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Rating Action:

Moody's Affirms 13 and Downgrades Two CMBS Classes of MLFA 2003-Canada 10

01 Oct 2009

Approximately $371.2 Million of Structured Securities Affected

New York, October 01, 2009 -- Moody's Investors Service ("Moody's") affirmed the ratings of 13 classes and downgraded two classes of Merrill Lynch Financial Assets Inc., Commercial Mortgage Pass-Through Certificates, Series 2003-Canada 10. Although the performance of the overall pool is stable, the downgrades are due to Moody's concerns about the performance of the largest loan on the master servicer's watchlist, the Lawrence Terrace Loan, which represents 4.7% of the pool balance. The rating action is the result of Moody's on-going surveillance of commercial mortgage backed securities ("CMBS") transactions.

As of the September 14, 2009 distribution date, the transaction's aggregate certificate balance has decreased by approximately 18% to $377.2 million from $460.4 million at securitization. The Certificates are collateralized by 55 mortgage loans ranging in size from less than 1% to 6% of the pool, with the top 10 non-defeased loans representing 34% of the pool. The pool includes two loans with investment-grade underlying ratings, representing 13% of the pool. Seven loans, representing 22% of the pool, have defeased and are collateralized by Canadian Government securities.

Five loans, representing 8% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of our ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance.

The pool has not experienced any losses since securitization and currently there are no loans in special servicing.

Moody's was provided with full-year 2008 operating results for 85% of the pool, excluding the defeased loans. Moody's weighted average loan to value ("LTV') ratio is 67%, essentially the same as at Moody's prior full review.

Moody's stressed DSCR for the pool, excluding the defeased loans, is 1.79X compared to 1.72X at last review. Moody's stressed DSCR is based on Moody's net cash flow ("NCF") and a 9.25% stressed rate applied to the loan balance.

Moody's uses a variation of the Herfindahl index ("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 the risk of multiple-notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool, excluding defeased loans, has a Herf of 24 compared to 25 at last review.

The largest loan with an underlying rating is the Sheridan Center Loan ($30.2 million -- 8.0%), which is secured by a 540,000 square foot value oriented mixed-use retail and office center located approximately 13 miles west of Toronto in Mississauga, Ontario. The retail portion (60% of the property's net rentable area) consists of a community center anchored by Zellers and Dominion. The largest tenant in the office portion is Royal & Sun Alliance, which occupies 38% of the premises through 2018. The center was 98% occupied as of December 2008, essentially the same as at last review. Moody's current underlying rating and stressed DSCR are A1 and 1.84X, respectively, the same as at last review.

The second loan with an underlying rating is the Richmond Center North Loan ($19.6 million - 5.2%), which is secured by the borrower's interest in a 716,000 square foot regional mall (309,000 square feet of collateral) located approximately seven miles south of Vancouver in Richmond, British Columbia. The center is anchored by The Bay. The center was 100% occupied as of December 2008, essentially the same as at last review. Moody's current underlying rating and stressed DSCR are Aaa and 2.78X, respectively, compared to Aaa and 2.90X at last review.

The top three conduit loans represent 16% of the pool. The largest conduit loan is the RioCan Fairgrounds Loan ($23.7 million - 6.3%), which is secured by a 250,000 square foot power center located approximately 50 miles northwest of Toronto in Orangeville, Ontario. Major tenants include Wal-Mart, Price Chopper and Galaxy Theatres. The center was 99% leased as of February 2009, essentially the same as at last review. The loan sponsor is RioCan Real Investment Trust ("RioCan"), a publicly traded REIT. Moody's LTV and stressed DSCR are 71% and 1.44X, respectively, compared to 72% and 1.43X at last review.

The second largest conduit loan is The Junction (Phase 1) Loan ($19.3 million - 5.1%), which is secured by a 194,000 square foot power center located in Mission, British Columbia. Major tenants include Save-On-Foods and Famous Players. The property was 99% occupied as of January 2009, the same as at last review. The loan sponsors are RioCan and Kimco Realty. Moody's LTV and stressed DSCR are 68% and 1.48X, respectively, compared to 71% and 1.40X at last review.

The third largest conduit loan is the Lawrence Terrace Loan ($17.8 million - 4.7%), which is secured by a 410-unit mid-rise apartment complex located in Toronto, Ontario. The property was constructed in 1964. Property performance has declined since securitization due to increased operating expenses. The most recent property inspection report (September 2008) indicates several areas of deferred maintenance, including the underground parking structure. Current financial information for this loan is not available. The loan is on the master servicer's watchlist due to low debt service coverage. Given the property's age, poor physical condition, lack of current financials and decline in performance since securitization, Moody's considers this loan to be a high default risk. Moody's LTV and stressed DSCR are 145% and 0.71X, respectively, compared to 118% and 0.78X at last review.

Moody's rating action is as follows:

-Class A-1, $69,727,014, affirmed at Aaa; previously affirmed at Aaa on 10/16/2008

-Class A-2, $243,600,000, affirmed at Aaa; previously affirmed at Aaa on 10/16/2008

-Class XC-1, Notional, affirmed at Aaa; previously affirmed at Aaa on 10/16/2008

-Class XC-2, Notional, affirmed at Aaa; previously affirmed at Aaa on 10/16/2008

-Class B, $10,300,000, affirmed at Aaa; previously affirmed at Aaa on 10/16/2008

-Class C, $13,300,000, affirmed at Aaa; previously upgraded to Aaa from Aa2 on 10/16/2008

-Class D-1, $13,199,000 affirmed at A2; previously upgraded to A2 from Baa1 on 10/16/2008

-Class D-2, $1,000, affirmed at A2; previously upgraded to A2 from Baa1 on 10/16/2008

-Class E-1, $5,199,000, affirmed at Baa2; previously upgraded to Baa2 from Baa3 on 10/16/2008

-Class E-2, $1,000, affirmed at Baa2; previously upgraded to Baa2 from Baa3 on 10/16/2008

-Class F, $4,054,000, affirmed at Ba1; previously affirmed at Ba1 on 10/16/2008

-Class G, $4,029,000, affirmed at Ba2; previously affirmed at Ba2 on 10/16/2008

-Class H, $2,302,000, affirmed at Ba3; previously affirmed at Ba3 on 10/16/2008

-Class J, $3,913,000, downgraded to B3 from B2; previously affirmed at B2 on 10/16/2008

-Class K, $1,612,000, downgraded to Caa1 from B3; previously affirmed at B3 on 10/16/2008

Moody's monitors transactions on a monthly basis through two sets of quantitative tools: MOST® (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp, and on a periodic basis through a comprehensive review. Moody's prior review is summarized in a press release dated October 16, 2008.

The principal methodology used in rating and monitoring this transaction is "Moody's Approach to Rating Canadian CMBS", dated May 26, 2000, which is available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this transaction can also be found in the Rating Methodologies sub-directory on Moody's website. In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our website, at www.moodys.com/SFQuickCheck.

New York
Sandra Ruffin
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Michael M. Gerdes
Senior Vice President
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Affirms 13 and Downgrades Two CMBS Classes of MLFA 2003-Canada 10
No Related Data.
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