Approximately $1.28 Billion of Structured Securities Affected
New York, March 23, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of 15 classes
of Credit Suisse First Boston Mortgage Securities Corporation, Commercial
Mortgage Pass-Through Certificates, Series 2005-C2
as follows:
Cl. A-3, Affirmed at Aaa (sf); previously on
Mar 9, 2011 Confirmed at Aaa (sf)
Cl. A-AB, Affirmed at Aaa (sf); previously on
Mar 9, 2011 Confirmed at Aaa (sf)
Cl. A-X, Affirmed at Aaa (sf); previously on
Mar 9, 2011 Confirmed at Aaa (sf)
Cl. A-SP, Affirmed at Aaa (sf); previously on
Mar 9, 2011 Confirmed at Aaa (sf)
Cl. A-4, Affirmed at Aa2 (sf); previously on
Aug 26, 2010 Downgraded to Aa2 (sf)
Cl. A-1-A, Affirmed at Aa2 (sf); previously
on Aug 26, 2010 Downgraded to Aa2 (sf)
Cl. A-MFL, Affirmed at Baa1 (sf); previously
on Aug 26, 2010 Downgraded to Baa1 (sf)
Cl. A-MFX, Affirmed at Baa1 (sf); previously
on Aug 26, 2010 Downgraded to Baa1 (sf)
Cl. A-J, Affirmed at Caa1 (sf); previously on
Aug 26, 2010 Downgraded to Caa1 (sf)
Cl. B, Affirmed at Ca (sf); previously on Aug 26,
2010 Downgraded to Ca (sf)
Cl. C, Affirmed at C (sf); previously on Aug 26,
2010 Downgraded to C (sf)
Cl. D, Affirmed at C (sf); previously on Aug 26,
2010 Downgraded to C (sf)
Cl. E, Affirmed at C (sf); previously on Aug 26,
2010 Downgraded to C (sf)
Cl. F, Affirmed at C (sf); previously on Aug 26,
2010 Downgraded to C (sf)
Cl. G, Affirmed at C (sf); previously on Aug 26,
2010 Downgraded to C (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 11.2%
of the current balance. At last full review, Moody's cumulative
base expected loss was 14.1%. The current cumulative
base loss plus realized losses is 16.8%, essentially
the same as at last review. Realized losses increased approximately
$48 million since last review due to the recent modification of
the Washington Mutual Irvine Campus Loan ($55.4 million
-- 4.3% of the pool). The modification included
a $48 million dollar principal write-off that eliminated
Classes H through L and a portion of Class G. The loan is in the
process of being returned to the master servicer. Moody's stressed
scenario loss is 19.3% of the current 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 sluggish macroeconomic
environment and varying performance in the commercial real estate property
markets. However, Moody's expects to see increasing or stabilizing
property values, higher transaction volumes, a slowing in
the pace of loan delinquencies and greater liquidity for commercial real
estate in 2011. The hotel and multifamily sectors are continuing
to show signs of recovery, while recovery in the office and retail
sectors will be tied to recovery of the broader economy. The availability
of debt capital continues to improve with terms returning toward market
norms. Moody's central global macroeconomic scenario reflects an
overall sluggish recovery through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations.
The principal methodology used in this rating was "CMBS: Moody's
Approach to Rating U.S. Conduit Transactions" published
in September 2000.
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 24,
the same as at Moody's prior full review.
Moody's ratings are determined by a committee process that considers both
quantitative and qualitative factors. Therefore, the rating
outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance
of commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of quantitative
tools -- MOST® (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 August 26, 2010. Please
see the ratings tab on the issuer / entity page on moodys.com for
the last rating action and the ratings history.
Moody's Investors Service did not receive or take into account a third
party due diligence report on the underlying assets or financial instruments
related to the monitoring of this transaction in the past 6 months.
DEAL PERFORMANCE
As of the March 17, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 20% to $1.29
billion from $1.61 billion at securitization. The
Certificates are collateralized by 153 mortgage loans ranging in size
from less than 1% to 11% of the pool, with the top
ten loans representing 47% of the pool. Eleven loans,
representing 5.9% of the pool, have defeased and are
collateralized with U.S. Government securities. No
loans have investment grade credit estimates.
Thirty-four loans, representing 18% 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.
Seven loans have been liquidated from the pool since securitization,
resulting in an aggregate $90.3 million loss (49%
loss severity on average). At last review the pool had an aggregate
realized loss of $42.4 million. Currently 12 loans,
representing 19% of the pool, are in special servicing.
The largest specially serviced loan is The Tri-County Mall Loan
($141.1 million -- 11.0% of the pool),
which is secured by a 1.1 million square foot regional mall located
in Cincinnati, Ohio. The loan was transferred to special
servicing in August 2009 due to imminent default and is currently 90+
days delinquent. The remaining 11 specially serviced loans are
secured by a mix of property types. The master servicer has recognized
an aggregate $107.2 million appraisal reduction for six
of the specially serviced loans. Moody's has estimated an aggregate
loss of $101.5 million (59% expected loss on average)
for all of the specially serviced loans.
Moody's has assumed a high default probability for 11 poorly performing
loans representing 6% of the pool and has estimated a $11.5
million loss (15% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 96% and 100%, respectively, of the
non-defeased performing pool. Excluding specially serviced
and troubled loans, Moody's weighted average LTV is 100%,
compared to 101% at last full 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 9.2%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.26X and 1.04X, respectively,
compared to 1.33X and 1.03X 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 loans represent 20% of the pool balance.
The largest performing loan is the 390 Park Avenue Loan ($105.6
million -- 8.3% of the pool), which is secured
by a 234,000 square foot (SF) office building located in New York
City. The property was 100% leased as of December 2010,
compared to 97% at last review. Net income has increased
slightly since last review and performance is stable. Moody's LTV
and stressed DSCR are 110% and 0.83X, respectively,
compared to 117% and 0.79X at last review.
The second largest performing loan is the Spectrum Office Portfolio Loan
($82.2 million -- 6.4% of the pool),
which is secured by six office properties located in the North Rivers
submarket of Chicago, Illinois. The portfolio was 89%
leased as of year-end 2010 compared to 86% at last review.
Portfolio performance has declined due to decreased rental revenues.
Moody's LTV and stressed DSCR are 124% and 0.83X,
respectively, compared to 106% and 0.97X at last review.
The third largest performing loan is the 65 Broadway Loan ($70.5
million -- 5.5% of the pool), which is secured
by a 342,000 square foot office building located in New York City
in the Battery Park submarket. The property was 86% leased
as of year-end 2010, compared to 85% at last review.
Property performance has declined due to decreased rental income.
Moody's LTV and stressed DSCR are 113% and 0.81X,
respectively, compared to 103% and 0.95X at last review.
New York
Tiffany Putman
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Sandra Ruffin
VP - Senior Credit Officer
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 15 CMBS Classes of CSFB 2005-C2
