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Rating Action:

Moody's Downgrades 14 and Affirms 14 CMBS Classes of JPMCC 2006-LDP9; One Class Placed on Review for Possible Downgrade

10 May 2012

Approximately $4.6 Billion of Structured Securities Affected

New York, May 10, 2012 -- Moody's Investors Service (Moody's) downgraded the ratings of 14 classes and affirmed 14 classes of J.P. Morgan Chase Commercial Mortgage Securities Corp. Commercial Mortgage Pass-Through Certificates Series 2006-LDP9. In addition, one class was placed on review for possible downgrade. Moody's rating actions are as follows:

Cl. A-2, Affirmed at Aaa (sf); previously on Jan 22, 2007 Assigned Aaa (sf)

Cl. A-2S, Affirmed at Aaa (sf); previously on Jan 22, 2007 Assigned Aaa (sf)

Cl. A-2SFL, Affirmed at Aaa (sf); previously on Jan 22, 2007 Assigned Aaa (sf)

Cl. A-2SFX, Affirmed at Aaa (sf); previously on Mar 17, 2010 Assigned Aaa (sf)

Cl. A-3, Affirmed at Aa3 (sf); previously on Sep 2, 2010 Downgraded to Aa3 (sf)

Cl. A-3SFL, Affirmed at Aa3 (sf); previously on Sep 2, 2010 Downgraded to Aa3 (sf)

Cl. A-3SFX, Affirmed at Aa3 (sf); previously on Feb 15, 2012 Assigned Aa3 (sf)

Cl. A-1A, Aa3 (sf) Placed Under Review for Possible Downgrade; previously on Sep 2, 2010 Downgraded to Aa3 (sf)

Cl. A-M, Downgraded to Baa3 (sf); previously on Sep 2, 2010 Downgraded to Baa1 (sf)

Cl. A-MS, Downgraded to Baa3 (sf); previously on Sep 2, 2010 Downgraded to Baa1 (sf)

Cl. A-J, Downgraded to B3 (sf); previously on Sep 2, 2010 Downgraded to Ba3 (sf)

Cl. A-JS, Downgraded to B3 (sf); previously on Sep 2, 2010 Downgraded to Ba3 (sf)

Cl. B, Downgraded to Caa2 (sf); previously on Sep 2, 2010 Downgraded to B2 (sf)

Cl. B-S, Downgraded to Caa2 (sf); previously on Sep 2, 2010 Downgraded to B2 (sf)

Cl. C, Downgraded to Caa3 (sf); previously on Sep 2, 2010 Downgraded to B3 (sf)

Cl. C-S, Downgraded to Caa3 (sf); previously on Sep 2, 2010 Downgraded to B3 (sf)

Cl. D, Downgraded to C (sf); previously on Sep 2, 2010 Downgraded to Caa2 (sf)

Cl. D-S, Downgraded to C (sf); previously on Sep 2, 2010 Downgraded to Caa2 (sf)

Cl. E, Downgraded to C (sf); previously on Sep 2, 2010 Downgraded to Caa3 (sf)

Cl. E-S, Downgraded to C (sf); previously on Sep 2, 2010 Downgraded to Caa3 (sf)

Cl. F, Downgraded to C (sf); previously on Sep 2, 2010 Downgraded to Ca (sf)

Cl. F-S, Downgraded to C (sf); previously on Sep 2, 2010 Downgraded to Ca (sf)

Cl. G, Affirmed at C (sf); previously on Sep 2, 2010 Downgraded to C (sf)

Cl. G-S, Affirmed at C (sf); previously on Sep 2, 2010 Downgraded to C (sf)

Cl. H, Affirmed at C (sf); previously on Sep 2, 2010 Downgraded to C (sf)

Cl. H-S, Affirmed at C (sf); previously on Sep 2, 2010 Downgraded to C (sf)

Cl. J, Affirmed at C (sf); previously on Sep 2, 2010 Downgraded to C (sf)

Cl. K, Affirmed at C (sf); previously on Sep 2, 2010 Downgraded to C (sf)

Cl. X, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf)

RATINGS RATIONALE

The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans, interest shortfalls and concerns about refinance risk associated with loans approaching maturity in an adverse environment.

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 placed Class A-1A on review for possible downgrade due to the potential interest shortfalls caused by The Belnord Loan, discussed below.

Moody's rating action reflects a cumulative base expected loss of 13.0% of the current balance. At last review, Moody's cumulative base expected loss was 10.0%. Moody's provides a current list of base expected 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.

The performance expectations for a given variable indicate 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 extent of the slowdown in growth in the current macroeconomic environment and commercial real estate property markets. While commercial real estate property values are beginning to move in a positive direction, a consistent upward trend will not be evident until the volume of investment activity increases, distressed properties are cleared from the pipeline, and job creation rebounds. The hotel and multifamily sectors continue to show positive signs and improvements in the office sector continue with minimal additions to supply. However, office demand is closely tied to employment, where unemployment remains above long-term averages and business confidence remains below long-term averages. Performance in the retail sector has been mixed with lackluster holiday sales driven by sales and promotions. Consumer confidence remains low. Across all property sectors, the availability of debt capital continues to improve with increased securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario reflects: an overall downward revision of real growth forecasts since last quarter, amidst ongoing and policy-induced banking sector deleveraging leading to a tightening of bank lending standards and credit contraction; financial market turmoil continuing to negatively impact consumer and business confidence; persistently high unemployment levels; and weak housing markets resulting in a further slowdown in growth.

The methodologies used in this rating were "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) 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 (sf) 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 (sf) and B2 (sf), 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 underlying rating 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 underlying rating level, is incorporated for loans with similar credit estimates in the same transaction.

The conduit model includes an IO calculator, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee.

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 a review utilizing MOST® (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated May 12, 2011. Please see the ratings tab on the issuer / entity page on moodys.com for the last rating action and the ratings history.

DEAL PERFORMANCE

As of the April 16, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 8% to $4.5 billion from $4.9 billion at securitization. The Certificates are collateralized by 221 mortgage loans ranging in size from less than 1% to 9% of the pool, with the top ten loans representing 44% of the pool. The pool contains two loans with investment grade credit estimates that represent 5% of the pool.

Fifty-eight loans, representing 20% 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.

Twenty-two loans have been liquidated from the pool, resulting in an aggregate realized loss of $91.1 million (65% loss severity overall). Thirty-three loans, representing 29% of the pool, are currently in special servicing. The largest specially serviced loan is The Belnord Loan ($375.0 million - 8% of the pool), which is secured by a 215-unit multifamily building located in the Upper West Side of Manhattan. The collateral also contains ground-floor retail space. The loan transferred to special servicing in June 2011 due to imminent default, but remains current. The loan was structured with a $35 million debt service reserve and a $15 million turnover reserve which is expected to be depleted by year-end 2012. The property was 95% occupied as of June 2011, the same at last review. The special servicer and borrower are discussing a potential workout.

The master servicer has recognized an aggregate $333.5 million appraisal reduction for 24 of the specially serviced loans. Moody's has estimated an aggregate $369.2 million loss (40% expected loss on average) for the specially serviced loans.

Moody's has assumed a high default probability for 43 poorly performing loans representing 14% of the pool and has estimated a $72.8 million aggregate loss (12% expected loss based on a 50% probability default) from these troubled loans.

As of the most recent remittance date, the pool has experienced cumulative interest shortfalls totaling $14.6 million and affecting Classes P through D-S, C-S and B-S. Moody's anticipates that the pool will continue to experience interest shortfalls caused by specially serviced loans. 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.

Moody's was provided with partial and full year 2011 operating results for 84% of the pool (excluding specially-serviced loans). Excluding specially serviced and troubled loans, Moody's weighted average LTV is 116% compared to 111% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 11% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.4%.

Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.33X and 0.91X, respectively, compared to 1.41X and 0.97X 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.

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 39 compared to 42 at Moody's prior review.

The largest loan with a credit estimate is the Merchandise Mart Loan ($175.0 million -- 3.9% of the pool), which represents a 50% pari passu interest in a $350 million first mortgage loan. The property is also encumbered by a $300 million mezzanine loan. The loan is secured by a 3.4 million square foot (SF) office and design showroom building located in downtown Chicago, Illinois. The sponsor is Vornado Realty, L.P. The property was 92% leased as of November 2011 compared to 93% as of November 2010. Property performance has declined due to lower revenues and expense reimbursements. Moody's current credit estimate and stressed DSCR are Baa3 and 1.39X, respectively, compared to A3 and 1.54X at last review.

The second loan with a credit estimate is the Raytheon LAX Loan ($50.9 million -- 1.1% of the pool), which is secured by two Class B office buildings, totaling 565,000 SF, located in Los Angeles, California. The property is 100% leased to two tenants, Raytheon Company (63% of the net rentable area (NRA); lease expiration December 2018) and DIRECTV (37% of the NRA; lease expiration December 2013). Moody's current credit estimate and stressed DSCR are Baa2 and 1.43X, respectively, compared to Baa2 and 1.45X at last review.

The top three performing conduit loans represent 15% of the pool balance. The largest loan is the 131 South Dearborn Loan ($236.0 million -- 5.0% of the pool), which represents a 50% pari passu interest in a $472 million first mortgage loan. The property is also encumbered by a $50 million mezzanine loan. The loan is secured by 1.5 million SF office building located in downtown Chicago, Illinois. The three largest tenants are JP Morgan Chase & Co. (36% of the NRA; lease expiration December 2017), Citadel Investment Group (22% of the NRA; lease expiration December 2013) and Seyfarth Shaw LLP (21% of the NRA; lease expiration June 2022). The property was 94% leased as of November 2011 compared to 95% at last review. Property performance has improved primarily due to an increase in base rents and expense reimbursements. Moody's LTV and stressed DSCR are 113% and 0.81X, respectively, compared to 120% and 0.76X at last review.

The second largest loan is the Galleria Towers Loan ($232.0 million -- 5.2% of the pool), which is secured by three Class A office buildings, totaling 1.4 million SF, located in Dallas, Texas. The collateral is also encumbered by a $29 million mezzanine loan. The loan is currently on the master servicer's watchlist for having a low DSCR. Tenants include FedEx Kinko's, Inc. (14% of the NRA; lease expiration August 2013) and Ryan & Company, Inc. (7% of the NRA; lease expiration January 2020). The property was 88% leased as of September 2011 compared to 92% at last review. However, Highland Capital (8% of the NRA) vacated its space in December 2011. Additionally, 33% of the NRA expires in 2012 and 2013, including the FedEx Kinko's lease. Property performance has improved due to a decline in operating expenses, but Moody's stressed the cash flow due to the Highland Capital vacancy and near-term rollover risk. Moody's LTV and stressed DSCR are 142% and 0.67X, respectively, compared to 133% and 0.71X at last review.

The third largest loan is the Corporate Woods Portfolio Loan ($220.0 million -- 4.9% of the pool), which is secured by 20 suburban office buildings and one retail center located in an office park in Overland Park, Kansas. The portfolio was 85% leased as of September 2011 compared to 87% at last review. Portfolio performance has declined due to an increase in operating expenses and decrease in effective gross income. Moody's LTV and stressed DSCR are 131% and 0.75X, respectively, compared to 117% and 0.83X at last review.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant 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.

Information sources used to prepare the rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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.

Raymond Flores
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

Michael M. Gerdes
MD - Structured Finance
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 Downgrades 14 and Affirms 14 CMBS Classes of JPMCC 2006-LDP9; One Class Placed on Review for Possible Downgrade
No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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