Approximately $4.132 Billion of Structured Securities Affected
New York, March 17, 2011 -- Moody's Investors Service (Moody's) downgraded the ratings of five classes,
affirmed 17 classes and confirmed three classes of Credit Suisse Commercial
Mortgage Trust Commercial Securities Pass-Through Certificates,
Series 2006-C4 as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Oct 2, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-AB, Affirmed at Aaa (sf); previously on
Oct 2, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Oct 2, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-X, Affirmed at Aaa (sf); previously on
Oct 2, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-SP, Affirmed at Aaa (sf); previously on
Oct 2, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-Y, Affirmed at Aaa (sf); previously on
Oct 2, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-4FL, Affirmed at Aaa (sf); previously on
Oct 2, 2006 Assigned Aaa (sf)
Cl. A-1-A, Affirmed at Aaa (sf); previously
on Oct 2, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-M, Confirmed at A1 (sf); previously on
Feb 17, 2011 A1 (sf) Placed Under Review for Possible Downgrade
Cl. A-J, Downgraded to Ba2 (sf); previously on
Feb 17, 2011 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to B2 (sf); previously on Feb 17,
2011 B1 (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to Caa1 (sf); previously on Feb 17,
2011 B3 (sf) Placed Under Review for Possible Downgrade
Cl. D, Downgraded to Caa2 (sf); previously on Feb 17,
2011 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. E, Downgraded to Caa3 (sf); previously on Feb 17,
2011 Caa2 (sf) Placed Under Review for Possible Downgrade
Cl. F, Confirmed at Caa3 (sf); previously on Feb 17,
2011 Caa3 (sf) Placed Under Review for Possible Downgrade
Cl. G, Confirmed at Ca (sf); previously on Feb 17,
2011 Ca (sf) Placed Under Review for Possible Downgrade
Cl. H, Affirmed at C (sf); previously on Dec 10,
2009 Downgraded to C (sf)
Cl. J, Affirmed at C (sf); previously on Dec 10,
2009 Downgraded to C (sf)
Cl. K, Affirmed at C (sf); previously on Dec 10,
2009 Downgraded to C (sf)
Cl. L, Affirmed at C (sf); previously on Dec 10,
2009 Downgraded to C (sf)
Cl. M, Affirmed at C (sf); previously on Dec 10,
2009 Downgraded to C (sf)
Cl. N, Affirmed at C (sf); previously on Dec 10,
2009 Downgraded to C (sf)
Cl. O, Affirmed at C (sf); previously on Dec 10,
2009 Downgraded to C (sf)
Cl. P, Affirmed at C (sf); previously on Dec 10,
2009 Downgraded to C (sf)
Cl. Q, Affirmed at C (sf); previously on Dec 10,
2009 Downgraded to C (sf)
On February 19, 2011, Moody's placed eight classes on
review for possible downgrade. This action concludes our review.
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. The affirmations and confirmations 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 the existing rating.
Moody's rating action reflects a cumulative base expected loss of
10.7% of the current balance. At last review,
Moody's cumulative base expected loss was 9.6%.
Moody's stressed scenario loss is 25.3% 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 sluggish macroeconomic
environment and varying performance in the commercial real estate property
markets. However, Moody's expects to see increasing or stabilizing
property values, higher transaction volumes, a slowing in
the pace of loan delinquencies and greater liquidity for commercial real
estate in 2011. The hotel and multifamily sectors are continuing
to show signs of recovery, while recovery in the office and retail
sectors will be tied to recovery of the broader economy. The availability
of debt capital continues to improve with terms returning toward market
norms. Moody's central global macroeconomic scenario reflects an
overall sluggish recovery through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations.
The principal methodologies used in these ratings were "Moody's
Approach to Rating Fusion Transactions" published in April 2005 and "Moody's
Approach to Rating Large Loan/Single Borrower Transactions" published
in July 2000.
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 pay down 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
underlying ratings is melded with the conduit model credit enhancement
into an overall model result. Fusion loan credit enhancement is
based on the credit estimate 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 17,
the same as at Moody's prior review.
In cases where the Herf falls below 20, Moody's also employs the
large loan/single borrower methodology. This methodology uses the
excel based Large Loan Model v 8.0 and then reconciles and weights
the results from the two 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. 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 December 10, 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 February 17, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 3% to $4.132
billion from $4.273 billion at securitization. The
Certificates are collateralized by 344 mortgage loans ranging in size
from less than 1% to 20% of the pool, with the top
ten loans representing 46% of the pool. The pool includes
47 residential cooperative loans, representing 3% of the
pool, which have Aaa credit estimates. One loan, representing
less than 1% of the has defeased and is collateralized with U.S.
Government securities.
Ninety-two loans, representing 16% 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.
Fifteen loans have been liquidated from the pool since securitization,
resulting in an aggregate $47.7 million loss (88%
loss severity on average). At last review the pool had experienced
less than $2.8 million in realized losses. Fifty-three
loans, representing 21% of the pool, are currently
in special servicing. The largest specially serviced loan is the
Babcock & Brown FX 3 Loan ($195.1 million --4.7%
of the pool), which is secured by 14 multifamily properties located
in six states. The collateral consists of older vintage Class B
properties and totals 3,719 units. The loan was transferred
to special servicing in February 2009 due to the borrower's request for
a loan modification. As of February 2011, the loan was 90+
days delinquent.
The second largest specially serviced loan is the Dream Hotel Loan ($99.4
million --2.4% of the pool), which is secured
by a 220-room hotel located in New York City. The loan is
encumbered by a ground lease that expires in 2103. The loan was
transferred to special servicing in April 2009 when the borrower indicated
it could no longer support debt service. The decline in business
and tourist travel due to the economic recession has significantly impacted
property performance. In July 2010, the master servicer recognized
an appraisal reduction of $41.5 million. As of February
2011, the loan was 90+ days delinquent.
The third largest specially serviced loan is the Carlton Hotel on Madison
Loan ($98.5 million --2.4% of the pool),
which is secured by a 316-room hotel located in New York City.
The property has never achieved the performance originally anticipated
at securitization. The property has reported a negative NOI since
2009. The loan was transferred to special servicing in December
2010 as the result of imminent default. The borrowers have requested
a loan modification of the current loan terms. As of January 2011,
the loan was current.
The remaining 50 specially serviced loans are secured by a mix of property
types. The master servicer has recognized an aggregate $161.2
million appraisal reduction for 42 of the specially serviced loans.
Moody's has estimated an aggregate $316.8 million
loss (36% expected loss on average) for all of the specially serviced
loans.
Moody's has assumed a high default probability for seven poorly
performing loans representing 6% of the pool and has estimated
a $59.1 million loss (23% expected loss based on
a 50% probability default) from these troubled loans. Moody's
rating action recognizes potential uncertainty around the timing and magnitude
of loss from these troubled loans.
Moody's was provided with full year 2009 operating results for 96%
of the conduit pool and partial year 2010 financials for 100% of
the conduit pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 115% compared to 118%
at last review. Moody's net cash flow reflects a weighted
average haircut of 7.8% 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 1.23X and 0.92X, respectively,
compared to 1.20X and 0.88X 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 31% of the pool
balance. The largest loan is the 11 Madison Avenue Loan ($806.0
million -- 19.5% of the pool), which
is secured by a 2.2 million square foot (SF) Class A office building
located in the East Midtown South office submarket in New York City.
The property was virtually 100% leased as of September 2010,
the same as last review. The building serves as the global headquarters
location for Credit Suisse AG, which leases 81% of the NRA
through May 2017. The loan is interest-only for the entire
term. Moody's LTV and stressed DSCR are 120% and 0.74X,
respectively, compared to 134% and 0.69X at last review.
The second largest loan is the 280 Park Avenue Loan ($300.0
million -- 7.3% of the pool), which represents
a pari passu interest in a $440 million loan. The loan is
secured by a 1.2 million SF Class A office building located in
the Plaza District office submarket in New York City. The loan
is also encumbered by a $670 million mezzanine loan. The
property was 70% leased as of March 2011 compared to 96%
at last review. In February 2011, Deutsche Bank Trust Companies
(28% of net rentable area (NRA)) vacated the property at the expiration
of its lease. The loan sponsors are currently seeking new tenants.
The three largest tenants are the National Football League (17%
of the NRA; lease expiration February 2014), Credit Suisse
(8% of theNRA; lease expiration March 2014) and General Electric
Corp. (4% of the NRA; lease expiration January 2014).
Moody's LTV and stressed DSCR are 89% and 1.00X, respectively,
compared to 87% and 1.06X at Moody's last review.
The third largest loan is the Ritz Carlton South Beach Loan ($181.0
million -- 4.4% of the pool), which is secured
by a 376-room full-service luxury hotel located in Miami
Beach, Florida. The loan was placed on the master servicer's
watchlist in October 2009 as the result of declining performance.
The property has never achieved the performance originally anticipated
at securitization. Because of the hotel's poor performance and
concerns about the Miami hotel market, Moody's has classified this
loan as a troubled loan. Moody's LTV and stressed DSCR are 213%
and 0.52X, respectively, compared to 213% and
< 0.40X 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
Lacey Morgan
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 Five, Affirms 17, and Confirms Three CMBS Classes of CSFB 2006-C4
