Fitch Downgrades 8 Classes of Bear Stearns Commercial Mortgage Securities Trust 2004-TOP16

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded and assigned Rating Outlooks, Loss Severity (LS) ratings and Recovery Ratings (RR) to Bear Stearns Commercial Mortgage Securities Trust 2004-TOP16 commercial mortgage pass-through certificates as follows:

--$11.6 million class G to 'BBB-/LS5' from 'BBB'; Outlook Stable;

--$10.1 million class H to 'BB/LS5' from 'BBB-'; Outlook Negative;

--$2.9 million class J to 'B/LS5' from 'BB+'; Outlook Negative;

--$4.3 million class K to 'B-/LS5' from 'BB'; Outlook Negative;

--$5.8 million class L to 'B-/LS5' from 'BB-'; Outlook Negative;

--$1.4 million class M to 'CCC/RR6' from 'B+';

--$1.4 million class N to 'CC/RR6' from 'B';

--$2.9 million class O to 'C/RR6' from 'B-'.

In addition Fitch has affirmed, assigned Rating Outlooks and LS ratings as follows:

--$92.2 million class A-4 at 'AAA/LS1'; Outlook Stable;

--$80 million class A-5 at 'AAA/LS1'; Outlook Stable;

--$676.1 million class A-6 at 'AAA/LS1'; Outlook Stable;

--Interest-Only class X-1 at 'AAA'; Outlook Stable;

--Interest-Only class X-2 at 'AAA'; Outlook Stable.

--$20.2 million class B at 'AA+/LS5'; Outlook Stable;

--$13 million class C at 'AA/LS5'; Outlook Stable;

--$13 million class D at 'A/LS5'; Outlook Stable;

--$15.9 million class E at 'A-/LS5'; Outlook Stable;

--$10.1 million class F at 'BBB+/LS5'; Outlook Stable.

Fitch does not rate the $4.2 million class P. Classes A-1, A-2, and A-3 have paid in full.

The downgrades are the result of projected losses on the two specially serviced assets (1.58%) minimal future expected losses following Fitch's prospective review of potential stresses to the transaction. Fitch expects losses of 1.22% of the remaining transaction balance, or $11.8 million, from loans in special servicing and loans that cannot refinance at maturity based on Fitch's refinance test. Rating Outlooks reflect the likely direction of any changes to the ratings over the next one to two years.

There are 105 of the original 117 loans remaining in the transaction, twelve of which have defeased (11.4% of the current transaction balance).

The largest specially serviced asset (1.44%) is secured by an office building located in Foster City, CA. The loan transferred to special servicing on Dec. 8, 2009 due to monetary default. Occupancy at the property has declined to 75% as of December 2009, down from 84% in December 2008 and 99% in December 2007. The borrower is seeking a loan modification.

The second largest specially serviced asset (0.95%) is secured by a retail property in Phoenix, AZ. The loan transferred to special servicing on Oct. 10, 2009. The largest tenant, Basha Food City (41.05% of NRA) cancelled its lease in bankruptcy and has vacated the property thus reducing occupancy to 35%. The special servicer is moving forward with foreclosure and the auction is expected to occur in June 2010.

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 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 payoff at maturity. Of the non-defeased or non-specially serviced loans, none 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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