Approximately $545.5 Million of Structured Securities Affected
New York, September 02, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of nine classes
of Credit Suisse First Boston Mortgage Securities Corp.,
Commercial Pass-Through Certificates, Series 2006-TFL1.
Moody's rating action is as follows:
US$52.0M Cl. A-1 Certificate, Affirmed
at Aaa (sf); previously on Aug 16, 2006 Definitive Rating Assigned
US$195M Cl. A-2 Certificate, Affirmed at Aaa
(sf); previously on Aug 16, 2006 Definitive Rating Assigned
Cl. A-X-1 Certificate, Affirmed at Aaa (sf);
previously on Aug 16, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-X-2 Certificate, Affirmed at Aaa (sf);
previously on Aug 16, 2006 Definitive Rating Assigned Aaa (sf)
US$39M Cl. B Certificate, Confirmed at Aaa (sf);
previously on Aug 26, 2010 Aaa (sf) Placed Under Review for Possible
US$34M Cl. C Certificate, Downgraded to A1 (sf);
previously on Aug 26, 2010 Aa1 (sf) Placed Under Review for Possible
US$27M Cl. D Certificate, Downgraded to A3 (sf);
previously on Aug 26, 2010 Aa2 (sf) Placed Under Review for Possible
US$29M Cl. E Certificate, Downgraded to Baa1 (sf);
previously on Aug 26, 2010 Aa3 (sf) Placed Under Review for Possible
US$24M Cl. F Certificate, Downgraded to Baa3 (sf);
previously on Aug 26, 2010 A2 (sf) Placed Under Review for Possible
US$25M Cl. G Certificate, Downgraded to Ba1 (sf);
previously on Aug 26, 2010 A3 (sf) Placed Under Review for Possible
US$25M Cl. H Certificate, Downgraded to Ba2 (sf);
previously on Aug 26, 2010 Baa1 (sf) Placed Under Review for Possible
US$27M Cl. J Certificate, Downgraded to B1 (sf);
previously on Aug 26, 2010 Baa3 (sf) Placed Under Review for Possible
US$36M Cl. K Certificate, Downgraded to B2 (sf);
previously on Aug 26, 2010 Ba2 (sf) Placed Under Review for Possible
US$32.5M Cl. L Certificate, Downgraded to B3
(sf); previously on Aug 26, 2010 Ba3 (sf) Placed Under Review
for Possible Downgrade
The downgrades were due to the deterioration in the performance of the
two remaining assets in the trust, the Tharaldson Portfolio Loan
(88% of the pool balance) and the Charleston Place Hotel Loan (12%),
and refinancing risk in an adverse environment. Both loans mature
in less than one year. Moody's also affirmed four pooled
classes and confirmed one pooled class. The affirmations and confirmation
were due to key parameters, including Moody's loan to value
(LTV) ratio remaining within an acceptable range. Moody's
placed ten classes on review for possible downgrade on August 26,
2010. This action concludes Moody's review.
Further downward pressure on ratings will be driven by the collateral
performance and refinance risk of the Tharaldson Portfolio Loan.
Moody's analysis incorporated the expectation of gradual improvement
in cash flow performance to a sustainable level 10% above trailing
twelve month (TTM) March 2010 cash flow of $52.5 million.
The TTM cash flow has fallen 36.5% since 2007. The
probability of default at loan maturity in 2011, is significant
given the overall debt of $801.0 million (including $145.1
million in mezzanine debt) and the limited time remaining for robust cash
flow recovery to materialize. Under the terms of the Pooling and
Servicing Agreement the special servicer has the option to extend the
maturity date of the loan to April 2014, seven years prior to April
2021, the Rated Final Maturity Distribution Date of the Certificates.
Transferral of the loan to special servicing may result in interest shortfalls
to rated classes due to special servicing and workout fees and expenses.
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 and monitoring this transaction
was Moody's "CMBS: Moody's Approach to Rating Large Loan/Single
Borrower Transactions", rating methodology 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.
Moody's review incorporated the use of the excel-based CMBS
Large Loan Model v 8.0 which is used for both large loan and single
borrower transactions. 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. The model also incorporates
a supplementary tool to allow for the testing of the credit support at
various rating levels. The scenario or "blow-up"
analysis tests the credit support for a rating assuming that loans in
the pool default with an average loss severity that is commensurate with
the rating level being tested.
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 17, 2008. The
previous review was part of Moody's first quarter 2009 ratings sweep
and incorporated assumptions for capitalization rates and stressed cash
flows that were outlined in "Rating Methodology Update: US
CMBS Conduit and Fusion Review Prompted by Declining Property Values and
Rising Delinquencies" dated February 5, 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.
As of the August 16, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 50% to $545.5
million from $1.084 billion at securitization due to the
payoff of five loans and the payment of release premiums associated with
the Tharaldson Portfolio Loan. The Certificates are collateralized
by two mortgage loans ranging in size from 12% to 88% of
the pool. Neither of the two remaining loans in the pool are on
the master servicer's watchlist, or in special servicing.
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. Watchlisted loans are loans which meet certain portfolio
review guidelines established as part of the CRE Finance Council (CREFC)
monthly reporting package. To date the pool has not experienced
Moody's was provided with full year 2009 operating results for both
loans in the pool, and operating results for the trailing 12-month
period ending March 31, 2010 for the Tharaldson Portfolio Loan.
Moody's weighted average LTV ratio is 94% compared to 89%
at Moody's prior review. Moody's stressed debt service
ratio ("DSCR") is 1.32X compared to 1.40X at
last review. Moody's stressed DSCR is based on Moody's
NCF and a 9.25% stressed rate applied to the loan balance.
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. Large loan transactions have
a Herf of less than 20. This pool has a Herf of 1, the same
as at Moody's prior review.
The largest loan is the Tharaldson Portfolio Loan ($478.5
million -- 87.7% of the pool), which is secured
by 105 limited service hotel properties with a total of 8,238 keys
located in 26 states. Two properties, with a total of 194
rooms, have been released from the loan collateral. Payments
of Release Prices associated with the two property releases has resulted
in a loan pay down of approximately 2% since securitization.
Each property is operated under a separate franchise agreement with 60
properties operating under a brand owned by Marriott International,
Inc.; 23 properties operating under a brand owned by Choice
Hotels International, Inc.; 14 properties operating
under a brand owned by Hilton Hotels Corporation; 4 properties operating
under a brand owned by InterContinental Hotels Group, and 4 properties
operating under a brand owned by Country Inns & Suites By Carlson,
Inc. Revenue per Available Room ("RevPAR") for the
portfolio peaked in 2008 at $71.66, compared to $64.79
at securitization. However, RevPAR declined 16.5%
to $59.82 in 2009, and continued to decline an additional
2% to $58.53 in the trailing 12-month period
ending March 31, 2010. Commencing in November 2009 all excess
cash flow after debt service is being deposited into a lender controlled
reserve account as additional collateral for the loan. As of August
2010 the balance in the reserve account was approximately $21.6
million. Moody's LTV ratio and stressed DSC ratio are 96%
and 1.31X, respectively. Moody's underlying
rating is B3, compared to Ba3 at last review. The loan has
a final extended maturity in April 2011. The loan sponsor is Whitehall
Street Global Real Estate Limited Partnership 2005.
The second loan is the Charleston Place Hotel Loan ($67.0
million -- 12.3% of the pool), which is secured
by a 442-key full-service, luxury hotel located in
the historic district of Charleston, South Carolina. Collateral
for the loan also includes 51,186 square feet of retail space and
a theater parcel that is utilized as a conference center and ballroom.
RevPAR peaked in 2007 at $191.67, compared to $168.64
at securitization. However, RevPAR declined 10% to
$171.73 in 2008 and declined an additional 21% to
$136.16 in 2009. Moody's LTV ratio and stressed
DSC ratio are 83% and 1.40X. Moody's underlying
rating is Ba2, the same as last review. The loan has a final
extended maturity date in March 2011. The loan sponsors are Orient
Express Hotels Ltd. and A. Alfred Taubman.
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
Moody's considers the quality of information available on the issuer
satisfactory for the purposes of maintaining a credit rating.
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 Investors Service adopts all necessary measures so that the information
it uses in assigning a credit rating is of sufficient quality and from
reliable sources; however, Moody's Investors Service does not
and cannot in every instance independently verify, audit 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.
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
Andrea M. Daniels
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Downgrades Nine and Affirms Four CMBS Classes of CSFB 2006-TFL1
250 Greenwich Street
New York, NY 10007