Approximately $134.6 Million of Structured Securities Affected
New York, December 17, 2010 -- Moody's Investors Service (Moody's) upgraded the ratings of three classes
and affirmed seven classes of Merrill Lynch Financial Assets Inc.,
Commercial Mortgage Pass-Through Certificates, Series 2001-
Canada 6, as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Mar 14, 2002 Definitive Rating Assigned Aaa (sf)
Cl. X, Affirmed at Aaa (sf); previously on Mar 14,
2002 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Aug 23,
2006 Upgraded to Aaa (sf)
Cl. C, Upgraded to Aaa (sf); previously on Sep 17,
2009 Upgraded to Aa1 (sf)
Cl. D, Upgraded to A2 (sf); previously on Sep 17,
2009 Upgraded to Baa1 (sf)
Cl. E, Upgraded to A3 (sf); previously on Sep 17,
2009 Upgraded to Baa2 (sf)
Cl. F, Affirmed at Ba2 (sf); previously on Mar 14,
2002 Definitive Rating Assigned Ba2 (sf)
Cl. G, Affirmed at Ba3 (sf); previously on Mar 14,
2002 Definitive Rating Assigned Ba3 (sf)
Cl. H, Affirmed at B2 (sf); previously on Mar 14,
2002 Definitive Rating Assigned B2 (sf)
Cl. J, Affirmed at B3 (sf); previously on Mar 14,
2002 Definitive Rating Assigned B3 (sf)
RATINGS RATIONALE
The upgrades are due to increased subordination from loan payoffs and
amortization and the pool's overall stable performance. The
pool has paid down 48% since securitization and 5% since
last review.
The affirmations are due to key parameters, including Moody's
LTV ratio, Moody's stressed debt service coverage ratio (DSCR)
and the Herfindahl Index (Herf), remaining within acceptable ranges.
Based on our current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their current
ratings.
Moody's rating action reflects a cumulative base expected loss of
1.6% of the current balance compared to 1.8%
at Moody's prior review. Moody's provides a current
list of base and stress scenario losses for conduit and fusion CMBS transactions
on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
Depending on the timing of loan payoffs and the severity and timing of
losses from specially serviced loans, the credit enhancement level
for investment grade 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.
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 current stressed macroeconomic
environment and continuing weakness in the commercial real estate and
lending markets. Moody's currently views the commercial real
estate market as stressed with further performance declines expected in
the industrial, office, and retail sectors. Hotel performance
has begun to rebound, albeit off a very weak base. Multifamily
has also begun to rebound reflecting an improved supply / demand relationship.
The availability of debt capital is improving with terms returning towards
market norms. Job growth and housing price stability will be necessary
precursors to commercial real estate recovery. Overall, Moody's
central global scenario remains "hook-shaped" for 2010
and 2011; we expect overall a sluggish recovery in most of the world's
largest economies, returning to trend growth rate with elevated
fiscal deficits and persistent unemployment levels.
The principal methodologies used were "CMBS: Moody's Approach to
Rating Canadian CMBS" published in May 2000, and "CMBS:
Moody's Approach to Rating Large Loan/Single Borrower Transactions"
published in July 2000.
In addition to methodologies and research available on moodsy.com,
Moody's publishes a weekly summary of structured finance credit,
ratings and methodologies, available to all registered users of
our website, at www.moodys.com/SFQuickCheck.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 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 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 and B2, 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 estimates is melded with the conduit model credit enhancement into
an overall model result. Fusion loan credit enhancement is based
on the credit estimate 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 estimate level, is incorporated
for loans with similar credit estimates in the same transaction.
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 11
compared to 12 at last 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 v8.0 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 and sponsorship. These aggregated
proceeds are then adjusted for any pooling benefits associated with loan
level diversity, other concentrations and correlations.
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.
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 two sets of quantitative
tools -- MOST® (Moody's Surveillance Trends) on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated September 17, 2009.
Please see the ratings tab on the issuer / entity page on moodys.com
for the last rating action and the ratings history.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or financial
instruments related to the monitoring of this transaction in the past
six months.
DEAL PERFORMANCE
As of the December 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 48% to $138.6
million from $265.5 million at securitization. The
Certificates are collateralized by 23 mortgage loans ranging in size from
less than 1% to 17% of the pool, with the top ten
loans representing 29% of the pool. Five loans, representing
15% of the pool, have defeased and are collateralized by
Canadian Government securities.
One loan, representing 0.7% of the pool, is
on the master servicer's watchlist. Currently, there are
no loans in special servicing and the pool has not realized any losses
to date.
Moody's was provided with full year 2009 operating results for 85%
of the pool. Moody's weighted average LTV is 66% compared
to 67% at Moody's prior review. Moody's net
cash flow reflects a weighted average haircut of 13.5% to
the most recently available net operating income. Moody's
value reflects a weighted average capitalization rate of 9.7%.
Moody's actual and stressed DSCRs are 1.49X and 1.78X,
respectively, compared to 1.44X and 1.70X 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.
The top three conduit loans represent 34% of the pool. The
largest loan is the Westbridge Shopping Center Loan ($23.0
million -- 16.6% of the pool), which
is secured by a 211,400 square foot retail center located in Vaughan,
Ontario, approximately 20 miles north of Toronto. Currently,
the center's largest tenants are Toys 'R' Us (14% of
the net rentable area (NRA); lease expiration November 2014) and
Mark's Work Warehouse (6% of the NRA; lease expiration March
2011). Linens 'N Things, which was the center's largest
tenant at securitization (17% of the NRA), vacated its space
in early 2009. As of September 2010, the property was 80%
leased. The property's net operating income (NOI) has declined
24% since last review. The loan matures in December 2011.
Moody's LTV and stressed DSCR are 89% and 1.15X, respectively,
compared to 80% and 1.29X at last review.
The second largest loan is the Chateau Janville Loan ($12.2
million -- 8.8% of the pool), which
is secured by a 271-unit apartment complex located in Ottawa,
Ontario. As of December 2010, the property was 97%
leased, the same as at last review. Moody's LTV ratio and
stressed DSCR are 79% and 1.16X, respectively,
compared to 84% and 1.09X at last review.
The third largest loan is the Zellers Centre Bridgeport Loan ($12.0
million -- 8.7% of the pool), which
is secured by a 210,800 square foot retail center located in Waterloo,
Ontario. The center is anchored by Zellers (50% of the NRA;
lease expiration October 2018) and Sobeys (23% of the NRA;
lease expiration July 2018). As of March 2010, the property
was 100% leased, essentially the same as at last review.
Moody's LTV and stressed DSCR are 55% and 1.96X,
respectively, compared to 64% and 1.69X at last review.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Analytics information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Sandra Ruffin
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Juan Acosta
Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Upgrades Three and Affirms Seven CMBS Classes of MLFA 2001-Canada 6
