Approximately $19 Million of Structured Securities Affected
New York, March 30, 2017 -- Moody's Investors Service, ("Moody's") has
upgraded the rating on one class and affirmed the rating on two classes
in CSFB Mortgage Securities Corp. Commercial Mortgage Pass-Through
Certificates, Series 2004-C3 as follows:
Cl. E, Upgraded to Ca (sf); previously on Jun 30,
2016 Affirmed C (sf)
Cl. F, Affirmed C (sf); previously on Jun 30,
2016 Affirmed C (sf)
Cl. A-X, Affirmed Caa3 (sf); previously on Jun
30, 2016 Affirmed Caa3 (sf)
RATINGS RATIONALE
The rating on Class E was upgraded to align the rating with Moody's expected recovery of principal and interest from specially serviced and troubled loans.
The rating on Class F was affirmed because the rating is consistent with
Moody's expected loss plus realized loss. Class F has already
experienced a 60% realized loss as result of previously liquidated
loans.
The rating on the IO class, Class A-X, was affirmed
based on the credit performance of its referenced classes.
Moody's rating action reflects a base expected loss of 58.3%
of the current certificate balance, compared to 62.8%
at Moody's last review. Moody's base expected loss plus realized
losses is now 7.4% of the original pooled balance,
compared to 8.7% 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://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
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 these ratings was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower CMBS"
published in October 2015. Please see the Rating Methodologies
page on www.moodys.com for a copy of this methodology.
Additionally, the methodology used in rating Cl. A-X
was "Moody's Approach to Rating Structured Finance Interest-Only
Securities" published in October 2015. Please see the Rating Methodologies
page on www.moodys.com for a copy of this methodology.
Please note that on February 27, 2017, Moody's released a
"Request for Comment" in which it has requested market feedback on proposed
changes to its methodology for rating structured finance interest-only
(IO) securities called "Moody's Approach to Rating Structured Finance
Interest-Only Securities," dated October 20, 2015.
If Moody's adopts the new methodology as proposed, the changes could
affect the ratings of CSFB 2004-C3. Please see "Moody's
Proposes Revised Approach to Rating Structured Finance Interest-Only
(IO) Securities", which is available at www.moodys.com,
for more information about the implications of the proposed changes to
the methodology on Moody's ratings.
Moody's analysis incorporated a loss and recovery approach in rating the
P&I classes in this deal since 77% of the remaining loans by
balance are in special servicing. 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 class and the recovery as a pay down of principal to
the most senior class.
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 2,
compared to 6 at Moody's last review.
Moody's analysis used the excel-based Large Loan Model.
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 and property type. Moody's also further adjusts
these aggregated proceeds for any pooling benefits associated with loan
level diversity and other concentrations and correlations.
DEAL PERFORMANCE
As of the March 17, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 99% to $19
million from $1.64 billion at securitization. The
certificates are collateralized by five mortgage loans. The transaction
is under-collateralized as the aggregate certificate balance is
$5.8 million greater than the pooled loan balance.
This disparity of principal balances is due to the servicer recovering
Workout-Delayed Reimbursement Amounts (WODRAs) from the transaction's
principal collections and the subordinate certificates are not written
down. Moody's is currently treating this certificate under-collateralization
as a loss of principal to the trust. One loan, constituting
3% of the pooled loan balance, has defeased and is secured
by US government securities.
There are currently no loans 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.
Thirty-two loans have been liquidated from the pool, resulting
in an aggregate realized loss of $111 million (for an average loss
severity of 48%). Three loans, constituting 77%
of the pooled loan balance, are currently in special servicing.
The largest specially serviced loan is the Counsel Square Loan ($7.5
million), which is secured by an eight building office park totaling
approximately 110,000 SF and located in New Port Richey, Florida.
The loan was transferred to special servicing in December 2012 due to
imminent default and became REO in October 2013.
The second largest specially serviced loan is the Bronx Apartments Loan
($2.0 million), which is secured by two multi-family
properties located in Bronx, New York. There is a total of
39 units and the properties were collectively 83% occupied as of
November 2016. The loan transferred to Special Servicing in July
2009 due to imminent default.
The third largest specially serviced loan is the Dellwood Apartments Loan
($867,000), which is secured by a 110-unit apartment
complex in Laredo, Texas. The Loan transferred to Special
Servicing in December 2012 due to payment default. Moody's
estimates an aggregate $5.4 million loss for specially serviced
loans.
The one performing non-defeased loan is The Groves at Wimauma Apartments
Loan ($2.6 million), which is secured by a 108-unit
multifamily apartment property located in Wimauma, Florida.
The property was 100% leased as of September 2016. Moody's
LTV and stressed DSCR are 72% and 1.32X, respectively,
compared to 74% and 1.29X at the last review.
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.
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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
Fred Kasimov
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
Matthew Halpern
Asst Vice President - Analyst
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
