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Related Issuers
Rating Action:

Moody's confirms/downgrades JLOC37 Notes (CMBS)

 The document has been translated in other languages

10 Feb 2011

Class A1 through Class D2 and Class X Notes affected

Tokyo, February 10, 2011 -- Moody's Japan K.K has today changed ratings on the Class A1 through D2 and Class X Notes issued by JLOC37.

Details follow:

Class A1/A2, downgraded to Aa3 (sf) from Aa2 (sf); previously, on January 13, 2011, Aa2 (sf) placed under review for possible downgrade

Class B1/B2, downgraded to Ba1 (sf) from A3 (sf); previously, on January 13, 2011, A3 (sf) placed under review for possible downgrade

Class C1/C2, downgraded to Caa2 (sf) from B3 (sf); previously, on January 13, 2011, B3 (sf) placed under review for possible downgrade

Class D1/D2, confirmed at Caa3 (sf); previously, on January 13, 2011, Caa3 (sf) placed under review for possible downgrade

Class X, downgraded to Aa3 (sf) from Aa2 (sf); previously, on January 13, 2011, Aa2 (sf) placed under review for possible downgrade

Deal Name: JLOC37

Class: Class A1 through D2 and Class X notes

Issue Amount (initial): JPY 81.22 billion

Dividend: Floating

Issue Date (initial): July 11, 2007

Final Maturity Date: January, 2015

Underlying Asset (initial): 10 non-recourse loans backed by real estate

Originator: Morgan Stanley Japan Securities Co., Ltd. and Morgan Stanley Japan Limited (as of the issue date)

Arranger: Morgan Stanley Japan Securities Co., Ltd. (as of the issue date)

JLOC37, effected in July 2007, represents the securitization of ten loans backed by real estate. The originator transferred the ten loans to the issuer SPE, which issued the Class A1 through D2 and X notes and then sold them to investors. The notes are rated by Moody's.

The underlying loans are classified as either component loans or pooled loans. Component loans are further divided into senior and junior components. The senior component and pooled loans will secure the Class A1 through D2 and X notes.

Interest and principal collections from the pooled loans will be used to make payments on the senior notes. Interest payments on the notes will be made sequentially, while principal payments will be made pro-rata. Principal collections from the underlying loans (other than defaulted loans) will be used to pay down the Class A1 through D2 notes pro-rata.

Interest and principal collections from the component loans will be used to pay down the senior and junior notes. Interest payments on the senior and junior components will be made sequentially, while principal payments will be made pro-rata. Principal collections from the underlying loans (other than defaulted loans) will be paid pro-rata, according to the outstanding amount of the senior and junior components.

Interest and principal payments made on the senior component loans will be used to pay the interest on and principal of the senior notes in the same manner as the pooled loans: interest payments on the notes will be made sequentially, while principal payments will be made pro-rata. Principal collections from the senior component (other than defaulted loans) will used to pay down the Class A1 through D2 notes pro-rata.

Five of the ten loans have been paid down in full thus far, so the transaction is now backed by the remaining five loans. Four of these are backed by office, residential, or hotel properties located throughout Japan and are under special servicing. The fifth is backed by an office building in central Tokyo and will mature in November 2011.

RATING RATIONALE

The recovery of the loan backed by hotels outside of a major city and under special servicing may well be lower than Moody's assumptions in June 2009 (the last rating action on these notes), in light of the type of property, location, and the special servicer's actions. Moody's has thus re-assessed and lowered by 67% (from its initial estimates) its recovery assumptions.

Moody's has re-assessed and lowered by 37% its recovery assumptions for the loan backed by office buildings in Tokyo and Saitama and under special servicing, and by 38% for the loan backed by office, residential, and hotel properties and under special servicing.

One loan under special servicing is likely to be recovered in full as a result of special servicing.

In this transaction, the principal collections from the underlying loans on the maturity or prepayment date will be used to pay down the notes pro-rata. Thus, in this rating action, Moody's is incorporating the impact stemming from the pro-rata payments on the loan backed by an office building in central Tokyo and maturing in December 2011.

The principal methodology used in this rating was "Updated: Moody's Approach to Rating CMBS Transactions in Japan" (June 2010) published on September 30, 2010, and available on www.moodys.co.jp.

In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all egistered users of our website, at www.moodys.com/SFQuickCheck.

Moody's did not receive or take into account any third party due diligence reports on the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

REGULATORY DISCLOSURES

For an explanation of the (sf) indicator, please see "Moody's Structured Finance Rating Scale" on www.moodys.com.

The principal information used to prepare the credit rating included the asset disposition report, and special servicer and trustee reports.

Information used to prepare the credit rating came the following: parties involved in the ratings (such as the arranger), parties not involved in the ratings (such as the servicer), public information, confidential and proprietary Moody's information.

Measures taken to ensure the quality of this information include preparation or reviews by a third party.

Moody's 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.

Credit ratings are Moody's current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. Moody's defines credit risk as the risk that an entity may not meet its contractual, financial obligations as they come due and any estimated financial loss in the event of default. Credit ratings do not address any other risk, including but not limited to: liquidity risk, market value risk, or price volatility. Credit ratings do not constitute investment or financial advice, and credit ratings are not recommendations to purchase, sell, or hold particular securities. No warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such rating or other opinion or information is given or made by Moody's in any form or manner whatsoever. The credit risk of an issuer or its obligations is assessed based on information received from the issuer or from public sources. Moody's may change the rating when it deems necessary. Moody's may also withdraw the rating due to insufficient information, or for other reasons.

Moody's Japan K.K. is a credit rating agency registered with the Japan Financial Services Agency and its registration number is FSA Commissioner (Ratings) No. 2. The Financial Services Agency has not imposed any supervisory measures on Moody's Japan K.K. in the past year.

Please see ratings tab on the issuer/entity page on the Moody's website 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 Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's 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 the Moody's website for further information.

Please see the Credit Policy page on the Moody's website for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

Tokyo
Kiyosei Sugioka
Analyst
Structured Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100

Tokyo
Koji Kumamaru
MD - Structured Finance
Structured Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100

Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100

Moody's confirms/downgrades JLOC37 Notes (CMBS)
No Related Data.
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CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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