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Rating Action:

Moody's Upgrades One and Affirms Six CMBS Classes of MLMI 1998-C1

28 Jan 2011

Approximately $284.5 Million of Structured Securities Affected

New York, January 28, 2011 -- Moody's Investors Service (Moody's) upgraded the rating of one class and affirmed six classes of Merrill Lynch Mortgage Investors, Inc., Mortgage Pass-Through Certificates, Series 1998-C1-CTL as follows:

Cl. A-3, Affirmed at Aaa; previously on Oct 5, 1999 Confirmed at Aaa

Cl. A-PO, Affirmed at Aaa; previously on Oct 5, 1999 Confirmed at Aaa

Cl. IO, Affirmed at Aaa; previously on Oct 5, 1999 Confirmed at Aaa

Cl. B, Upgraded to Aaa; previously on Apr 18, 2007 Upgraded to Aa1

Cl. C, Affirmed at A3; previously on Jul 23, 2009 Downgraded to A3

Cl. D, Affirmed at Ba2; previously on Jul 23, 2009 Downgraded to Ba2

Cl. E, Affirmed at B3; previously on Jul 23, 2009 Downgraded to B3

RATINGS RATIONALE

The upgrade is due to increased credit subordination levels resulting from paydowns and amortization. The pool has paid down 13% since Moody's prior review.

Moody's affirmed six classes because the current credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings based on our current base expected loss.

Moody's rating action reflects a cumulative base expected loss of 13.4% of the current balance. Moody's stressed scenario loss is 16.7% 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. Due to the high level of credit subordination and defeasance, it is unlikely that investment grade classes would be downgraded even if losses are higher than Moody's expected base.

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 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 Credit Tenant Lease (CTL) Backed Transactions" published in October 1998.

In addition to methodologies and research available on moodys.com, 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 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 16 compared to 19 at Moody's prior review.

In rating this transaction, Moody's used its credit-tenant lease (CTL) financing rating methodology (CTL approach) for single tenants. Under Moody's CTL approach, the rating of a transaction's certificates is primarily based on the senior unsecured debt rating (or the corporate family rating) of the tenant, usually an investment grade rated company, leasing the real estate collateral supporting the bonds. This tenant's credit rating is the key factor in determining the probability of default on the underlying lease. The lease generally is "bondable", which means it is an absolute net lease, yielding fixed rent paid to the trust through a lock-box, sufficient under all circumstances to pay in full all interest and principal of the loan. The leased property should be owned by a bankruptcy-remote, special purpose borrower, which grants a first lien mortgage and assignment of rents to the securitization trust. The dark value of the collateral, which assumes the property is vacant or "dark", is then examined to determine a recovery rate upon a loan's default. Moody's also considers the overall structure and legal integrity of the transaction.

For deals that consist of a pool of credit tenant loans, Moody's currently uses a Gaussian copula model, incorporated in its public CDO rating model CDOROMv2.6 to generate a portfolio loss distribution to assess the ratings.

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 23, 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 January 16, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 46% to $335.9 million from $630.4 million at securitization. The Certificates are collateralized by 91 mortgage loans ranging in size from less than 1% to 16% of the pool, with the top ten non-defeased loans representing 35% of the pool. Eighty of the loans are CTL loans secured by properties leased to 12 corporate credits. Eleven loans, representing 26% of the pool, have defeased and are collateralized with U.S. Government securities. At last review defeasance represented 25% of the pool balance.

Sixteen loans have been liquidated from the pool, resulting in an aggregate realized loss of $22.7 million (49% loss severity on average). Due to realized losses, classes G,H, J and K have been eliminated entirely and class F has experienced a 11% principal loss. At Moody's prior review the pool had experienced an aggregate $10.8 million realized loss.

One loan, representing 1% of the pool, is on the master servicer's watchlist. Four loans, representing 5% of the pool, are currently in special servicing. All of the specially serviced loans are secured by retail properties previously leased to Circuit City, which declared bankruptcy in late 2008 and subsequently closed all its stores. Moody's estimates an aggregate loss of $11.6 million (75% loss severity on average) for the specially serviced loans. Moody's expected loss is based on the recent liquidation of four loans previously occupied by Circuit City which experienced an average severity of 74%.

Based on the most recent remittance statement, Classes K through F have experienced cumulative interest shortfalls totaling $4.9 million. Moody's anticipates that the pool will continue to experience interest shortfalls because of the exposure to specially serviced loans. Interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal subordinate entitlement reductions (ASERs), extraordinary trust expenses and non-advancing by the master servicer based on a determination of non-recoverability.

The pool's largest exposures are Rite Aid Corporation ($86.3 million - 26% of the pool balance; Moody's senior unsecured rating Caa3 - stable outlook), Georgia Power Company ($54.5 million - 16%; Moody's senior unsecured rating A3 - stable outlook), Kroger Co. ($28.6 million -- 9%; Moody's senior unsecured rating Baa2 -- stable outlook), and Circuit City ($22.6 million - 7%) Approximately 73% of the pool, excluding defeased loans, are publicly rated by Moody's.

The bottom-dollar weighted average rating factor (WARF) for this pool is 3,419 compared to 3,414 at last review. WARF is a measure of the overall quality of a pool of diverse credits. The bottom-dollar WARF is a measure of the default probability within the pool.

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
Dariusz Surmacz
Asst Vice President - 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 Six CMBS Classes of MLMI 1998-C1
No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be reckless and inappropriate for retail investors to use MOODY’S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or other professional adviser.

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