Approximately $2.05 billion of Structured Securities Affected
New York, December 17, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of 31 and affirmed
three classes of Lehman Brothers Floating Rate Commercial Mortgage Trust,
Commercial Mortgage Pass-Through Certificates, Series 2007-LLF
C5. Moody's rating action is as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on
Aug 28, 2007 Definitive Rating Assigned Aaa (sf)
Cl. X-2, Affirmed at Aaa (sf); previously on
Aug 28, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Downgraded to A3 (sf); previously on
Aug 28, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Downgraded to Baa3 (sf); previously
on Mar 19, 2009 Downgraded to Aa3 (sf)
Cl. B, Downgraded to Ba1 (sf); previously on Mar 19,
2009 Downgraded to A2 (sf)
Cl. C, Downgraded to Ba2 (sf); previously on Mar 19,
2009 Downgraded to A3 (sf)
Cl. D, Downgraded to B1 (sf); previously on Mar 19,
2009 Downgraded to Baa1 (sf)
Cl. E, Downgraded to B2 (sf); previously on Mar 19,
2009 Downgraded to Baa2 (sf)
Cl. F, Downgraded to B3 (sf); previously on Mar 19,
2009 Downgraded to Baa3 (sf)
Cl. G, Downgraded to Caa1 (sf); previously on Mar 19,
2009 Downgraded to Ba1 (sf)
Cl. H, Downgraded to Caa3 (sf); previously on Mar 19,
2009 Downgraded to Ba2 (sf)
Cl. J, Downgraded to Ca (sf); previously on Mar 19,
2009 Downgraded to B1 (sf)
Cl. CPE, Downgraded to B3 (sf); previously on Mar 19,
2009 Downgraded to Ba3 (sf)
Cl. CQR-1, Downgraded to B1 (sf); previously
on Mar 19, 2009 Downgraded to Baa2 (sf)
Cl. CQR-2, Downgraded to B2 (sf); previously
on Mar 19, 2009 Downgraded to Ba1 (sf)
Cl. HAR-1, Downgraded to Caa1 (sf); previously
on Mar 19, 2009 Downgraded to Ba2 (sf)
Cl. HAR-2, Downgraded to Caa2 (sf); previously
on Mar 19, 2009 Downgraded to Ba3 (sf)
Cl. HRH, Downgraded to B3 (sf); previously on Mar 19,
2009 Downgraded to Ba2 (sf)
Cl. HSS, Downgraded to B1 (sf); previously on Mar 19,
2009 Downgraded to Ba3 (sf)
Cl. INO, Downgraded to Ba3 (sf); previously on Mar 19,
2009 Downgraded to Ba2 (sf)
Cl. JHC, Downgraded to B1 (sf); previously on Mar 19,
2009 Downgraded to Ba1 (sf)
Cl. OCS, Downgraded to Caa1 (sf); previously on Mar
19, 2009 Downgraded to Ba1 (sf)
Cl. ONA, Downgraded to Caa1 (sf); previously on Mar
19, 2009 Downgraded to Ba1 (sf)
Cl. OWS-1, Downgraded to B1 (sf); previously
on Mar 19, 2009 Downgraded to Ba1 (sf)
Cl. OWS-2, Downgraded to B3 (sf); previously
on Mar 19, 2009 Downgraded to Ba3 (sf)
Cl. PHO, Downgraded to Caa1 (sf); previously on Mar
19, 2009 Downgraded to Ba3 (sf)
Cl. SBG, Downgraded to Ba3 (sf); previously on Mar 19,
2009 Downgraded to Ba2 (sf)
Cl. SFO-1, Downgraded to Baa1 (sf); previously
on Mar 19, 2009 Downgraded to A3 (sf)
Cl. SFO-2, Downgraded to Baa2 (sf); previously
on Mar 19, 2009 Downgraded to Baa1 (sf)
Cl. SFO-3, Downgraded to Baa3 (sf); previously
on Mar 19, 2009 Downgraded to Baa2 (sf)
Cl. SFO-4, Downgraded to Ba1 (sf); previously
on Mar 19, 2009 Downgraded to Baa3 (sf)
Cl. SFO-5, Downgraded to Ba2 (sf); previously
on Mar 19, 2009 Downgraded to Ba1 (sf)
Cl. UCP, Affirmed at Ba3 (sf); previously on Mar 19,
2009 Downgraded to Ba3 (sf)
Cl. WHH, Downgraded to B3 (sf); previously on Mar 19,
2009 Downgraded to Ba3 (sf)
RATINGS RATIONALE
The downgrades are due to higher expected losses for the trust resulting
from anticipated losses and interest shortfalls due to loans in special
servicing.
The affirmation of the two pooled classes are due to key parameters,
including Moody's loan to value (LTV) ratio and Moody's stressed debt
service coverage ratio (DSCR) remaining within acceptable ranges.
The pool has paid down by 3% since Moody's last review, benefiting
the most senior class and the notional balance class.
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 previous 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 "Moody's Approach to
Rating Large Loan/Single Borrower Transactions" published in July 2000.
In addition, 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 Large Loan
Model v 8.0. 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.
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 March 19, 2009. The
previous full review was part of Moody's first quarter 2009 ratings sweep
and incorporated assumptions for capitalization rates and stressed cash
flows that were outlined in "Rating Methodology Update: US CMBS
Conduit and Fusion Review Prompted by Declining Property Values and Rising
Delinquencies" dated February 19, 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 December 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased to $2.09 billion
from $2.14 billion at last review. The Certificates
are collateralized by 32 floating rate whole loans and senior interests
in whole loans. The loans range in size from 1% to 14%
of the pooled balance, with the top three loans representing 31%
of the pool. Due to the high number of loans and high diversity,
the trust's Herfindahl Index (Herf) is 18, exceptionally high for
a floating rate large loan pool. All of the loans have additional
debt in the form of a non-pooled or rake bond within the trust
and/or B notes or mezzanine debt outside of the trust.
The largest loan in the pool is secured by fee and leasehold interests
in Calwest Industrial Portfolio Loan ($275 million, or 14%
of the pooled balance). There is additional debt in the form of
pari passu and mezzanine debt outside the trust. The 95 property
portfolio (23.3 million square feet) is located across six states
and 12 MSAs. The sponsor is Walton Street Capital, LLC.
In 2009, total Net Cash Flow (NCF) for the portfolio was $105
million. During the first six month of 2010, the overall
portfolio's NCF was $51 million. The loan's
final maturity date including extensions is June 8, 2012.
Moody's weighted average LTV for the pooled portion is 103%.
Moody's current credit estimate for the pooled portion is Caa1.
The John Hancock Chicago Loan ($175 million, or 9%
of pooled balance plus $7.5 million rake bond within the
trust) is secured by a fee interest in a 1 million square foot office
building located in Chicago, IL. The sponsors are Whitehall
Street Global Real Estate Limited Partnership and Golub & Company.
As of the September 2010 rent roll, the property was 76%
leased, and the property's NCF for the nine month period ending
September 2010 was $15.6 million. The NCF for the
calendar year 2009 was $18.4 million.
There is additional debt in the form of mezzanine outside the trust.
Moody's weighted average LTV for the pooled portion is 84%,
and including the rake bonds is 88%. Moody's current
credit estimate for the pooled portion is Ba3.
There are currently two loans totaling 6% of the pooled balance
in special servicing. The Whitehall/Highgate Hotel Portfolio Loan
(5% of pooled balance) has been in special servicing since December
2009. There are nine full-service properties remaining after
three assets have been released. The portfolio's NCF for
the first ten months of this year was $9.2 million,
down from $10.6 million achieved in the same period in 2009.
However, NCF for the month of October 2010 was $2.1
million, up 19% from that of October 2009. The special
servicer is in the process of modifying the loan.
The Crescent Hotel Portfolio -- Ventana Inn and Spa Loan (1%
of pooled balance) transferred to special servicing in January 2010.
This 60-room luxury hotel is located in Big Sur, CA.
The property's revenue statistics have improved dramatically in
2010. Revenue per Available Room (RevPAR) for the first six months
of 2010 was $271, up 39% from $195 achieved
in the comparable time frame in 2009. However, the current
NOI is not sufficient to support the operating expenses and debt service.
The special servicer is in the process of modifying the loan.
The trust has not incurred any cumulative bond losses to date, but
there is $170,226 in interest shortfalls affecting pooled
Class J. Additional interest shortfalls totaling $118,145
have been incurred by rake classes VIH and WHH.
Moody's weighted average pooled LTV ratio is 89% and Moody's weighted
average stressed debt service coverage ratio (DSCR) for the pooled trust
debt is 1.17X. Moody's weighted average first mortgage
LTV is 107% and Moody's weighted average stressed debt service
coverage ratio (DSCR) for first mortgage debt is 1.02X.
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, and confidential and proprietary Moody's Investors
Service 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
Eun Jee Park
VP - Senior Credit Officer
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 31 and Affirms Three CMBS Classes of LBFRC 2007-LLF C5
