Approximately $46 Million of Structured Securities Affected
New York, April 02, 2015 -- Moody's Investors Service has downgraded the ratings on five classes and
affirmed the ratings on two classes in GE Commercial Mortgage Corporation
2003-C1 as follows:
Cl. J, Downgraded to B1 (sf); previously on May 1,
2014 Affirmed Ba1 (sf)
Cl. K, Downgraded to B2 (sf); previously on May 1,
2014 Downgraded to B1 (sf)
Cl. L, Downgraded to Ca (sf); previously on May 1,
2014 Downgraded to Caa3 (sf)
Cl. M, Downgraded to C (sf); previously on May 1,
2014 Downgraded to Ca (sf)
Cl. N, Affirmed C (sf); previously on May 1, 2014
Affirmed C (sf)
Cl. O, Affirmed C (sf); previously on May 1, 2014
Affirmed C (sf)
Cl. X-1, Downgraded to C (sf); previously on
May 1, 2014 Downgraded to Caa2 (sf)
RATINGS RATIONALE
The ratings on P&I classes J through M were downgraded due to interest
shortfalls and realized and anticipated losses from specially serviced
and troubled loans that are higher than Moody's had previously expected.
The rating on the IO Class was downgraded due to a decline in the credit
performance (or the weighted average rating factor or WARF) of its referenced
classes, as well as anticipated interest shortfalls for the remaining
life of the deal.
The ratings on the P&I classes were affirmed due to interest shortfalls
and because the ratings are consistent with Moody's expected loss.
Certificates are not expected to receive interest for the remaining life
of the deal
Moody's rating action reflects a base expected loss of 52% of the
current balance, compared to 34% at Moody's last review.
Moody's base expected loss plus realized losses is now 3.8%
of the original pooled balance, compared to 4.0% at
the last review. Moody's provides a current list of base
expected losses for conduit and fusion CMBS transactions on moodys.com
at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:
The performance expectations for a given variable indicate Moody's forward-looking
view of the likely range of performance over the medium term. Performance
that falls outside the given range can indicate that the collateral's
credit quality is stronger or weaker than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a significant
amount of loan paydowns or amortization, an increase in the pool's
share of defeasance or an improvement in pool performance.
Factors that could lead to a downgrade of the ratings include a decline
in the performance of the pool, loan concentration, an increase
in realized and expected losses from specially serviced and troubled loans
or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in this rating was " Moody's Approach
to Rating CMBS Large Loan/Single Borrower Transactions" published
in July 2000. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
Moody's analysis incorporated a loss and recovery approach in rating the
P&I classes in this deal since 100% of the pool is in special
servicing. In this approach, Moody's determines a probability
of default for each specially serviced loan that it expects will generate
a loss and estimates a loss given default based on a review of broker's
opinions of value (if available), other information from the special
servicer, available market data and Moody's internal data.
The loss given default for each loan also takes into consideration repayment
of servicer advances to date, estimated future advances and closing
costs. Translating the probability of default and loss given default
into an expected loss estimate, Moody's then applies the aggregate
loss from specially serviced loans to the most junior classes and the
recovery as a pay down of principal to the most senior classes.
DESCRIPTION OF MODELS USED
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity.
Loan concentration has an important bearing on potential rating volatility,
including the risk of multiple notch downgrades under adverse circumstances.
The credit neutral Herf score is 40. The pool has a Herf of two,
the same as at Moody's last review.
When the Herf falls below 20, Moody's uses the excel-based
Large Loan Model 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. Moody's
also further adjusts these aggregated proceeds for any pooling benefits
associated with loan level diversity and other concentrations and correlations.
DEAL PERFORMANCE
As of the March 10, 2015 distribution date, the transaction's
aggregate certificate balance has decreased by 96% to $46.5
million from $1.19 billion at securitization. The
certificates are collateralized by four mortgage loans ranging in size
from less than 5% to 76% of the pool.
Sixteen loans have been liquidated from the pool, resulting in an
aggregate realized loss of $22 million (for an average loss severity
of 23%). Four loans, constituting 100% of the
pool, are currently in special servicing. The largest specially
serviced loan is the 801 Market Street Loan ($35 million --
76% of the pool), which is secured by a 370,000 square
foot (SF) office condominium situated within a 1.0 million SF office
building in downtown Philadelphia, Pennsylvania. The condominium
includes part of the basement, ground floor and all of floors seven
through 13. The office building was built in 1928 and renovated
in 2002. The building is located in the Market Street East office
market of Center City Philadelphia. This loan transferred to Special
Servicing due to the borrower being unable to pay off the loan at the
February 1, 2013 maturity date. The largest tenant is the
U.S. GSA, occupying 46% of the NRA, plan
to vacate at their lease expiration in February 2016 . The property
was 76% leased as of year-end 2014 versus 65% at
prior review.
The remaining three specially serviced loans are secured by a mix of property
types. Moody's estimates an aggregate $24 million loss for
the specially serviced loans (52% expected loss on average).
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions of the disclosure form.
Moody's did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments related to the monitoring of this transaction
in the past six months.
The analysis includes an assessment of collateral characteristics and
performance to determine the expected collateral loss or a range of expected
collateral losses or cash flows to the rated instruments. As a
second step, Moody's estimates expected collateral losses or cash
flows using a quantitative tool that takes into account credit enhancement,
loss allocation and other structural features, to derive the expected
loss for each rated instrument.
Moody's did not use any stress scenario simulations in its analysis.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Sini Gomes
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Sandra Ruffin
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Downgrades Five and Affirms Two Classes of GECMC 2003-C1