Approximately $3.31 Billion of Structured Securities Affected
New York, January 13, 2011 -- Moody's Investors Service (Moody's) downgraded the ratings of four and
affirmed 18 classes of Credit Suisse Commercial Mortgage Trust Commercial
Securities Pass-Through Certificates, Series 2006-C5
as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Dec 22, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-AB, Affirmed at Aaa (sf); previously on
Dec 22, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Dec 22, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-M, Affirmed at Aa1 (sf); previously on
Dec 16, 2009 Downgraded to Aa1 (sf)
Cl. A-1-A, Affirmed at Aaa (sf); previously
on Dec 22, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-X, Affirmed at Aaa (sf); previously on
Dec 22, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-J, Affirmed at Baa1 (sf); previously on
Dec 16, 2009 Downgraded to Baa1 (sf)
Cl. A-SP, Affirmed at Aaa (sf); previously on
Dec 22, 2006 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Baa2 (sf); previously on Dec 16,
2009 Downgraded to Baa2 (sf)
Cl. C, Affirmed at Ba1 (sf); previously on Dec 16,
2009 Downgraded to Ba1 (sf)
Cl. D, Affirmed at B2 (sf); previously on Dec 16,
2009 Downgraded to B2 (sf)
Cl. E, Downgraded to Caa2 (sf); previously on Dec 16,
2009 Downgraded to B3 (sf)
Cl. F, Downgraded to Caa3 (sf); previously on Dec 16,
2009 Downgraded to Caa2 (sf)
Cl. G, Downgraded to Ca (sf); previously on Dec 16,
2009 Downgraded to Caa3 (sf)
Cl. H, Downgraded to C (sf); previously on Dec 16,
2009 Downgraded to Ca (sf)
Cl. J, Affirmed at C (sf); previously on Dec 16,
2009 Downgraded to C (sf)
Cl. K, Affirmed at C (sf); previously on Dec 16,
2009 Downgraded to C (sf)
Cl. L, Affirmed at C (sf); previously on Dec 16,
2009 Downgraded to C (sf)
Cl. M, Affirmed at C (sf); previously on Dec 16,
2009 Downgraded to C (sf)
Cl. N, Affirmed at C (sf); previously on Dec 16,
2009 Downgraded to C (sf)
Cl. O, Affirmed at C (sf); previously on Dec 16,
2009 Downgraded to C (sf)
Cl. P, Affirmed at C (sf); previously on Dec 16,
2009 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 a cumulative base expected loss of 7.6%
of the current balance. Moody's stressed scenario loss is 22.0%
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 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 methodology used in rating CSMC 2006-C5 was "CMBS:
Moody's Approach to Rating U.S. Conduit Transactions" published
in September 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, 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 52
compared to 55 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 December 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 6 months.
DEAL PERFORMANCE
As of the December 17, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 3% to $3.31
billion from $3.43 billion at securitization. The
Certificates are collateralized by 288 mortgage loans ranging in size
from less than 1% to 6% of the pool, with the top
ten loans representing 37% of the pool. One loan,
representing 3.5% of the pool, has defeased and is
collateralized with U.S. Government securities. No
loans have investment grade credit estimates.
Eighty-five loans, representing 19% 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.
Nineteen loans have been liquidated from the pool since securitization,
resulting in an aggregate $40.5 million loss (52%
loss severity on average). Currently 26 loans, representing
13% of the pool, are in special servicing. The largest
specially-serviced loan is the Babcock & Brown FX4 Loan ($193.0
million -- 5.8% of the pool), which is secured
by 20 multifamily properties located in Texas, South Carolina,
and Georgia. The collateral consists of older vintage Class B properties
and totals 4,958 units. The largest geographic concentrations
are Houston, Dallas, and Columbia, South Carolina.
The loan was transferred to special servicing in February 2009 due to
the borrower's request for a loan modification and is current.
Although the portfolio has maintained a high occupancy level, performance
has declined since securitization due to a decline in rental rates and
increased expenses.
The remaining 25 specially serviced loans are secured by a mix of property
types. The master servicer has recognized an aggregate $79.0
million appraisal reduction for 18 of the specially serviced loans.
Moody's has estimated an aggregate loss of $151.2 million
(35% expected loss on average) for all of the specially serviced
loans.
Moody's has assumed a high default probability for 20 poorly performing
loans representing 8% of the pool and has estimated a $56.0
million loss (21% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 99% and 97%, respectively, of the
non-defeased performing pool. Excluding specially serviced
and troubled loans, Moody's weighted average LTV is 110%,
the same as at last full review. Moody's net cash flow reflects
a weighted average haircut of 10% 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 1.25X and 0.95X, respectively,
the same as at last full 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 15% of the pool
balance. The largest performing loan is the Queens Multifamily
Portfolio Loan ($192.0 million -- 5.8%
of the pool), which is secured by 31 multifamily properties located
in Queens, New York. The borrower purchased the property
in 2006 for $277.5 million and planned to increase its value
through a comprehensive capital renovation program and conversion of rent
regulated units to market rents. Progress has been slower than
expected and multifamily market conditions in the New York City metropolitan
area have deteriorated since securitization. In addition,
operating expenses are significantly higher than originally projected.
The loan is currently on the master servicer's watchlist due to low DSCR.
Due to its weaker than expected performance, Moody's has assumed
a high probability of default for this loan. The loan is interest-only
for the entire term and matures in December 2013. Moody's LTV and
stressed DSCR are 136% and 0.64X, respectively,
compared to 145% and 0.60X at last review.
The second largest loan is the 720 Fifth Avenue Loan ($165.0
million -- 5.0% of the pool), which is secured
by a 121,108 square foot mixed-use property located in New
York City. The property was 93% leased as of September 2010
compared to 92% at last review. The largest tenant is Abercrombie
& Fitch (57% of the NRA; various lease expirations from
2013 through 2022). Property performance is inline with Moody's
original expectations. The loan is interest-only throughout
its entire ten-year term and matures in November 2016. Moody's
LTV and stressed DSCR are 112% and 0.79X, respectively,
compared to 114% and 0.78X at last review.
The third largest loan is the HGSI Headquarters Loan ($147.0
million -- 4.4% of the pool), which is secured
by a 635,000 square foot office property located in Rockville,
Maryland. The property is 100% leased to Human Genome Sciences,
Inc. through May 2026 and serves as its corporate headquarters.
Property performance is inline with Moody's original projections.
The loan has a 60-month interest-only period and will amortize
on a 360-month schedule maturing in September 2016. Moody's
LTV and stressed DSCR are 109% and 0.93X, respectively,
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
Tiffany Putman
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 18 CMBS Classes of CSMC 2006-C5
