NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded and removed from Rating Watch Negative 19 classes of ML-CFC Commercial Mortgage Trust's commercial mortgage pass-through certificates, series 2007-8. The downgrades are due to further deterioration of loan performance, most of which involves increased losses on the specially serviced loans. A detailed list of rating actions follows at the end of this press release.
The downgrades reflect an increase in Fitch-modeled losses across the pool, which total 13.1% of the remaining pool (13% of the original pool). Fitch expects losses associated with the specially serviced loans to deplete classes G through T and a portion of class F. As of February 2011, cumulative interest shortfalls totaling $5.7 million are affecting classes H through T.
As of the February 2011 distribution date, the pool's aggregate principal balance has been reduced by 1.6% to $2.397 billion from $2.435 billion at issuance.
Fitch has identified 47 loans (42.8%) as Fitch Loans of Concern, including 25 specially serviced loans (34.7%). Of the 25 loans in special servicing, four loans (1.3%) are real-estate owned (REO), four loans (1.4%) are in foreclosure, 12 loans (6.1%) are 90 days or more delinquent, two loans (14%) are 60 days delinquent, one loan (0.5%) is 30 days delinquent, and two loans (11.4%) remain current. When Fitch placed the transaction on Rating Watch Negative in September 2010, 8.8% of the portfolio was in special servicing.
The largest contributors to modeled losses are three (19.4%) of the top 15 loans in the transaction, two (15.3%) of which are currently specially serviced.
The largest contributor to modeled losses is the Empirian Portfolio Pool 2 loan (14%), which is secured by 73 multifamily properties totaling 6,892 units located across eight states. As of the February 2011 distribution date, the loan was 60 days delinquent. The loan transferred to special servicing in November 2010 for imminent default. The borrower is in the process of requesting for a loan modification and discussions between the borrower and the special servicer remain ongoing. The servicer-reported year-end (YE) 2010 net operating income (NOI) debt-service coverage ratio (DSCR) was 1.11 times (x), down from 1.48x at YE 2009. September 2010 occupancy was 88%, down from 93% in 2009.
The second largest contributor to modeled losses is the Executive Hills Portfolio loan (4.2%). The loan is secured by a portfolio of nine office properties; five of which are located in Overland Park, KS and the other four in Kansas City, MO. Portfolio performance has been on the decline. The servicer-reported YE 2010 NOI DSCR decreased to 0.98x from 1.17x and 1.50x at YE 2009 and YE 2008, respectively. YE 2010 occupancy has decreased to 61.5% from 67%, 69%, and 94% at YE 2009, YE 2008, and at issuance, respectively. Four of the nine properties in the portfolio have a DSCR below 1.0x on a stand alone basis. Additionally, according to the December 2010 rent roll, approximately 23% of the in-place leases could potentially roll in 2012.
The third largest contributor to modeled losses is the Gray Apartment Portfolio loan (1.3%), which is secured by two adjacent apartment properties located in Houston, TX. As of the February 2011 distribution date, the loan was more than 90 days delinquent. The loan transferred to special servicing in February 2009 due to monetary default. The properties suffered significant damages from Hurricane Ike in 2008. A receiver was appointed by the servicer in March 2009 and is currently operating and marketing the properties. Renovation work has been completed and all units are back online at one of the properties. However, for the other property, renovation work will not be completed as the insurance claim settlement was insufficient to complete the work needed to be done. Losses are likely at liquidation given that the most recent appraisal and broker of opinion values on the properties are below the loan amount.
Fitch has downgraded and removed the following classes from Rating Watch Negative, assigning Rating Outlooks, Loss Severity (LS) ratings, and Recovery Ratings (RRs) where applicable:
--$126.9 million class A-M to 'AAsf/LS4' from 'AAAsf/LS3'; Outlook Negative;
--$116.6 million class AM-A to 'AAsf/LS4' from 'AAAsf/LS3'; Outlook Negative;
--$109.4 million class A-J to 'B-sf/LS4' from 'Asf/LS3'; Outlook Negative;
--$100.6 million class AJ-A to 'B-sf/LS4' from 'Asf/LS3'; Outlook Negative;
--$12.2 million class B to 'B-sf/LS5' from 'Asf/LS5'; Outlook Negative;
--$39.6 million class C to 'CCCsf/RR1' from 'BBB-sf/LS5';
--$27.4 million class D to 'CCCsf/RR1' from 'BBsf/LS5';
--$9.1 million class E to 'CCCsf/RR1' from 'BBsf/LS5';
--$18.3 million class F to 'CCsf/RR4' from 'BBsf/LS5';
--$21.3 million class G to 'Csf/RR6' from 'BBsf/LS5';
--$33.5 million class H to 'Csf/RR6' from 'Bsf/LS5';
--$24.4 million class J to 'Csf/RR6' from 'B-sf/LS5';
--$15.2 million class K to 'Csf/RR6' from 'B-sf/LS5';
--$15.2 million class L to 'Csf/RR6' from 'B-sf/LS5';
--$9.1 million class M to 'Csf/RR6' from 'B-sf/LS5';
--$3 million class N to 'Csf/RR6' from 'B-sf/LS5';
--$3 million class P to 'Csf/RR6' from 'B-sf/LS5';
--$6.1 million class Q to 'Csf/RR6' from 'B-sf/LS5';
--$3 million class S to 'Csf/RR6' from 'B-sf/LS5'.
In addition, Fitch has affirmed the following super senior classes and corresponding Rating Outlooks:
--$15.5 million class A-1 at 'AAAsf/LS2'; Outlook Stable;
--$122.5 million class A-2 at 'AAAsf/LS2'; Outlook Stable;
--$72.7 billion class A-SB at 'AAAsf/LS2'; Outlook Stable;
--$655.8 billion class A-3 at 'AAAsf/LS2'; Outlook Stable;
--$801.3 million class A-1A at 'AAAsf/LS2'; Outlook Stable.
Fitch has also withdrawn the rating on the interest-only (IO) class X. Additional information on the withdrawal of the rating on class X is available in Fitch's June 23, 2010 press release, 'Fitch Revises Practice for Rating IO & Pre-Payment Related Structured Finance Securities'.
Fitch does not rate the $35 million class T.
Additional information is available at 'www.fitchratings.com'
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 13, 2010);
--'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions' (Nov. 17, 2010).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547326
Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=574208
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