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Rating Action:

Moody's Affirms Ten and Upgrades Two Classes of MLFA 2007-Canada 22

Global Credit Research - 17 Mar 2017

Approximately $88.5 Million of Structured Securities Affected

New York, March 17, 2017 -- Moody's Investors Service has affirmed the ratings on ten classes and upgraded the ratings on two classes in Merrill Lynch Financial Assets Inc. Commercial Mortgage Pass-Through Certificates, Series 2007-Canada 22 as follows:

Cl. A-3, Affirmed Aaa (sf); previously on Mar 31, 2016 Affirmed Aaa (sf)

Cl. B, Affirmed Aaa (sf); previously on Mar 31, 2016 Affirmed Aaa (sf)

Cl. C, Upgraded to Aa2 (sf); previously on Mar 31, 2016 Affirmed Aa3 (sf)

Cl. D, Upgraded to A3 (sf); previously on Mar 31, 2016 Affirmed Baa1 (sf)

Cl. E, Affirmed Baa2 (sf); previously on Mar 31, 2016 Affirmed Baa2 (sf)

Cl. F, Affirmed Ba1 (sf); previously on Mar 31, 2016 Affirmed Ba1 (sf)

Cl. G, Affirmed Ba3 (sf); previously on Mar 31, 2016 Affirmed Ba3 (sf)

Cl. H, Affirmed B2 (sf); previously on Mar 31, 2016 Affirmed B2 (sf)

Cl. J, Affirmed Caa1 (sf); previously on Mar 31, 2016 Affirmed Caa1 (sf)

Cl. K, Affirmed Caa2 (sf); previously on Mar 31, 2016 Affirmed Caa2 (sf)

Cl. L, Affirmed Caa3 (sf); previously on Mar 31, 2016 Affirmed Caa3 (sf)

Cl. XC, Affirmed Ba3 (sf); previously on Mar 31, 2016 Affirmed Ba3 (sf)

RATINGS RATIONALE

The ratings of Classes C and D were upgraded based primarily on an increase in credit support resulting from paydowns and loan amortization. The deal has paid down 58% since Moody's last review.

The ratings on nine P&I classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf) are within acceptable ranges.

The rating on the IO class, Class XC, was affirmed because of the credit performance (or weighted average rating factor or WARF) of its referenced classes.

Moody's rating action reflects a base expected loss of 2.3% of the current balance, compared to 2.6% at Moody's last review. Moody's base expected loss plus realized losses is now 1.2% of the original pooled balance, compared to 2.1% at the 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.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.

Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.

Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.

METHODOLOGY UNDERLYING THE RATING ACTION

The methodologies used in these ratings were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in December 2014, and "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in October 2015. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Additionally, the methodology used in rating Cl. XC was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in October 2015. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Please note that on February 27, 2017, Moody's released a "Request for Comment" in which it has requested market feedback on proposed changes to its methodology for rating structured finance interest-only (IO) securities called "Moody's Approach to Rating Structured Finance Interest-Only Securities," dated October 20, 2015. If Moody's adopts the new methodology as proposed, the changes could affect the ratings of MLFA 2007-Canada 22. Please see "Moody's Proposes Revised Approach to Rating Structured Finance Interest-Only (IO) Securities", which is available at www.moodys.com, for more information about the implications of the proposed changes to the methodology on Moody's ratings.

DESCRIPTION OF MODELS USED

Moody's review used the excel-based CMBS Conduit Model, which it uses for both conduit and fusion transactions. Credit enhancement levels for conduit loans are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Moody's fuses the conduit results with the results of its analysis of investment grade structured credit assessed loans and any conduit loan that represents 10% or greater of the current pool balance.

Moody's uses a variation of Herf to measure the diversity of loan sizes, 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 40. The pool has a Herf of seven, compared to 20 at Moody's last review.

When the Herf falls below 20, Moody's uses the excel-based Large Loan Model and then reconciles and weights the results from the conduit and large loan 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, and property type. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations.

DEAL PERFORMANCE

As of the March 13, 2017 distribution date, the transaction's aggregate certificate balance has decreased by 79% to $92.5 million from $434.4 million at securitization. The certificates are collateralized by 19 mortgage loans ranging in size from less than 1% to 14.6% of the pool, with the top ten loans (excluding defeasance) constituting 56% of the pool. Seven loans, constituting 42% of the pool, have defeased and are secured by US government securities.

Twelve loans, constituting 58% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance.

One loans have been liquidated from the pool, resulting in an aggregate realized loss of $3.2 million (for a loss severity of 43.5%).

Moody's has assumed a high default probability for two poorly performing loans, constituting 9.5% of the pool, and has estimated an aggregate loss of $1.8 million (a 20% expected loss based on a 50% probability default) from these troubled loans.

Moody's received full or partial year 2015 operating results for 83% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 87%, compared to 85% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 14.2% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.2%.

Moody's actual and stressed conduit DSCRs are 1.35X and 1.26X, respectively, compared to 1.41X and 1.27X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance.

The top three conduit loans represent 32.4% of the pool balance. The largest loan is the Station Park London Loan ($13.5 million -- 14.6% of the pool), which is secured by four office buildings and a retail property located in the CBD of London, Ontario and are part of a mixed-use development. The property was 73% occupied as of the January 2017 rent roll. Moody's LTV and stressed DSCR are 114% and 0.86X, respectively, compared to 116% and 0.84X at the last review.

The second largest loan is the Yorkgate Mall Loan ($10.0 million -- 10.9% of the pool), which represents a pari passu portion of a $20.1 million mortgage loan. The loan is secured by a 217,000 SF enclosed shopping mall located in Toronto, Ontario, Canada. The property is grocery anchored and was built in 1990. The property's largest tenant, Designer Depot, went bankrupt in 2016, but the space has been partially re-leased to Planet Fitness. Moody's LTV and stressed DSCR are 71% and 1.33X, respectively, compared to 72% and 1.32X at the last review.

The third largest loan is the Hotel Gouverneur Pooled Pari Passu Interest Loan ($6.4 million -- 7.0% of the pool), which represents a pari passu portion of a $18.4 million mortgage loan. The loan is secured by a 352 key hotel located in Montreal, Quebec, Canada. The most-recent financial information from December 2015 lists the property as having had an occupancy rate of 71%. Moody's LTV and stressed DSCR are 85% and 1.47X, respectively, compared to 96% and 1.30X at the last review.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.

Moody's did not use any stress scenario simulations in its analysis.

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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.

Aaron Dresher
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

Matthew Halpern
Asst Vice President - Analyst
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

No Related Data.
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