Approximately $100.7 Million of Structured Securities Affected
New York, February 24, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of nine classes
Credit Suisse First Boston Mortgage Securities Corp., Commercial
Mortgage Pass-Through Certificates, Series 2003-CK2
Cl. F, Affirmed at Aa2 (sf); previously on Feb 25,
2010 Confirmed at Aa2 (sf)
Cl. G, Affirmed at A2 (sf); previously on Feb 25,
2010 Confirmed at A2 (sf)
Cl. H, Affirmed at Baa3 (sf); previously on Feb 25,
2010 Downgraded to Baa3 (sf)
Cl. J, Affirmed at B1 (sf); previously on Feb 25,
2010 Downgraded to B1 (sf)
Cl. K, Affirmed at Caa3 (sf); previously on Feb 25,
2010 Downgraded to Caa3 (sf)
Cl. L, Affirmed at Ca (sf); previously on Feb 25,
2010 Downgraded to Ca (sf)
Cl. N, Affirmed at C (sf); previously on Feb 25,
2010 Downgraded to C (sf)
Cl. O, Affirmed at C (sf); previously on Feb 25,
2010 Downgraded to C (sf)
Cl. GLC, Affirmed at Ba3 (sf); previously on Feb 25,
2010 Downgraded to Ba3 (sf)
Moody's rating action did not address the ratings of Classes A-3,
A-4, B, C, D, E and A-X, which
are all currently rated Aaa, on review for possible downgrade.
These classes were placed on review on January 19, 2011.
KeyCorp Real Estate Capital Markets, Inc. (KRECM) is the
master servicer on this transaction and deposits collection, escrow
and other accounts in KeyBank, National Association (KeyBank).
KeyBank no longer meets Moody's rating criteria for an eligible depository
account institution for Aaa and Aa1 rated securities. Moody's is
reviewing arrangements that KeyBank has proposed, and that it may
propose, to mitigate the incremental risk indicated by the lower
rating of the depository account institution, so as possibly to
allow the classes on review to maintain their current ratings.
The affirmations are due to key rating parameters, including Moody's
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
Moody's rating action reflects a cumulative base expected loss of
5.9% of the current balance. At last review,
Moody's cumulative base expected loss was 7.1%.
Moody's stressed scenario loss is 8.8% 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 methodology used in this rating was: "CMBS:
Moody's Approach to Rating U.S. Conduit Transactions
" published on September 15, 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 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 20
compared to 21 at Moody's prior 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 February 25, 2010.
Please see the ratings tab on the issuer / entity page on moodys.com
for the last rating action and the ratings history.
As of the February 17, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 36% to $637.9
million from $1.0 billion at securitization. The
Certificates are collateralized by 79 mortgage loans ranging in size from
less than 1% to 12% of the pool, with the top ten
loans representing 51% of the pool. Twelve loans,
representing 21% of the pool, have defeased and are collateralized
with U.S. Government securities.
Ten loans, representing 6% 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
Six loans have been liquidated from the pool, resulting in an aggregate
$10.5 million realized loss (47% loss severity on
average). Three loans, representing 9% of the pool,
are currently in special servicing. The largest specially serviced
loan is the 2300 Imperial Building Loan ($25.6 million --
4.0% of the pool), which is secured by a 157,225
square foot office building located in El Segundo, California.
The loan was transferred to special servicing in November 2009 due to
payment default. The property was 48% leased as of December
2009. The property has become REO. The most recent appraisal
(January 2010) valued the property at $23.9 million.
The second largest specially serviced loan is the Michigan Commercial
Portfolio Loan ($25.0 million - 3.9%
of the pool), which is secured by a portfolio of 16 Class B office
buildings and one retail building, all located in and around Lansing,
Michigan. The loan was transferred to special servicing in May
2008 due to imminent monetary default and has become REO. The property
was 68% leased as of October 2010, compared to 77%
at last review. The most recent appraisal (March 2010) valued the
property at $15.7 million.
The remaining specially serviced loan is secured by a multifamily property
located in Melbourne, Florida. The master servicer has recognized
appraisal reductions totaling $19.6 million for the specially
serviced loans. Moody's has estimated an aggregate $25.3
million loss (44% expected loss on average) for the specially serviced
Moody's has assumed a high default probability for three poorly
performing loans representing 3% of the pool and has estimated
a $4.0 million loss (25% expected loss based on a
50% probability default).
Moody's was provided with full year 2009 and partial year 2010 operating
results for 97% and 86% of the pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 81% compared to 85% at Moody's prior
review. Moody's net cash flow reflects a weighted average
haircut of 14% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.48X and 1.33X, respectively,
compared to 1.44X and 1.25X 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 Great Lakes Crossing Loan ($76.3
million -- 12.0% of the pool), which represents
a 60% participation interest in a $127.2 million
first mortgage loan. The loan is secured by the borrower's interest
in a 1.1 million square foot value oriented shopping center located
approximately 30 miles north of Detroit in Auburn Hills, Michigan.
The center is anchored by Bass Pro Shops and AMC Theatre, which
are not part of collateral. The largest collateral tenants are
Burlington Coat Factory, Sports Authority and Bed Bath & Beyond.
The center is also encumbered by a B-note which is the security
for the non-pooled Class GLC. As of June 2010, the
center was 76% leased compared to 82% at last review and
91% at securitization. Performance has declined since last
review due to higher vacancy and increased expenses. The decline
in performance has been partially offset by amortization. The loan
has amortized by 3% since last review. Moody's LTV and stressed
DSCR for the A-note are 83% and 1.2X, respectively,
compared to 82% and 1.23X at last review.
The second largest loan is the Museum Square Loan ($50.2
million - 7.9% of the pool), which is secured
by a 522,362 square foot office building located in Los Angeles,
California. The property was 91% leased as of September
2010 compared to 89% at last review. Performance has improved
since last review due to increased revenues, stable expenses and
amortization. The loan has amortized by 2% since last review.
Moody's LTV and stressed DSCR are 66% and 1.64X, respectively,
compared to 74% and 1.47X at last review.
The third largest loan is the BAE Systems Building Loan ($23.3
million - 3.7% of the pool), which is secured
by a 133,806 square foot office building located in Reston,
Virginia. The building is 100% leased to BAE Systems (BAE)
through October 2012. The loan also matures in October 2012.
Although property performance has been stable, Moody's valuation
incorporates a stressed cash flow to reflect the decline in the market
conditions. Moody's LTV and stressed DSCR are 115% and 0.89X,
respectively, compared to 118% and 0.87X at last review
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
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purpose of maintaining
a credit rating.
Asst Vice President - Analyst
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 Nine CMBS Classes of CSFB 2003-CK2
250 Greenwich Street
New York, NY 10007