NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded nine classes and removed five classes from Rating Watch Negative of LB-UBS Commercial Mortgage Trust (LBUBS) commercial mortgage pass-through certificates series 2007-C6. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The downgrades and removal from Rating Watch
Negative for Classes A-M through C are due to ongoing concerns and
increased loss expectations on the specially serviced loans. The classes
were placed on Rating Watch Negative following the transfer of the
Islandia Shopping Center (2.94% of the pool), in March 2013.
The downgrades reflect an increase in Fitch expected losses on the specially serviced loans since Fitch's rating action in November 2012, primarily attributed to the Peco Portfolio (12.8%). The ratings of the senior classes take into account the impending loan pay off of the Innkeepers portfolio, which is expected to occur within the next 60 days.
Fitch modeled losses of 15.3% of the remaining pool; expected losses on the original pool balance total 16.8%, including losses already incurred. The pool has experienced $116 million (3.9% of the original pool balance) in realized losses to date. Fitch has designated 76 loans (43.5%) as Fitch Loans of Concern, which includes 56 specially serviced assets (22%).
As of the June 2013 distribution date, the pool's aggregate principal balance has been reduced by 15.9% to $2.50 billion from $2.98 billion at issuance. No loans are defeased. Interest shortfalls are currently affecting classes G through T.
RATING SENSITIVITIES
The Negative Outlook on classes A-M and A-MFL
reflect potential for further rating actions should expected losses on
the specially serviced loans increase, primarily the Peco Portfolio. The
loan has been in default since September 2012 and no appraisals or
values have been provided to Fitch by the special servicer.
The largest contributor to Fitch expected losses is the Peco Portfolio (12.8%), which consists of 39 crossed-collateralized loans totaling $320.9 million secured by 39 retail properties totaling 4.25 million SF located across 13 states. Primarily grocery-anchored, the portfolio's major tenants include Tops Markets, Bi-Lo Grocery, Big Lots, and Publix. The loans had transferred to special servicing in August 2012.
In December 2012 the properties funds and management have been turned over to a special servicer appointed management company. The special servicer reports it is currently evaluating the appropriate resolution strategy.
The second largest contributor to Fitch expected losses is the McCandless Towers loan (4.6% of the pool). The property, which is also referred to as the Santa Clara Towers, is collateralized by two 11-story, Silicone Valley office buildings totaling 426,326 square feet (SF) located in Santa Clara, CA. The property has experienced cash flow issues due to occupancy declines, as well as softening market conditions. McAfee Associates Inc. (McAfee) (previously 46% of the total net rentable area [NRA]), which occupied 100% of Tower II (214,080 SF), had vacated the property at its recent lease expiration in March 2013. The borrower has been successful in releasing approximately 85,000SF (20% of total NRA) of the vacated McAfee space to CA Technologies on a long term lease from July 2013 through January 2024. The property is currently 61% occupied. The net operating income (NOI) debt service coverage ratio (DSCR) for year end (YE) December 2012 reported at 0.92 times (x) but includes the McAfee lease. As of June 2013, the loan is current and there are more than $2.3 million in upfront and ongoing leasing cost reserves.
The third largest contributor to Fitch expected losses is the Islandia Shopping Center loan (2.9%) which is collateralized by a 376,774 SF retail center located in Islandia, NY (Long Island). The property's anchors are a Wal-Mart and a Stop & Shop. Additional major tenants include Dave & Busters and TJ Maxx. The property transferred to special servicing in March 2013 due to imminent default and loan modification request. Although the property is currently 97% occupied, the borrower cited previous cash flow constraints from vacancies, reduced rental rates and chronically delinquent payments. The YE December 2012 NOI DSCR reported at 0.92x. The loan remains current as of the June 2013 remittance date.
Fitch removes from Rating Watch Negative and downgrades the following classes:
--$227.9 million class A-M to 'Asf' from 'AAAsf'; Outlook Negative;
--$70
million class A-MFL to 'Asf' from 'AAAsf'; Outlook Negative;
--$156.4
million class A-J to 'CCCsf' from 'BBB-sf'; RE 60%;
--$33.5 million
class B to 'CCCsf' from 'BBsf'; RE 0%;
--$37.2 million class C to
'CCCsf' from 'Bsf'; RE 0%;
Fitch downgrades and assigns Recovery Estimates (RE) to the following classes as indicated:
--$33.5 million class D to 'CCsf' from 'CCCsf'; RE 0%;
--$29.8
million class E to 'CCsf' from 'CCCsf'; RE 0%;
--$29.8 million
class F to 'Csf' from 'CCsf'; RE 0%;
--$33.5 million class G to
'Csf' from 'CCsf'; RE 0%.
Fitch affirms the following classes:
--$216 million class A-2 at 'AAAsf'; Outlook Stable;
--$19 million
class A-2FL at 'AAAsf'; Outlook Stable;
--$169 million class A-3 at
'AAAsf'; Outlook Stable;
--$53.4 million class A-AB at 'AAAsf';
Outlook Stable;
--$910.4 million class A-4 at 'AAAsf'; Outlook
Stable;
--$360.8 million class A-1A at 'AAAsf'; Outlook Stable;
--$37.2
million class H at 'Csf'; RE 0%;
--$41 million class J at 'Csf'; RE
0%;
--$29.8 million class K at 'Csf'; RE 0%;
--$18 million
class L at 'Dsf'; RE 0%;
--$0 class M at 'Dsf'; RE 0%;
--$0
class N at 'Dsf'; RE 0%;
--$0 class P at 'Dsf'; RE 0%;
--$0
class Q at 'Dsf'; RE 0%;
--$0 class S at 'Dsf'; RE 0%.
The class A-1 certificates have paid in full. Fitch does not rate the class T certificates. Fitch previously withdrew the rating on the interest-only class X certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 18, 2012 report, 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is available at www.fitchratings.com under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'Structured Finance
Rating Criteria' (May 24, 2013);
--'U.S. Fixed-Rate Multiborrower
CMBS Surveillance and Re-REMIC Criteria' (Dec. 18, 2012).
Applicable Criteria and Related Research:
Global Structured Finance
Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661
U.S.
Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696969
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=796944
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