Approximately $32 Million of Structured Securities Affected
New York, February 25, 2016 -- Moody's Investors Service has upgraded the rating on one class and affirmed
the ratings on three classes in LB-UBS Commercial Mortgage Trust,
Pass-Through Certificates, Series 2004-C4 as follows:
Cl. H, Upgraded to Aa1 (sf); previously on Dec 4,
2015 Upgraded to Aa2 (sf)
Cl. J, Affirmed Caa2 (sf); previously on Dec 4,
2015 Affirmed Caa2 (sf)
Cl. K, Affirmed C (sf); previously on Dec 4, 2015
Affirmed C (sf)
Cl. X, Affirmed Ca (sf); previously on Dec 4,
2015 Affirmed Ca (sf)
RATINGS RATIONALE
The rating on one class was upgraded based on an increase in credit support
resulting from loan paydowns. The deal has paid down 27%
since Moody's last review.
The ratings on two P&I classes were affirmed because the ratings are
consistent with Moody's expected loss.
The rating on the IO Class (Class X) was affirmed at Ca (sf) due to the
uncertainty of future interest payments based on the fact that all of
its references classes have an interest rate equal to the weighted average
coupon of the pool.
Moody's rating action reflects a base expected loss of 29.8%
of the current balance, compared to 22.2% at Moody's
last review. Moody's base expected loss plus realized losses is
now 3.4% of the original pooled balance, the same
as 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 RATING:
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 was "Moody's Approach to
Rating Large Loan and Single Asset/Single Borrower CMBS" published in
October 2015, and "Approach to Rating US and Canadian Conduit/ Fusion
CMBS" published in December 2014. 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 six,
compared to seven 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, 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 February 18, 2016 distribution date, the transaction's
aggregate certificate balance has decreased by 98% to $32
million from $1.4 billion at securitization. The
certificates are collateralized by ten mortgage loans ranging in size
from less than 1% to 28% of the pool.
Two loans, constituting 12% 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.
Seventeen loans have been liquidated from the pool, resulting in
an aggregate realized loss of $38.6 million (for an average
loss severity of 34%). Three loans, constituting 41%
of the pool, are currently in special servicing. The largest
specially serviced loan is the 2200 Byberry Road Loan ($8.8
million -- 27.6% of the pool), which
is secured by a 105,191 square foot (SF) office property located
in Hatboro, Pennsylvania. The property was transferred to
special servicing in May of 2014 for maturity default.
The remaining two specially serviced loans are secured by retail properties.
Moody's estimates an aggregate $8.8 million loss for the
specially serviced loans (67% expected loss on average).
Moody's has assumed a high default probability for one poorly performing
loan, constituting 9% of the pool, and has estimated
an aggregate loss of less than $1 million from this troubled loan.
Moody's received full year 2014 operating results for 100% of the
pool. Moody's weighted average conduit LTV is 65%,
compared to 58% at Moody's last review. Moody's
conduit component excludes loans with credit assessments, defeased
and CTL loans, and specially serviced and troubled loans.
Moody's net cash flow (NCF) reflects a weighted average haircut
of 20% to the most recently available net operating income (NOI).
Moody's value reflects a weighted average capitalization rate of
10.0%.
Moody's actual and stressed conduit DSCRs are 1.00X and 1.78X,
respectively, compared to 1.49X and 1.91X 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 38% of the pool balance.
The largest loan is the Regal Cinema Loan ($6.8 million
-- 21% of the pool), which is secured by a
21 screen cinema located in Augusta, Georgia. The property
is 100% leased to Regal through October 2019. Performance
has been stable. Moody's LTV and stressed DSCR are 56% and
1.93X, respectively, compared to 57% and 1.89X
at the last review.
The second largest loan is the Orchid Centre Loan ($3.6
million -- 11% of the pool), which is secured
by an unanchored retail center located 30 miles north of Dallas in McKinney,
Texas. The property was 84% occupied as of September 2015.
Moody's LTV and stressed DSCR are 101% and 1.07X,
respectively, compared to 79% and 1.37X at the last
review.
The third largest loan is the Rite Aid - Westlake Loan ($1.7
million -- 5% of the pool), which is secured
by an 11,000 SF drug store in Westlake, Ohio. The property
is 100% leased to Rite Aid through July 2021. Moody's LTV
and stressed DSCR are 51% and 2.10X, respectively,
the same as at 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.
Rhett Terrell
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
Moody's Affirms Three and Upgrades One Class of LBUBS 2004-C4
