Approximately $91.9 Million of Structured Securities Affected
New York, April 22, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of three classes
of Credit Suisse First Boston Mortgage Securities Corp.,
Commercial Mortgage Pass-Through Certificates, Series 1999-C1
as follows:
Cl A-X., Affirmed at Aaa (sf); previously on
Nov 10, 1999 Definitive Rating Assigned Aaa (sf)
Cl F., Affirmed at A1 (sf); previously on Sep 25,
2008 Upgraded to A1 (sf)
Cl L., Affirmed at C (sf); previously on May 4,
2006 Downgraded to C (sf)
RATINGS RATIONALE
The affirmations are 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. Based on our current base expected loss, the credit
enhancement levels for the affirmed classes are sufficient to maintain
their current ratings.
Moody's rating action reflects a cumulative base expected loss of
48.0% of the current balance. At last review,
Moody's cumulative base expected loss was 39.2%.
Moody's stressed scenario loss is 53.6% of the current
balance. Moody's provides a current list of base and stress
scenario losses for conduit and fusion CMBS transactions on moodys.com
at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
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 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 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 methodologies used in this rating were: "CMBS:
Moody's Approach to Rating Fusion Transactions" published
on April 19, 2005, "CMBS: Moody's Approach to Rating
Large Loan/Single Borrower Transactions" published in July 2000,
and "CMBS: Moody's Approach to Rating Credit Tenant Lease
(CTL) Backed Transactions" published on October 2, 1998.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 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 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 and B2, 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 estimates is melded with the conduit model credit enhancement into
an overall model result. Fusion loan credit enhancement is based
on the credit estimate 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 estimate level, is incorporated
for loans with similar credit estimates 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 3 compared
to 4 at Moody's prior 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 8.0 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.
In rating this transaction, Moody's used its credit-tenant
lease (CTL) financing rating methodology (CTL approach). Under
Moody's CTL approach, the rating of a transaction's certificates
is primarily based on the senior unsecured debt rating (or the corporate
family rating) of the tenant, usually an investment grade rated
company, leasing the real estate collateral supporting the bonds.
This tenant's credit rating is the key factor in determining the probability
of default on the underlying lease. The lease generally is "bondable",
which means it is an absolute net lease, yielding fixed rent paid
to the trust through a lock-box, sufficient under all circumstances
to pay in full all interest and principal of the loan. The leased
property should be owned by a bankruptcy-remote, special
purpose borrower, which grants a first lien mortgage and assignment
of rents to the securitization trust. The dark value of the collateral,
which assumes the property is vacant or "dark", is then examined;
the dark value must be sufficient, assuming a bankruptcy of the
tenant and rejection of the lease, to support the expected loss
consistent with the certificates' rating. Moody's may make adjustments
reflecting the possibility of lease affirmations by the tenant and for
the landlord's claim for lease rejection damages in bankruptcy.
Moody's also may give credit for some amortization of the debt,
depending upon the rating of the credit tenant. In addition,
Moody's considers the overall structure and legal integrity of the transaction.
The certificates' rating may change as the senior unsecured debt rating
(or the corporate family rating) of the tenant changes.
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 September 16, 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 April 15, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 92% to $91.9
million from $1.17 billion at securitization. The
Certificates are collateralized by 8 mortgage loans ranging in size from
1% to 47% of the pool. The pool includes a credit
tenant lease (CTL) component which comprises 32% of the pool.
The pool does not contain any defeased loans or loans with underlying
ratings.
Three loans, representing 41% 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.
Thirty loans have been liquidated from the pool, resulting in an
aggregate realized loss of $49.0 million (28% loss
severity). Currently one loan, representing 47% of
the pool, is in special servicing. The sole specially serviced
loan is the Tallahassee Mall Loan ($42.9 million --
46.7% of the pool), which is secured by a leasehold
interest in a 973,973 square foot mall located in Tallahassee,
Florida. The loan was transferred to special servicing in September
2008 due to imminent default when the mall lost two anchor tenants,
Dillard's and Goody's. Foreclosure was completed in
January 2011 and the property is currently Real Estate Owned (REO).
The property is subject to a ground lease and the Lender filed suit for
damages with the Ground Lessor when the Ground Lessor was unable to provide
the Lender with a clean Ground Lease Estopel Certificate (GLEC).
The lender cannot sell the property without a clean GLEC. The property
was recently appraised for $4.5 million but given the ongoing
litigation expenses with the Ground Lessor, Moody's has estimated
an aggregate $42.9 million loss (100% expected loss)
for this specially serviced loan.
Based on the most recent remittance statement, Classes G through
O have experienced cumulative interest shortfalls totaling $11.4
million. Moody's anticipates that the pool will continue to experience
interest shortfalls because of the pool's exposure to the loan secured
by the leasehold interest of Tallahassee Mall. Interest shortfalls
are caused by special servicing fees, including workout and liquidation
fees, appraisal subordinate entitlement reductions (ASERs),
extraordinary trust expenses and non-advancing by the master servicer
based on a determination of non-recoverability. The master
servicer has made a determination of non-recoverability for the
largest loan in special servicing and is no longing advancing for this
loan.
Moody's was provided with full year 2009 operating results for 88%
of the pool (excluding specially serviced loans). Excluding specially
serviced and troubled loans, Moody's weighted average LTV
is 80% compared to 85% at Moody's prior 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 9.7%.
Excluding special serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.25X and 2.00X, respectively,
compared to 1.11X and 1.45X 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 performing conduit loans represent 19% of the pool
balance. The largest loan is the IBM Corporate Center Loan ($8.1
million -- 8.8% of the pool), which is secured
by a 129,293 square foot office property located in Parsippany,
NJ. The loan has passed its September 2009 anticipated repayment
date (ARD) and is current. As of December 2010, the property
was 89% leased, essentially the same as at the last review.
The largest tenant, EchoStar Satellite Corp (51% of the NRA),
has a lease that expires in December 2011. Moody's valuation is
based on a stressed net cash flow due to concerns with the property's
near-term lease rollover exposure. Moody's LTV and stressed
DSCR are 94% and 1.15X, respectively, compared
to 96% and 1.13X at last review.
The second largest loan is the Park Glen West Business Center Loan ($4.7
million -- 5.1% of the pool), which is secured
by a 127,336 square foot industrial property located in St.
Louis Park, Minnesota. As of February 2011, the property
was 81% leased, essentially the same as the prior review.
Three tenants, totaling 20,000 square feet (28% of
the NRA) have leases that expire by year-end 2011. Moody's
valuation is based on a stressed net cash flow due to concerns with the
property's near-term lease rollover exposure. Moody's LTV
and stressed DSCR are 85% and 1.33X, respectively,
compared to 84% and 1.36X at last review.
The third largest loan is the Pinewood Square Shopping Center Loan ($4.4
million -- 4.8% of the pool), which is secured
by a Wal-Mart anchored retail center located in Goldsboro,
North Carolina. The loan has passed its August 2009 ARD and is
current. As of December 2010, the property was 94%
leased, essentially the same as the prior review. Moody's
LTV and stressed DSCR are 74% and 1.38X, respectively,
compared to 76% and 1.34X at last review.
The CTL component ($29.4 million -- 31.9%)
consists of two cross-collateralized loans secured by a bondable
lease to Accor SA. The collateral consists of 11 Motel 6 hotels
totaling 1,224 rooms and located in five states. On July
2, 2010, Moody's withdrew Accor SA's Prime-3 commercial
paper rating due to business reasons. For the purpose of rating
this component of the subject transaction, Moody's developed an
internal view of the credit quality of the company.
New York
Amit Rustgi
Associate Analyst
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 Three CMBS Classes of CSFB 1999-C1
