Fitch Affirms LB Commercial Mortgage Trust 1999-C2; Assigns Outlooks

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed, assigned Loss Severity (LS) and Rating Outlooks to LB Commercial Mortgage Trust's commercial mortgage pass-through certificates, series 1999-C2, as follows:

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

--$9.6 million class E at 'AAA/LS4'; Outlook Stable;

--$12.3 million class F at 'AAA/LS4' Outlook Negative.

Fitch does not rate classes G through P. Class A-1, A-2, B, C, and D have paid in full.

The affirmations are the result of sufficient credit enhancement to the remaining Fitch rated class following Fitch's prospective review of potential stresses and expected losses associated with specially serviced assets. Fitch expects losses of 18.4% of the remaining pool balance (2.67% cumulative), approximately $13.7 million, the majority of which are from loans currently in special servicing.

As of the April 2010 distribution date, the pool's collateral balance has paid down 91.7% to $74.2 million from $892.4 million at issuance. Three of the remaining 31 loans have defeased (7.76%).

As of April 2010, there are 13 specially serviced loans (45.6%). The largest specially serviced loan (7.87%) is secured by a 168-unit multifamily property in Clemmons, NC. The loan transferred to special servicing in July 1009 due to imminent maturity default. The special servicer is working with the borrower to resolve the default and may take title to the property. Fitch expects the loan to incur a loss upon liquidation based on a recent appraisal.

Fitch stressed the cash flow of the remaining non-defeased and non-specially serviced loans by applying a 10% reduction to 2008 fiscal year end net operating income and applying an adjusted market cap rate between 7.25% and 10.5% 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. One loan is not expected payoff at maturity and 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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