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Rating Action:

Moody's Upgrades One and Affirms Two Classes of CSFB 2003-CK2

16 May 2014

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
No Related Data.
© 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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