Approximately $65 Million Notional Balance of Structured Securities Affected
New York, April 26, 2018 -- Moody's Investors Service (Moody's) affirmed the ratings of three interest
only (IO) classes of Merrill Lynch Floating Trust Commercial Pass-Through
Certificates, Series 2006-1 as follows:
Cl. X-1B, Affirmed C (sf); previously on Jun
29, 2017 Affirmed C (sf)
Cl. X-3B, Affirmed C (sf); previously on Jun
29, 2017 Affirmed C (sf)
Cl. X-3C, Affirmed C (sf); previously on Jun
29, 2017 Affirmed C (sf)
RATINGS RATIONALE
The rating of Class X-1B was affirmed based on the credit quality
of its referenced classes. Moody's does not rate Classes L and
M. The ratings of Classes X-3B and X-3C were affirmed
based on the credit quality of their referenced loan, the Royal
Holiday Portfolio loan, the only loan remaining in the pool.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
An IO class may be subject to ratings upgrades if there is an improvement
in the credit quality of its referenced classes or loan, subject
to the limits and provisions of the updated IO methodology.
An IO class may be subject to ratings downgrades if there is (i) a decline
in the credit quality of the reference classes and/or (ii) paydowns of
higher quality reference classes, subject to the limits and provisions
of the updated IO methodology.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in rating Merrill Lynch Floating Trust Pass-Through
Certificates, Series 2006-1, Cl. X-1B,
Cl. X-3B, and Cl. X-3C were "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower CMBS"
published in July 2017 and "Moody's Approach to Rating Structured
Finance Interest-Only (IO) Securities" published in June
2017. Please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
DEAL PERFORMANCE
As of the April 16, 2018 Payment Date, the certificate balance
has remains unchanged from the last review at $65 million.
The trust balance has decreased by 98% from $2.6
billion at securitization from the payoff of 14 loans. The trust
has experienced $1.0 million in cumulative bond losses,
affecting Class M. Interest shortfalls total approximately $10.0
million and affect Classes L, M, X-3B, and X-3C.
Interest shortfalls are caused by special servicing fees, including
workout and liquidation fees, appraisal subordinate entitlement
reductions (ASERs) and extraordinary trust expenses.
One specially-serviced loan remains in the pool, the Royal
Holiday Portfolio loan ($65 million), secured by six hotels
located in Mexico with a total of 1,495-keys. Two
of the hotels are located in Cancun, and the other four hotels are
located in Cozumel, Ixtapa, Acapulco and San Jose del Cabo.
The $103 million whole loan includes $38 million in non-trust
subordinate debt.
The loan was transferred to special servicing in February 2010 and is
a non-performing matured loan. The borrower had filed a
Mexican bankruptcy petition for the Cozumel Caribe Hotel in May 2010.
The bankruptcy court terminated the flow of funds into the lender's cash
management system and blocked the lender from pursuing remedies against
the five other assets or the guarantors. The borrower has not made
debt service payments since May 2010, nor has the borrower provided
financials for the hotel properties. Interest advances were terminated
in late 2012.
Currently, approximately $22 million in servicer advances
are outstanding, including $4.5 million in interest
advances with the balance primarily for legal and insurance expenses,
cumulative accrued unpaid advance interest and taxes and insurance.
The special servicer is defending and pursuing multiple legal actions
and foresees a lengthy litigation.
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.
EunJee EJ Park
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Matthew Halpern
Vice President - Senior Analyst
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653