NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed 21 classes of ML-CFC Commercial Mortgage Trust commercial mortgage pass-through certificates series 2007-6. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations are the result of overall stable performance and continued pay down since the last rating action. Fitch modeled losses of 21.5% of the remaining pool; expected losses on the original pool balance total 20.8%, including $58.6 million (2.7% of the original pool balance) in realized losses to date. At Fitch's last review, expected losses on the original pool balance were 19.6%. Fitch has designated 40 loans (48.1%) as Fitch Loans of Concern, which includes 11 specially serviced assets (23.1%). Of the 11 specially serviced assets, nine of them, or 18.3% of the total pool, are real estate owned (REO) (including Stuyvesant Town/Peter Cooper Village, 11.2%).
As of the August 2015 distribution date, the pool's aggregate principal balance has been reduced by 16.1% to $1.8 billion from $2.15 billion at issuance. Per the servicer reporting, four loans (2.3% of the pool) are defeased, the largest of which is the 17th largest in the pool. Interest shortfalls are currently affecting classes AJ through Q and total $53.5 million.
The largest contributor to expected losses is the MSKP Retail Portfolio A loan (12.4% of the pool), which is secured by eight neighborhood, regional, and power centers located in four distinct markets in Florida totalling 1.2 million square feet (sf). Five properties are located in the Orlando metropolitan statistical area (MSA), one in the Palm Beach MSA, one in the Ft. Lauderdale MSA, and one in Port Charlotte in southwest Florida. Overall property performance declined significantly from issuance to 2012 due to weak local retail markets, which resulted in lower rents and a drop in occupancy from 88% at issuance to 78% at year-end 2012. Recent performance has improved, with a first half 2015 (1H15) debt service coverage ratio (DSCR) of 1.51x and occupancy of 85%.
After initially being transferred to the special servicer in March 2011, the portfolio was returned to the master servicer as a modified loan in October 2012. Terms of the modification included the bifurcation of the loan into a senior ($130.3 million) and junior ($93.1 million) component with maturity being extended to March 2019; both notes will retain the original note rate of 5.6% and remain as interest only through maturity. Although losses are not expected imminently, any recovery to the subject B-note is contingent upon full recovery to the A-note proceeds at the loan's maturity in March 2019. Fitch modeled losses based on the stressed annualized net operating income (NOI) from June 2015. Unless collateral performance improves more significantly, recovery to the B-note component is unlikely.
The next largest contributor to expected losses is the specially-serviced Peter Cooper Village/Stuyvesant Town (PCV/ST) asset (11.2% of the pool), a 56-building multi-family complex with 11,227 units located on the east side of Manhattan in New York City. The loan transferred to special servicing in November 2009. Subsequently, in October 2012 PCV/ST suffered damage from Hurricane Sandy; property restoration efforts have been completed. The special servicer continues to pursue the remaining claim amounts from the insurance providers and anticipates a resolution in the near term.
On June 3, 2014, the trust received title to the property via deed-in-lieu of foreclosure. On July 3, 2014, certain mezzanine lenders who had purchased their positions filed a complaint alleging that the deed-in-lieu breached the terms of the intercreditor agreement, among other claims. These mezzanine lenders are pursuing damages from the special servicer as senior lender. The special servicer filed an initial motion to dismiss on Aug. 18, 2014 and a motion to dismiss a second amended complaint on March 9, 2015. Status is pending regarding the motion to dismiss, but a final ruling is expected in the near term. Any potential sale of the property cannot occur until this litigation is resolved; therefore, timing of a sale remains uncertain.
In November 2012, the special servicer (CWCapital) announced a settlement to The Roberts Litigation to address historical overcharges and future rents for over 4,300 units. Final approval for the settlement was reached and implementation is now complete.
An updated 2015 appraisal and an updated operating statement are still pending, therefore, Fitch continues to model conservative losses. Property performance is stable with 97% occupancy as of August 2015.
The third largest contributor to expected losses is the specially-serviced Blackpoint Puerto Rico Retail loan (4.7%), which is secured by six retail properties totalling approximately 857k sf located within the greater San Juan, Puerto Rico area. The portfolio properties range from two to 20 miles from the city of San Juan and three of the six properties are supermarket anchored. The loan was transferred for imminent default in February 2012 due to upcoming maturity and borrower expressing inability to payoff loan at maturity. The portfolio was approximately 67% occupied as of September 2014. Discussions with the borrower concerning a resolution are ongoing and the borrower is preparing a loan modification proposal.
RATING SENSITIVITIES
The Rating Outlooks on classes A-2 and A-2FL remain Stable due to the senior payment priority in the capital structure and likelihood of near-term payoff. Outlooks on classes A-3 and A-1A have been revised to Stable from Negative to reflect progress in the workout of the PCV/ST loan. Fitch ran additional model scenarios assuming full recovery on the PCV/ST loan, as well as scenarios assuming lower recovery based on a stressed value. The current Negative Rating Outlooks on classes A-4 and A-M are based on the potential for losses on PCV/ST loan, as well as the expected losses on the assets in special servicing. These classes may be subject to downgrades if pool performance continues to deteriorate, the specially serviced assets are not disposed timely and result in higher than expected losses. Additional downgrades to the distressed classes (those rated below 'B') are expected as losses are realized on specially serviced loans.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch affirms the following classes and revises Outlooks as indicated:
--$57.7 million class A-2 at 'AAAsf'; Outlook Stable;
--$50.8 million class A-2FL at 'AAAsf'; Outlook Stable;
--$60.7 million class A-3 at 'AAAsf'; Outlook to Stable from Negative;
--$729 million class A-4 at 'AAAsf'; Outlook Negative;
--$317.6 million class A-1A at 'AAAsf'; Outlook to Stable from Negative;
--$107.4 million class AJ at 'CCCsf'; RE 10%;
--$75 million class AJ-FL at 'CCCsf'; RE 10%;
--$214.6 million class AM at 'BBsf'; Outlook Negative;
--$42.9 million class B at 'CCsf'; RE 0%;
--$16.1 million class C at 'CCsf'; RE 0%;
--$34.9 million class D at 'CCsf'; RE 0%;
--$18.8 million class E at 'Csf'; RE 0%;
--$24.1 million class F at 'Csf'; RE 0%;
--$24.1 million class G at 'Csf'; RE 0%;
--$26.8 million class H at 'Csf'; RE 0%;
--$406,075 class J at 'Dsf'; RE 0%.
Classes K, L, M, N and P have been reduced to zero due to realized losses and are affirmed at 'Dsf', RE 0%. Class A-1 has paid in full. Fitch does not rate the class Q 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. 10, 2014 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
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria (pub. 10 Dec 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=991441
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=991441
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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