Approximately $45.5 Million of Structured Securities Affected
New York, October 16, 2014 -- Moody's Investors Service has upgraded the ratings of two classes and
affirmed the ratings on three classes of Wachovia Bank Commercial Mortgage
Trust, Commercial Mortgage Pass-Through Certificates,
Series 2003-C7 as follows:
Cl. E, Upgraded to Aa2 (sf); previously on Jul 10,
2014 Affirmed A3 (sf)
Cl. F, Upgraded to A3 (sf); previously on Jul 10,
2014 Affirmed Ba1 (sf)
Cl. G, Affirmed Caa2 (sf); previously on Jul 10,
2014 Downgraded to Caa2 (sf)
Cl. H, Affirmed C (sf); previously on Jul 10,
2014 Downgraded to C (sf)
Cl. X-C, Affirmed Caa3 (sf); previously on Jul
10, 2014 Downgraded to Caa3 (sf)
RATINGS RATIONALE
The ratings on P&I classes E and F were upgraded based primarily on
an increase in credit support resulting from loan paydowns and amortization.
The deal has paid down 41% since Moody's last review.
The ratings on P&I classes G and H were affirmed because the ratings
are consistent with Moody's expected loss.
The rating on the IO class was affirmed based on the credit performance
(or the weighted average rating factor or WARF) of the referenced classes.
Moody's rating action reflects a base expected loss of 3.7%
of the current balance compared to 36.5% at Moody's
last review. Moody's base expected loss plus realized losses is
now 6.4% of the original pooled balance compared to 7.3%
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 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.
On October 9, 2014, Moody's issued a "Request for Comment"
asking for market feedback on proposed changes to the methodology it uses
to rate conduit and fusion CMBS transactions. If Moody's adopts
the new methodology as proposed, the changes could affect the ratings
of WBCMT 2003-C7. Please see "Request for Comment:
Proposed Enhancements to Our Approach to Rating US and Canadian Conduit/Fusion
CMBS", 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 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 structured
credit assessments with the conduit model credit enhancement for an overall
model result. Moody's incorporates negative pooling (adding
credit enhancement at the structured credit assessment level) for loans
with similar structured 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 seven,
compared to six 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 September 15, 2014 distribution date, the transaction's
aggregate certificate balance has decreased by 96% to $45.5
million from $1.012 billion at securitization. The
certificates are collateralized by 16 mortgage loans ranging in size from
less than 2% to 19% of the pool, with the top ten
loans constituting 90% of the pool. Two loans, constituting
4% of the pool, have defeased and are secured by US government
securities.
One loan, constituting 19% of the pool, is 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.
Five loans have been liquidated from the pool, resulting in an aggregate
realized loss of $63 million (for an average loss severity of 71.9%).
No loans are currently in special servicing.
Moody's has assumed a high default probability for one poorly performing
loan, constituting 19% of the pool and has recognized an
expected loss for this loan.
Moody's received full year 2013 operating results for 100% of the
pool and full or partial year 2014 operating results for 86% of
the pool. Moody's weighted average conduit LTV is 69%,
compared to 70% 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 11.6% 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 1.23X and 1.53X,
respectively, compared to 1.21X and 1.52X 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 Sea Breeze Village Loan ($8.7 million
-- 19.2% of the pool), which is secured by a
shadow-anchored retail property in Las Vegas, Nevada.
The shadow anchors are CVS and Albertsons grocery store. At year-end
2013, The property was 90% leased. Moody's LTV and
stressed DSCR are 85% and 1.17X, respectively,
compared to 86% and 1.17X at the last review.
The second largest loan is the Plaza de Laredo Loan ($8.6
million -- 19.0% of the pool), which
is secured by a retail property located in Laredo, Texas,
approximately 2.5 hours south of San Antonio. The top three
tenants are Home Depot, Academy Sports & Outdoors, and
Office Depot. As of March 2014, the property was 100%
leased. Moody's LTV and stressed DSCR are 68% and 1.47X,
respectively, compared to 69% and 1.46X at the last
review.
The third largest loan is the Acacia Court Loan ($8.6 million
-- 18.9% of the pool), which is secured by a
retail property located in Tempe, Arizona. As of June 2014,
the property was 78% leased. The loan is on the Watchlist
due to low DSCR and occupancy. Moody's has identified this loan
as a troubled loan due to its poor performance and approaching maturity.
Moody's LTV and stressed DSCR are 155% and 0.73X,
respectively, the same as at 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.
Sini Gomes
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
Sandra Ruffin
VP - Senior Credit Officer
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 Two and Affirms Three Classes of WBCMT 2003-C7
