Approximately $107.6 Million of Structured Securities Affected
New York, October 28, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of five classes
and affirmed five classes of LB-UBS Commercial Mortgage Trust 2000-C4,
Commercial Mortgage Pass-Through Certificates, Series 2000-C4
Cl. X, Affirmed at Aaa (sf); previously on Jan 15,
2003 Assigned Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Dec 8,
2006 Upgraded to Aaa (sf)
Cl. D, Affirmed at Aaa (sf); previously on Feb 25,
2008 Upgraded to Aaa (sf)
Cl. E, Affirmed at Aa1 (sf); previously on Feb 25,
2008 Upgraded to Aa1 (sf)
Cl. F, Affirmed at A1 (sf); previously on Dec 8,
2006 Upgraded to A1 (sf)
Cl. G, Downgraded to B2 (sf); previously on Feb 9,
2007 Upgraded to Baa1 (sf)
Cl. H, Downgraded to Ca (sf); previously on Jan 15,
2003 Assigned Ba1 (sf)
Cl. J, Downgraded to C (sf); previously on Feb 26,
2009 Downgraded to B2 (sf)
Cl. K, Downgraded to C (sf); previously on Jul 16,
2009 Downgraded to Caa3 (sf)
Cl. L, Downgraded to C (sf); previously on Jul 16,
2009 Downgraded to Ca (sf)
The downgrades are due to higher expected losses for the pool resulting
from realized and anticipated losses from specially serviced and troubled
loans, a decline in loan diversity, as measured by the Herfindahl
Index (Herf) and concerns about loans approaching maturity in an adverse
environment. Fourteen loans, representing 56% of the
pool, have either matured or mature within the next six months.
All of these loans have a Moody's stressed debt service coverage
ratio (DSCR) below 1.0X.
The affirmations are due to key parameters, including Moody's
loan to value (LTV) ratio and Moody's stressed DSCR 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
29.9% of the current balance. At last review,
Moody's cumulative base expected loss was 3.6%.
Moody's stressed scenario loss is 30.8% 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 <A href="http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255">http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255</A>.
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 methodologies used in rating LB-UBS Commercial Mortgage
Trust 2000-C4 were "CMBS: Moody's Approach to Rating
U.S. Conduit Transactions" published in September
2000 and "CMBS: Moody's Approach to Rating Large Loan/Single
Borrower Transactions" published in July 2000. 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 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 as well as the excel-based CMBS Large Loan Model v.
8.0 which is used for Large Loan 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 9 compared
to 27 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 July 16, 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
As of the October 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 89% to $107.6
million from $999.1 million at securitization. The
Certificates are collateralized by 29 mortgage loans ranging in size from
less than 1% to 10% of the pool, with the top ten
loans representing 63% of the pool. The conduit component
includes 12 loans representing 45% of the pool. The remaining
pool consists of nine specially serviced loans (41% of the pool),
two defeased loans (3% of the pool) and six tenant leases (CTL;
11% of the pool).
Nine loans, representing 41% 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 loans have been liquidated from the pool, resulting in an
aggregate realized loss of $30.8 million (31% loss
severity overall). These losses have resulted in a the liquidation
of Classes M, N and P in their entirety and a 14% principal
loss to Class L.
Nine loans, representing 41% of the pool, are currently
in special servicing. The largest specially serviced loan is the
111 Franklin Place Loan ($10.8 million -- 10.1%
of the pool), which is secured by a 138,801 square foot office
building located in Roanoke, Virginia. The loan was transferred
to special servicing in April 2010 due to imminent monetary default but
has remained current. The remaining eight specially serviced loans
are secured by a mix of property types. The servicer has recognized
an aggregate $6.3 million appraisal reduction for three
of the specially serviced loans. Moody's has estimated an
aggregate $14.9 million loss (34% expected loss on
average) for the specially serviced loans.
Moody's has assumed a high default probability for all of the watchlisted
loans, representing 32% of the pool. Moody's
aggregate estimated losses for these loans is $8.4 million
loss (25% expected loss based on a 100% probability default)
from these troubled loans.
Based on the most recent remittance statement, Classes H through
L have experienced cumulative interest shortfalls totaling $3.9
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 year 2009 operating results for 76%
of the three performing conduit loans. Moody's weighted average
LTV for these loans is 61% compared to 85% for the pool
at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 10.0% to the most recently
available net operating income. Moody's value reflects a
weighted average capitalization rate of 10.1%.
Moody's actual and stressed DSCRs for these loans are 1.63X
and 1.87X, respectively, compared to 1.32X and
1.49X 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 CTL component consists of six loans leased under bondable triple net
leases to three corporate credits. The largest corporate credits
include CVS/Caremark Corp. (51% of the CTL component;
senior unsecured rating Baa2, stable outlook) and Walgreen Co.
(40% of the CTL component; senior unsecured rating A2,
Due to the high percentage of loans in special servicing, Moody's
analysis was largely based on a loss and recovery analysis for specially
serviced and troubled loans. The performance of the CTL component
and performing conduit loans is stable and performing in-line with
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's information, and confidential and proprietary Moody's
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.
Structured Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Downgrades Five and Affirms Five CMBS Classes of LBUBS 2000-C4
250 Greenwich Street
New York, NY 10007