Approximately $45 Million of Structured Securities Affected
New York, May 25, 2012 -- Moody's Investors Service (Moody's) upgraded the ratings of two classes
and affirmed four CMBS classes of Banc of America Commercial Mortgage
Inc. Commercial Mortgage Pass-Through Certificates,
Series 2001-1 as follows:
Cl. H, Upgraded to B1 (sf); previously on Sep 16,
2010 Downgraded to B2 (sf)
Cl. J, Upgraded to Caa1 (sf); previously on Sep 16,
2010 Downgraded to Caa3 (sf)
Cl. K, Affirmed at Ca (sf); previously on Sep 16,
2010 Downgraded to Ca (sf)
Cl. L, Affirmed at C (sf); previously on Sep 16,
2010 Downgraded to C (sf)
Cl. M, Affirmed at C (sf); previously on Sep 16,
2010 Downgraded to C (sf)
Cl. X, Affirmed at Caa3 (sf); previously on Feb 22,
2012 Downgraded to Caa3 (sf)
RATINGS RATIONALE
The upgrades of Class J and K are due to a significant increase in subordination
due to amortization and loan payoffs. Based on our current base
expected loss, the credit enhancement levels for the affirmed classes
are sufficient to maintain their current ratings. The rating of
the IO class, Class X, is affirmed because its rating is consistent
with the credit profile of its referenced classes.
Moody's rating action reflects a cumulative base expected loss of approximately
47% of the current deal balance. At last review, Moody's
cumulative base expected loss was approximately 30%. On
a percentage basis the base expected loss has increased significantly
due to the 35% paydown since last review. However,
on a numerical basis, the base expected loss has only increased
by $721,400. Moody's provides a current list of base
expected 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.
The performance expectations for a given variable indicate Moody's forward-looking
view of the likely range of performance over the medium term. From
time to time, Moody's may, if warranted, change these
expectations. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker than
Moody's had anticipated when the related securities ratings were issued.
Even so, a deviation from the expected range will not necessarily
result in a rating action nor does performance within expectations preclude
such actions. The decision to take (or not take) a rating action
is dependent on an assessment of a range of factors including, but
not exclusively, the performance metrics.
Primary sources of assumption uncertainty are the extent of growth in
the current macroeconomic environment and commercial real estate property
markets. While commercial real estate property values are beginning
to move in a positive direction along with a rise in investment activity
and stabilization in core property type performance, a consistent
upward trend will not be evident until the volume of investment activity
steadily increases, distressed properties are cleared from the pipeline,
and job creation rebounds. The hotel sector is performing strongly
and the multifamily sector continues to show increases in demand.
Moderate improvements in the office sector continue with minimal additions
to supply. However, office demand is closely tied to employment,
where growth remains slow. Performance in the retail sector has
been mixed with lackluster sales driven by discounting and promotions.
However, rising wages and reduced unemployment, along with
increased consumer confidence, is helping to spur consumer spending.
Across all property sectors, the availability of debt capital continues
to improve with increased securitization activity of commercial real estate
loans supported by a monetary policy of low interest rates. Moody's
central global macroeconomic scenario reflects healthier growth in the
US and US growth decoupling from the recessionary trend in the euro zone,
while a mild recession is expected in 2012. Downside risks remain
significant, although they have moderated compared to earlier this
year. Major downside risks include an increase in the potential
magnitude of the euro area recession, the risk of an oil supply
shock weighing negatively on consumer purchasing power and home prices,
ongoing and policy-induced banking sector deleveraging leading
to a tightening of bank lending standards and credit contraction,
financial market turmoil continuing to negatively impact consumer and
business confidence, persistently high unemployment levels,
and weak housing markets, any or all of which will continue to constrain
growth.
The methodologies used in this rating were "Moody's Approach to Rating
U.S. CMBS Conduit Transactions" published in September 2000,
"Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions"
published in July 2000, and "Moody's Approach to Rating Structured
Finance Interest-Only Securities" published in February 2012.
Please see the Credit Policy page on www.moodys.com for
a copy of these methodologies.
Moody's review incorporated the use of the Excel-based CMBS Conduit
Model v 2.61 which is used 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 used by Moody's to estimate Moody's
value). Conduit model results at the B2 (sf) level are driven by
a pay down 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 (sf) and B2 (sf), 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
underlying ratings 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 underlying rating level,
is incorporated for loans with similar credit estimates in the same transaction.
The conduit model includes an IO calculator, which uses the following
inputs to calculate the proposed IO rating based on the published methodology:
original and current bond ratings and credit estimates; original
and current bond balances grossed up for losses for all bonds the IO(s)
reference(s) within the transaction; and IO type as defined in the
published methodology. The calculator then returns a calculated
IO rating based on both a target and mid-point. For example,
a target rating basis for a Baa3 (sf) rating is a 610 rating factor.
The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e.
the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf)
rating factor of 940). If the calculated IO rating factor is 700,
the CMBS IO calculator would provide both a Baa3 (sf) and Ba1 (sf) IO
indication for consideration by the rating committee.
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 4,
compared to a Herf of 7 at Moody's prior 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 v 8.2 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 derived from Moody's loan level LTV ratios.
Major adjustments to determining proceeds include leverage, loan
structure, property type, and sponsorship. These aggregated
proceeds are then further 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 a review utilizing MOST®
(Moody's Surveillance Trends) Reports and a proprietary program that highlights
significant credit changes that have occurred in the last month as well
as cumulative changes since the last full transaction review. On
a periodic basis, Moody's also performs a full transaction
review that involves a rating committee and a press release. Moody's
prior transaction review is summarized in a press release dated June 9,
2011. Please see the ratings tab on the issuer / entity page on
moodys.com for the last rating action and the ratings history.
DEAL PERFORMANCE
As of the May 15, 2012 distribution date, the transaction's
aggregate certificate balance has decreased by 95% to $45
million from $948 million at securitization. The Certificates
are collateralized by seven mortgage loans ranging in size from less than
3% to 31% of the pool. The pool contains no defeased
loans and no loans with investment-grade credit estimates.
There are no loans on the master servicer's watchlist.
Fifty-two loans have liquidated from the pool, resulting
in an aggregate realized loss of $41 million (16% average
loan loss severity). Currently, six loans, representing
97% of the pool, are in special servicing. The largest
specially-serviced loan is the Waretech Industrial Park Loan ($14
million -- 31% of the pool). The loan is secured by
a 700,000 square foot industrial facility located in Grand Blanc,
Michigan, that was formerly occupied by General Motors. The
loan transferred to special servicing in 2009 due to imminent monetary
default. The servicer foreclosed on the loan, and the loan
became REO in May 2011. The property has seen recent leasing activity
and is now 92% leased. The property is currently being marketed
for sale.
The second largest loan in special servicing is the Freeport Office Center
IV Loan ($12 million -- 27% of the pool). The
loan is secured by a 160,000 square foot Class A office complex
located in Irving, Texas near the Dallas-Fort Worth airport.
The property had been 100% leased to Ford Motor Company until lease
maturity in 2010. Ford subsequently downsized to approximately
40% of net rentable area (NRA). A new lease was signed by
Metropolitan Life Insurance Company for 10% of the property NRA,
bringing building occupancy up to 50%. The remaining space
is being marketed for lease by Cassidy Turley. The servicer is
simultaneously pursuing foreclosure and possible loan workout options.
The third largest loan in special servicing is the Willows Corporate Center
Loan ($9 million -- 20% of the pool), which is
secured by a 50,000 square foot office property in Redmond,
Washington, a northern suburb of Seattle. American Telephone
& Telegraph had occupied 100% of the property until lease expiration
in February 2011. The property has been vacant since AT&T's
departure. The property is being marketed for sale.
The remaining three specially serviced loans are secured by a mix of commercial
and mobile home property types. Moody's estimates an aggregate
$21 million loss (49% expectected loss overall) for all
specially serviced loans.
The sole performing loan in the pool is the Downtown Mini Storage Loan
($1 million -- 2.7% of the pool). The
loan is secured by a 100,000 square foot self storage facility located
near downtown Los Angeles, California. Moody's was provided
with full-year 2010 and 2011 operating results for this loan.
The loan has been a consistent strong performer. Moody's current
LTV and stressed DSCR are 16% and 6.65X, respectively,
compared to 21% and 4.97X 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.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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.
Information sources used to prepare the rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
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.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a 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 the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's 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 our website www.moodys.com for further information.
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.
Wesley Flamer-Binion
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
Keith Banhazl
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 four CMBS Classes of BACM 2001-1
