Approximately $22 Million of Structured Securities Affected
New York, June 01, 2017 -- Moody's Investors Service has affirmed the ratings on two classes and
upgraded the ratings on two classes in Wachovia Bank Commercial Mortgage
Trust 2003-C7, Commercial Mortgage Pass-Through Certificates,
Series 2003-C7 as follows:
Cl. F, Upgraded to Aaa (sf); previously on Jul 14,
2016 Upgraded to Aa2 (sf)
Cl. G, Upgraded to B1 (sf); previously on Jul 14,
2016 Upgraded to Caa1 (sf)
Cl. H, Affirmed C (sf); previously on Jul 14,
2016 Affirmed C (sf)
Cl. X-C, Affirmed Ca (sf); previously on Jul
14, 2016 Affirmed Ca (sf)
RATINGS RATIONALE
The rating on the P&I class H was affirmed because the ratings are
consistent with Moody's expected loss plus realized losses.
Class H has already experienced a 71% realized loss as result of
previously liquidated loans.
The ratings on the P&I classes F and G were upgraded due to a significant
increase in defeasance, to 18% of the current pool balance
from 4% at the last review, as well as an increase in credit
support resulting from loan paydowns and amortization. The deal
has paid down 9% since Moody's last review.
The rating on the IO class, Class X-C, was affirmed
because the class does not, nor is expected to receive monthly interest
payments.
Moody's rating action reflects a base expected loss of 0.0%
of the current balance, compared to 0.4% at Moody's
last review. Moody's does not anticipate losses from the
remaining collateral in the current environment. However,
over the remaining life of the transaction, losses may emerge from
macro stresses to the environment and changes in collateral performance.
Our ratings reflect the potential for future losses under varying levels
of stress. Moody's base expected loss plus realized losses is now
6.5% of the original pooled balance, compared to 6.6%
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 rating 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. X-C
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 Wachovia Bank Commercial Mortgage Trust 2003-C7.
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 4,
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 May 15, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 98% to $22
million from $1.012 billion at securitization. The
certificates are collateralized by 14 mortgage loans ranging in size from
less than 1% to 35% of the pool, with the top ten
loans (excluding defeasance) constituting 83% of the pool.
Three loans, constituting 18% of the pool, have defeased
and are secured by US government securities.
There are currently no loans on the watchlist or in special servicing.
Five loans have been liquidated from the pool, resulting in an aggregate
realized loss of $66 million (for an average loss severity of 75%).
Moody's received full year 2015 operating results for 100% of the
pool, and full or partial year 2016 operating results for 98%
of the pool (excluding specially serviced and defeased loans).
Moody's weighted average conduit LTV is 54%, compared
to 61% 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 25% to the most recently available net operating income (NOI).
Moody's value reflects a weighted average capitalization rate of
9.2%.
Moody's actual and stressed conduit DSCRs are 1.19X and 2.13X,
respectively, compared to 1.18X and 1.82X 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 top three conduit loans represent 57% of the pool balance.
The largest loan is the Plaza de Laredo Loan ($7.6 million
-- 34.7% of the pool), which is secured by a
retail property located in Laredo, Texas, approximately 2.5
hours south of San Antonio near the border of Mexico. The top three
tenants at the property are Home Depot, Academy Sports & Outdoors,
and Office Depot. As of December 2016, the property was 100%
leased. The loan has amortized 33% since securitization
and is scheduled to mature in October 2023. Moody's LTV and stressed
DSCR are 61% and 1.63X, respectively, compared
to 65% and 1.55X at the last review.
The second largest loan is the Clearwater and Ocala, Florida Loan
(formerly known as the Florida Eckerd Portfolio Loan) ($2.7
million -- 12.1% of the pool), which was originally
secured by two cross-collateralized and cross-defaulted
single-tenant Eckerd stores in Clearwater and Ocala, Florida.
The property in Clearwater is now a Main Street Thrift Shop and the property
in Ocala is a Dollar Tree. Performance has remained stable and
the loan has benefited from 54% of amortization since securitization.
The loan is scheduled to mature in September 2023. Moody's LTV
and stressed DSCR are 53% and 1.82X, respectively,
compared to 57% and 1.72X at the last review.
The third largest loan is the Sorrento Place I & II Loan ($2.2
million -- 10.3% of the pool), which is secured
by a 72-unit multifamily property in Fargo, North Dakota.
The subject property consists of two three-story garden style apartments
with a mixture of 1, 2, and 3 bedroom units, along with
single and double car garages. The property was 90% occupied
in December 2016, compared to 91% occupied in December 2015.
The loan has amortized 24% since securitization and is scheduled
to mature in July 2018. Moody's LTV and stressed DSCR are 64%
and 1.48X, respectively, compared to 68% and
1.4X 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.
Leah Zulkoski
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
Keith Banhazl
Associate Managing Director
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
