Approximately $33.8 Million of Structured Securities Affected
New York, March 24, 2011 -- Moody's Investors Service (Moody's) upgraded the rating of one class and
affirmed five classes of Prudential Securities Secured Financing Corporation,
Series Key 2000-C1 as follows:
Cl. X, Affirmed at Aaa (sf); previously on Mar 9,
2011 Confirmed at Aaa (sf)
Cl. F, Affirmed at Aaa (sf); previously on Mar 9,
2011 Confirmed at Aaa (sf)
Cl. G, Upgraded to Aaa (sf); previously on Aug 26,
2010 Upgraded to Aa2 (sf)
Cl. J, Affirmed at Ba2 (sf); previously on Jun 29,
2000 Definitive Rating Assigned Ba2 (sf)
Cl. K, Affirmed at Caa3 (sf); previously on Aug 26,
2010 Downgraded to Caa3 (sf)
Cl. M, Affirmed at C (sf); previously on Aug 26,
2010 Downgraded to C (sf)
RATINGS RATIONALE
The upgrade is due to increased subordination due to loan amortization
and payoffs. 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 the existing ratings.
Moody's rating action reflects a cumulative base expected loss of 14.7%
of the current balance. At last review, Moody's cumulative
base expected loss was 13.0%. Moody's stressed scenario
loss is 18.9% 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 methodologies used in this rating were "CMBS: Moody's
Approach to Rating Conduit Transactions" published in September 2000 and
"CMBS: Moody's Approach to Rating Large Loan/Single Borrower Transactions"
published in July 2000.
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 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 8,
the same as at Moody's prior review.
In cases where the Herf falls below 20, Moody's employs also the
large loan/single borrower methodology. This methodology uses the
excel-based Large Loan Model v 8.0. 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.
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 May 20, 2010. Please
see the ratings tab on the issuer / entity page on moodys.com for
the last rating action and the ratings history.
DEAL PERFORMANCE
As of the March 17, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 90% to $78.7
million from $816.3 million at securitization. The
Certificates are collateralized by 19 mortgage loans ranging in size from
less than 1% to 15% of the pool, with the top ten
non-defeased loans representing 70% of the pool.
Two loans, representing 6% of the pool, have defeased
and are secured by U.S. Government securities.
Three loans, representing 13% 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.
Twenty loans have been liquidated from the pool since securitization,
resulting in an aggregate $21.8 million loss (18%
loss severity on average). Three loans, representing 20%
of the pool, are currently in special servicing. The largest
specially serviced loan is the Northcrest Village Shopping Center Loan
($9.7 million -- 12.3% of the pool),
which is secured by a 136,275 square foot (SF) retail center located
in Carrollton, Texas. The property was 37% leased
as of March 2010 compared to 20% at last review. The loan
transferred into special servicing in November 2008 and is now real estate
owned (REO).
The second largest specially serviced loan is the Country Meadow Estates
Loan ($3.5 million -- 4.4% of the pool),
which is secured by a 187-unit multifamily complex located in Lee's
Summit, Missouri. The property was 82% leased as of
March 2010 compared to 75% at last review. The loan transferred
into special servicing in August 2008 and is now REO.
The master servicer has recognized an aggregate $4.1 million
appraisal reduction on the specially serviced loans. Moody's has
estimated a $7.2 million loss (45% expected loss
on average) for the specially serviced loans.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 99% and 99%, respectively, of the
pool's non-defeased loans. Excluding specially serviced
and troubled loans, Moody's weighted average LTV is 71% compared
to 80% at last review. Moody's net cash flow reflects a
weighted average haircut of 14% to the most recently available
net operating income. Moody's value reflects a weighted average
capitalization rate of 10.0%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.29X and 1.62X, respectively,
compared to 1.57X and 1.52X 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.
The top three performing conduit loans represent 40% of the pool
balance. The largest loan is Meadowood Plaza Shopping Center Loan
($11.7 million -- 14.9% of the pool),
which is secured by a 100,000 SF retail center located in Reno,
Nevada. The center is anchored by Best Buy, Barnes &
Noble and Petco. The property was 100% leased as of September
2010, the same as last review. Moody's LTV and stressed DSCR
are 77% and 1.40X, respectively, compared to
87% and 1.25X at last review.
The second largest loan is Aberfeldy Portfolio Center Loan ($10.9
million -- 13.9% of the pool), which is secured
by a six-building portfolio totaling 481,901 SF of office,
retail and warehouse space located in various Texas cities. Performance
has fluctuated since securitization due to lease rollovers. The
portfolio was 92% leased as of September 2010. Moody's LTV
and stressed DSCR are 83% and 1.42X, respectively,
compared to 106% and 1.11X at last review.
The third largest loan is Inman Grove Shopping Center Loan ($8.9
million -- 11.3% of the pool), which is secured
by a 112,400 SF grocery anchored retail center located in Edison,
New Jersey. The center was 96% leased as of September 2010.
Moody's LTV and stressed DSCR are 67% and 1.57X, respectively,
compared to 65% and 1.63X 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
Robert Gilbane
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 Upgrades One and Affirms Five CMBS Classes of PSSF 2000-C1
