) Placed Under Review for Possible Downgrade
Cl. 2A-2, Downgraded to B3 (sf); previously on Jun 19, 2013 B1
(sf) Placed Under Review for Possible Downgrade
Cl. 2A-PO, Downgraded to B3 (sf); previously on Jun 19, 2013 B1
(sf) Placed Under Review for Possible Downgrade
Cl. 2A-IO, Downgraded to B3 (sf); previously on Jun 19, 2013 B1
(sf) Placed Under Review for Possible Downgrade
Issuer: Fannie Mae REMIC Trust 2001-W3
Cl. M, Downgraded to Baa3 (sf); previously on Jun 19, 2013 Baa1
(sf) Placed Under Review for Possible Downgrade
Cl. B-1, Downgraded to Ba2 (sf); previously on Jun 19, 2013 Baa2
(sf) Placed Under Review for Possible Downgrade
Cl. B-2, Downgraded to B3 (sf); previously on Aug 26, 2011
Downgraded to B1 (sf)
Issuer: Fannie Mae REMIC Trust 2002-W1
Cl. M, Downgraded to Ba1 (sf); previously on Jun 19, 2013 Baa1
(sf) Placed Under Review for Possible Downgrade
Cl. B-1, Downgraded to B1 (sf); previously on Jun 19, 2013 Ba1
(sf) Placed Under Review for Possible Downgrade
Cl. B-2, Downgraded to Caa3 (sf); previously on Aug 26, 2011
Downgraded to Caa2 (sf)
Issuer: Fannie Mae REMIC Trust 2002-W6
Cl. M, Downgraded to Ba1 (sf); previously on Jun 19, 2013 Baa2
(sf) Placed Under Review for Possible Downgrade
Cl. B-1, Downgraded to Caa1 (sf); previously on Aug 26, 2011
Downgraded to B2 (sf)
Issuer: MASTR Reperforming Loan Trust 2006-2
Cl. 1A1, Downgraded to Caa1 (sf); previously on Jun 19, 2013 B3
(sf) Placed Under Review for Possible Downgrade
Cl. 2A1, Downgraded to Caa1 (sf); previously on Jun 19, 2013 B3
(sf) Placed Under Review for Possible Downgrade
Issuer: Reperforming Loan REMIC Trust 2003-R2
Cl. M, Downgraded to Caa2 (sf); previously on Jun 19, 2013 B3
(sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Securities Corp 2006-RF3
Cl. 1-A1, Downgraded to Caa1 (sf); previously on Jun 19, 2013 B3
(sf) Placed Under Review for Possible Downgrade
Cl. 1-A2, Downgraded to Caa1 (sf); previously on Jun 19, 2013 B3
(sf) Placed Under Review for Possible Downgrade
Cl. 1-A3, Downgraded to Caa1 (sf); previously on Jun 19, 2013 B3
(sf) Placed Under Review for Possible Downgrade
Cl. 1-A4, Downgraded to Caa1 (sf); previously on Jun 19, 2013 B3
(sf) Placed Under Review for Possible Downgrade
Cl. 1-AX, Downgraded to Caa1 (sf); previously on Jun 19, 2013 B3
(sf) Placed Under Review for Possible Downgrade
Cl. 2-A, Downgraded to Caa1 (sf); previously on Jun 19, 2013 B3
(sf) Placed Under Review for Possible Downgrade
Ratings Rationale
The actions are a result of the recent performance of FHA-VA
portfolio and reflect Moody's updated loss expectations on these
pools and the structural nuances of the transactions. The
downgrades are a result of higher than expected losses and erosion
of credit enhancement supporting some of these bonds. The current
delinquent pipeline includes loans that have been in foreclosure
for over four years. Moody's believes the severity on some of
these loans could be much higher than the FHA-VA expected
severity.
A FHA guarantee covers 100% of a loan's outstanding principal and
a large portion of its outstanding interest and foreclosure-
related expenses in the event that the loan defaults. A VA
guarantee covers only a portion of the principal based on the
lesser of either the sum of the current loan amount, accrued and
unpaid interest, and foreclosure expenses, or the original loan
amount. HUD usually pays claims on defaulted FHA loans when
servicers submit the claims, but can impose significant penalties
on servicers if it finds irregularities in the claim process later
during the servicer audits. This can prompt servicers to push more
expenses to the trust that they deem reasonably incurred than
submit them to HUD and face significant penalty. The rating
actions consider the portion of a defaulted loan normally not
covered by the FHA or VA guarantee and other servicer expenses
they deemed reasonably incurred and passed on to the trust.
The methodology used in these ratings was "FHA-VA 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.
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
8.1% in August 2012 to 7.3% in August 2013. Moody's forecasts an
unemployment central range of 7.0% to 8.0% for the 2013 year.
Moody's expects house prices to continue to rise in 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.
* Moody's Takes Action on $280MM of Subprime RMBS Issued 2000-2006
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 17 tranches
and downgraded the ratings of 2 tranches from 10 transactions
issued by various issuers, backed by Subprime mortgage loans
Complete rating actions are as follows:
Issuer: ABFC Asset-Backed Certificates, Series 2005-HE1
Cl. M-1, Downgraded to Baa2 (sf); previously on Mar 12, 2013
Downgraded to A3 (sf)
Issuer: C-BASS Mortgage Loan Asset-Backed Certificates, Series
2004-CB2
M-1, Upgraded to Ba2 (sf); previously on Dec 4, 2012 Downgraded to
B2 (sf)
Issuer: C-BASS Mortgage Loan Asset-Backed Certificates, Series
2004-CB4
Cl. M-1, Upgraded to B2 (sf); previously on May 4, 2012 Confirmed
at Caa2 (sf)
Issuer: C-BASS Mortgage Loan Asset-Backed Certificates, Series
2004-CB5
Cl. M-1, Upgraded to Baa1 (sf); previously on Mar 10, 2011
Downgraded to Ba1 (sf)
Cl. M-2, Upgraded to B3 (sf); previously on Mar 10, 2011
Downgraded to Caa3 (sf)
Cl. M-3, Upgraded to Caa2 (sf); previously on Mar 10, 2011
Downgraded to Ca (sf)
Issuer: Centex Home Equity Loan Trust 2002-A
Cl. AV, Downgraded to Baa1 (sf); previously on May 3, 2012
Downgraded to A2 (sf)
Issuer: Long Beach Mortgage Loan Trust 2000-1
Cl. M-1, Upgraded to Caa1 (sf); previously on Mar 8, 2011
Downgraded to Ca (sf)
Cl. AV-1, Upgraded to Baa3 (sf); previously on May 2, 2012
Downgraded to Ba3 (sf)
Cl. AF-3, Upgraded to Ba3 (sf); previously on May 2, 2012
Downgraded to B3 (sf)
Cl. AF-4, Upgraded to Ba1 (sf); previously on Mar 8, 2011
Downgraded to B1 (sf)
Issuer: Long Beach Mortgage Loan Trust 2002-2
Cl. M2, Upgraded to Caa1 (sf); previously on Mar 8, 2011
Downgraded to Caa3 (sf)
Issuer: Long Beach Mortgage Loan Trust 2003-3
Cl. M-1, Upgraded to Ba3 (sf); previously on Mar 8, 2011
Downgraded to B3 (sf)
Cl. M-2, Upgraded to Caa2 (sf); previously on Mar 8, 2011
Downgraded to Ca (sf)
Issuer: Long Beach Mortgage Loan Trust 2006-WL3
Cl. II-A3, Upgraded to Baa1 (sf); previously on Jan 9, 2013
Upgraded to Ba1 (sf)
Issuer: Bear Stearns Asset Backed Securities Trust 2002-2
Cl. A-1, Upgraded to A3 (sf); previously on Apr 9, 2012 Downgraded
to Baa2 (sf)
Cl. A-2, Upgraded to Baa1 (sf); previously on Apr 9, 2012
Downgraded to Ba1 (sf)
Cl. M-1, Upgraded to Ba3 (sf); previously on Apr 9, 2012
Downgraded to B3 (sf)
Cl. M-2, Upgraded to Caa2 (sf); previously on Apr 9, 2012
Downgraded to C (sf)
Ratings Rationale:
The rating actions reflect recent performance of the underlying
pools and Moody's updated expected losses on the pools. The
downgrades are a result of deteriorating performance or structural
features resulting in higher expected losses for the bonds than
previously anticipated. The upgrades are due to improvement in
collateral performance, and/ or build-up in credit enhancement.
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 8.1% in August 2012 to 7.3% in August 2013. Moody's
forecasts an unemployment central range of 7.0% to 8.0% for 2013.
Moody's expects housing prices to continue to rise in 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 the performance of these transactions.
* Moody's Takes Action on $269MM of Securities Issued 1995-2002
---------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of two
tranches and upgraded the ratings of 10 tranches from 11
transactions, backed by manufactured housing loans, and issued
between 1995 and 2002.
Complete rating actions are as follows:
Issuer: Associates Manufactured Housing 1996-2
B-1, Upgraded to A3 (sf); previously on Oct 25, 2012 Upgraded to
Baa2 (sf)
Issuer: BankAmerica MH Contract 1996-1
B-1, Downgraded to C (sf); previously on Oct 25, 2012 Upgraded to
Caa3 (sf)
Issuer: BankAmerica MH Contract 1997-1
M, Upgraded to A3 (sf); previously on Oct 25, 2012 Upgraded to
Baa1 (sf)
Issuer: BankAmerica MH Contract 1998-2
B-1, Downgraded to Caa3 (sf); previously on Oct 25, 2012 Upgraded
to B3 (sf)
Issuer: Green Tree Financial Corporation MH 1995-03
B-1, Upgraded to A1 (sf); previously on Oct 25, 2012 Upgraded to
Baa1 (sf)
Issuer: Madison Avenue Manufactured Housing Contract Trust 2002-A
Cl. M-2, Upgraded to A3 (sf); previously on Oct 25, 2012 Upgraded
to Baa1 (sf)
Cl. B-1, Upgraded to B1 (sf); previously on Oct 25, 2012 Upgraded
to Caa1 (sf)
Issuer: MERIT Securities Corp Series 12
1-M1, Upgraded to Caa1 (sf); previously on Oct 25, 2012 Upgraded
to Caa3 (sf)
Issuer: MERIT Securities Corp Series 13
A4, Upgraded to A3 (sf); previously on Dec 15, 2011 Upgraded to
Baa1 (sf)
Issuer: Signal Securitization Corp. MH 1997-3
Class B, Upgraded to Baa3 (sf); previously on Oct 25, 2012
Upgraded to Ba2 (sf)
Issuer: Signal Securitization Corp. MH 1998-2
Class A, Upgraded to Ba1 (sf); previously on Oct 25, 2012 Upgraded
to B1 (sf)
Issuer: UCFC Funding Corporation 1998-1
A-3, Upgraded to A3 (sf); previously on Oct 25, 2012 Upgraded to
Baa1 (sf)
Ratings Rationale:
The actions are a result of the recent performance of manufactured
housing loans backed pools and reflect Moody's updated loss
expectations on the pools. The tranches upgraded are primarily due
to the build-up in credit enhancement due to sequential pay
structures and non-amortizing subordinate bonds. The tranches
downgraded are not expected to receive their full principal
payments primarily due to the outstanding interest shortfalls.
Performance has remained generally stable from Moody's last
review.
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
8.1% in August 2012 to 7.3% in August 2013. Moody's forecasts an
unemployment central range of 7.0% to 8.0% for the 2013 year.
Moody's expects house prices to continue to rise in 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.
* Moody's Takes Action on $202MM of Subprime RMBS Issued 1998-2006
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of five
tranches and downgraded the rating of one tranche from five
transactions, backed by subprime mortgage loans issued by various
trusts.
Complete rating actions are as follows:
Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2006-
NC3
Cl. A-2B, Downgraded to C (sf); previously on Apr 14, 2010
Confirmed at Ca (sf)
Issuer: AMRESCO Residential Mortgage Loan Trust 1998-3
M-2A, Upgraded to Caa1 (sf); previously on Mar 24, 2011 Downgraded
to Caa3 (sf)
B-1A, Upgraded to Caa1 (sf); previously on Mar 24, 2011 Downgraded
to Caa3 (sf)
Issuer: Carrington Mortgage Loan Trust, Series 2006-NC2
Cl. A-2, Upgraded to B1 (sf); previously on Jul 15, 2011
Downgraded to B3 (sf)
Issuer: Credit Suisse First Boston Mortgage Securities Corp.
Series 2003-1
Cl. M-2, Upgraded to Caa3 (sf); previously on Mar 15, 2011
Downgraded to Ca (sf)
Issuer: Park Place Securities, Inc., Asset-Backed Pass-Through
Certificates, Series 2005-WCW2
Cl. M-1, Upgraded to Ba1 (sf); previously on Dec 12, 2012 Upgraded
to Ba2 (sf)
Ratings Rationale:
The actions are a result of the recent performance of the
underlying pools and reflect Moody's updated loss expectations on
the pools. The upgrades are a result of improving performance of
the related pools and/or faster pay-down of the bonds due to high
prepayments/faster liquidations. The downgrades are a result of
deteriorating performance and/or structural features resulting in
higher expected losses for the bonds than previously anticipated.
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
8.1% in August 2012 to 7.3% in August 2013. Moody's forecasts an
unemployment central range of 7.0% to 8.0% for the 2013 year.
Moody's expects house prices to continue to rise in 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.
* Moody's Takes Action on $143MM of Subprime RMBS Issued 2002-2004
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of two tranches
and downgraded the ratings of 28 tranches backed by Subprime RMBS
loans, issued by various trusts.
Complete rating actions are as follows:
Issuer: Aames Mortgage Trust 2003-1
Cl. M-1, Downgraded to B2 (sf); previously on Mar 17, 2011
Downgraded to Ba3 (sf)
Cl. M-2, Downgraded to Ca (sf); previously on Mar 17, 2011
Downgraded to Caa3 (sf)
Issuer: Ameriquest Mortgage Securities Inc., Series 2002-2
Cl. M-3, Upgraded to B2 (sf); previously on Mar 29, 2011
Downgraded to Caa1 (sf)
Issuer: Ameriquest Mortgage Securities Inc., Series 2004-R1
Cl. M-1, Downgraded to B1 (sf); previously on Mar 29, 2011
Downgraded to Ba3 (sf)
Cl. M-2, Downgraded to Caa3 (sf); previously on Mar 29, 2011
Downgraded to Caa1 (sf)
Cl. M-4, Downgraded to C (sf); previously on Mar 29, 2011
Downgraded to Ca (sf)
Cl. M-5, Downgraded to C (sf); previously on Mar 29, 2011
Downgraded to Ca (sf)
Cl. M-6, Downgraded to C (sf); previously on Mar 29, 2011
Downgraded to Ca (sf)
Cl. M-7, Downgraded to C (sf); previously on Mar 29, 2011
Downgraded to Ca (sf)
Cl. M-8, Downgraded to C (sf); previously on Mar 29, 2011
Downgraded to Ca (sf)
Issuer: Argent Securities Inc., Series 2003-W10
Cl. M-1, Downgraded to Ba3 (sf); previously on Mar 18, 2011
Downgraded to Ba1 (sf)
Cl. M-2, Downgraded to Ca (sf); previously on Mar 18, 2011
Downgraded to Caa3 (sf)
Cl. M-3, Downgraded to C (sf); previously on Mar 18, 2011
Downgraded to Ca (sf)
Cl. M-4, Downgraded to C (sf); previously on Mar 18, 2011
Downgraded to Ca (sf)
Issuer: Encore Credit Corp. Series 2003-1
Cl. M1, Upgraded to Baa3 (sf); previously on Dec 4, 2012 Upgraded
to Ba3 (sf)
Issuer: Option One Mortgage Loan Trust 2003-4
Cl. M-2, Downgraded to Ca (sf); previously on Mar 18, 2011
Downgraded to Caa3 (sf)
Cl. M-3, Downgraded to C (sf); previously on Mar 18, 2011
Downgraded to Caa3 (sf)
Cl. M-4, Downgraded to C (sf); previously on Mar 18, 2011
Downgraded to Ca (sf)
Cl. M-5A, Downgraded to C (sf); previously on Mar 18, 2011
Downgraded to Ca (sf)
Cl. M-5F, Downgraded to C (sf); previously on Mar 18, 2011
Downgraded to Ca (sf)
Cl. M-6, Downgraded to C (sf); previously on Mar 18, 2011
Downgraded to Ca (sf)
Issuer: Option One Mortgage Loan Trust 2004-1
Cl. M-2, Downgraded to Ca (sf); previously on Mar 18, 2011
Downgraded to Caa3 (sf)
Cl. M-3, Downgraded to C (sf); previously on Mar 18, 2011
Downgraded to Ca (sf)
Cl. M-4, Downgraded to C (sf); previously on Mar 18, 2011
Downgraded to Ca (sf)
Cl. M-5, Downgraded to C (sf); previously on Mar 18, 2011
Downgraded to Ca (sf)
Cl. M-6, Downgraded to C (sf); previously on Mar 18, 2011
Downgraded to Ca (sf)
Issuer: Specialty Underwriting and Residential Finance Trust,
Series 2003-BC1
Cl. A, Downgraded to Aa2 (sf); previously on May 9, 2003 Assigned
Aaa (sf)
Cl. M-1, Downgraded to Ba3 (sf); previously on Mar 4, 2011
Downgraded to Ba1 (sf)
Cl. M-2, Downgraded to Ca (sf); previously on Apr 9, 2012 Upgraded
to Caa2 (sf)
Cl. S, Downgraded to Caa1 (sf); previously on Apr 9, 2012
Confirmed at B2 (sf)
Ratings Rationale:
The actions are a result of the recent performance of the
underlying pools and reflect Moody's updated loss expectations on
the pools. The downgrades are a result of deteriorating
performance and/or structural features resulting in higher
expected losses for the bonds than previously anticipated. The
upgrades are a result of improving performance of the related
pools and/or faster pay-down of the bonds due to high
prepayments/faster liquidations.
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 8.1% in August 2012 to 7.3% in August 2013. Moody's
forecasts an unemployment central range of 7.0% to 8.0% for 2013.
Moody's expects housing prices to continue to rise in 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 the performance of these transactions.
* Moody's Cuts Rating on $133MM Prime Jumbo RMBS Issued 2004-2006
-----------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 14
tranches backed by Prime Jumbo RMBS loans, issued by miscellaneous
issuers.
Complete rating actions are as follows:
Issuer: GMACM Mortgage Loan Trust 2004-J4
Cl. A-6, Downgraded to Ba1 (sf); previously on Nov 8, 2012
Downgraded to Baa2 (sf)
Cl. A-7, Downgraded to Ba1 (sf); previously on Nov 8, 2012
Downgraded to Baa2 (sf)
Cl. PO, Downgraded to Ba2 (sf); previously on Nov 8, 2012
Downgraded to Baa2 (sf)
Issuer: J.P. Morgan Mortage Trust 2006-S2
Cl. 1-A-24, Downgraded to Caa1 (sf); previously on Apr 12, 2010
Confirmed at B3 (sf)
Cl. 2-A-1, Downgraded to Caa2 (sf); previously on Apr 12, 2010
Confirmed at B3 (sf)
Cl. 3-A-1, Downgraded to Caa3 (sf); previously on Apr 12, 2010
Downgraded to Caa1 (sf)
Cl. 3-A-2, Downgraded to Caa3 (sf); previously on Nov 27, 2012
Downgraded to Caa1 (sf)
Cl. 3-A-3, Downgraded to Caa3 (sf); previously on Apr 12, 2010
Downgraded to Caa1 (sf)
Cl. A-P, Downgraded to Caa1 (sf); previously on Apr 12, 2010
Confirmed at B3 (sf)
Issuer: RFMSI Series 2004-S2 Trust
Cl. A-6, Downgraded to Baa3 (sf); previously on Nov 15, 2012
Downgraded to Baa2 (sf)
Financial Guarantor: Radian Asset Assurance Inc. (Affirmed at Ba1
on Feb 27, 2013, Outlook Negative)
Cl. A-7, Downgraded to Baa3 (sf); previously on Nov 15, 2012
Downgraded to Baa1 (sf)
Cl. A-8, Downgraded to Baa3 (sf); previously on Nov 15, 2012
Downgraded to Baa1 (sf)
Cl. A-9, Downgraded to Baa3 (sf); previously on Nov 15, 2012
Downgraded to Baa1 (sf)
Cl. A-P, Downgraded to Ba1 (sf); previously on Nov 15, 2012
Downgraded to Baa2 (sf)
Ratings Rationale:
The downgrades are a result of deteriorating performance and/or
structural features resulting in higher expected losses for the
bonds than previously anticipated.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in June 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
8.1% in August 2012 to 7.3% in August 2013. Moody's forecasts an
unemployment central range of 7.0% to 8.0% for the 2013 year.
Moody's expects house prices to continue to rise in 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.
*********
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, Valerie Udtuhan, Howard C. Tolentino, 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.
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*** End of Transmission ***