Approximately $835 Million of Structured Securities Affected
New York, February 06, 2013 -- Moody's Investors Service (Moody's) affirmed nine classes of Credit Suisse
First Boston Mortgage Securities Corp. Commercial Mortgage Pass-Through
Certificates, Series 2007-TFL2. Moody's rating action
is as follows:
Cl. A-1, Affirmed A2 (sf); previously on Sep
16, 2010 Confirmed at A2 (sf)
Cl. A-2, Affirmed B1 (sf); previously on Apr
28, 2011 Downgraded to B1 (sf)
Cl. A-3, Affirmed B2 (sf); previously on Apr
28, 2011 Downgraded to B2 (sf)
Cl. B, Affirmed B3 (sf); previously on Apr 28,
2011 Downgraded to B3 (sf)
Cl. C, Affirmed Caa1 (sf); previously on Apr 28,
2011 Downgraded to Caa1 (sf)
Cl. D, Affirmed Caa3 (sf); previously on Apr 28,
2011 Downgraded to Caa3 (sf)
Cl. E, Affirmed C (sf); previously on Sep 16,
2010 Downgraded to C (sf)
Cl. A-X-1, Affirmed Caa1 (sf); previously
on Feb 22, 2012 Downgraded to Caa1 (sf)
Cl. A-X-2, Affirmed B2 (sf); previously
on Feb 22, 2012 Downgraded to B2 (sf)
RATINGS RATIONALE
The affirmations were due to key parameters, including Moody's loan
to value (LTV) ratio and Moody's stressed debt service coverage ratio
(DSCR), remaining within acceptable ranges. The ratings of
the interest-only classes are consistent with the expected credit
performance of the referenced classes or loans, and thus are affirmed.
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 growth in
the current macroeconomic environment given the weak pace of recovery
and commercial real estate property markets. Commercial real estate
property values are continuing to move in a modestly positive direction
along with a rise in investment activity and stabilization in core property
type performance. Limited new construction and moderate job growth
have aided this improvement. However, a consistent upward
trend will not be evident until the volume of investment activity steadily
increases for a significant period, non-performing properties
are cleared from the pipeline, and fears of a Euro area recession
are abated.
The hotel sector is performing strongly with nine straight quarters of
growth and the multifamily sector continues to show increases in demand
with a growing renter base and declining home ownership. Recovery
in the office sector continues at a measured pace with minimal additions
to supply. However, office demand is closely tied to employment,
where growth remains slow and employers are considering decreases in the
leased space per employee. Also, primary urban markets are
outperforming secondary suburban markets. Performance in the retail
sector continues to be mixed with retail rents declining for the past
four years, weak demand for new space and lackluster sales driven
by internet sales growth. Across all property sectors, the
availability of debt capital continues to improve with robust securitization
activity of commercial real estate loans supported by a monetary policy
of low interest rates.
Moody's central global macroeconomic scenario is for continued below-trend
growth in US GDP over the near term, with consumer spending remaining
soft in the US. Hurricane Sandy may skew near-term economic
data but is unlikely to have any long-term macroeconomic effects.
Primary downside risks include: a deeper than expected recession
in the euro area accompanied by deeper credit contraction; the potential
for a hard landing in major emerging markets, including China,
India and Brazil; an oil supply shock; albeit abated in recent
months; and given recent political gridlock, excessive fiscal
tightening in the US in 2013 leading the US into recession. However,
the Federal Reserve has shown signs of support for activity by continuing
with quantitative easing.
The principal methodology used in this rating was "Moody's Approach to
Rating CMBS Large Loan/Single Borrower Transactions" published in July
2000. The methodology used in rating Interest-Only Securities
was "Moody's Approach to Rating Structured Finance Interest-Only
Securities" published in February 2012. The Interest-Only
Methodology was used for the ratings of Classes A-X-1 and
A-X-2. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.
Moody's review incorporated the use of the excel-based Large Loan
Model v 8.5. 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 incorporates the CMBS
IO calculator ver1.1, which uses the following inputs to
calculate the proposed IO rating based on the published methodology:
original and current bond ratings and credit assessments; original
and current bond balances grossed up for losses for all bonds the IO(s)
reference(s) within the transaction; and IO type corresponding to
an IO type as defined in the published methodology. The calculator
then returns a calculated IO rating based on both a target and mid-point
. For example, a target rating basis for a Baa3 (sf) rating
is a 610 rating factor. The midpoint rating basis for a Baa3 (sf)
rating is 775 (i.e. the simple average of a Baa3 (sf) rating
factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated
IO rating factor is 700, the CMBS IO calculator ver1.0 would
provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration
by the rating committee.
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 a review utilizing MOST®
(Moody's Surveillance Trends) Reports and Remittance Statements.
On a periodic basis, Moody's also performs a full transaction review
that involves a rating committee and a press release. Moody's prior
transaction review is summarized in a press release dated March 21,
2012. 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 January 15, 2013 distribution date, the transaction's
certificate balance decreased by approximately 41% to $718.2
million from $1.52 billion at securitization due to the
payoff of four loans, the liquidation of two loans, and partial
paydowns of the remaining two loans in the pool. Since last review,
two loans paid off. The pool is comprised of two floating-rate
loans one secured by a casino hotel (60% of the pooled balance)
and the other is secured by an office portfolio (40%).
Classes A-3 through L have experienced significant interest shortfalls
totaling $8.0 million as of the January 2013 distribution
date. Moody's expects the interests shortfalls associated the Resorts
Atlantic City loan and the Bicayne Landing loan to remain permanent.
Interest shortfalls are caused by special servicing fees, including
workout and liquidation fees, appraisal subordinate entitlement
reductions (ASERs) and extraordinary trust expenses.
Currently, there is one specially serviced loan, the Whitehall
Seattle Portfolio loan ($290.4 million, 40%
of the pooled balance).
The pool has experienced $290.4 million in losses since
securitization due to losses from the liquidation of both the Resorts
Atlantic City loan and the Biscayne Landing loan. Classes F,
G, H, J, K, and L have been wiped out.
Moody's weighed average pooled loan to value (LTV) ratio is 88%,
compared to over 92% at last review and 63% at securitization.
Moody's pooled stressed debt service coverage (DSCR) is 1.30X compared
to 1.24X to last review and 1.31X at securitization.
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. Large loan transactions have
a Herf of less than 20. The pool has a Herf of 2, compared
to 3 at last review.
The largest loan in the pool is the Planet Hollywood loan ($427.8
million, 60% of the pooled balance) is collateralized by
a 2,516 guestroom hotel and casino located on Las Vegas Boulevard
in Las Vegas, Nevada. The property hit hard times in the
recession, but was recapitalized by Harrah's Entertainment
in 2010 and the loan was modified. The property net cash flow has
rebounded to $65.9 million for the trailing twelve month
period ending September 2012 which is up due to a 1.6% increase
in gaming revenue over year end 2011 which resulted in a 6% increase
to the net cash flow over the same time period. The property was
appraised for $775 million in September 2011. There is additional
debt in the form of a subordinate $94.4 million B-Note.
Loan maturity is December 2013. Moody's current pooled LTV is 97%
and stressed DSCR is 1.50X. Moody's current credit assessment
is B3, the same as last review.
The pool's other loan is The Whitehall Seattle Portfolio loan ($290.4
million, 40% of the pooled balance) which transferred to
special servicing in December 2011 and is collateralized by eleven office
properties in Seattle, Washington. As of December 2012,
the occupancy was 58% which is down from 64% at last review
and 92% at securitization. The net cash flow has continued
to decrease since securitization. A March 2012 appraisal valued
the portfolio at $617 million. There is subordinate debt
in the form of a $173.8 million B-Note and $430.2
million of mezzanine debt. The loan has passed the April 2012 final
maturity date and the borrower and special servicer are currently in discussions.
A receiver was appointed in July 2012. Moody's current pooled LTV
is 92% and stressed DSCR is 1.00X. Moody's current
credit assessment is B2, the same as last review.
REGULATORY DISCLOSURES
Moody's did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments related to the monitoring of this transaction
in the past six months.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 certain 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 certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Annelise Osborne
VP - Senior Credit Officer
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 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 Nine CMBS Classes of CSFB 2007-TFL2
