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Rating Action:

Moody's Affirms 16 Classes and Downgrades 19 CMBS Classes of CSFB 2006-TFL2

17 Mar 2011

Approximately $1.8 billion of Structured Securities Affected

New York, March 17, 2011 -- Moody's Investors Service (Moody's) downgraded the ratings of 19 classes, including 11 pooled classes and eight non-pooled, or rake, classes of Credit Suisse First Boston Mortgage Securities Corp., Series 2006-TFL2. Moody's also affirmed the ratings of two pooled classes and 14 rake classes. Moody's rating action is as follows:

Cl. A-X-1, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf)

Cl. A-X-3, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf)

Cl. A-2, Downgraded to Aa2 (sf); previously on Mar 9, 2011 Confirmed at Aa1 (sf)

Cl. B, Downgraded to A1 (sf); previously on Mar 19, 2009 Downgraded to Aa3 (sf)

Cl. C, Downgraded to Baa1 (sf); previously on Mar 18, 2010 Downgraded to A3 (sf)

Cl. D, Downgraded to Baa3 (sf); previously on Mar 18, 2010 Downgraded to Baa2 (sf)

Cl. E, Downgraded to Ba1 (sf); previously on Mar 18, 2010 Downgraded to Baa3 (sf)

Cl. F, Downgraded to Ba2 (sf); previously on Mar 18, 2010 Downgraded to Ba1 (sf)

Cl. G, Downgraded to B1 (sf); previously on Mar 18, 2010 Downgraded to Ba3 (sf)

Cl. H, Downgraded to B2 (sf); previously on Mar 18, 2010 Downgraded to B1 (sf)

Cl. J, Downgraded to Caa1 (sf); previously on Mar 18, 2010 Downgraded to B2 (sf)

Cl. K, Downgraded to Caa2 (sf); previously on Mar 18, 2010 Downgraded to B3 (sf)

Cl. L, Downgraded to Ca (sf); previously on Mar 18, 2010 Downgraded to Caa1 (sf)

Cl. BEV-A, Downgraded to Caa3 (sf); previously on Mar 18, 2010 Downgraded to Caa1 (sf)

Cl. NHK-A, Downgraded to Caa3 (sf); previously on Mar 18, 2010 Downgraded to Caa2 (sf)

Cl. KER-A, Downgraded to Baa3 (sf); previously on Mar 19, 2009 Downgraded to Baa1 (sf)

Cl. KER-B, Downgraded to Ba2 (sf); previously on Mar 19, 2009 Downgraded to Baa3 (sf)

Cl. KER-C, Downgraded to B1 (sf); previously on Mar 18, 2010 Downgraded to Ba2 (sf)

Cl. KER-D, Downgraded to B2 (sf); previously on Mar 18, 2010 Downgraded to Ba3 (sf)

Cl. KER-E, Downgraded to Caa1 (sf); previously on Mar 18, 2010 Downgraded to B2 (sf)

Cl. KER-F, Downgraded to Caa3 (sf); previously on Mar 18, 2010 Downgraded to Caa1 (sf)

Cl. MW-A, Affirmed at Ba2 (sf); previously on Aug 28, 2008 Downgraded to Ba2 (sf)

Cl. MW-B, Affirmed at B2 (sf); previously on Aug 28, 2008 Downgraded to B2 (sf)

Cl. SV-A1, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf)

Cl. SV-A2, Affirmed at Aa2 (sf); previously on Mar 19, 2009 Downgraded to Aa2 (sf)

Cl. SV-B, Affirmed at A1 (sf); previously on Mar 19, 2009 Downgraded to A1 (sf)

Cl. SV-C, Affirmed at A2 (sf); previously on Mar 19, 2009 Downgraded to A2 (sf)

Cl. SV-D, Affirmed at A3 (sf); previously on Mar 19, 2009 Downgraded to A3 (sf)

Cl. SV-E, Affirmed at Baa1 (sf); previously on Mar 19, 2009 Downgraded to Baa1 (sf)

Cl. SV-F, Affirmed at Baa2 (sf); previously on Mar 19, 2009 Downgraded to Baa2 (sf)

Cl. SV-G, Affirmed at Baa3 (sf); previously on Mar 19, 2009 Downgraded to Baa3 (sf)

Cl. SV-H, Affirmed at Ba1 (sf); previously on Mar 19, 2009 Downgraded to Ba1 (sf)

Cl. SV-J, Affirmed at Ba2 (sf); previously on Mar 19, 2009 Downgraded to Ba2 (sf)

Cl. SV-K, Affirmed at Ba3 (sf); previously on Mar 19, 2009 Downgraded to Ba3 (sf)

Cl. SV-AX, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf)

RATINGS RATIONALE

The downgrades were due to the deterioration in performance of five hotel properties that account for 98% of the trust balance and refinance risk associated with loans approaching maturity in an adverse environment. The affirmations of the pooled and non-pooled classes were due to key parameters, including Moody's loan to value (LTV) ratio remaining within an acceptable range.

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 Large Loan/Single Borrower Transactions" published in July 2000.

Moody's review incorporated the use of the excel-based CMBS Large Loan Model v 8.0 which is used for both large loan and single borrower transactions. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. The model also incorporates a supplementary tool to allow for the testing of the credit support at various rating levels. The scenario or "blow-up" analysis tests the credit support for a rating assuming that loans in the pool default with an average loss severity that is commensurate with the rating level being tested.

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 March 18, 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 six months.

DEAL PERFORMANCE

As of the March 15, 2011 Payment Date, the transaction's aggregate certificate balance has decreased by 45% to $1.9 billion from $3.4 billion at securitization due to the payoff of eight loans originally in the pool and the payment of release premiums associated with the Kerzner International Loan ($372.8 million -- 52% of the pooled balance). The Certificates are collateralized by six floating-rate loans ranging in size from 2% to 52% of the pooled trust balance.

There currently are two loans on the master servicer's watchlist equal to 46% of the outstanding trust principal balance. 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. Watchlisted loans are loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package.

Moody's weighted average pooled LTV ratio is 77% compared to 76% at last review. Moody's stressed debt service coverage ratio (DSCR) is 1.72X compared to 1.49X at last review.

The pool has experienced $211,774 in losses since securitization. The losses were due to the special servicer's workout fee associated with the Sheffield condo conversion loan. One loan, the JW Marriott Starr Pass Loan ($78.0 million--11%) is currently in special servicing. The loan was transferred to special servicing in April 2010 and is a performing matured balloon loan.

The Sava Portfolio and Fundamental Healthcare Loans ($842.7 million -- not pooled) consist of two non-pooled mortgage loans that are partially cross collateralized and cross defaulted. The larger of the two loans has a first mortgage balance of approximately $735.0 million and is collateralized by the Sava Healthcare Portfolio. The smaller of the two loans has a first mortgage balance of approximately $107.7 million and is collateralized by the Fundamental Healthcare Portfolio. Collectively these loans secure the non-pooled Sava rake bonds. The Sava Portfolio loan collateral includes 169 healthcare facilities located in 19 states, containing 20,667 beds and the Fundamental Portfolio collateral includes 27 healthcare facilities located in nine states, containing 2,822 beds. Skilled nursing facilities account for 93% of properties across the two portfolios. The largest state concentrations across the two portfolios are in Texas (24.8%), North Carolina (13.3%) and Colorado (10.3%).

The portfolio has enjoyed strong operating performance since securitization exhibiting consecutive positive growth. However, one of the assumptions at securitization was that refinancing of these loans would be done through new Housing and Urban Development (HUD) loans. A letter issued from HUD on June 22, 2006 states that the borrower would be allowed to submit an application for up to $1.055 billion on the portfolio. It is not expected that the loans will be paid off on the June 9, 2011 maturity date. To reflect increased refinance risk, Moody's downgraded the rake bonds associated with these two loans at our review on March 19, 2009.

On February 26, 2010, Sava Senior Care Administrative LLC, as well as their principals, agreed to pay the United States and several states $14 million as a settlement arising from allegations made by the United States that the defendants received kickbacks from a pharmaceutical vendor. As part of the settlement, the Office of the Inspector General of the Department of Health and Human Services (OIG-HHS) reserved its rights to seek exclusions of Sava and its principals from participation in Medicare, Medicaid and all other federal health care programs. If OIG-HHS were to exclude the borrower and its principals from participation in federal health care programs, the borrower's ability to meet its loan obligations could be significantly impaired and could result in a change in control of the borrower. Moody's has taken this into consideration in its analysis and has identified several large and experienced healthcare operators that could replace the borrower, if necessary, and continue the successful operation of the properties.

Additionally, members of the ownership structure are currently in mutual litigation regarding the operations of the properties and the distribution of funds within the ownership organization. To date the properties and cash flows have not been hurt by the litigation and the litigants have indicated that future debt service payments are not in jeopardy.

Given the solid performance of the underlying collateral, Moody's is affirming the current rating of the rake bonds (Classes SVA-1, SVA-2, SVA-X, SV-B, SV-C, SV-D, SV-E, SV-F, SV-G, SV-H, SV-J, and SV-K).

The largest pooled loan is the Kerzner International Portfolio Loan ($372.7 million -- 52% of the pooled balance), a 50% portion of a pari passu split loan structure that is securitized in COMM 2006-FL12. There is also $293.5 million of non-pooled, or rake, trust debt (Classes KERA, KERB, KERC, KERD, KERE and KERF) and a $1.3 billion non-trust junior secured loan component. The loan is secured by substantially all of the Kerzner family's real estate assets located on Paradise Island, Bahamas, including the Atlantis Hotel (2,917 keys) and the One & Only Ocean Club Hotel and golf course (106 keys, located one mile from the Atlantis), a marina and vacant and improved land. The resort features the largest casino and ballroom in the Caribbean and water-themed attractions, including the world's largest open-air marine habitat. The loan is also supported by a pledge of Kerzner's 100% interest in management agreements and fees relating to the properties, a right to receive Kerzner's 50% interest in excess net cash flow and/or sales proceeds generated from the One & Only Palmilla Hotel in Mexico, Harborside timeshare units, and the Residences at Atlantis and Ocean Club condos.

Revenue per available room (RevPAR), calculated by multiplying the average daily rate by the occupancy rate, for the trailing 12-month period ending December 2010 was $195 at the Atlantis and $719 at the One & Only Ocean Club. Although combined RevPAR for the two hotels increased 5% from the trailing 12-month period ending in December 2009, it remains 18% less than at securitization. Casino revenue, which represents 17% of total revenue, decreased 8% from 2009 and approximately 25% from securitization.

A concern is the additional competition from the $3.4 billion Baha Mar resort complex that just broke ground in March 2011 on Nassau's Cable Beach. Baha Mar is a single-phase project backed by the Chinese government that is scheduled to open in late 2014. The resort will feature four hotels with a total of approximately 2,250 rooms, a golf course, convention center, a casino that is to be the largest in the Caribbean and a 10-acre Eco Water Park. In overall size and amenities it is expected to be very similar to the Atlantis. Although scheduled completion is four years away, the project is expected to be future competition for the Atlantis and complicate the re-financing of the current debt that has a final maturity date in September 2011. Moody's credit estimate for the pooled debt is Ba3 compared to Ba1 at last review.

The Beverly Hilton Loan ($155.0 million -- 22%) is secured by a 569 room hotel in Beverly Hills, California. Total debt includes $11.0 million of non-pooled trust debt (Class BEVA) and a $98.0 million non-trust junior secured component. There is also $36.0 million of mezzanine debt. The hotel was built in 1965 and underwent an $80 million renovation in 2004. The loan sponsor is Oasis West Realty. RevPAR for the trailing 12-month period ending September 30, 2010 was $153, a slight decrease from RevPAR for full year 2009. The hotel has not performed up to expectations. RevPAR at securitization was $248. Moody's credit estimate for the pooled debt is Caa3, compared to B3 at last review.

The JW Marriott Starr Pass Loan ($78.0 million -- 11%) was transferred to special servicing in April 2010. The loan matured in August 2010. Principal and interest payments are current through March 2011, however, the borrower did not make a required seasonality deposit. Total debt includes a $67.0 million non-trust junior secured component and $20.0 million in mezzanine debt. Security for the loan is a 575 room hotel located in Tucson, Arizona that was constructed in 2005. RevPAR has been declining for the past several years and for the trailing 12-month period ending in June 2010 it was $88 compared to $137 at securitization. The special servicer is formulating a work-out plan. The property was re-appraised in October 2010 for $111.0 million. Moody's credit estimate is Caa3 compared to B3 at last review.

REGULATORY DISLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York
Jay Rosen
Vice President - Senior Analyst
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 16 Classes and Downgrades 19 CMBS Classes of CSFB 2006-TFL2
No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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