Approximately $73.7 Million of Structured Securities Affected
New York, March 30, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of five classes
of Credit Suisse First Boston Mortgage Securities Corp.,
Commercial Mortgage Pass-Through Certificates, Series 1997-C2
Cl. A-X, Affirmed at Aaa (sf); previously on
Dec 19, 1997 Assigned Aaa (sf)
Cl. D, Affirmed at Aaa (sf); previously on Jun 1,
2006 Upgraded to Aaa (sf)
Cl. E, Affirmed at Aaa (sf); previously on Dec 8,
2006 Upgraded to Aaa (sf)
Cl. H, Affirmed at Caa2 (sf); previously on May 2,
2005 Downgraded to Caa2 (sf)
Cl. I, Affirmed at C (sf); previously on May 2,
2005 Downgraded to C (sf)
The affirmations are due to key rating 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
3.0% of the current balance. At last review,
Moody's cumulative base expected loss was 7.1%.
Moody's stressed scenario loss is 8.2% 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
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 methodologies used in this rating were: "CMBS:
Moody's Approach to Rating Conduit Transactions "published
in September 2000, "CMBS: Moody's Approach to
Rating Large Loan Transactions" published in 2000, and "CMBS:
Moody's Approach to Rating Credit Tenant Lease (CTL) Backed Transactions"
published in October 1998.
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 credit estimate 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 credit estimate 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 17
compared to 18 at Moody's prior review.
In cases where the Herf falls below 20, Moody's employs also
the large loan/single borrower methodology. This methodology uses
the excel-based Large Loan Model v 8.0. 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.
For deals that include a pool of credit tenant loans, Moody's
currently uses a Gaussian copula model, incorporated in its public
CDO rating model CDOROMv2.8 to generate a portfolio loss distribution
to derive credit enhancement levels for CTL component. Under Moody's
CTL approach, the rating of a transaction's certificates is
primarily based on the senior unsecured debt rating (or the corporate
family rating) of the tenant, usually an investment grade rated
company, leasing the real estate collateral supporting the bonds.
This tenant's credit rating is the key factor in determining the
probability of default on the underlying lease. The lease generally
is "bondable", which means it is an absolute net lease,
yielding fixed rent paid to the trust through a lock-box,
sufficient under all circumstances to pay in full all interest and principal
of the loan. The leased property should be owned by a bankruptcy-remote,
special purpose borrower, which grants a first lien mortgage and
assignment of rents to the securitization trust. The dark value
of the collateral, which assumes the property is vacant or "dark",
is then examined to determine a recovery rate upon a loan's default.
Moody's also considers the overall structure and legal integrity
of the transaction.
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 May 20, 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
As of the March 17, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 89% to $162.2
million from $1.465 billion at securitization. The
Certificates are collateralized by 47 mortgage loans ranging in size from
less than 1% to 11% of the pool, with the top ten
loans representing 57% of the pool. The pool includes a
credit tenant lease (CTL) component, representing 42% of
the pool. There are no loans with investment grade credit estimates.
Four loans, representing 15% of the pool, have defeased
and are collateralized with U.S. Government securities.
Seven loans, representing 24% 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
Twenty loans have been liquidated from the pool, resulting in an
aggregate $39.4 million realized loss (20% loss severity
on average). At Moody's last review the pool had realized
an aggregate loss of $38.9 million. Three loans,
representing 8% of the pool, are currently in special servicing.
The largest specially serviced loan is the Bannockburn Executive Plaza
Loan ($8.6 million --5.3% of the pool),
which is secured by a 131,500 square foot (SF) industrial building
located in Bannockburn, Illinois. The loan was transferred
to special servicing in December 2010 as the result of a requested loan
restructure. The loan is currently being restructured to interest-only
payments. The loan remains 30 days delinquent.
The second largest specially serviced loan is the Autumn Run Apartments
Loan ($4.2 million—2.6% of the pool),
which is secured by a 204 unit multifamily property located in Louisville,
Kentucky. The loan was transferred to special servicing in August
2010 as the result of payment default. The loan is currently in
foreclosure and a receiver has been assigned. In March 2011,
the master servicer recognized an $835,400 appraisal reduction
on the loan.
The remaining specially serviced loan is secured by an office property
and remains current. Moody's has estimated an aggregate $2.4
million loss (19% expected loss on average) for two of the specially
Moody's was provided with full year 2009 and partial year 2010 operating
results for 100% and 76% of the pool, respectively,
excluding the CTL and defeased loans. Excluding specially serviced
loans, troubled loans and CTL loans, Moody's weighted
average LTV is 74% compared to 80% at Moody's prior
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
Excluding specially serviced loans, troubled loans and CTL loans,
Moody's actual and stressed DSCRs are 1.44X and 1.57X,
respectively, compared to 1.16X and 1.50X 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 top three performing conduit loans represent 24% of the pool
balance. The largest loan is the 78 Corporate Center Loan ($18.2
million - 11.2% of the pool), which is secured
by a 176,700 SF office building located in Bedminster Township,
New Jersey. The property is 100% leased to Verizon Wireless
through November 2021. Moody's LTV and stressed DSCR are 66%
and 1.73X, respectively, compared to 70% and
1.63X at last review.
The second largest loan is the Kendig Square Shopping Center Loan ($12.5
million -- 7.7% of the pool), which is secured
by a 260,200 SF anchored retail center located in West Lampeter
Township (Lancaster County), Pennsylvania. The two largest
tenants are K-Mart (33% of the net rentable area (NRA);
lease expiration September 2016) and Weis Market (23% od the NRA;
lease expiration August 2016). The property was 97% leased
as of December 2010 compared to 99% at last review. Moody's
LTV and stressed DSCR are 71% and 1.48X, respectively,
compared to 76% and 1.43X at last review.
The third largest loan is the 1515 Industrial Way Loan ($7.7
million -- 4.7% of the pool), which is secured
by a 225,000 SF industrial building located in Belmont, California.
The property is 100% leased to Novartis until July 2012.
The loan is currently on the watchlist. The loan has passed its
December 11, 2007 anticipated repayment date (ARD). A lockbox
has been put in place and excess cash flow is applied to paydown principal.
Moody's LTV and stressed DSCR are 51% and 2.14X, respectively,
compared to 47% and 2.29X at last review.
The CTL component includes thirty four-loans ($67.7
million -- 42% of the pool) secured by properties leased to
seven tenants under bondable leases. The largest exposures are
CVS/Caremark Corp (33% of the CTL component; Moody's senior
unsecured rating Baa2 - stable outlook) and Sears (28% of
the CTL component; Moody's LT Corporate rating Ba2 - positive
The bottom-dollar weighted average rating factor (WARF) for this
pool is 2,220 compared to 1,766 at last review. WARF
is a measure of the overall quality of a pool of diverse credits.
The bottom-dollar WARF is a measure of the default probability
within the pool.
Structured Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Affirms Five CMBS Classes of CSFB 1997-C2
250 Greenwich Street
New York, NY 10007