Approximately $75 Million of Structured Securities Affected
New York, May 18, 2017 -- Moody's Investors Service has upgraded the ratings on three classes,
affirmed the ratings on three classes and downgraded the rating on one
class in J.P. Morgan Chase Commercial Mortgage Securities
Corp. Series 2003-CIBC7, Commercial Pass-Through
Certificates, Series 2003-CIBC7 as follows:
Cl. D, Affirmed Aaa (sf); previously on Jun 23,
2016 Affirmed Aaa (sf)
Cl. E, Affirmed Aaa (sf); previously on Jun 23,
2016 Upgraded to Aaa (sf)
Cl. F, Upgraded to Aa1 (sf); previously on Jun 23,
2016 Upgraded to Aa3 (sf)
Cl. G, Upgraded to A2 (sf); previously on Jun 23,
2016 Upgraded to Baa1 (sf)
Cl. H, Upgraded to B3 (sf); previously on Jun 23,
2016 Upgraded to Caa1 (sf)
Cl. J, Affirmed C (sf); previously on Jun 23,
2016 Affirmed C (sf)
Cl. X-1, Downgraded to Caa2 (sf); previously
on Jun 23, 2016 Affirmed Caa1 (sf)
RATINGS RATIONALE
The ratings on Classes F, G and H were upgraded based primarily
on an increase in credit support resulting from loan paydowns and amortization.
The deal has paid down 19% since Moody's last review.
The ratings on Classes D and E were affirmed because the transaction's
key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable ranges.
The rating on Class J was affirmed because the ratings are consistent
with Moody's expected loss and realized losses. Class J has already
experienced a 58% realized loss as result of previously liquidated
loans.
The rating on the IO Class (Class X-1) was downgraded due to the
decline in the credit performance of its reference classes resulting from
principal paydowns of higher quality reference classes.
Moody's rating action reflects a base expected loss of 0.5%
of the current balance, compared to 0.4% at Moody's
last review. Moody's base expected loss plus realized losses is
now 3.9% of the original pooled balance, the same
as at 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 methodologies used in these ratings were "Approach to Rating US and
Canadian Conduit/Fusion CMBS" published in December 2014, and "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 these methodologies.
Additionally, the methodology used in rating Cl. X-1
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 in J.P. Morgan Chase Commercial Mortgage
Securities Corp. Series 2003-CIBC7. 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.
DESCRIPTION OF MODELS USED
Moody's review used the excel-based CMBS Conduit Model,
which it uses for both conduit and fusion transactions. Credit
enhancement levels for conduit loans 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). Moody's fuses the conduit
results with the results of its analysis of investment grade structured
credit assessed loans and any conduit loan that represents 10%
or greater of the current pool balance.
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 11,
compared to 10 at Moody's last review.
When the Herf falls below 20, Moody's uses the excel-based
Large Loan Model 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, 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 May 12, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 95% to $75
million from $1.4 billion at securitization. The
certificates are collateralized by 38 mortgage loans ranging in size from
less than 1% to 16% of the pool. Five cross-collateralized
loans, constituting 16% of the pool, have investment-grade
structured credit assessments. Nine loans, constituting 31%
of the pool, have defeased and are secured by US government securities.
Two loans, constituting 3% 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.
Twenty-four loans have been liquidated from the pool, resulting
in an aggregate realized loss of $53.3 million (for an average
loss severity of 46%). There are currently no loans in special
servicing.
Moody's received full year 2015 operating results for 99% of the
pool, and full year 2016 operating results for 92% of the
pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 34%, compared to 41%
at Moody's last review. Moody's conduit component excludes
loans with structured credit assessments, defeased and CTL loans,
and specially serviced and troubled loans. Moody's net cash
flow (NCF) reflects a weighted average haircut of 14% to the most
recently available net operating income (NOI). Moody's value
reflects a weighted average capitalization rate of 9.6%.
Moody's actual and stressed conduit DSCRs are 1.53X and 4.32X,
respectively, compared to 1.45X and 3.41X at the last
review. Moody's actual DSCR is based on Moody's NCF
and the loan's actual debt service. Moody's stressed
DSCR is based on Moody's NCF and a 9.25% stress rate
the agency applied to the loan balance.
The exposure with a structured credit assessment is the Brown Noltemeyer
Apartments Portfolio ($12.2 million -- 16%
of the pool), which is a portfolio of five cross-collateralized
loans secured by eight multifamily properties located in Louisville,
Kentucky. As of December 2015, the weighted average occupancy
of the portfolio was approximately 93%, compared to 92%
at last review. The loans are fully amortizing and have amortized
71% since securitization. The loan matures in November 2020
and Moody's structured credit assessment and stressed DSCR are aaa (sca.pd)
and greater than 4.00X, respectively.
The top three conduit loans represent 17% of the pool balance.
The largest loan is the Crestpointe Corporate Center II Loan ($6.1
million -- 8% of the pool), which is secured
by an approximately 122,000 SF office property located in Columbia,
Maryland. The property was 100% leased as of November 2016,
the same as at Moody's prior review. The loan is fully amortizing
and has amortized 53% since securitization. The loan matures
in October 2023 and Moody's LTV and stressed DSCR are 46% and 2.25X,
respectively, compared to 51% and 2.03X at the prior
review.
The second largest loan is the Grande Communications Portfolio Loan ($3.7
million -- 5% of the pool), which is secured
by a portfolio of four office properties located throughout Texas.
The four properties are fully leased to Grande Communications.
Due to the single tenant exposure, Moody's value incorporated a
lit/dark analysis. The loan is fully amortizing, has amortized
51% since securitization and matures in September 2023.
Moody's LTV and stressed DSCR are 26% and greater than 4.00X,
respectively.
The third largest loan is the Hopkins Emporia Loan ($3.2
million -- 4% of the pool), which is secured
by a 321,000 SF industrial property in Emporia, Kansas.
The property serves as the headquarters for Hopkins Manufacturing Corporation
and includes warehouse and production space on 16.6 acres.
Hopkins Manufacturing's lease ends in December 2020, and the loan
matures in September 2023. Due to the single tenant exposure,
Moody's value incorporated a lit/dark analysis. The loan is fully
amortizing, has amortized 53% since securitization and matures
in September 2023. Moody's LTV and stressed DSCR are 27%
and 3.81X, respectively, compared to 28% and
3.71X 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.
Rhett Terrell
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Matthew Halpern
Vice President - Senior Analyst
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
