Approximately $192.1 Million of Structured Securities Affected
New York, February 09, 2011 -- Moody's Investors Service (Moody's) downgraded the ratings of eight classes
and continued the review for possible downgrade on Class AJ and affirmed
five classes of Credit Suisse First Boston Mortgage Securities Corp.,
Commercial Mortgage Pass-Through Certificates, Series 2004-C4as
follows:
Cl. A-J, Downgraded to Aa1 (sf) and Remains On Review
for Possible Downgrade; previously on Jan 19, 2011 Aaa (sf)
Placed Under Review for Possible Downgrade
Cl. B, Downgraded to A3 (sf); previously on Feb 3,
2011 A1 (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to Ba1 (sf); previously on Feb 3,
2011 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. D, Downgraded to Ba3 (sf); previously on Feb 3,
2011 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. E, Downgraded to B3 (sf); previously on Feb 3,
2011 Ba2 (sf) Placed Under Review for Possible Downgrade
Cl. F, Downgraded to Caa3 (sf); previously on Feb 3,
2011 B2 (sf) Placed Under Review for Possible Downgrade
Cl. G, Downgraded to C (sf); previously on Feb 3,
2011 Caa2 (sf) Placed Under Review for Possible Downgrade
Cl. H, Downgraded to C (sf); previously on Feb 3,
2011 Ca (sf) Placed Under Review for Possible Downgrade
Cl. J, Affirmed at C (sf); previously on Feb 3,
2010 Downgraded to C (sf)
Cl. K, Affirmed at C (sf); previously on Feb 3,
2010 Downgraded to C (sf)
Cl. L, Affirmed at C (sf); previously on Feb 3,
2010 Downgraded to C (sf)
Cl. M, Affirmed at C (sf); previously on Feb 3,
2010 Downgraded to C (sf)
Cl. N, Affirmed at C (sf); previously on Feb 3,
2010 Downgraded to C (sf)
RATINGS RATIONALE
Moody's rating action did not address the ratings of Classes A4,
A5, A6, A1A, AX, ASP and AY, which are all
currently rated Aaa, on review for possible downgrade. These
classes were placed on review on January 19, 2011. KeyCorp
Real Estate Capital Markets, Inc. (KRECM) is the master servicer
on this transaction and deposits collection, escrow and other accounts
in KeyBank, National Association (Keybank). Keybank no longer
meets Moody's rating criteria for an eligible depository account institution
for Aaa and Aa1 rated securities. Moody's is reviewing arrangements
that KeyBank has proposed, and that it may propose, to mitigate
the incremental risk indicated by the lower rating of the depository account
institution, so as possibly to allow the classes on review to maintain
their current ratings.
On February 4, 2011 Moody's placed seven additional classes on review
for possible downgrade due to potential losses from troubled and specially
serviced loans. This action concludes that review.
The downgrades are due to higher expected losses for the pool resulting
from realized and anticipated losses from specially serviced and troubled
loans as well as interest shortfalls. Class AJ has been downgraded
to Aa1 from Aaa, but is still on review for possible downgrade due
to the fact that Keybank no longer meets Moody's rating criteria
for an eligible depository account institution for Aaa and Aa1 rated securities.
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 rating action reflects a cumulative base expected loss of
8.3% of the current balance. At last review,
Moody's cumulative base expected loss was 5.5%.
Moody's stressed scenario loss is 16.5% 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 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 "CMBS: Moody's
Approach to Rating Fusion Transactions", published on April
19, 2005. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found on Moody's
website. 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 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 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 21 at Moody's prior full review.
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 February 3, 2010.
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 January 18, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 27% to $832.9
million from $1.14 billion at securitization. The
Certificates are collateralized by 158 mortgage loans ranging in size
from less than 1% to 10% of the pool, with the top
ten loans representing 32% of the pool. Thirteen loans,
representing 18% of the pool, have defeased and are collateralized
with U.S. Government securities. Defeasance at last
review represented 23% of the pool. The pool includes 78
loans secured by residential cooperative properties, representing
15% of the pool. These loans have Aaa credit estimates,
the same as last review.
Eighteen loans, representing 18% 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.
Twelve loans have been liquidated from the pool since securitization,
resulting in an aggregate $6.5 million loss (12%
loss severity on average). At last review the pool had realized
a $660,340 loss. Currently four loans, representing
11% of the pool, are in special servicing. The largest
specially serviced loan is the Village on the Parkway Loan ($45.0
million - 5.0%) which is secured by a 381,000
square foot retail center located in Addison, Texas. The
loan was transferred to special servicing in October 2009 and is now real
estate owned (REO).
The remaining three specially serviced loans are secured by a mix of property
types. Moody's has estimated an aggregate $39.0
million loss (52% expected loss on average) for the specially serviced
loans. The master servicer has recognized an aggregate $21.6
million appraisal reduction for the specially serviced loans.
Moody's has assumed a high default probability for two poorly performing
loans representing less than 1% of the pool and has estimated a
$1.5 million aggregate loss (20% expected loss based
on a 50% probability default) from these troubled loans.
Based on the most recent remittance statement, Classes J through
O have experienced cumulative interest shortfalls totaling $1.3
million. Moody's anticipates that the pool will continue to experience
interest shortfalls because of the high exposure to specially serviced
loans. Interest shortfalls are caused by special servicing fees,
including workout and liquidation fees, appraisal subordinate entitlement
reductions (ASERs) and extraordinary trust expenses.
Moody's was provided with full and partial year 2010 operating results
for 99% of the pool. Excluding specially serviced and troubled
loans, Moody's weighted average LTV is 104% compared
to 101% at Moody's prior review. Moody's net
cash flow reflects a weighted average haircut of 12% to the most
recently available net operating income. Moody's value reflects
a weighted average capitalization rate of 9.3%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.27X and 1.03X, respectively,
compared to 1.32X and 1.05X 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.
The top three performing conduit loans represent 18% of the pool
balance. The largest loan is the Brunswick Square Loan ($80.8
million -- 9.7%), which is secured by a 769,000
foot retail center located in East Brunswick, New Jersey.
The center is anchored by Macy's and JC Penney, both of which own
their respective buildings and are not part of the collateral.
The property was 98% leased as of September 2010, similar
to last review. Performance has improved to increased revenues.
Moody's LTV and stressed DSCR are 113% and 0.83X,
respectively, compared to 116% and 0.82X at last review.
The second largest loan is the Bertakis MHP Portfolio Loan ($36.4
million -- 4.4%), which is secured by a 1,723
unit portfolio of seven cross-collateralized and cross-defaulted
manufactured housing properties located in Michigan and Texas.
Combined occupancy for the portfolio was 91% as of September 2010
compared to 99% at the last review. The loan matured in
August 2009 but was extended until November 2011. Performance has
declined due to decreased revenues. Moody's LTV and stressed
DSCR are 142% and 0.76X, respectively compared to
104% and 1.04X as at last review.
The third largest loan is the Lake Zurich Portfolio Loan ($30.0
million -- 3.6% of the pool), which is secured
by two cross-collateralized and cross-defaulted retail centers
located in Lake Zurich, Illinois. The two centers total 363,000
square feet. Combined occupancy for the portfolio was 86%
as of September 2010 compared to 87% at last review. One
of the properties, Deerpath Court Shopping Center, is currently
on the servicer's watchlist due to low occupancy. Moody's
LTV and stressed DSCR are 99% and 1.01X, respectively,
essentially the same as 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
Polina Margolina
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 Eight Classes and Continues the Review for Possible Downgrade for One Class and Affirms Five CMBS Classes of CSFB 2004-C4
