Approximately $11 Million of Structured Securities Affected
New York, May 16, 2014 -- Moody's Investors Service has upgraded one class and affirmed the ratings
on two classes in Credit Suisse First Boston Mortgage Securities Corp.
Commercial Mortgage Pass-Through Certificates, Series 2003-CK2
as follows:
Cl. K, Upgraded to Caa1 (sf); previously on Jun 13,
2013 Affirmed Caa3 (sf)
Cl. L, Affirmed Ca (sf); previously on Jun 13,
2013 Affirmed Ca (sf)
Cl. A-X, Affirmed Caa3 (sf); previously on Jun
13, 2013 Downgraded to Caa3 (sf)
RATINGS RATIONALE
The rating on the P&I class was upgraded based primarily on an increase
in credit support resulting from loan paydowns and amortization.
The deal has paid down 61% since Moody's last review.
The rating on the P&I class was affirmed because the rating is consistent
with Moody's expected loss.
The rating on the IO class was affirmed based on the credit performance
(or the weighted average rating factor or WARF) of the referenced classes.
Moody's rating action reflects a base expected loss of 54% of the
current balance, compared to 52% at Moody's last review.
Moody's base expected loss plus realized losses is now 4.4%
of the original pooled balance, compared to 4.7% 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 principal methodology used in this rating was "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 this methodology.
Moody's analysis incorporated a loss and recovery approach in rating the
P&I classes in this deal since 74% of the pool is in special
servicing and performing conduit loans only represent 26% of the
pool. In this approach, Moody's determines a probability
of default for each specially serviced loan that it expects will generate
a loss and estimates a loss given default based on a review of broker's
opinions of value (if available), other information from the special
servicer, available market data and Moody's internal data.
The loss given default for each loan also takes into consideration repayment
of servicer advances to date, estimated future advances and closing
costs. Translating the probability of default and loss given default
into an expected loss estimate, Moody's then applies the aggregate
loss from specially serviced loans to the most junior classes and the
recovery as a pay down of principal to the most senior classes.
DESCRIPTION OF MODELS USED
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 four,
the same as at Moody's last review.
Moody's review incorporated the use of the excel-based Large Loan
Model v 8.7. 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.
DEAL PERFORMANCE
As of the April 17, 2014 distribution date, the transaction's
aggregate certificate balance has decreased by 97.7% to
$22.5 million from $988 million at securitization.
The certificates are collateralized by five mortgage loans ranging in
size from just over 7% to 40% of the pool, with the
top ten loans constituting 100% of the pool.
Two loans, constituting 26% 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.
Nine loans have been liquidated from the pool, resulting in an aggregate
realized loss of $31 million (for an average loss severity of 41%).
Three loans, constituting 74% of the pool, are currently
in special servicing. The largest specially serviced loan is the
Abbotts Village Shopping Center (for $9 million --
40% of the pool), which is secured by a 110,000 SF
shopping center in Alpharetta, GA. The loan transferred to
special servicing in 2012 for maturity default. Current occupancy
is 85% and the largest tenant (51%) has a lease expiration
in February 2015.
The remaining two specially serviced loans are secured by a retail shopping
center and an industrial property. Moody's estimates an aggregate
$10 million loss for the specially serviced loans (60% expected
loss on average).
Moody's has assumed a high default probability for two poorly performing
loans, constituting 26% of the pool, and has estimated
an aggregate loss of $2 million (a 38% expected loss based
on a 75% probability default) from these troubled loans.
Moody's received full year 2012 operating results for 100% of the
pool, and full or partial year 2013 operating results for 50%.
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.
Sini Gomes
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
Michael Gerdes
MD - Structured Finance
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 One and Affirms Two Classes of CSFB 2003-CK2