Approximately $1.56 Billion of Structured Securities Affected
New York, December 17, 2010 -- Moody's Investors Service (Moody's) downgraded the rating of 14 classes
and affirmed seven classes of Credit Suisse First Boston Mortgage Securities
Corp., Commercial Mortgage Pass-Through Certificates,
Series 2004-C5 as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
May 25, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
May 25, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-AB, Affirmed at Aaa (sf); previously on
May 25, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
May 25, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-1-A, Affirmed at Aaa (sf); previously
on May 25, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-X, Affirmed at Aaa (sf); previously on
May 25, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-SP, Affirmed at Aaa (sf); previously on
May 25, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-J, Downgraded to Aa2 (sf); previously on
Nov 4, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to A2 (sf); previously on Nov 4,
2010 Aa2 (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to Baa1 (sf); previously on Nov 4,
2010 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. D, Downgraded to Baa3 (sf); previously on Nov 4,
2010 A2 (sf) Placed Under Review for Possible Downgrade
Cl. E, Downgraded to Ba2 (sf); previously on Nov 4,
2010 A3 (sf) Placed Under Review for Possible Downgrade
Cl. F, Downgraded to B1 (sf); previously on Nov 4,
2010 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. G, Downgraded to B3 (sf); previously on Nov 4,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. H, Downgraded to Caa2 (sf); previously on Nov 4,
2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. J, Downgraded to Caa3 (sf); previously on Nov 4,
2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. K, Downgraded to Ca (sf); previously on Nov 4,
2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. L, Downgraded to C (sf); previously on Nov 4,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. M, Downgraded to C (sf); previously on Nov 4,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
Cl. N, Downgraded to C (sf); previously on Nov 4,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
Cl. O, Downgraded to C (sf); previously on Nov 4,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
RATINGS RATIONALE
The downgrades are due to higher expected losses for the pool resulting
from actual and anticipated losses from specially serviced and troubled
loans.
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.
On November 4, 2010, Moody's placed 14 classes on review for
possible downgrade. This action concludes our review.
Moody's rating action reflects a cumulative base expected loss of 6.7%
of the current balance. At last review, Moody's cumulative
base expected loss was 4.7%. Moody's stressed scenario
loss is 19.5% 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 analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key parameters
may indicate that the collateral's credit quality is stronger or weaker
than Moody's had anticipated during the current review. Even so,
deviation from the expected range will not necessarily result in a rating
action. There may be mitigating or offsetting factors to an improvement
or decline in collateral performance, such as increased subordination
levels due to amortization and loan payoffs or a decline in subordination
due to realized losses.
Primary sources of assumption uncertainty are the current stressed macroeconomic
environment and continuing weakness in the commercial real estate and
lending markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in the industrial,
office, and retail sectors. Hotel performance has begun to
rebound, albeit off a very weak base. Multifamily has also
begun to rebound reflecting an improved supply / demand relationship.
The availability of debt capital is improving with terms returning towards
market norms. Job growth and housing price stability will be necessary
precursors to commercial real estate recovery. Overall, Moody's
central global scenario remains "hook-shaped" for 2010 and 2011;
we expect overall a sluggish recovery in most of the world's largest economies,
returning to trend growth rate with elevated fiscal deficits and persistent
unemployment levels.
The principal methodology used in this rating was "CMBS: Moody's
Approach to U.S. Conduit Transactions" published on September
15, 2000, which is available on Moody's website at www.moodys.com.
In addition to methodologies and research available on moodys.com,
Moody's publishes a weekly summary of structured finance credit,
ratings and methodologies, available to all registered users of
our website, at www.moodys.com/SFQuickCheck.
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 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.
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 June 4, 2009. 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 November 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 16% to $1.58
billion from $1.87 billion at securitization. The
Certificates are collateralized by 202 mortgage loans ranging in size
from less than 1% to 20% of the pool, with the top
ten loans representing 41% of the pool. Eight loans,
representing 3% of the pool, have defeased and are collateralized
by U.S. Government securities. There are no loans
with investment grade credit estimates.
Forty-six loans, representing 43% 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.
Ten loans have been liquidated from the trust since securitization,
resulting in an aggregate $9.0 million loss (21%
loss severity on average). The pool had experienced a $32,900
realized loss at last review. Eleven loans, representing
4% of the pool, are currently in special servicing.
None of the specially serviced loans represent more than 1% of
the pool and are secured by a mix of property types. The master
servicer has recognized an aggregate $17.7 million appraisal
reduction for ten of the specially serviced loans. Moody's has
estimated an aggregate $31 million loss (51% expected loss
on average) for all of the specially serviced loans.
Moody's has assumed a high default probability for 18 poorly performing
loans representing 8% of the pool and has estimated an aggregate
$31.2 million loss (27% expected loss based on a
56% probability of default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 95%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV for the conduit component is 97% compared
to 101% at Moody's prior full review. Moody's net cash flow
reflects a weighted average haircut of 10.5% to the most
recently available net operating income (NOI). Moody's value reflects
a weighted average capitalization rate of 8.8%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs for the performing conduit loans are 1.29X and
1.03X, respectively, compared to 1.30X and 1.0X
at last full 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 20,
compared to 24 at Moody's prior review.
The top three performing conduit loans represent 27% of the pool
balance. The largest loan is the Time Warner Retail Loan ($308.2
million -- 19.6% of the pool), which is secured
by a 343,000 square feet (SF) retail center located at Columbus
Circle between West 58th and West 60th Street in New York City.
The largest tenants are Whole Foods (17% of the net rentable area
(NRA); lease expiration January 2024), Equinox (12%
of the NRA; lease expiration February 2019) and Borders Books (8%
of the NRA; lease expiration February 2019). The property
was 99% leased as of September 2010 compared to 97% at last
review. Although occupancy has been stable, property performance
is below original expectations due to increased operating expenses.
The loan was interest-only for three years. The loan is
on the servicer's watchlist because the DSCR dropped below 1.20x
when the loan began to amortize in January 2008. The loan sponsor
is Related Companies LP and Apollo Real Estate Advisors. Moody's
LTV and stressed DSCR are 108% and 0.80X, respectively,
compared to 101% and 0.85X at last review.
The second largest loan is the 275 Madison Avenue Loan ($68.6
million -- 4.4% of the pool), which is secured
by a 306,000 SF office building located in midtown Manhattan.
The property was 96% leased as of September 2010, the same
as at last review. Performance has improved since last review due
to an increase in base rent. Moody's LTV and stressed DSCR are
79% and 1.16X, respectively, compared to 100%
and 0.92X at last review.
The third largest loan is the AT&T Consumer Services Headquarters
Loan ($55.4 million -- 3.5% of the pool),
which is secured by a 387,000 SF office building located in Morris
Township, New Jersey. The property is 100% leased
to AT&T Consumer Services (AT&T Corp., Moody's senior
unsecured rating - A2, negative outlook) through September
2014. AT&T has been in the building since it was built in 1979
and has renewed its lease multiple times. The loan was interest
only until its anticipated repayment date (ARD) of October 2009.
The loan is on the servicer's watchlist for missing its ARD but is performing.
The final maturity date is October 2034. Although property performance
has been stable, Moody's stressed the cash flow because of concerns
that AT&T's relatively short remaining lease term may impact refinancing
of the loan. Moody's LTV and stressed DSCR are 125% and
0.78X, respectively, compared to 134% and 0.73X
at last review.
REGULATORY DISCLOSURES
Information sources used to prepare the credit 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 Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Robert Gilbane
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Sandra Ruffin
VP - Senior Credit Officer
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 Downgrades 14 and Affirms Seven CMBS Classes of CSFB 2004-C5
