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I AGREE
23 Mar 2011
Approximately $1.438 Billion of Structured Securities Affected
New York, March 23, 2011 -- Moody's Investors Service (Moody's) affirmed the rating of one pooled
class and downgraded two pooled classes of Merrill Lynch Floating Trust
Commercial Mortgage Pass-Through Certificates, Series 2008-LAQ
as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on
Mar 28, 2008 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Downgraded to Baa1 (sf); previously
on May 12, 2010 Downgraded to A1 (sf)
Cl. A-3, Downgraded to Baa3 (sf); previously
on May 12, 2010 Downgraded to Baa1 (sf)
RATINGS RATIONALE
The downgrades are a result of lower-than-expected property
performance improvement and the resulting high leverage of the loan that
matures in July 2012 . The affirmation of the most senior class
is due to key parameters, including Moody's loan to value (LTV)
ratio remaining within an acceptable range.
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 "Moody's Approach to
Rating Large Loan/Single Borrower Transactions" published in July 2000.
Moody's review incorporated the use of 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.
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 12, 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 six months.
DEAL PERFORMANCE
As of the March 9, 2011 distribution date, the transaction's
aggregate certificate balance remains effectively the same at $1.44
billion since securitization. In addition to the trust debt there
is a non-trust junior participation interest and mezzanine loan
for a total of $3.05 billion in total debt outstanding.
The transaction is secured by a cross-collateralized and cross-defaulted
floating rate mortgage loan secured by 355 properties totaling 44,110
guestrooms. The limited service hotel chain is operated under three
brands (La Quinta Inn, La Quinta Inn and Suites, and Baymont
Inn and Suites) located in 35 states. The loan's current
maturity date is July 2011 and the final maturity date including an extension
option is July 2012. The sponsor of the loan is The Blackstone
Group.
The portfolio achieved Revenue per Available Room (RevPAR) of $36.92
in 2010, almost flat to that of 2009 of $36.86.
The loan's EBIDTA for the calendar year 2010 was $255.3
million compared to that of year-end 2009 at $253.4
million. However, the month of January 2011 EBIDTA was $13.5
million, up 15% from $11.7 million in January
2010. The full year 2011 budgeted EBIDTA is $277.5
million. The overall US lodging sector continues to recover from
steep declines experienced in 2009 and 2010. And the portfolio's
January comparison between 2011 and 2010 reflects this positive trend.
The portfolio's net cash flow (NCF) after replacement reserves and
management fees for 2010 was $204 million, well below Moody's
NCF assumption of $237 million at last review. Moody's
did anticipate that the portfolio would continue to struggle during the
early part of 2010 bust also factored in a stronger rebound in the latter
half. Based on the most recent financial data, the Moody's
2011 Review NCF is $224 million, which would be in line with
2011 budgeted NCF.
Moody's weighted average trust loan to value (LTV) ratio is 75%
compared to 73% at last review. Moody's stressed debt service
coverage ratio (DSCR) for the trust is at 1.68X compared to 1.78X
at last review. The trust has not experienced any losses since
securitization.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's Investors
Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Eun Jee Park
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 Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Affirms One and Downgrades Two CMBS Classes of MLFT 2008-LAQ
No Related Data.
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