Fitch Affirms BSCMSI 2004-PWR5; Assigns LS Ratings

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed and assigned Loss Severity (LS) ratings to Bear Stearns Commercial Mortgage Securities Trust 2004-PWR5. Rating actions are listed at the end of this release.

The affirmations are to due sufficient credit enhancement to offset Fitch expected losses following Fitch's prospective review of potential stresses and expected losses associated with specially serviced assets. Fitch expects losses of approximately 1.0% of the remaining pool balance, approximately $10.4 million, from the loans in special servicing and the loans that are not expected to refinance at maturity based on Fitch's refinance test.

There are currently two loans in special servicing. The largest (4.7%) transferred due to a maturity default. The loan has been extended until September 2011 and will be transferred back to the master servicer. The other specially serviced loan (0.57%) is secured by a 51,000 square foot (sf) retail center located in Garden City, NY. The loan transferred to the special servicer due to imminent default in February 2009. The center lost a second major tenant in December 2008 which reduced the occupancy to 26%. A recent appraisal indicates losses.

As of the April distribution date, the pool has paid down 15.5% to $1.04 billion from $1.23 billion at issuance and 10 loans (19%) have defeased.

The top 10 non-defeased loans represent 32.6% of the pool. The loans have generally experienced stable performance since issuance. None of the loans have reported debt service coverage ratios below 1.47 times (x). The largest loan in the pool is 2941 Fairview Park Drive which is collateralized by a 353,000 sf office building in Falls Church, VA. The servicer reported occupancy and debt service coverage ratio (DSCR) as of year end (YE) 2009, the most recent available, were 100% and 1.47x, respectively.

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, property specific market cap rate between 7.25% and 10.5% 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 DSCR of 1.25x or higher were considered to pay off at maturity. Twenty-nine loans did not pay off at maturity with two loans incurring a loss when compared to Fitch's stressed value.

Fitch has affirmed and assigned LS ratings to the following classes, as indicated:

--$73.9 million class A-2 at 'AAA/LS1'; Outlook Stable;

--$134 million class A-3 at 'AAA/LS1'; Outlook Stable;

--$100 million class A-4 at 'AAA/LS1'; Outlook Stable;

--$579.1 million class A-5 at 'AAA/LS1'; Outlook Stable;

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

--Interest-only class X-2 at 'AAA'; Outlook Stable;

--$29.3 million class B at 'AA+/LS3'; Outlook Stable;

--$9.3 million class C at 'AA/LS4'; Outlook Stable;

--$20 million class D at 'A+/LS3'; Outlook Stable;

--$13 million class E at 'A'/LS4; Outlook Stable;

--$15.4 million class F at 'BBB+/LS4'; Outlook Stable;

--$9.3 million class G at 'BBB/LS4'; Outlook Stable;

--$18.5 million class H at 'BBB-/LS3'; Outlook Stable;

--$4.6 million class J at 'BB+/LS5'; Outlook Negative;

--$4.6 million class K at 'BB/LS5'; Outlook Negative;

--$6.2 million class L at 'BB-/LS5'; Outlook Negative;

--$4.6 million class M at 'B+/LS5'; Outlook Negative;

--$4.6 million class N at 'B/LS5'; Outlook Negative;

--$3.1 million class P at 'CCC/RR1'.

Class A-1 has paid in full. Fitch does not rate the $11.6 million class Q certificates.

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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