Approximately $765 Million of Structured Securities Affected
New York, March 02, 2011 -- Moody's Investors Service (Moody's) downgraded the ratings of four classes
and affirmed fourteen classes of Credit Suisse First Boston Mortgage Securities
Corp., Commercial Mortgage Pass-Through Certificates,
Series 2003-CPN1 as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on
Mar 13, 2003 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on
Mar 13, 2003 Definitive Rating Assigned Aaa (sf)
Cl. A-X, Affirmed at Aaa (sf); previously on
Mar 13, 2003 Definitive Rating Assigned Aaa (sf)
Cl. A-Y, Affirmed at Aaa (sf); previously on
Mar 13, 2003 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Dec 8,
2006 Upgraded to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Apr 15,
2010 Confirmed at Aaa (sf)
Cl. D, Affirmed at Aa2 (sf); previously on Apr 15,
2010 Downgraded to Aa2 (sf)
Cl. E, Affirmed at A1 (sf); previously on Apr 15,
2010 Downgraded to A1 (sf)
Cl. F, Downgraded to Baa2 (sf); previously on Apr 15,
2010 Downgraded to A3 (sf)
Cl. G, Downgraded to B2 (sf); previously on Apr 15,
2010 Downgraded to Ba2 (sf)
Cl. H, Downgraded to Caa3 (sf); previously on Apr 15,
2010 Downgraded to B3 (sf)
Cl. J, Downgraded to C (sf); previously on Apr 15,
2010 Downgraded to Ca (sf)
Cl. K, Affirmed at C (sf); previously on Apr 15,
2010 Downgraded to C (sf)
Cl. L, Affirmed at C (sf); previously on Apr 15,
2010 Downgraded to C (sf)
Cl. M, Affirmed at C (sf); previously on Apr 15,
2010 Downgraded to C (sf)
Cl. N, Affirmed at C (sf); previously on Apr 15,
2010 Downgraded to C (sf)
Cl. O, Affirmed at C (sf); previously on Apr 15,
2010 Downgraded to C (sf)
Cl. P, Affirmed at C (sf); previously on Apr 15,
2010 Downgraded to C (sf)
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 are due to key parameters, including Moody's loan
to value (LTV) ratio, Moody's stressed 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 cumulative base expected and stressed scenario
loss estimates of 9.9% and 13.3% of the current
pooled balance, respectively. At last review, Moody's
cumulative base expected loss estimate was 8.2%.
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 methodology used in this rating was "Moody's Approach
to Rating Fusion U.S. CMBS Transactions," published
in April 2005.
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.
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.
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.
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 23,
the same as last 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 April 15,
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 February 12, 2011 distribution date, the transaction's
aggregate certificate balance decreased by 24% to $763.9
million from $1.0 billion at securitization. The
Certificates are collateralized by 158 mortgage loans ranging in size
from less than 1% to 9.6% of the pool, with
the top ten loans representing 33% of the pool. The pool
contains 68 loans, representing 12% of the pool, that
are secured by residential cooperative properties primarily located in
New York City. These loans have a Aaa credit estimate, the
same as last review. Twenty-three loans, representing
23% of the pool, have defeased and are collateralized by
U.S. Government securities.
Nineteen loans, representing 8% 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.
Five loans have been liquidated from the pool resulting in a $14.5
million aggregate loss (60% severity on average). There
has also been $3 million of principal forgiveness for one loan,
which brings the pool's cumulative realized losses to $17.4
million. The pool had realized $12.6 million of losses
at last review. Eight loans, representing 17% of the
pool, are in special servicing. The largest specially serviced
loan is the Northgate Mall Loan ($73 million -- 9.6%
of the pool), which is secured by the borrower's interest
in a 1.1 million square foot (SF) regional mall located in northwest
Cincinnati, Ohio. The property is not the dominant mall in
its trade area. Property occupancy and performance have deteriorated
with the loss of several major tenants including JC Penney, Dillard's
and Northgate Cinema. Additionally, the property's
Borders store will be closing as part of Border's recent Chapter
11 filing. The servicer has recognized a $31 million appraisal
reduction for the Northgate Mall Loan, which is currently 90+
days past due.
The second largest specially serviced loan is the Michigan Equities C
Portfolio ($27 million -- 3.5% of the pool),
which is secured by 16 properties located throughout Michigan and totaling
369,000 SF. Most of the properties are office buildings and
individual properties range in size from 2,100 to 42,000 SF.
The property's occupancy has declined from 90% at securitization
to 60% as of June 2010. The loan is currently 90+ days
past due. The remaining six specially serviced loans are secured
by a mix of retail, office and multifamily properties. Moody's
estimates an aggregate $67 million loss (based on a 95%
probability of default and 54% loss given default on average) from
the eight loans in special servicing.
Moody's has assumed a high default probability for two of the loans on
the watchlist. The troubled loans represent 1% of the pool.
Moody's has estimated a $762,000 loss (based on a 50%
probability of default and 30% loss given default on average) from
the troubled loans.
Moody's was provided with full year 2009 and partial-year 2010
operating results for 100% and 66% of the pool, respectively.
Excluding troubled, specially serviced and co-op loans,
Moody's weighted average LTV is 81% compared to 82% at last
full review. Moody's net cash flow reflects a weighted average
haircut of 11% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of 9.4%.
Excluding troubled, specially serviced and co-op loans,
Moody's actual and stressed DSCRs are 1.49X and 1.33X,
respectively, compared to 1.48X and 1.30X 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 three largest performing conduit loans represent 9% of the
pool. The largest conduit loan is the Fairfax Building Loan ($26
million -- 3.4% of the pool), which is secured
by a 210,000 SF Class B office building located in Tyson's Corner,
Virginia. The largest tenant is PNC Bank, N.A.
(long term bank deposits rating A2, positive outlook), which
leases 9% of the space through June 2018. The property's
occupancy declined to 74% as of December 2010 from 83% at
last review. Moody's LTV and stressed DSCR are 91% and 1.16X,
respectively, compared to 87% and 1.21X at last review.
The second largest conduit loan is the Willoughby Commons Loan ($25
million -- 3.2% of the pool), which is secured
by a 354,000 SF power center located in Willoughby, Ohio.
The center is shadow anchored by Target. The collateral's largest
tenant is BJ's Wholesale Club, which leases 31% of the NRA
through March 2020. The property has maintained 98%+
occupancy since securitization. As of December 2010, the
property was 99% leased, with no lease expirations in 2011-12.
Moody's LTV and stressed DSCR are 79% and 1.26X ,
respectively, compared to 86% and 1.17X at last review.
The third largest conduit loan is the 100 Middle Street Loan ($19
million -- 2.5% of the pool), which is secured
by two adjacent seven-story office buildings located at the northern
edge of Portland, Maine's CBD. The property is 97%
leased, which is the same as at securitization. Only one
lease, totaling 2% of the NRA, expires in 2011-12.
The U.S. government's General Services Administration
(GSA) has expanded its space from approximately 14,000 SF at securitization
to 43,000 SF as of January 2011. Moody's LTV and stressed
DSCR are 76% and 1.35X, respectively, compared
to 85% and 1.20X 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
Peter Simon
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 Four and Affirms 14 CMBS Classes of CSFB 2003-CPN1
