Approximately $379.7 Million of Structured Securities Affected
New York, August 29, 2013 -- Moody's Investors Service affirmed the ratings of ten classes, upgraded
four classes and downgraded one class of Greenwich Capital Commercial
Funding Corporation, Commercial Mortgage Pass-Through Certificates,
Series 2003-C2 as follows:
Cl. A-4, Affirmed Aaa (sf); previously on Jan
14, 2004 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed Aaa (sf); previously on Aug 17,
2006 Upgraded to Aaa (sf)
Cl. C, Affirmed Aaa (sf); previously on Jul 23,
2007 Upgraded to Aaa (sf)
Cl. D, Upgraded to Aaa (sf); previously on Sep 25,
2008 Upgraded to Aa1 (sf)
Cl. E, Upgraded to Aaa (sf); previously on Jul 23,
2007 Upgraded to Aa3 (sf)
Cl. F, Upgraded to Aa2 (sf); previously on Jul 23,
2007 Upgraded to A2 (sf)
Cl. G, Upgraded to A3 (sf); previously on Jul 23,
2007 Upgraded to Baa1 (sf)
Cl. H, Affirmed Ba1 (sf); previously on Jan 6,
2012 Downgraded to Ba1 (sf)
Cl. J, Affirmed B3 (sf); previously on Dec 20,
2012 Downgraded to B3 (sf)
Cl. K, Affirmed Caa2 (sf); previously on Dec 20,
2012 Downgraded to Caa2 (sf)
Cl. L, Affirmed Ca (sf); previously on Dec 20,
2012 Downgraded to Ca (sf)
Cl. M, Affirmed C (sf); previously on Dec 20,
2012 Downgraded to C (sf)
Cl. N, Affirmed C (sf); previously on Dec 20,
2012 Downgraded to C (sf)
Cl. O, Affirmed C (sf); previously on Feb 3, 2011
Downgraded to C (sf)
Cl. XC, Downgraded to Caa1 (sf); previously on Feb 22,
2012 Downgraded to Ba3 (sf)
RATINGS RATIONALE
The upgrade of four investment grade classes is due to increased credit
support as the result of significant pay downs, including the $120.2
million US Bank loan, amortization and the anticipated pay downs
of $152.2 million of defeased loans and other loans approaching
maturity.
The affirmation of three investment grade P&I classes is due to key
parameters, including Moody's loan to value (LTV) ratio, Moody's
stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf),
remaining within acceptable ranges. The ratings of the below investment
grade P&I classes are consistent with Moody's expected loss and thus
are affirmed. Based on our current base expected loss, the
credit enhancement levels for the affirmed classes are sufficient to maintain
their current ratings.
The IO Class, Class XC, is downgraded based on the weighted
average rating factor (WARF) of its referenced classes incorporating the
expected pay downs of $152.2 million of defeased loans and
loans approaching maturity.
Depending on the timing of loan payoffs and the severity and timing of
losses from specially serviced loans, the credit enhancement level
for rated 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 base expected loss of 13.4%
of the current balance compared to 8.2% at last review.
While the base expected loss percentage increased due to the 56%
pay down since last review, the base expected numeric loss declined
$18.9 million. Moody's base plus realized losses
totals 4.7% of the original balance compared to 5.7%
at last review. Moody's provides a current list of base expected
losses for conduit and fusion CMBS transactions on moodys.com at
http://www.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.
The methodologies used in this rating were "Moody's Approach to Rating
U.S. CMBS Conduit Transactions" published in September 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 pay down 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 14
compared to 10 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 December 20,
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 07, 2013 distribution date, the transaction's
aggregate certificate balance has decreased 56% to $379.7
million from $1.7 billion at securitization. The
Certificates are collateralized by 30 mortgage loans ranging in size from
less than 1% to 45% of the pool. There are six defeased
loans, representing 40% of the pool, that are backed
by U.S. government securities. All six defeased loans
mature by December 5, 2013. There are no loans with an investment
grade credit assessment.
There are presently nine loans, representing 22% of the pool,
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.
Seven loans have been liquidated from the pool since securitization,
resulting in an aggregate $29.9 million loss (47.3%
loss severity on average). Currently six loans, representing
17% of the pool, are in special servicing and are secured
by a mix of property types. Moody's estimates an aggregate $41.9
million loss for the specially serviced loans (65% expected loss
on average).
Moody's was provided with full year 2012 and partial year 2013 operating
results for 100% and 67% of the performing pool, respectively.
Excluding specially serviced loans, Moody's weighted average conduit
LTV is 84% compared to 96% at last review. Moody's
net cash flow reflects a weighted average haircut of 11.9%
to the most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 10.2%.
Excluding specially serviced loans, Moody's actual and stressed
conduit DSCRs are 1.40X and 1.36X, respectively,
compared to 1.24X and 1.18X, respectively, at
last full 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 17% of the pool
balance. The largest conduit loan is the Generation Company Hotel
Portfolio Loan ($32.5 million -- 8.6%
of the pool), which is secured by the borrower's interest in a nine
property portfolio of Candlewood and Suburban Lodge hotels in Virginia
and North Carolina. These hotels were 71% occupied as of
December 2012; the same as at last review. Financial performance
had declined between 2010 and 2011 but December 2012 financial results
suggest improvement. Moody's LTV and stressed DSCR are 92%
and 1.42X, respectively, compared to 94% and
1.38X at last review. The servicer expects this loan to
pay off on October 1, 2013.
The second largest conduit loan is the Manaport Plaza Loan ($18.7
million -- 4.9% of the pool), which is secured
by a 249,547 SF strip retail center located in Manassas, Virginia.
The property was 90% leased as of June 2013; the same as at
last review. The three largest tenants are Food Lion, Marshalls
and Advance Auto Parts. All three tenants have long-term
leases in place. Moody's LTV and stressed DSCR are 75% and
1.38X respectively, compared to 79% and 1.3X
at last review.
The third largest conduit loan is the 8670 Wilshire Boulevard Loan ($13.6
million -- 3.6% of the pool), which is secured
by a 53,981 SF medical office building located in Beverly Hills,
California. The property was 95% leased as of August 2013
compared to 100% at last review. Financial performance increased
between 2011 and 2012 and significant recent leasing activity has limited
the prior lease expiration risk at this property. This loan matures
December 2013. Moody's LTV and stressed DSCR are 66% and
1.64X respectively, compared to 72% and 1.5X
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.
In conducting surveillance of this credit, Moody's considered performance
data contained in servicer and remittance reports. Moody's obtains
servicer reports on this transaction on a periodic basis, at least
annually.
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.
Gregory Reed
Vice President - Senior 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 Ten Classes, Upgrades Four and Downgrades One CMBS Class of GCCFC 2003-C2
