Approximately $51.5 Million of Structured Securities Affected
New York, April 22, 2011 -- 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
Apr 20, 1999 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. H, Upgraded to Baa1 (sf); previously on Sep 16,
2010 Upgraded to Baa3 (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)
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 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 2.4%
of the current balance. At last full review, Moody's cumulative
base expected loss was 2.0%. Moody's stressed scenario
loss is 6.0% 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 "Moody's Approach
to Rating Conduit Transaction", published on September 15,
2000 and "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.
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 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 four,
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.
For deals that include a pool of credit tenant loans, Moody's currently
uses a Gaussian copula model, incorporated in its public CDO rating
model CDOROMv2.8 to generate a portfolio loss distribution to derive
credit enhancement levels for CTL component. 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.
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 September 16, 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 March 21, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 93% to $91.8
million from $1.36 billion at securitization. The
Certificates are collateralized by 12 mortgage loans ranging in size from
1% to 36% of the pool. Four loans, representing
52% of the pool, have defeased and are collateralized with
U.S. Government securities. Six loans, representing
45% of the pool, are CTL loans. The conduit component
consists of two loans, representing 3% of the pool balance.
Two loans, representing 3% 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.
Sixteen loans have been liquidated from the pool, resulting in a
$19.5 million loss (20% loss severity on average).
No loans are currently in special servicing.
The largest conduit loan is the Glastonbury Country Club Loan ($1.7
million -- 1.8% 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. However,
property performance has recently improved with a third quarter 2010 DSCR
of 0.89X compared to 0.70X at the year-end 2009.
The loan fully amortizes over the loan term and has amortized by approximately
47% since securitization and 7% since last review.
Moody's LTV and stressed DSCR are 57% and 1.85X, respectively,
compared to 89% and 1.20X at last review.
The second largest conduit loan is the Genus Inc. Building Loan
($1.3 million -- 1.4%), 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 November 2015. The loan is on the master servicer's watchlist
due to outstanding servicer advances for taxes. The loan fully
amortizes over the loan term and has amortized by approximately 81%
since securitization and 23% since last review. Moody's
LTV and stressed DSCR are 19% and >4.00X, respectively,
compared to 26% and >4.00X at last review.
The CTL component includes six loans secured by properties leased under
bondable leases. The CTL exposures are Bank of America Corporation
($16.4 million -- 17.9%; Moody's
senior unsecured rating A2 - negative outlook), RadioShack
Corporation ($11.3 million -- 12.3%;
Moody's senior unsecured rating Ba2 - stable outlook), Bon-Ton
Stores Inc. ($8.5 million -- 9.2%;
Moody's senior unsecured rating Caa1 -- stable outlook), and
Kohl's Corporation ($5.4 million -- 5.9%;
Moody's senior unsecured rating Baa1 - stable outlook).
Credits representing approximately 100% of the CTL exposure are
publicly rated by Moody's. Moody's has downgraded the rating of
one credit since the prior review of this transaction in September 2010.
The bottom-dollar weighted average rating factor (WARF) for the
CTL component has declined to 1,420 compared to 1,331 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 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.
New York
Tiffany Putman
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 Three CMBS Classes of CSFB 1997-C1
