Fitch Downgrades 13 Classes of BACM 2004-4; Revises Outlooks & Assigns LS Ratings

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded, removed from Rating Watch, revised Rating Outlooks and assigned Loss Severity (LS) ratings or Recovery Ratings (RR) to the following classes of Banc of America Commercial Mortgage, Inc. (BACM), series 2004-4, commercial mortgage pass-through certificates:

--$21.1 million class D to 'BB/LS5' from 'A'; Outlook to Stable from Negative;

--$9.7 million class E to 'BB/LS5' from 'A-'; Outlook Negative;

--$16.2 million class F to 'B/LS5' from 'BBB+'; Outlook Stable;

--$11.3 million class G to 'B-/LS5' from 'BBB'; Outlook Stable;

--$16.2 million class H to 'B-/LS5' from 'BBB-'; Outlook Stable;

--$6.5 million class J to 'B-/LS5' from 'BB+'; Outlook Stable;

--$6.5 million class K to 'CCC/RR6' from 'BB';

--$6.5 million class L to 'CC/RR6' from 'BB-';

--$3.2 million class M to 'CC/RR6' from 'B+';

--$3.2 million class N to 'CC/RR6' from 'B'.

Fitch also downgrades and assigns LS ratings or revises the Recovery Rating to the following classes:

--$35.6 million class B to 'A/LS4' from 'AA'; Outlook Stable;

--$11.3 million class C to 'A/LS5' from 'AA-'; Outlook Stable;

--$4.9 million class O to 'C/RR6' from 'CCC/RR1'.

In addition, Fitch has affirmed the following classes, assigned LS ratings and maintains Stable Outlooks as follows:

--$55.7 million class A-3 at 'AAA/LS1'; Outlook Stable;

--$225 million class A-4 at 'AAA/LS1'; Outlook Stable;

--$107 million class A-5 at 'AAA/LS1'; Outlook Stable;

--$272.2 million class A-6 at 'AAA/LS1'; Outlook Stable;

--$119.3 million class A-1A at 'AAA/LS1'; Outlook Stable;

--Interest-only class XC at 'AAA'; Outlook Stable;

--Interest-only class XP at 'AAA'; Outlook Stable;

--$2.1 million class DM-A at 'A+/LS1'; Outlook Stable;

--$4.4 million class DM-B at 'A/LS1'; Outlook Stable;

--$3.5 million class DM-C at 'A-/LS1'; Outlook Stable;

--$3.7 million class DM-D at 'BBB+/LS1'; Outlook Stable;

--$4.0 million class DM-E at 'BBB/LS1'; Outlook Stable;

--$3.6 million class DM-F at 'BBB-/LS1'; Outlook Stable;

--$3.4 million class DM-G at 'BBB-/LS1'; Outlook Stable.

Fitch does not rate the $16.2 million P and $103 million BC classes. Classes A-1 and A-2 have paid in full.

The downgrades are due to significant expected losses upon disposition of specially serviced assets along with expected losses from Fitch's prospective review of potential stresses. In addition, interest shortfalls are affecting classes F through O which may not be recoverable in the near term. As of the March 2010 distribution date, the pool's certificate balance has paid down 24.6% to $1.08 billion from $1.43 billion at issuance. Four loans, 6.6% of the pool, have defeased.

Nine loans are specially serviced (8.5%) of which three are real estate owned (REO) assets and one loan is current. Fitch expects losses from loans currently in special servicing to deplete the unrated class P and to significantly decrease the credit support to several non-investment grade classes.

The largest specially serviced asset (7.7%) is an office building located in Irvine, CA. The loan transferred to special servicing in August 2009 for maturity default and is now in foreclosure. As of December 2008, the property was 100% occupied. The borrower was unable to pay off the loan at maturity.

The second largest specially serviced asset (1.6%) is a 723,971 square foot (sf) warehouse located in North Kingstown, RI. The loan transferred to special servicing on October 2008 for payment default and is REO. The June 2008 servicer-reported occupancy at the property was 51%.

Fitch stressed the cash flow of the remaining non-defeased loans by applying a 10% reduction to 2008 fiscal year end net operating income and applying an adjusted market cap rate between 7.5% and 10% to determine value.

Similar to Fitch's prospective analysis of recent vintage commercial mortgage backed securities (CMBS), each loan also underwent a refinance test by applying an 8% interest rate and 30-year amortization schedule based on the stressed cash flow. Loans that could refinance to a debt service coverage ratio of 1.25 times or higher were considered to pay off at maturity. Fourteen loans did not pay off at maturity and four loans incurred a loss when compared to Fitch's stressed value.

Additional information on Fitch's amended criteria for analyzing recent vintage U.S. CMBS is available in the July 7, 2009 report, 'Surveillance Methodology for Recent Vintage U.S. CMBS,' which is available at www.fitchratings.com under the following headers:

Structured Finance >> CMBS >> Criteria Reports

Additional information is available at www.fitchratings.com.

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