CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed all classes of TimberStar Trust I, series 2006-1, commercial mortgage pass-through certificates. A complete list of rating actions is provided at the end of this release.
KEY RATING DRIVERS
While the appraised value has improved since issuance, the affirmations and Negative Outlook on classes D, E and F are warranted due to the significant volatility recently exhibited in commodity prices and the continued depressed demand for wood and paper products. Collateral has exhibited volatile cash flow trends over the past few years.
RATING SENSITIVITY
Collateral performance is affected by fluctuations of supply and demand and pricing in the wood products market. The two sectors of the economy that most directly influence the demand for timber are housing, and pulp and paper. The decline in home construction during the recession has had an adverse effect on the performance of the portfolio but current indicators point to a recovery in that sector. Should timber demand increase over the coming years, the Rating Outlooks on classes D, E and F could be revised to Stable. Upgrades are unlikely given the volatility of the timber market. Should cash flow show further deterioration, downgrades to classes D, E and F are possible.
The transaction is a single-borrower, interest-only loan with an expected repayment date of Oct. 15, 2016. As of the March 2013 distribution date, the transaction balance is $800 million, unchanged since issuance.
Collateral for the loan is a first-priority mortgage lien on timberlands located in Texas (43% of the total acreage), Louisiana (31%), and Arkansas (26%).
At issuance, total acreage was 874,490 of which 99,993 was non-mortgage acreage considered higher and better use (HBU) land that is expected to be sold. Timber growing on the HBU land is pledged as security for the trust; however, any proceeds from the sale of the land will not be pledged to the trust. As of December 2013, HBU has been reduced by 51,832 acres to 48,161 acres, resulting in total acreage of 822,658.
The servicer reported December 2013 trailing 12 months (TTM) debt service ratio was 1.27x compared to issuance of 1.41x. The total harvest volume for this same period was 2.9 million tons compared to issuance projections of 5.2 million tons. Harvest volume was kept intentionally low because of low demand as a result of the economic downturn and continued weakness in homebuilding. Fitch reviewed the borrower prepared December 2013 TTM financial statements, 2014 budget and harvest plan, and a December 2013 appraisal. The annual appraised value as of YE 2013 was up approximately 4% from YE 2012 due primarily to natural forest growth combined with lower than anticipated harvest volumes.
Fitch has affirmed the ratings as follows:
--$400,000,000 class A at 'AAA'; Outlook Stable;
--$80,000,000
class B at 'AA'; Outlook Stable;
--$80,000,000 class C at 'A';
Outlook Stable;
--$80,000,000 class D at 'BBB'; Outlook Negative;
--$30,000,000
class E at 'BBB-'; Outlook Negative;
--$130,000,000 class F at
'BB'; Outlook Negative.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured
Finance Rating Criteria' (May, 2013);
--'Criteria for Analyzing
Large Loans in U.S. Commercial Mortgage Transactions' (Sept. 2013).
Applicable Criteria and Related Research:
Global Structured Finance
Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661
Criteria
for Analyzing Large Loans in U.S. Commercial Mortgage Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=718468
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=822633
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