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Rating Action:

Moody's Upgrades Seven, Affirms One and Downgrades One CMBS Class of WBCMT 2003-C6

Global Credit Research - 25 Jul 2013

Approximately $61 Million of Structured Securities Affected

New York, July 25, 2013 -- Moody's Investors Service (Moody's) upgraded the ratings of seven classes, affirmed one class and downgraded one class of Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2003-C6 as follows:

Cl. G, Upgraded to Aaa (sf); previously on Sep 6, 2012 Upgraded to Aa2 (sf)

Cl. H, Upgraded to Aaa (sf); previously on Sep 6, 2012 Upgraded to A2 (sf)

Cl. J, Upgraded to Aa2 (sf); previously on Sep 6, 2012 Upgraded to Baa2 (sf)

Cl. K, Upgraded to A2 (sf); previously on Sep 17, 2003 Definitive Rating Assigned Ba2 (sf)

Cl. L, Upgraded to Baa1 (sf); previously on Sep 17, 2003 Definitive Rating Assigned Ba3 (sf)

Cl. M, Upgraded to Ba1 (sf); previously on Sep 17, 2003 Definitive Rating Assigned B1 (sf)

Cl. N, Upgraded to B2 (sf); previously on Dec 2, 2010 Downgraded to Caa1 (sf)

Cl. O, Affirmed Caa3 (sf); previously on Dec 2, 2010 Downgraded to Caa3 (sf)

Cl. IO, Downgraded to B2 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf)

RATINGS RATIONALE

The upgrades are due to an increase in credit support from loan amortization and payoffs. The deal has paid down 84% since Moody's last review. Further credit support improvement is expected because the deal's largest remaining loan ($23 million - 32.1% of the pool) is fully defeased and matures in August 2013.

The rating of Class O is consistent with Moody's expected loss and thus is affirmed. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for rated 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.

The rating of the interest-only lass, Class IO, is downgraded to align its expected credit performance with that of its referenced classes.

Moody's rating action reflects a base expected loss of 3.8% of the current pooled balance compared to 2.8% at last review. The deal has paid down substantially since Moody's last review, but realized losses have only increased by $1 million. Moody's based expected loss plus realized losses is now 0.9% of the original deal balance compared to 1.8% at 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.

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 extent of growth in the current macroeconomic environment given the weak pace of recovery in the commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated.

The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000 and "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 these methodologies.

Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.62 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) 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 (sf) 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 (sf) and B2 (sf), 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 credit assessment level, is incorporated for loans with similar credit assessments in the same transaction.

CMBS Conduit Model v 2.62 includes an IO calculator, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee.

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.

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 eight compared to 19 at Moody's prior review.

In cases where the Herf falls below 20, Moody's also employs the large loan/single borrower methodology. This methodology uses the excel based Large Loan Model v 8.5 and then reconciles and weights the results from the two models in formulating a rating recommendation. 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.

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 a review utilizing MOST® (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated September 6, 2012. Please see the ratings tab on the issuer / entity page on moodys.com for the last rating action and the ratings history.

DEAL PERFORMANCE

As of the July 15, 2013 distribution date, the transaction's aggregate pooled certificate balance has decreased by 93% to $71 million from $953 million at securitization. The Certificates are collateralized by 14 mortgage loans ranging in size from 1% to 32% of the pool, with the top ten loans representing 91% of the pool. Two loans, representing 35% of the pool, have been defeased and are collateralized with U.S. Government Securities.

As of the most recent remittance report seven loans, representing 52% 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.

As of the most recent remittance report six loans have been liquidated at a loss from the pool, resulting in an aggregate realized loss of $5.5 million (19% average loss severity). One loan, representing 2% of the pool, is currently in special servicing. The specially serviced loan is the Rite Aid -- Moses Lake, WA loan ($1.6 million -- 2.2%), which is secured by a 17,000 square foot (SF) retail property is Moses Lake, Washington. The property is fully leased to Rite Aid. The loan and lease terms are coterminous. The loan is fully amortizing and the lease payments are sufficient to repay the loan. The property transferred to special servicing in May 2010 due to the previous guarantor filing for personal bankruptcy. Moody's expects a minimal to no loss for the loan at this time.

Moody's was provided with full year 2011 and full year 2012 operating results for 100% of the pool. Moody's weighted average conduit LTV is 88% compared to 77% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 16% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.1%.

Moody's actual and stressed conduit DSCRs are 1.25X and 1.29X, respectively, compared to 1.55X and 1.36X 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 stressed DSCR is greater than Moody's actual DSCR for this transaction because the actual debt constant for the pool is greater than Moody's 9.25% stressed rate.

The top three conduit loans represent 31% of the pool balance. The largest conduit loan is the Wildewood Center Loan ($9 million -- 13.0%), which is secured by a 263,000 SF retail property in California, Maryland. The property is currently on the watchlist for its upcoming August 2013 loan maturity. The borrower expects to repay the loan by the loan's maturity date. The property is 87% leased as of June 2013. Moody's LTV and stressed DSCR are 78% and 1.31X, respectively, compared to 61% and 1.67X at last review.

The second largest conduit loan is the Ridgeview Plaza Shopping Center ($8 million -- 11.9%), which is secured by 91,000 SF grocery anchored retail property in Reno, Nevada. This loan is also on the watchlist for its upcoming July 2013 loan maturity. Safeway, the grocer anchor, has a January 2014 lease expiration. The borrower is currently working to extend Safeway's lease and then expects to refinance the loan. The property was 91% leased as of June 2013. Moody's LTV and stressed DSCR are 99% and 0.98X, respectively, compared to 72% an 1.34X at last review.

The third largest conduit loan is the Trader Joe's Plaza Loan ($4 million -- 6.0%), which is secured by a retail property located in Las Vegas, Nevada. The property had been on the watchlist since May 2012 due to low occupancy and debt service coverage. The loan transferred to special servicing after the most recent remittance date due to the borrower's inability to repay the loan by its July 2013 loan maturity. The property was 74% leased as of December 2012. Only one lease, representing 3% of the net rentable area, expires in 2013-14. Moody's LTV and DSCR are 110% and 0.88X, respectively, compared to 106% and 0.91X at last review.

REGULATORY DISCLOSURES

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.

In conducting surveillance of this credit, Moody's considered performance data contained in servicer and remittance reports. Moody's obtains servicer reports on this transaction on a periodic basis, at least annually.

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.

Peter Simon
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 Seven, Affirms One and Downgrades One CMBS Class of WBCMT 2003-C6
No Related Data.

 

© 2014 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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