Approximately $51.5 Million of Structured Securities Affected
New York, September 16, 2010 -- Moody's Investors Service (Moody's) upgraded the ratings of one class
and affirmed three classes of Credit Suisse First Boston Mortgage Securities
Corp., Series 1997-C1 as follows:
Cl. A-X, Affirmed at Aaa (sf); previously on
May 19,1999 Confirmed at Aaa (sf)
Cl. H, Upgraded to Baa3 (sf); previously on Oct 25,
2007 Upgraded to B2 (sf)
Cl. I, Affirmed at Caa3 (sf); previously on Feb 15,
2005 Downgraded to Caa3 (sf)
Cl. J, Affirmed at C (sf); previously on Feb 15,
2005 Downgraded to C (sf)
The upgrade is due to increased credit enhancement resulting from loan
pay downs and amortization and overall stable performance. Based
on our current base expected loss, the credit enhancement levels
for the affirmed classes are sufficient to maintain their currentg ratings.
Moody's rating action reflects a cumulative base expected loss of
2.0% of the current balance. At last review,
Moody's cumulative base expected loss was 1.5%.
Moody's stressed scenario loss is 5.5% 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
Based on the significant increase in credit enhancement since securitization
and the pool's high exposure to defeased loans, it is likely
that the current levels of credit enhancement for the investment grade
classes would be sufficient to maintain their existing ratings even if
overall pool performance declines.
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 methodologies used in rating Credit Suisse First Boston
Mortgage Securities Corp., Series 1997-C1 were "CMBS:
Moody's Approach to Rating Large Loan/Single Borrower Transactions" published
in July 2000 and "CMBS: Moody's Approach to Rating Credit
Tenant Lease (CTL) Backed Transactions" published in October 1998.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found on Moody's website.
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.
In cases where the Herf falls below 20, Moody's employs 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 currently uses a Gaussian copula model to evaluate pools of credit
tenant loans (CTLs) within CMBS transaction. Moody's public CDO
rating model CDOROMv2.6 is used to generate a portfolio loss distribution
to assess the credit enhancement levels for ratings. Under Moody's
CTL approach, the rating is primarily based on the senior unsecured
debt rating (or the corporate family rating) of the tenant leasing the
real estate collateral. 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. Moody's reconciles and weights the results
from the two models in formatting a rating recommendation.
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 October 25, 2007.
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
As of the August 20, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 90% to $129.4
million from $1.36 billion at securitization. The
Certificates are collateralized by 13 mortgage loans ranging in size from
less than 1% to 24% of the pool, with the top ten
non-defeased loans representing 61% of the pool.
Four loans, representing 39% of the pool, have defeased
and are collateralized with U.S. Government securities.
Six loans, representing 34% of the pool, are CTL loans.
The conduit component consists of three loans, representing 27%
of the pool balance.
Two loans, representing 26% 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
Sixteen loans have been liquidated from the pool, resulting in an
aggregate realized loss of $19.7 million (21% loss
severity). Currently there are no loans in special servicing.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 100% and 76% of the pool, respectively.
Excluding defeased and CTL loans, Moody's weighted average
LTV is 49% compared to 50% at Moody's prior review.
Moody's net cash flow reflects a weighted average haircut of 32%
to the most recently available net operating income. Moody's
value reflects a weighted average capitalization rate of 11.5%.
Moody's actual and stressed DSCRs are 1.05X and 2.60X,
respectively, compared to 1.47X and 2.53X 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 4 compared
to 5 at Moody's prior review.
The largest conduit loan is the Hyatt Aruba Loan ($31.4
million -- 24.3%), which is secured by a 360-room
luxury oceanfront resort property located in Aruba. The loan is
on the master servicer's watchlist due to a decline in DSCR caused by
decrease in revenues. The loan benefits from a 20-year amortization
schedule and has amortized by approximately 42% since securitization
and 20% since last review. The hotel's occupancy for
trailing 12 months ending June 2010 was 76% compared to trailing
12 months ending December 2006 at 85%. Moody's LTV
and stressed DSCR are 48% and 2.37X, respectively,
compared to 45% and 2.52X at last review.
The second conduit loan is the Glastonbury Country Club Loan ($1.8
million -- 1.4% of the pool), which is secured
by an 18-hole golf course located in an upscale neighborhood near
Hartford, Connecticut. The loan is on the master servicer's
watchlist due to low DSCR caused by decrease in revenues. As of
December 2009 NCF DSCR was 0.69x compared to 1.24x at securitization.
The loan fully amortizes over the loan term and has amortized by approximately
44% since securitization and 22% since last review.
Moody's LTV and stressed DSCR are 89% and 1.20X,
respectively, compared to 48% and 2.10X at last review.
The third conduit loan is the Genus Inc. Building Loan ($1.6
million - 1.3%), which is secured by a 74,400
square foot R&D facility located in Newburyport, Massachusetts.
The property is 100% leased to Varian Inc. through June
2013. The loan fully amortizes over the loan term and has amortized
by approximately 75% since securitization and 49% since
last review. Moody's LTV and stressed DSCR are 26%
and >4.00X, respectively, compared to 49%
and 2.34X at last review.
The CTL component includes 6 loans secured by properties leased under
bondable leases. The CTL exposures are Bank of America Corporation
($17.4 million -- 13.5%; Moody's
senior unsecured rating A2 - negative outlook), RadioShack
Corporation ($11.6 million -- 9.0%;
Moody's senior unsecured rating Ba1 - stable outlook), Bon-Ton
Stores Inc. ($9.2 million - 7.1%;
Moody's senior unsecured rating Caa1 - stable outlook), and
Kohl's Corporation ($5.6 million -- 4.3%;
Moody's senior unsecured rating Baa1 - stable outlook).
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
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purpose 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.
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Upgrades One and Affirms Three CMBS Classes of CSFB 1997-C1
250 Greenwich Street
New York, NY 10007