Approximately 378.1 Million of Structured Securities Affected
New York, January 28, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of 14 classes
of Schooner Trust Commercial Mortgage Pass-Through Certificates,
Series 2007-7 as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on
Mar 6, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on
Mar 6, 2007 Definitive Rating Assigned Aaa (sf)
Cl. XP, Affirmed at Aaa (sf); previously on Mar 6,
2007 Definitive Rating Assigned Aaa (sf)
Cl. XC, Affirmed at Aaa (sf); previously on Mar 6,
2007 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aa2 (sf); previously on Mar 6,
2007 Definitive Rating Assigned Aa2 (sf)
Cl. C, Affirmed at A2 (sf); previously on Mar 6,
2007 Definitive Rating Assigned A2 (sf)
Cl. D, Affirmed at Baa2 (sf); previously on Mar 6,
2007 Definitive Rating Assigned Baa2 (sf)
Cl. E, Affirmed at Baa3 (sf); previously on Mar 6,
2007 Definitive Rating Assigned Baa3 (sf)
Cl. F, Affirmed at Ba1 (sf); previously on Mar 6,
2007 Definitive Rating Assigned Ba1 (sf)
Cl. G, Affirmed at Ba2 (sf); previously on Mar 6,
2007 Definitive Rating Assigned Ba2 (sf)
Cl. H, Affirmed at Ba3 (sf); previously on Mar 6,
2007 Definitive Rating Assigned Ba3 (sf)
Cl. J, Affirmed at B2 (sf); previously on Oct 22,
2009 Downgraded to B2 (sf)
Cl. K, Affirmed at Caa1 (sf); previously on Oct 22,
2009 Downgraded to Caa1 (sf)
Cl. L, Affirmed at Caa2 (sf); previously on Oct 22,
2009 Downgraded to Caa2 (sf)
RATINGS RATIONALE
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, Moody's stressed DSCR and the Herfindahl Index
(Herf), remaining within acceptable ranges. Based on our
current base expected loss, the credit enhancement levels for the
affirmed classes are sufficient to maintain their current ratings.
Moody's rating action reflects a cumulative base expected loss of 2.2%
of the current pooled balance, which is the same as at last review.
Moody's stressed scenario loss is 8.9% of the current pooled
balance. Moody's provides a current list of base and stress scenario
losses for conduit and fusion CMBS transactions on moodys.com at
http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
Depending on the timing of loan payoffs and the severity and timing of
losses from specially serviced loans, the credit enhancement level
for investment grade classes could decline below the current levels.
If future performance materially declines, the expected level of
credit enhancement and the priority in the cash flow waterfall may be
insufficient for the current ratings of these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key parameters
may indicate that the collateral's credit quality is stronger or weaker
than Moody's had anticipated during the current review. Even so,
deviation from the expected range will not necessarily result in a rating
action. There may be mitigating or offsetting factors to an improvement
or decline in collateral performance, such as increased subordination
levels due to amortization and loan payoffs or a decline in subordination
due to realized losses.
Primary sources of assumption uncertainty are the current stressed macroeconomic
environment and continuing weakness in the commercial real estate and
lending markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in the industrial,
office, and retail sectors. Hotel performance has begun to
rebound, albeit off a very weak base. Multifamily has also
begun to rebound reflecting an improved supply / demand relationship.
The availability of debt capital is improving with terms returning towards
market norms. Job growth and housing price stability will be necessary
precursors to commercial real estate recovery. Overall, Moody's
central global scenario remains "hook-shaped" for 2010 and 2011;
we expect overall a sluggish recovery in most of the world's largest economies,
returning to trend growth rate with elevated fiscal deficits and persistent
unemployment levels.
The principal methodology used in this rating was "Moody's Approach to
Rating Canadian CMBS" published May 26, 2000.
In addition to methodologies and research available on moodys.com,
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.
Moody's review incorporated the use of the Excel-based CMBS Conduit
Model v 2.50 which is used for both conduit and fusion transactions.
Conduit model results at the Aa2 level are driven by property type,
Moody's actual and stressed DSCR, and Moody's property quality grade
(which reflects the capitalization rate used by Moody's to estimate Moody's
value). Conduit model results at the B2 level are driven by a paydown
analysis based on the individual loan level Moody's LTV ratio.
Moody's Herfindahl score (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 our analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or determined based
on a multiple or ratio of either of these two data points. For
fusion deals, the credit enhancement for loans with investment-grade
credit estimates is melded with the conduit model credit enhancement into
an overall model result. Fusion loan credit enhancement is based
on the underlying rating of the loan which corresponds to a range of credit
enhancement levels. Actual fusion credit enhancement levels are
selected based on loan level diversity, pool leverage and other
concentrations and correlations within the pool. Negative pooling,
or adding credit enhancement at the underlying rating level, is
incorporated for loans with similar credit estimates in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan size,
where a higher number represents greater diversity. Loan concentration
has an important bearing on potential rating volatility, including
risk of multiple notch downgrades under adverse circumstances.
The credit neutral Herf score is 40. The pool has a Herf of 28
compared to 31 at Moody's prior full review.
Moody's ratings are determined by a committee process that considers both
quantitative and qualitative factors. Therefore, the rating
outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance
of commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of quantitative
tools -- MOST® (Moody's Surveillance Trends) and CMM
(Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated October 22, 2009.
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 January 12, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 10.3% to
$383.5 million from $427.6 million at securitization.
The Certificates are collateralized by 70 mortgage loans ranging in size
from less than 1% to 10.3% of the pool, with
the top ten loans representing 43% of the pool. The pool
does not contain any loans with investment grade credit estimates.
One loan, representing less than 1% of the pool, has
defeased and is collateralized with Canadian Government securities.
Thirteen loans, representing 11% of the pool, are on
the master servicer's watchlist. The watchlist includes loans which
meet certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) 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. There
is currently one loan in special servicing. The specially serviced
loan represents less than 1% of the pool. The servicer has
not recognized an appraisal reduction and Moody's has not estimated
a loss for the specially serviced loan.
Moody's has assumed a high default probability for three poorly performing
loans representing 3% of the pool and has estimated a $1.8
million loss (based on a 44% probability of default and 32%
loss given default on average) from these troubled loans.
Moody's was provided with full year 2009 operating results for 82%
of the pool. Excluding troubled loans, Moody's weighted average
LTV is 84% compared to 94% at last full review. Moody's
net cash flow reflects a weighted average haircut of 11% to the
most recently available net operating income. Moody's value reflects
a weighted average capitalization rate of 9.1%.
Excluding troubled loans, Moody's actual and stressed DSCRs are
1.50X and 1.24X, respectively, as compared to
1.36X and 1.10X 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 23% of the pool
balance. The largest loan is the MTS Building Loan ($39.7
million -- 10.3% of the pool), which is secured
by two adjacent office buildings located in Winnipeg, Manitoba.
One of the two buildings serves as MTS Allstream's corporate headquarters.
MTS is the largest telecommunications company in Manitoba and the 4th
largest company in Canada. MTS occupies 89% of the net rentable
area (NRA) via a lease that runs through December 2021. The property
is 100% leased, which is the same as last review and at securitization.
Moody's LTV and stressed DSCR are 98% and .97X, respectively,
compared to 115% and 0.84X at last review.
The second largest loan is the Aviva Insurance Complex Loan ($30.1
million -- 7.8%), which is secured by a 438,000
square foot mixed-use commercial complex located in Toronto,
Ontario. The property was 99% leased as of March 2010 compared
to 80% at last review. Performance has improved since last
review primarily because of the increase in occupancy. Moody's
LTV and stressed DSCR are 70% and 1.22X, respectively,
compared to 95% and 1.03X at last review.
The third largest loan is the Festival Marketplace Loan ($18.3
million -- 4.8%), which is secured by a 208,000
square foot enclosed community shopping center located in Stratford,
Ontario. The property was 97% leased as of November 2010
compared to 96% at last review. Moody's LTV and stressed
DSCR are 92% and 1.03X, respectively, compared
to 98% and .97X at last review.
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 Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Affirms 14 CMBS Classes of Schooner 2007-7
