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Rating Action:

Moody's Affirms Six and Upgrades Seven CMBS Classes of SCSC 2004-CCF1

13 Sep 2013

Approximately $165.5 Million of Structured Securities Affected

New York, September 13, 2013 -- Moody's Investors Service affirms six, upgrades seven classes of Schooner Trust, Commercial Mortgage Pass-Through Certificates, Series 2004-CCF1 as follows:

Cl. A-2, Affirmed Aaa (sf); previously on Jan 23, 2004 Definitive Rating Assigned Aaa (sf)

Cl. B, Affirmed Aaa (sf); previously on Apr 18, 2007 Upgraded to Aaa (sf)

Cl. C, Affirmed Aaa (sf); previously on Nov 29, 2012 Upgraded to Aaa (sf)

Cl. D-1, Upgraded to Aaa (sf); previously on Nov 29, 2012 Upgraded to A1 (sf)

Cl. D-2, Upgraded to Aaa (sf); previously on Nov 29, 2012 Upgraded to A1 (sf)

Cl. E, Upgraded to Aaa (sf); previously on Nov 29, 2012 Upgraded to A3 (sf)

Cl. F, Upgraded to Aa3 (sf); previously on Nov 29, 2012 Upgraded to Baa2 (sf)

Cl. G, Upgraded to A3 (sf); previously on Jan 23, 2004 Definitive Rating Assigned Ba2 (sf)

Cl. H, Upgraded to Baa2 (sf); previously on Jan 23, 2004 Definitive Rating Assigned Ba3 (sf)

Cl. J, Upgraded to B1 (sf); previously on Jan 23, 2004 Definitive Rating Assigned B2 (sf)

Cl. K, Affirmed B3 (sf); previously on Jan 23, 2004 Definitive Rating Assigned B3 (sf)

Cl. IO-1, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf)

Cl. IO-2, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf)

RATINGS RATIONALE

The affirmations of the three investment grade P&I classes are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed DSCR and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on our current base expected loss, the credit enhancement level for the affirmed class is sufficient to maintain their current ratings. The affirmation of the one below investment grade P&I class is due to the rating being consistent with Moody's expected losses.

The upgrades of seven P&I classes are due to increased credit support due to amortization and payoffs as well as anticipated paydowns from defeased loans and other loans approaching maturity that are well positioned for refinance. The pool has paid down by 32% since Moody's last review. The entire pool matures by the end of 2013.

The affirmations of the interest-only classes, Classes IO-1 and IO-2, are due to the rating being consistent with the weighted average rating factor (WARF) of their referenced classes.

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 rating action reflects a cumulative base expected loss of 1.2% of the current balance, compared to 2.5% at last review. Moody's base expected loss plus realized loss is now 0.9%, compared to 1.8% at last review. Moody's provides a current list of base losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

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 methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, "Moody's Approach to Rating Canadian CMBS" published in May 2000, and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. 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 CMBS Conduit Model v 2.62 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) 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 (sf) 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 (sf) and B2 (sf), 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessment level, is incorporated for loans with similar credit assessments 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 12 compared to 17 at last review.

In cases where the Herf falls below 20, Moody's also employs the large loan/single borrower methodology. This methodology uses the excel-based Large Loan Model v 8.5 and then reconciles and weights the results from the two models in formulating a rating recommendation. 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 a review utilizing MOST® (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. 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 November 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 August 12, 2013 distribution date, the transaction's aggregate certificate balance has decreased by 64% to $170.5 million from $474.0 million at securitization. The Certificates are collateralized by 32 mortgage loans ranging in size from less than 1% to 12% of the pool. Eight loans representing 17% of the pool have defeased and are secured by Canadian Government securities.

Eight loans, representing 29% 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 performance.

One loan has been liquidated from the pool, resulting in an aggregate realized loss of $2.1 million (24% loss severity). There are currently no loans in special servicing.

Moody's was provided with full year 2011 and partial year 2012 operating results for 96% and 83% of the performing pool respectively. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 59% compared to 62% at last 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 10.0%.

Moody's actual and stressed DSCRs are 1.66X and 1.92X, respectively, compared to 1.60X and 1.83X 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 conduit loans represent 33% of the pool balance. The largest loan is the Fortis Portfolio Loan ($22.1 million -- 13% of the pool), which is secured by four Holiday Inn hotels located in multiple cities in southern Ontario. The loan is amortizing on a 264-month schedule maturing in November 2013. The loan has paid down 26% since securitization. Moody's LTV and stressed DSCR are 64% and 1.90X, respectively, compared to 54% and 2.23X at review.

The second largest loan is the Cherry Lane Shopping Centre Loan ($20.7 million -- 12% of the pool), which is secured by a 269,716 SF anchored retail center located in Penticton, BC. The loan is amortizing on a 300-month schedule maturing in December 2013. The loan has paid down 23% since securitization. The loan is on the watchlist for the largest tenant, The Bay (35% of the NRA), with a lease expiration in June 2013, however, they have extended their lease to June 2023. Moody's LTV and stressed DSCR are 50% and 2.17X, respectively, compared to 51% and 2.12X at last review.

The third largest loan is the Merivale Place Loan ($13.7 million -- 8% of the pool), which is secured by a 157,657 SF shopping mall located in Ontario. The property was 100% leased as of January 2012, the same as of January 2011. Performance has been steadily improving over the past three years. Moody's LTV and stressed DSCR are 51% and 2.12X, respectively, compared to 55% and 1.96X at 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Dana Baranaskas
Associate Analyst
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 Six and Upgrades Seven CMBS Classes of SCSC 2004-CCF1
No Related Data.
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