Approximately $51 Million of Structured Securities Affected
New York, April 11, 2014 -- Moody's Investors Service (Moody's) has upgraded the ratings on three
classes, affirmed the ratings on three classes and downgraded the
rating of one class in Credit Suisse First Boston Mortgage Securities
Corp., Commercial Mortgage Pass-Through Certificates
2003-CPN1 as follows:
Cl. A-X, Downgraded to Caa3 (sf); previously
on May 30, 2013 Downgraded to Caa2 (sf)
Cl. A-Y, Affirmed Aaa (sf); previously on May
30, 2013 Affirmed Aaa (sf)
Cl. D, Upgraded to Baa1 (sf); previously on May 30,
2013 Upgraded to Baa3 (sf)
Cl. E, Upgraded to Ba2 (sf); previously on May 30,
2013 Upgraded to B1 (sf)
Cl. F, Upgraded to B2 (sf); previously on May 30,
2013 Affirmed Caa1 (sf)
Cl. G, Affirmed Caa3 (sf); previously on May 30,
2013 Affirmed Caa3 (sf)
Cl. H, Affirmed C (sf); previously on May 30,
2013 Affirmed C (sf)
RATINGS RATIONALE
The ratings on the three P&I classes were upgraded based primarily
on an increase in credit support resulting from loan paydowns and amortization.
The deal has paid down 31% since Moody's last review.
The ratings on the two below investment grade P&I classes were affirmed
because the ratings are consistent with expected recovery of principal
and interest from liquidated and troubled loans.
The ratings on IO class AY was affirmed based on the credit performance
of the referenced classes.
The rating on IO Class AX was downgraded due to a decline in the credit
performance of its referenced classes resulting from principal paydowns
of higher quality reference classes.
Moody's rating action reflects a base expected loss of 20% of the
current balance compared to 14% at Moody's prior review.
Moody's base expected loss plus realized losses is now 10.2%
of the original pooled balance compared to 10.0% at the
prior 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 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.
DESCRIPTION OF MODELS USED
Moody's review used the excel-based CMBS Conduit Model v
2.64, which it uses 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 Moody's uses
to estimate Moody's value). Conduit model results at the
B2 (sf) level are based on a paydown analysis using the individual loan-level
Moody's LTV ratio. Moody's may consider other concentrations
and correlations in its analysis. Based on the model pooled credit
enhancement levels of Aa2 (sf) and B2 (sf), the required credit
enhancement on 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, Moody's
merges the credit enhancement for loans with investment-grade credit
assessments with the conduit model credit enhancement for an overall model
result. Moody's incorporates negative pooling (adding credit
enhancement at the credit assessment level) for loans with similar credit
assessments in the same transaction.
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 5,
compared to 7 at Moody's last review.
When the Herf falls below 20, Moody's uses the excel-based
Large Loan Model v 8.7 and then reconciles and weights the results
from the conduit and large loan 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. 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, 2014 distribution date, the transaction's
aggregate certificate balance has decreased by 95% to $51
million from $1.0 billion at securitization. The
Certificates are collateralized by 15 mortgage loans ranging in size from
less than 1% to 36% of the pool, with the top ten
loans (excluding defeasance) representing 99% of the pool.
The pool contains nine loans, representing 3% of the pool,
that are secured by residential cooperative properties, primarily
located in New York City. One of the co-op loans,
representing 0.6% of the pool, has defeased and is
collateralized by U.S. Government securities. The
co-op loans have a Aaa credit estimate, the same as last
review.
Three loans, representing 29% 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.
Eleven loans have been liquidated from the pool, resulting in an
aggregate realized loss of $93.0 million (64% loss
severity on average). No loans are in special servicing.
Moody's has assumed a high default probability for three poorly-performing
loans representing 41% of the pool and has estimated an aggregate
$8.8 million loss (42% expected loss based on a 62%
probability of 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 54%.
Moody's weighted average conduit LTV is 68% compared to approximately
97% at Moody's last review. Moody's conduit
component excludes loans with credit assessments, defeased and CTL
loans and specially serviced and troubled loans. Moody's
net cash flow (NCF) reflects a weighted average haircut of 12%
to the most recently available net operating income (NOI). Moody's
value reflects a weighted average capitalization rate of 10.1%.
Moody's actual and stressed conduit DSCRs are 1.74X and 1.25X,
respectively, compared to 1.52X and 1.14X at the 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.
The top three performing conduit loans represent 69% of the pool
balance. The largest loan is the Northgate Mall Loan ($18
million -- 36% of the pool), which is secured by 576,000
square feet (SF) of a regional mall in Cincinnati, Ohio.
Major tenants Macy's and Burlington Coat Factory. The mall
was 85% leased as of September 2013 compared to 76% as of
last review. Moody's LTV and stressed DSCR are 80% and 1.43X,
respectively, same as at the last review.
The second largest loan is the Signature Place Apartments Loan ($11.3
million -- 22% of the pool), which is secured by a 414-unit
garden apartment complex located in Marietta, Georgia. The
loan was previously in special servicing and returned to the master servicer
in September 2013 following a loan modification. The modified loan
closed on March 15, 2013 and resulted in an A/B note split in conjunction
with a $3.1 million equity investment by the borrower.
The B-Note outstanding balance is $5.0 million.
The property was 85% leased as of January 2014 compared to 84%
leased as of March 2013. Moody's LTV and stressed DSCR are 125%
and 0.83X, respectively.
The third largest loan is the 261-267 Boston Road Loan ($5.7
million -- 11% of the pool). The loan is secured by
a 97,000 SF Class B office flex complex in Billerica, Massachusetts
in north suburban Boston. The property was 71% leased as
of February 2014 compared to 67% as of December 2012. Moody's
LTV and stressed DSCR are 109% and 0.97X, respectively,
compared to 122% and 0.86X 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.
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.
Stephanie Sun
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 Three, Affirms Three and Downgrades One Class of CSFB 2003-CPN1
