Approximately $956.5 Million of Structured Securities Affected
New York, December 10, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of seven classes,
confirmed two classes and affirmed six classes of Credit Suisse First
Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through
Certificates, Series 2003-C4 as follows:
Cl. A-3, Affirmed at Aaa (sf); previously on
Oct 9, 2003 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Oct 9, 2003 Definitive Rating Assigned Aaa (sf)
Cl. A-1-A, Affirmed at Aaa (sf); previously
on Oct 9, 2003 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Jan 24,
2007 Upgraded to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Jan 24,
2007 Upgraded to Aaa (sf)
Cl. D, Confirmed at Aa2 (sf); previously on Oct 20,
2010 Aa2 (sf) Placed Under Review for Possible Downgrade
Cl. E, Confirmed at A1 (sf); previously on Oct 20,
2010 A1 (sf) Placed Under Review for Possible Downgrade
Cl. F, Downgraded to Baa2 (sf); previously on Oct 20,
2010 A3 (sf) Placed Under Review for Possible Downgrade
Cl. G, Downgraded to Ba3 (sf); previously on Oct 20,
2010 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. H, Downgraded to Caa1 (sf); previously on Oct 20,
2010 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. J, Downgraded to Caa2 (sf); previously on Oct 20,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. K, Downgraded to Ca (sf); previously on Oct 20,
2010 Ba2 (sf) Placed Under Review for Possible Downgrade
Cl. L, Downgraded to C (sf); previously on Oct 20,
2010 Ba3 (sf) Placed Under Review for Possible Downgrade
Cl. O, Downgraded to C (sf); previously on Oct 20,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. A-X, Affirmed at Aaa (sf); previously on
Oct 9, 2003 Definitive Rating Assigned Aaa (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 confirmation and affirmations are due to key parameters,
including Moody's loan to value (LTV) ratio, Moody's
stressed debt service coverage ratio (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 the existing rating.
On October 20, 2010 Moody's placed nine classes on review
for possible downgrade. This action concludes our review.
Moody's rating action reflects a cumulative base expected loss of
5.0% of the current balance. At last review,
Moody's cumulative base expected loss was 1.7%.
Moody's stressed scenario loss is 10.6% 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 this rating was "CMBS: Moody's
Approach to Rating Fusion Transactions" published in April 2005.
In addition to methodologies and research, 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 pay down 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
underlying ratings is melded with the conduit model credit enhancement
into an overall model result. Fusion loan credit enhancement is
based on the credit estimate 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 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 March 11, 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
six months.
DEAL PERFORMANCE
As of the November 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 27% to $978.3
million from $1.34 billion at securitization. The
Certificates are collateralized by 145 mortgage loans ranging in size
from less than 1% to 7% of the pool, with the top
ten loans representing 36% of the pool. The pool contains
two loans, representing 12% of the pool, with investment
grade credit estimates. Twenty two loans, representing 18%
of the pool, have defeased and are collateralized with U.S.
Government securities.
Thirty-six loans, representing 22% 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.
Thirteen loans have been liquidated from the pool since securitization,
resulting in a $16.6 million loss (42% loss severity
on average). Seven loans, representing 6% of the pool,
are currently in special servicing. The specially serviced loans
are secured by a mix of property types. The master servicer has
recognized an aggregate $11 million appraisal reduction for four
of the specially serviced loans. Moody's has estimated an
aggregate $25.4 million loss (42% expected loss on
average) for all of the specially serviced loans.
Moody's has assumed a high default probability for eight poorly
performing loans representing 1.3% of the pool and has estimated
an aggregate $2.4 million loss (20% expected loss
based on a 50% probability default) from these troubled loans.
Moody's rating action recognizes potential uncertainty around the
timing and magnitude of loss from these troubled loans.
Moody's was provided with full year 2009 operating results for 80%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 82% compared to 91%
at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 11.8% to the most recently
available net operating income. Moody's value reflects a
weighted average capitalization rate of 9.0%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.76X and 1.54X, respectively,
compared to 1.24X and 1.18X 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.
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 37
compared to 44 at Moody's prior review.
The largest loan with a credit estimate is the Circle Centre Mall Loan
($70.1 million -- 7.2% of the pool),
which is secured by an 800,000 square foot (SF) regional mall located
in Indianapolis, Indiana. The mall is anchored by Nordstrom
and Carson Pirie Scott. As of June 2010 the property had an inline
occupancy of 85% compared to 80% at last review.
The loan sponsor is Simon Property Group. Moody's current
credit estimate and stressed DSCR are Aa3 and 1.97X, respectively,
compared to A2 and 1.62X at last review.
The second loan with a credit estimate is the 540 Madison Avenue Loan
($44.1 million -- 4.5% of the pool),
which is secured by a 281,000 SF office building located in the
Plaza District office submarket of New York City. The property
was 92% occupied as of June 2010, essentially the same as
at last review. The property performance has improved due to a
decrease in expenses. Moody's current credit estimate and
stressed DSCR are Aa1 and 2.63X, respectively, compared
to Baa1 and 1.86X at last review.
The top three performing conduit loans represent 14% of the pool
balance. The largest loan is Wanamaker Building Loan ($58.8
million -- 6.1% of the pool), which is secured
by a 974,000 SF office property located in Philadelphia, Pennsylvania.
The largest tenants are Children's Hospital of Philadelphia, United
Health Services and U.S. Army Corp. of Engineers.
The property was 99% leased as of September 2010 compared to 97%
at last review. Moody's LTV and stressed DSCR are 62% and
1.65X, respectively, compared to 70% and 1.41X
at last review.
The second largest loan is Jefferson Point Shopping Center Loan ($57.0
million -- 5.9% of the pool), which is secured
by a 410,000 SF retail center located in Fort Wayne, Indiana.
Major tenants include Rave Theater, Bed Bath & Beyond and Barnes
& Noble. The property was 81% leased as of June 2010
compared to 89% at last review. Moody's LTV and stressed
DSCR are 123% and 0.84X, respectively, compared
to 121% at last and 0.85X at last review.
The third largest loan is the Town & Country Apartments Loan ($22.6
million -- 2.3% of the pool), which is secured
by a 618 unit multifamily property located near the University of Illinois
Champaign campus in Urbana, Illinois. The property was 89%
leased as of September 2010 compared to 92% at last review.
Moody's LTV and stressed DSCR are 104% and 0.94X,
respectively, compared to 95% and 1.02X 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
Lacey Morgan
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Keith Banhazl
Vice President - Senior Analyst
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 Seven, Confirms Two and Affirms Six CMBS Classes of CSFB 2003-C4
