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Rating Action:

Moody's Affirms Nine and Downgrades 11 CMBS Classes of MLMT 2005-LC1

05 May 2010

Approximately $1.4 Billion of Structured Securities Affected

New York, May 05, 2010 -- Moody's Investors Service (Moody's) affirmed the ratings of nine classes and downgraded 11 classes of Merrill Lynch Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2005-LC1. The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from loans in special servicing and highly leveraged watchlisted loans, increased credit quality dispersion and concerns about refinancing risk associated with loans approaching maturity in an adverse lending environment. Eleven loans, representing 18% of the pool, mature within the next three years. Four of these loans (3.4% of the pool) have a Moody's stressed debt service coverage ratio (DSCR) below 1.00X.

The affirmations are due to key rating parameters, including Moody's loan-to-value (LTV) ratio, Moody's stressed DSCR and the Herfindahl Index (Herf), remaining within acceptable ranges.

Moody's placed 11 classes of this transaction on review for possible downgrade on April 28, 2010. This rating action concludes that review. The rating action is the result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions.

As of the April 12, 2010 statement date, the transaction's aggregate certificate balance decreased 6% to $1.45 billion from $1.55 billion at securitization. The 139 mortgage loans that collateralize these Certificates range in size from less than 1% to 8% of the pool, with the top ten loans representing 37% of the pool. The pool contains one loan, representing 8% of the pool, with an investment grade underlying rating. Two loans, representing 1% of the pool, have defeased and are secured with U.S. Government securities.

Twenty-nine loans, representing 23% 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; formerly Commercial Mortgage Securities Association) 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.

One loan has been liquidated from the pool since last review, resulting in a $1.25 million loss (69% loss severity). Seven loans, representing 3% of the pool, are currently in special servicing. The largest specially serviced loan is the East Empire Industrial Portfolio in Bend, Oregon ($11.5 million, 0.8% of the pool), which is secured by three industrial buildings totaling 153,240 square feet. The loan was transferred to special servicing in December 2007 and is now real estate owned (REO). An appraisal reduction totaling $4.0 million was realized April 2010.

The remaining six specially serviced loans are secured by a mix of retail, industrial and multifamily properties. Moody's estimates an aggregate $15.5 million loss for the specially serviced loans, which represents an overall 43% expected loss. The servicer has recognized an aggregate $13.8 million appraisal reduction for all seven of the specially serviced loans.

In addition to recognizing losses from specially serviced loans, Moody's has assumed a high default probability on 11 watchlisted loans, representing 4% of the pool, due to declining property performance concerns. Moody's estimates a $9.1 million aggregate loss for these troubled loans (overall 26% expected loss based on 55% probability of default). Moody's rating action recognizes potential uncertainty around the timing and magnitude of loss from these troubled loans.

Moody's was provided with full year 2008 operating statements for 95% of the pool. Moody's weighted average LTV for the conduit pool, excluding specially serviced and troubled loans, is 101% compared to 104% at last review. Although the pool's overall performance has improved slightly since last review, credit quality dispersion has increased. Based on Moody's analysis, 56% of the pool has an LTV greater than 100% compared to 29% at last review and 20% of the pool has an LTV greater than 120% compared to 15% at last review.

Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.40x and 1.02x, respectively, compared to 1.30x and 0.98x at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) and the loans' actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance.

Moody's uses a variation of Herf to measure loan size diversity, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple-notch downgrades under adverse circumstances. The credit neutral Herf score is 43. The pool has a Herf of 38 compared to 40 at last review.

The loan with an underlying rating is the Glendale Galleria Loan ($117 million -- 8.1% of the pool), which is secured by the borrower's interest in a 1.3 million square foot regional mall (661,000 square feet of retail and office collateral) located in Glendale, California. The loan represents a 44% pari-passu interest in a $260 million amortizing loan. There is also a $37 million B Note and $47 million of mezzanine debt held outside the trust. As of December 2009, the property was 95% leased compared to 93% at last review. Financial performance has declined from last review due to lower revenue achievement and higher operating expenses. Moody's current underlying rating and stressed DSCR are Baa1and 1.26X, respectively, compared to A3 and 1.40X at last review.

The top three conduit loans represent 16.3% of the pool. The largest conduit loan is the Colonial Mall Bel Air Loan ($120.2 million -- 8.3%), which is secured by the borrower's interest in a 1.3 million square foot regional mall (1.0 million square feet of collateral) located in Mobile, Alabama. Although property performance has been stable in recent years, same-store in-line tenant sales declined 8% between year-end 2008 and year-end 2009. Moody's current LTV and stressed DSCR are 106% and 0.92x, respectively, compared to 109% and 0.92x at last review.

The second largest conduit loan is the Four Forest Plaza and Lakeside Square Loan ($58.8 million -- 4.1% of the pool), which is secured by two office buildings totaling 792,000 square feet located in Dallas, Texas. Performance has been stable since last review. The borrower has been chronically late in making debt service payments and the loan is currently 30+ days delinquent. The loan's anticipated repayment date (ARD) is November 2010. Moody's LTV and stressed DSCR are 133% and 0.79x, respectively, compared to 122% and 0.91x at last review.

The third largest conduit loan is the CNL-Cirrus MOB Portfolio Loan ($57.7 million -- 4.0% of the pool), which is secured by seven medical office buildings and one surgical center located in Dallas, Texas (six) and Oklahoma City, Oklahoma (two). The portfolio totals 338,000 square feet and was 79% leased as of December 2009 compared to 85% in December 2008. Moody's LTV and stressed DSCR are 111% and 0.94x, respectively, compared to 96% and 1.1x at last review.

Moody's rating action is as follows:

-Class A-2, $77,316,265, affirmed at Aaa, previously assigned Aaa on 1/12/2006;

-Class A-3, $43,000,000, affirmed at Aaa, previously assigned Aaa on 1/12/2006;

-Class A-3FL, $119,667,000, affirmed at Aaa, previously assigned Aaa on 1/12/2006;

-Class A-1A, $210,459,210, affirmed at Aaa, previously assigned Aaa on 1/12/2006;

-Class A-SB, $88,067,000, affirmed at Aaa, previously assigned Aaa on 1/12/2006;

-Class A-4, $425,698,000, affirmed at Aaa, previously assigned Aaa on 1/12/2006;

-Class A-4FC, $25,000,000, affirmed at Aaa, previously assigned Aaa on 1/12/2006;

-Class AM, $154,625,000, affirmed at Aaa, previously assigned Aaa on 1/12/2006;

-Class X, $1,451,829,720, notional, affirmed at Aaa, previously assigned Aaa on 1/12/2006;

-Class AJ, $94,708,000, downgraded to Aa2 from Aaa, previously placed on review for possible downgrade on April 28, 2010;

-Class B, $32,858,000, downgraded to A1 from Aa2, previously placed on review for possible downgrade on April 28, 2010;

-Class C, $15,463,000, downgraded to A2 from Aa3, previously placed on review for possible downgrade on April 28, 2010;

-Class D, $28,992,000, downgraded to Baa1 from A2, previously placed on review for possible downgrade on April 28, 2010;

-Class E, $15,463,000, downgraded to Baa2 from A3, previously placed on review for possible downgrade on April 28, 2010;

-Class F, $25,126,000, downgraded to Ba1 from Baa1, previously placed on review for possible downgrade on April 28, 2010;

-Class G, $19,329,000, downgraded to Ba3 from Baa2, previously placed on review for possible downgrade on April 28, 2010;

-Class H, $21,261,000, downgraded to Caa1 from Baa3, previously placed on review for possible downgrade on April 28, 2010;

-Class J, $7,731,000, downgraded to Caa2 from Ba1, previously placed on review for possible downgrade on April 28, 2010;

-Class K, $5,798,000, downgraded to Caa3 from Ba2, previously placed on review for possible downgrade on April 28, 2010;

-Class L, $5,799,000, downgraded to Ca from Ba3, previously placed on review for possible downgrade on April 28, 2010;

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 review is summarized in a press release dated March 10, 2008.

The principal methodology used in rating and monitoring this transaction is "CMBS: Moody's Approach to Rating Fusion Transactions," published on April 19, 2005 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website. In addition, 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.

New York
Sandra Ruffin
VP - Senior Credit Officer
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 Affirms Nine and Downgrades 11 CMBS Classes of MLMT 2005-LC1
No Related Data.
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