Approximately $917.47 Million of Structured Securities Affected
NOTE: On December 2, 2011 the Press Release was revised as follows: Added a reference to the Request for Comment on a Global Methodology Change for Structured Finance Interest Only Securities after the paragraph outlining the principal methodology used in the rating. Revised release follows:
New York, December 01, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of fifteen classes
of Credit Suisse First Boston Mortgage Securities Corp.,
Commercial Mortgage Pass-Through Certificates, Series 2003-C4
as follows:
Cl. A-3, Affirmed at Aaa (sf); previously on
March 9, 2011 Confirmed at Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
March 9, 2011 Confirmed at Aaa (sf)
Cl. A-1-A, Affirmed at Aaa (sf); previously
on March 9, 2011 Confirmed at Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on March 9,
2011 Confirmed at Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on March 9,
2011 Confirmed at Aaa (sf)
Cl. D, Affirmed at Aa2 (sf); previously on December
10, 2010 Confirmed at Aa2 (sf)
Cl. E, Affirmed at A1 (sf); previously on December 10,
2010 Confirmed at A1 (sf)
Cl. F, Affirmed at Baa2 (sf); previously on December
10, 2010 Downgraded to Baa2 (sf)
Cl. G, Affirmed at Ba3 (sf); previously on December
10, 2010 Downgraded to Ba3 (sf)
Cl. H, Affirmed at Caa1 (sf); previously on December
10, 2010 Downgraded to Caa1 (sf)
Cl. J, Affirmed at Caa2 (sf); previously on December
10, 2010 Downgraded to Caa2 (sf)
Cl. K, Affirmed at Ca (sf); previously on December 10,
2010 Downgraded to Ca (sf)
Cl. L, Affirmed at C (sf); previously on December 10,
2010 Downgraded to C (sf)
Cl. O, Affirmed at C (sf); previously on December 10,
2010 Downgraded to C (sf)
Cl. A-X, Affirmed at Aaa (sf); previously on
March 9, 2011 Confirmed at Aaa (sf)
RATINGS RATIONALE
The affirmations 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. 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 4.9%
of the current balance. At last full review, Moody's cumulative
base expected loss was 5.0%. Moody's stressed scenario
loss is 7.9% 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.
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 the slowdown
in growth in the current macroeconomic environment and the commercial
real estate property markets. While commercial real estate property
markets are gaining momentum, a consistent upward trend will not
be evident until the volume of transactions increases, distressed
properties are cleared from the pipeline and job creation rebounds.
The hotel and multifamily sectors are in recovery and improvements in
the office sector continue, with fundamentals in Gateway cities
outperforming their suburban counterparts. However, office
demand is closely tied to employment, where fundamentals remain
weak, so significant improvement may be delayed. Performance
in the retail sector has been mixed with on-going rent deflation
and leasing challenges. Across all property sectors, the
availability of debt capital continues to improve with monetary policy
expected to remain supportive and interest rate hikes postponed.
Moody's central global macroeconomic scenario reflects an overall downward
revision of forecasts since last quarter, amidst ongoing fiscal
consolidation efforts, household and banking sector deleveraging,
persistently high unemployment levels, and weak housing markets
that will continue to constrain growth.
The principal methodology used in this rating was "Moody's Approach to
Rating Fusion U.S. CMBS Transactions" published in April
2005. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
Moody’s noted that on November 22, 2011, it released a Request for Comment, in which the rating agency has requested market feedback on potential changes to its rating methodology for Interest-Only Securities. If the revised methodology is implemented as proposed the
rating on Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2003-C4 Class A-X may be negatively affected. Please refer to Moody’s request for Comment, titled “Proposal Changing the Global Rating Methodology for Structured Finance Interest-Only Securities,” for further details regarding the implications of the proposed methodology change on Moody’s rating. Please see the Credit Policy page on www.moodys.com for a copy of this methodology and the Request forComment.
Moody's review incorporated the use of the Excel-based CMBS Conduit
Model v 2.60 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 our 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 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 32
compared to 33 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 December 10, 2010.
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 November 18, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 30% to $933.77
million from $1.34 billion at securitization. The
Certificates are collateralized by 141 mortgage loans ranging in size
from less than 1% to 7.3% of the pool, with
the top ten loans representing 37% of the pool. Twenty-one
loans, representing 18% of the pool, have defeased
and are collateralized with U.S. Government securities.
Two loans, representing 12% of the pool, have investment
grade credit estimates.
Thirty-three loans, representing 22% 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.
Seventeen loans have been liquidated from the pool since securitization,
resulting in an aggregate $22.1 million loss (36%
loss severity on average). Currently six loans, representing
6% of the pool, are in special servicing. The master
servicer has recognized an aggregate $9.9 million appraisal
reduction for the specially serviced loans. Moody's has estimated
an aggregate loss of $20.4 million (38% 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 11% of the pool and has estimated a $15.4
million loss (15% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full year 2010 and partial year 2011 operating
results for 100% and 97% of the performing pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 79% compared to 82% at last full review.
Moody's net cash flow reflects a weighted average haircut of 12%
to the most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 9.7%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.64X and 1.48X, respectively,
compared to 1.76X and 1.54X 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 largest loan with a credit estimate is the Circle Centre Mall Loan
($68.3 million -- 7.3% of the
pool), which is secured by an 800,000 square foot (SF) regional
mall located in Indianapolis, Indiana. The loan is sponsored
by Simon Property Group. The mall is anchored by Carson Pirie Scott.
Although the property was 96% leased as of September 2011 compared
to 85% at last review, Nordstrom has vacated its 206,000
SF store but is still making rental payments. Nordstrom's lease
expires in February 2026. Property performance has declined since
last review. Moody's current credit estimate and stressed DSCR
are Baa2 and 1.60X, respectively, compared to Aa3 and
1.97X at last review.
The second loan with a credit estimate is the 540 Madison Avenue Loan
($43.6 million -- 4.7% of the
pool), which is secured by a 281,000 SF office building located
in the Plaza District office submarket of New York City. The property
was 97% leased as of September 2011 compared to 92% at last
review. Property performance has improved since last review.
Moody's current credit estimate and stressed DSCR are Aaa and 3.02X,
respectively, compared to Aa1 and 2.63X at last review.
The top three performing conduit loans represent 10.8% of
the pool balance. The largest loan is Wanamaker Building Loan ($57.5
million -- 6.2% of the pool), which
is secured by a 974,000 SF office property located in Philadelphia,
Pennsylvania. The property is also encumbered by a $15 million
B-note. The largest tenant is The Children's Hospital of
Philadelphia, occupying 19% of NRA with a lease expiration
in June 2027. The property was 97% leased as of June 2011,
compared to 99% at last review. Property performance remains
stable. Moody's LTV and stressed DSCR are 63% and 1.63X,
respectively, compared to 62% and 1.65X at last review.
The second largest loan is the Town & Country Apartments Loan ($22.0
million -- 2.4% of the pool), which
is secured by a 618 unit multifamily property located near the University
of Illinois Champaign campus in Urbana, Illinois. The property
was 99% leased as of September 2011 compared to 89% at last
review. Property performance has been stable. Moody's LTV
and stressed DSCR are 95% and 1.03X, respectively,
compared to 104% and 0.94X at last review.
The third largest loan is the Blackbaud Plaza Loan ($21.1
million -- 2.3% of the pool), which is secured
by a 280,000 SF office property located in Charleston, South
Carolina. The property is 100% leased to Blackbaud,
Inc. through September 2023. The lease originally expired
in July 2010. Property performance has been stable. Moody's
LTV and stressed DSCR are 75% and 1.51X, respectively,
compared to 75% and 1.52X at last review.
REGULATORY DISCLOSURES
Although this credit rating has been issued in a non-EU country
which has not been recognized as endorsable at this date, this credit
rating is deemed "EU qualified by extension" and may still
be used by financial institutions for regulatory purposes until 31 January
2012. ESMA may extend the use of credit ratings for regulatory
purposes in the European Community for three additional months,
until 30 April 2012, if ESMA decides that exceptional circumstances
arise that may imply potential market disruption or financial instability.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a 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 Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the meaning of each rating category and the definition of default and
recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's 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 www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has
issued the rating.
Caroline Chan
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Michael M. Gerdes
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Affirms Fifteen CMBS Classes of CSFB 2003-C4
