Fitch Downgrades 7 Classes of ML-CFC Commercial Mortgage Trust 2007-6; Assigns Outlooks

NEW YORK--(BUSINESS WIRE)--Fitch Ratings downgrades seven classes of ML-CFC Commercial Mortgage Trust's commercial mortgage pass-through certificates, series 2007-6 and assigns Rating Outlooks as follows:

--$24.1 million class G to 'BBB-' from 'BBB'; Outlook Negative;

--$26.8 million class H to 'BB+' from 'BBB-'; Outlook Negative;

--$5.4 million class J to 'BB' from 'BB+'; Outlook Negative;

--$5.4 million class K to 'BB-' from 'BB'; Outlook Negative;

--$5.4 million class L to 'B+' from 'BB-'; Outlook Negative;

--$5.4 million class M to 'B' from 'B+'; Outlook Negative;

--$5.4 million class N to 'B-' from 'B'; Outlook Negative.

In addition, Fitch affirms and assigns Rating Outlooks to the following classes:

--$20.8 million class A-1 at 'AAA'; Outlook Stable;

--$170.4 million class A-2 at 'AAA'; Outlook Stable;

--$150 million class A-2FL at 'AAA'; Outlook Stable;

--$60.7 million class A-3 at 'AAA'; Outlook Stable;

--$730 million class A-4 at 'AAA'; Outlook Stable;

--$364.4 million class A-1A at 'AAA'; Outlook Stable;

--$214.6 million class AM at 'AAA'; Outlook Stable;

--$107.4 million class A-J at 'AAA'; Outlook Stable;

--$75 million class AJ-FL at 'AAA'; Outlook Stable;

--Interest Only class X at 'AAA'; Outlook Stable;

--$42.9 million class B at 'AA'; Outlook Stable;

--$16.1 million class C at 'AA-'; Outlook Stable;

--$34.9 million class D at 'A'; Outlook Stable;

--$18.8 million class E at 'A-'; Outlook Stable;

--$24.1 million class F at 'BBB+'; Outlook Negative;

--$5.4 million class P at 'B-'; Outlook Negative.

Fitch does not rate the $26.8 million class Q.

The downgrades of classes G through N are the result of the lowering of shadow rating on the transaction's second largest loan, Peter Cooper Village and Stuyvesant Town (9.5%) to below investment grade.

The loan, which had a 'BBB-' shadow rating at issuance, is no longer considered investment grade. At issuance, the loan's proceeds were allocated to 'BBB-' and above, while they are now allocated to all classes in the capital structure. This results in higher credit enhancement requirements. While the current net cash flow is not sufficient to meet the debt service obligations, due to the sufficient amount of remaining interest reserves ($161.2 million) and the continued conversion of units to market rental rates from stabilized rental rates, Fitch does not expect a default of the loan in the near term. However, the pace of the unit conversions does not meet expectations at issuance and rental rates are less likely to increase given the current economic conditions. Fitch's estimates of future net cash flow, based on reduced conversion rates and reduced year-over-year increases to market rental rates, no longer support an investment grade rating. The borrower, Tishman Speyer Properties, LP and Blackrock Realty acquired the property with the intent to convert rent stabilized units to market rents as tenants vacated the property, resulting in increased rental revenue. As of June 2008 there are 3,543 market units and 7,210 rent stabilized units, with vacancy of 4.2%.

The affirmations are the result of stable performance since issuance. The Rating Outlooks reflect the likely direction of the rating changes over the next one to two years. As of the October 2008 distribution date, the pool's certificate balance has decreased 0.34% to $2.139 billion from $2.146 billion at issuance. Eighty-two loans (83.4%) are interest-only or partial interest-only.

There is currently one loan (0.5%) in special servicing. The loan is secured by a multifamily property in Petoskey, Michigan and is 90 days delinquent. Potential losses would be absorbed by the non-rated class Q.

Fitch reviewed servicer provided operating statement analysis for the remaining shadow rated loan, Westfield Southpark (7.0%). The loan is secured by a 1,588,360 sf regional mall, located in Strongsville, OH. The mall is anchored by Dillards (210,992 sf), Macy's (178,173 sf), Sears (167,400 sf), and J.C. Penny (145,330 sf), which are not part of the collateral. As of December 2007, the in-line occupancy was 95.3% compared to 89.4% at issuance. Based on stable performance since issuance, the loan maintains an investment grade shadow rating.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.