Approximately $3.3 Billion of Structured Securities Affected
New York, March 02, 2011 -- Moody's Investors Service (Moody's) downgraded the ratings of two classes
and affirmed 18 classes of Greenwich Capital Commercial Funding Corp.
Commercial Mortgage Trust, Series 2006-GG7 as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Aug 16, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Aug 16, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-AB, Affirmed at Aaa (sf); previously on
Aug 16, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Aug 16, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-1-A, Affirmed at Aaa (sf); previously
on Aug 16, 2006 Assigned Aaa (sf)
Cl. X, Affirmed at Aaa (sf); previously on Aug 16,
2006 Definitive Rating Assigned Aaa (sf)
Cl. A-M, Affirmed at Aa3 (sf); previously on
Apr 15, 2010 Downgraded to Aa3 (sf)
Cl. A-J, Affirmed at Baa3 (sf); previously on
Apr 15, 2010 Downgraded to Baa3 (sf)
Cl. B, Affirmed at Ba1 (sf); previously on Apr 15,
2010 Downgraded to Ba1 (sf)
Cl. C, Affirmed at Ba3 (sf); previously on Apr 15,
2010 Downgraded to Ba3 (sf)
Cl. D, Affirmed at B2 (sf); previously on Apr 15,
2010 Downgraded to B2 (sf)
Cl. E, Affirmed at B3 (sf); previously on Apr 15,
2010 Downgraded to B3 (sf)
Cl. F, Downgraded to Caa2 (sf); previously on Apr 15,
2010 Downgraded to Caa1 (sf)
Cl. G, Downgraded to Caa3 (sf); previously on Apr 15,
2010 Downgraded to Caa2 (sf)
Cl. H, Affirmed at Ca (sf); previously on Apr 15,
2010 Downgraded to Ca (sf)
Cl. J, Affirmed at C (sf); previously on Apr 15,
2010 Downgraded to C (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 Feb 3,
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 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
their current ratings.
Moody's rating action reflects a cumulative base expected loss of
7.3% of the current balance. At last review,
Moody's cumulative base expected loss was 7.5%.
Moody's stressed scenario loss is 23% 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 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 "CMBS: Moody's
Approach to Rating U.S. Conduit Transactions" published
in September 2000.
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 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 10, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 9% to $3.3
billion from $3.6 billion at securitization. The
Certificates are collateralized by 123 mortgage loans ranging in size
from less than 1% to 8% of the pool, with the top
ten loans representing 48% of the pool. The pool does not
contain any defeased loans or loans with credit estimates.
Twenty-one loans, representing 10% 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.
Ten loans have been liquidated from the pool, resulting in an aggregate
realized loss of $119.9 million (86% loss severity
overall). The pool had realized an aggregate $82 million
loss at last review. Fifteen loans, representing 10%
of the pool, are currently in special servicing. Moody's
has estimated an aggregate $142.4 million loss (51%
expected loss on average) for the specially serviced loans.
Moody's has assumed a high default probability for five poorly performing
loans representing 3% of the pool and has estimated a $15.2
million aggregate loss (15% 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 93% and 64% of the pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 109% compared to 110% at Moody's prior
review. Moody's net cash flow reflects a weighted average
haircut of 13% 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 1.28X and 0.94X, respectively,
essentially the same 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 32
compared to 35 at Moody's prior review.
The top three performing conduit loans represent 19% of the pool
balance. The largest loan is the Investcorp Retail Portfolio Loan
($248.4 million -- 7.6%), which
represents a pari passu interest in a $257.9 million loan.
The loan is secured by 22 shopping centers located in three Texas MSA's
(Dallas, Houston and San Antonio). Since securitization,
seven properties have been released from the loan collateral reducing
the total net rentable area to 2.2 million square feet from 2.8
million square feet at securitization. As of June 2010, the
portfolio was 91% leased compared to 89% in March 2009 and
93% at securitization. Moody's LTV and stressed DSCR
are 114% and 0.91X, respectively, compared to
139% and 0.74X at last review.
The second largest loan is the One New York Plaza Loan ($192.8
million -- 5.9%), which represents a pari passu
interest in a $386 million loan. The loan is secured by
a 2.4 million square foot Class A office building located in downtown
Manhattan. The property was 100% leased as of March 2010,
similar to last review. The largest tenants are Wachovia which
leases 53% of the net rentable area (NRA) through December 2014
and Goldman Sachs, which leases 21% of the NRA through December
2014. Moody's LTV and stressed DSCR are 75% and 1.23X,
respectively, compared to 81% and 1.13X at last review.
The third largest loan is the 55 Corporate Drive Loan ($190 million
-- 5.8%), which is secured by three office buildings
totaling 670,000 square feet located in Bridgewater, New Jersey.
The property was 100% leased to Sanofi-Aventis (Moody's
senior unsecured debt rating -- A2; stable outlook) through
June 2026. Moody's LTV and stressed DSCR are 133%
and 0.71X, respectively, essentially the same 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
Raymond Flores
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 Two and Affirms 18 CMBS Classes of GCCFC 2006-GG7
