Approximately $234 Million of Structured Securities Affected
New York, May 12, 2016 -- Moody's Investors Service has affirmed the ratings on ten classes and
upgraded the ratings on two classes in Schooner Trust Commercial Mortgage
Pass-Through Certificates, Series 2007-7 as follows:
Cl. A-2, Affirmed Aaa (sf); previously on May
29, 2015 Affirmed Aaa (sf)
Cl. B, Affirmed Aaa (sf); previously on May 29,
2015 Affirmed Aaa (sf)
Cl. C, Upgraded to Aa1 (sf); previously on May 29,
2015 Affirmed Aa2 (sf)
Cl. D, Upgraded to Baa1 (sf); previously on May 29,
2015 Affirmed Baa2 (sf)
Cl. E, Affirmed Baa3 (sf); previously on May 29,
2015 Affirmed Baa3 (sf)
Cl. F, Affirmed Ba1 (sf); previously on May 29,
2015 Affirmed Ba1 (sf)
Cl. G, Affirmed Ba2 (sf); previously on May 29,
2015 Affirmed Ba2 (sf)
Cl. H, Affirmed Ba3 (sf); previously on May 29,
2015 Affirmed Ba3 (sf)
Cl. J, Affirmed B2 (sf); previously on May 29,
2015 Affirmed B2 (sf)
Cl. K, Affirmed Caa1 (sf); previously on May 29,
2015 Affirmed Caa1 (sf)
Cl. L, Affirmed Caa2 (sf); previously on May 29,
2015 Affirmed Caa2 (sf)
Cl. XC, Affirmed Ba3 (sf); previously on May 29,
2015 Affirmed Ba3 (sf)
RATINGS RATIONALE
The ratings on two P&I classes, Class C and D, were upgraded
primarily due to Moody's expectation of increases in credit support
resulting from the payoff of loans approaching maturity that are well
positioned for refinance. Loans constituting 82% of the
pool that have debt yields exceeding 10.0% are scheduled
to mature within the next 12 months.
The ratings on P&I classes A-2, B and E through J 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 ratings on
Classes K and L were affirmed because the ratings are consistant with
Moody's expected loss.
The rating on the IO class, Class XC, was affirmed based on
the credit performance (or the weighted average rating factor or WARF)
of the referenced classes.
Moody's rating action reflects a base expected loss of 2.8%
of the current balance, compared to 3.0% at Moody's
last review. Moody's base expected loss plus realized losses is
now 1.6% of the original pooled balance, compared
to 1.7% 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 Ratings Methodologies
page on www.moodys.com for a copy of these methodologies.
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 17,
compared to 18 at the prior 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, property type and sponsorship. 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 April 12th, 2016 distribution date, the transaction's
aggregate certificate balance has decreased by 44% to $239
million from $428 million at securitization. The certificates
are collateralized by 46 mortgage loans ranging in size from less than
1% to 15% of the pool, with the top ten loans constituting
57% of the pool. Two loans, constituting 3%
of the pool, have defeased and are secured by government securities.
Eighteen loans, constituting 36% 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 loan has been liquidated from the pool, resulting in an aggregate
realized loss of $6,223 (for a loss severity of 1.2%).
There are currently no loans in special servicing.
Moody's has assumed a high default probability for 3 poorly performing
loans, constituting 5% of the pool, and has estimated
an aggregate loss of $1.8 million (a 15% expected
loss based on a 50% probability default) from these troubled loans.
Moody's received full year 2014 operating results for 94% of the
pool and full or partial year 2015 operating results for 37% of
the pool. Moody's weighted average conduit LTV is 81%,
compared to 82% 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 15% to the most recently available net operating income (NOI).
Moody's value reflects a weighted average capitalization rate of
9%.
Moody's actual and stressed conduit DSCRs are 1.46X and 1.37X,
respectively, compared to 1.49X and 1.35X 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% of the pool balance.
The largest loan is the MTS Building Loan ($36 million --
15% of the pool), which is secured by two adjacent office
buildings located in downtown Winnipeg. One of the two buildings
serves as MTS Allstream's corporate headquarters, and they occupy
89% of the total net rentable area with a lease expiration in 2021.
The properties are 100% leased as of March 2016, the same
as at last review. Moody's LTV and stressed DSCR are 87%
and 1.08X, respectively, compared to 89% and
1.07X at the last review
The second largest loan is the Aviva Insurance Complex Loan ($27
million -- 11% of the pool), which is secured
by a mixed-use complex comprised of two office buildings,
ground retail and an industrial building. The property was 93%
leased as of May 2015, compared to 100% in March 2013.
Aviva Canada Inc., the property's largest tenant (73%
of net rental area), is due to vacate the property at their lease
expiration in September 2017. Moody's factored the upcoming
lease rollover into its analysis. Moody's LTV and stressed DSCR
are 99% and 0.99X, respectively, compared to
101% and 0.96X at the last review.
The third largest loan is the Milner Professional Loan ($14 million
-- 6% of the pool), which is secured by an
office building with ground floor retail tenants in Toronto. The
property was 76% leased as of April 2016, compared to 80%
in May 2015. Moody's LTV and stressed DSCR are 109% and
0.89X, respectively, compared to 110% and 0.88X
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.
Leah Zulkoski
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
AVP-Analyst/Manager
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 and Upgrades Two Classes of Schooner 2007-7
