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Rating Action:

Moody's Upgrades Four, Affirms Seven and Downgrades One Class of BSCMS 2003-TOP12

Global Credit Research - 17 Jan 2014

Approximately $83.8 Million of Structured Securities Affected

New York, January 17, 2014 -- Moody's Investors Service has upgraded the ratings on four classes, affirmed the ratings on seven classes, and downgraded the rating on one class of Bear Stearns Commercial Mortgage Securities Trust Commercial Mortgage Pass-Through Certificates, Series 2003-TOP12 as follows:

Cl. C, Upgraded to Aaa (sf); previously on May 23, 2013 Upgraded to Aa1 (sf)

Cl. D, Upgraded to Aaa (sf); previously on May 23, 2013 Upgraded to Aa3 (sf)

Cl. E, Upgraded to Aa2 (sf); previously on May 23, 2013 Upgraded to A2 (sf)

Cl. F, Upgraded to A2 (sf); previously on May 23, 2013 Upgraded to Baa1 (sf)

Cl. G, Affirmed Baa3 (sf); previously on May 23, 2013 Affirmed Baa3 (sf)

Cl. H, Affirmed Ba1 (sf); previously on May 23, 2013 Affirmed Ba1 (sf)

Cl. J, Affirmed Ba2 (sf); previously on May 23, 2013 Affirmed Ba2 (sf)

Cl. K, Affirmed B1 (sf); previously on May 23, 2013 Affirmed B1 (sf)

Cl. L, Affirmed B3 (sf); previously on May 23, 2013 Affirmed B3 (sf)

Cl. M, Affirmed Caa3 (sf); previously on May 23, 2013 Affirmed Caa3 (sf)

Cl. N, Affirmed C (sf); previously on May 23, 2013 Affirmed C (sf)

Cl. X-1, Downgraded to B1 (sf); previously on May 23, 2013 Affirmed Ba3 (sf)

RATINGS RATIONALE

The ratings on the P&I classes C through F were upgraded based primarily on an increase in credit support resulting from loan paydowns and amortization. The deal has paid down 76% since Moody's last review.

The rating on the investment grade P&I class, class G was affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on the six below investment grade P&I classes, classes H through N were affirmed because the ratings are consistent with Moody's expected loss.

The rating on the IO Class (Class X-1) was downgraded due to the decline in the credit performance of its reference classes resulting from principal paydowns of higher quality reference classes.

Moody's rating action reflects a base expected loss of 3.7% of the current balance, compared to 1.9% at Moody's last review. Moody's base expected loss plus realized losses is now 0.6% of the original pooled balance, compared to 0.9% at the last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.

Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.

Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.

METHODOLOGY UNDERLYING THE RATING ACTION

The methodologies used in this rating were "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005, and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

DESCRIPTION OF MODELS USED

Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan-level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on 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, Moody's merges the credit enhancement for loans with investment-grade credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the credit assessment level) for loans with similar credit assessments in the same transaction.

Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 9, compared to 25 at Moody's last review.

When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.6 and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. 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. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations.

DEAL PERFORMANCE

As of the December 15, 2013 distribution date, the transaction's aggregate certificate balance has decreased by 92% to $92.1 million from $1.2 billion at securitization. The certificates are collateralized by 22 mortgage loans ranging in size from less than 1% to 16% of the pool, with the top ten loans excluding defeasance constituting 74% of the pool. Two loans, constituting 18% of the pool, have investment-grade credit assessments. Four loans, constituting 16% of the pool, have defeased and are secured by US government securities.

Three loans, constituting 15% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance.

Eight loans have been liquidated from the pool, resulting in an aggregate realized loss of $3.3 million (for an average loss severity of 3%). Two loans, constituting 13% of the pool, are currently in special servicing. The largest specially serviced loan is the Wheatland Marketplace Shopping Center ($6.7 million -- 7.3% of the pool), which is secured by 60,500 square foot (SF) retail property located in Naperville, Illinois. The loan transferred to special servicing in September 2013 due to maturity default. The Borrower has since filed for bankruptcy effective December 3, 2013.

The second specially serviced loan is the Stonebriar Centre Shops ($4.9 million -- 5.3% of the pool), which is secured by a 33,700 SF retail property located in Frisco, Texas. The Loan transferred to special servicing in July 2013 due to maturity default. The Special Servicer originally executed a forbearance agreement with the Borrower through December 31, 2013. The forbearance agreement has since expired. The Borrower informed the Special Servicer that their broker is preparing to submit an offer for the purchase of the property. The Special Servicer is currently awaiting details of the purchase offer before reviewing alternative options for the resolution of this asset. As of November 2013, the property was 91.5% leased

Moody's estimates an aggregate $ 1.2 million loss for the specially serviced loans (18 % expected loss on average).

Moody's received full year 2012 operating results for 90% of the pool, and full or partial year 2013 operating results for 81% of the pool. Moody's weighted average conduit LTV is 73%, compared to 69% at Moody's last review. Moody's conduit component excludes loans with credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 17% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.7%.

Moody's actual and stressed conduit DSCRs are 1.45X and 1.99X, respectively, compared to 1.73X and 1.69X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance.

The largest loan with a credit assessment is the 284 Mott Street Loan ($14.5 million -- 15.7% of the pool), which is secured by a 163 unit multifamily property located in the SoHo neighborhood of New York City. As of December 2012, the property was 99% leased, the same as at last review. Moody's current credit assessment and stressed DSCR are Aaa and 3.06X, respectively, compared to Aaa and 2.93X at last review.

The second loan with a credit assessment is the Wayne Towne Center Loan ($1.9 million -- 2.2% of the pool), which is secured by a 642,100 SF regional shopping center located in Wayne, New Jersey. The shopping center is located next to the Willowbrook Mall. As of December 2012, the property was 100% leased, the same as at last review. The loan benefits from full amortization. Moody's current credit assessment and stressed DSCR are Aaa and >4.0X, respectively, the same as at last review.

The top three conduit loans represent 34% of the pool balance. The largest loan is the Eagle Plaza Shopping Center Loan ($13.1 million --14.2% of the pool), which is secured by a 226,900 SF retail property located in Voorhees, New Jersey. The largest tenants include Acme Markets, Office Depot and Ross Dress for Less. As of June 2013 the property was 86% leased compared to 84% at Moody's prior review. Moody's LTV and stressed DSCR are 63% and 1.71X, respectively, compared to 65% and 1.67X at the last review.

The second largest loan is the Wachovia Loan ($12.5 million -- 13.5% of the pool), which is secured by a 102,300 SF office property located in Boca Raton, Florida. The largest tenant is Wells Fargo. The loan is on the watchlist due to low DSCR and occupancy. As of July 2013, the property was 45% leased compared to 84% at last review. Moody's LTV and stressed DSCR are 131% and 0.80X, respectively, compared to 66% and 1.59X at the last review.

The third largest loan is the Cokesbury Court Loan ($5.5 million -- 6.0% of the pool), which is secured by a 200 unit student housing project located at the Oklahoma City University. Units range from single bedrooms to four person suites. The loan is benefiting from full amortization. Moody's LTV and stressed DSCR are 64% and 1.55X, respectively.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.

Moody's did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Lacey M Morgan
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Keith Banhazl
VP - Sr Credit Officer/Manager
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Upgrades Four, Affirms Seven and Downgrades One Class of BSCMS 2003-TOP12
No Related Data.

 

© 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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