Fitch Takes Various Actions on CSFB 2006-TFL2; Revises Outlooks

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded one class and affirmed the remaining classes from Credit Suisse First Boston Mortgage Securities Corp., series 2006-TFL2, reflecting Fitch's base case loss expectation of 5.7% for the pooled classes. The remaining non-pooled junior component certificates were also affirmed, reflecting Fitch's generally stable loss expectations and stable performance of the underlying assets. Fitch's performance expectation incorporates prospective views regarding commercial real estate market value and cash flow declines. The revised Rating Outlooks reflect the increases in credit enhancement as the result of the pay off/disposition of four loans since Fitch's last review. A detailed list of rating actions follows at the end of this release.

Under Fitch's methodology, approximately 94.7% of the pool is modeled to default in the base case stress scenario, defined as the 'B' stress. In this scenario, the modeled average cash flow decline is 10.5% from generally year-end 2010 financials. To determine a sustainable Fitch cash flow and stressed value, Fitch analyzed servicer-reported operating statements and rent rolls, updated property valuations, and recent sales comparisons. Fitch estimates the average recoveries on the pooled loans will be approximately 94% in the base case.

The transaction is collateralized by five loans, four of which are secured by hotels (98.4%), and one by a multifamily/condominium project (1.6%). The transaction faces near-term maturity risk, with three loans (90.9%) having a final maturity date in 2011, including the Kerzner Portfolio (55.9%), which represents a majority of the collateral. The remaining two loans have been extended, with maturity dates ranging from 2012 to 2014.

With respect to the pooled classes, two loans were modeled to incur a loss in the base case: Beverly Hilton (23.3%) and NH Krystals Hotel Portfolio (7.5%). There is one performing specially serviced loan, the JW Marriott Starr Pass (11.7%).

The Beverly Hilton consists of a 569-room upscale hotel located at the corner of Wilshire Blvd and Santa Monica Blvd in Beverly Hills, CA. The hotel underwent an $80 million ($140,598/key) renovation from 2003 - 2006. The renovation upgraded and enlarged the guestrooms and added nine luxury suites and seven luxury king guestrooms. Performance is below expectations from issuance, largely due to the impacts of the weak economy on the hospitality sector. As of year-end 2010, occupancy, average daily rate (ADR), and revenue per available room (RevPAR) were 60.3%, $203.50, and $122.74, respectively, compared with 57.1%, $209.92, and $119.77 in 2009. At issuance, the loan was underwritten on an issuer basis to an occupancy, ADR, and RevPAR of 73.9%, $345.32, and $255.19. The borrower is currently in discussions with the servicer regarding refinance options, including a loan payoff and an extension. The loan matures next month on Aug. 8, 2011.

The JW Marriott Starr Pass consists of a 575-room full service hotel and a 27-hole Arnold Palmer-designed championship golf course, located in Tucson, AZ. The hotel opened in 2005 and is one of the newest hotels in the Tucson market. The subject offers 88,000 square feet (sf) of meeting space including a 20,000 sf ballroom. The hotel is managed by Marriott Hotel Services. The property is part of a 1,356-acre master planned community named Starr Pass. In April 2010, the loan transferred to special servicing for imminent default. Performance remains below expectations from issuance; however, an updated property valuation was received in April, which indicates strong recovery prospects. As a result, losses are not expected at this time.

The largest loan in the pool, Kerzner Portfolio (56%), is secured by a diverse portfolio of real estate. The main collateral interests consist of: 3,023-key Atlantis Resort and casino, Paradise Island; 600-room all-suite hotel tower, 495-unit condominium hotel; 40-acres of new water attractions; 106-key One & Only Ocean Club and 18-hole Ocean Club Golf Course; water treatment and desalinization facility; 63-slip Marina at Atlantis and associated retail at Marina Village. Additional collateral interests consist of sales proceeds from the sale of condominium units, timeshare units, and land parcels.

As of year-end 2010, the Atlantis Resort's occupancy, ADR, and RevPAR were 62.2%, $313, and $195, respectively, compared with 60.3%, $313, and $189 in 2009. At origination, the issuer anticipated a stabilized occupancy, ADR and RevPAR of 81%, $323, and $262, respectively. The loan reaches its final maturity in September 2011, and given the significant size of the total collateral and the associated leverage, the loan may default on its repayment obligations. However, no losses are currently expected in Fitch's base case. The borrower is currently discussing refinance options with the special servicer.

Fitch upgrades the following class:

--$411.5 million class A-2 to 'AAAsf/LS2' from 'AA+/LS2'; Outlook Stable.

Fitch affirms the following classes and revises Outlooks as indicated:

--$41 million class B at 'AAsf/LS4'; Outlook to Positive from Stable;

--$41 million class C at 'Asf/LS4'; Outlook Stable;

--$33 million class D at 'BBBsf/LS4' from LS5; Outlook Stable;

--$25 million class E at 'BBBsf/LS4' from LS5; Outlook to Stable from Negative;

--$19 million class F at 'BBsf/LS5'; Outlook to Stable from Negative;

--$19 million class G at 'CCCsf/RR2';

--$19 million class H at 'Csf/RR6';

--$20 million class J at 'Csf/RR6';

--$22 million class K at 'Csf/RR6';

--$16.1 million class L at 'Dsf/RR6'.

In addition, Fitch affirms the following non-pooled junior component classes and revises Outlooks as indicated:

--$59.8 million class KER-A at 'A-sf'; Outlook Negative;

--$42.6 million class KER-B at 'BBBsf'; Outlook Negative;

--$37.3 million class KER-C at 'BBsf'; Outlook Negative;

--$46 million class KER-D at 'BBsf'; Outlook Negative;

--$46.3 million class KER-E at 'Bsf'; Outlook Negative;

--$61.6 million class KER-F at 'CCCsf/RR4';

--$3 million class MW-A at 'Bsf'; Outlook to Stable from Negative;

--$1.8 million class MW-B at 'Bsf; Outlook to Stable from Negative;

--$11 million class BEV-A at 'Csf/RR6';

--$4 million class NHK-A at 'CCCsf/RR6'.

Furthermore, the following classes are affirmed by Fitch, and are non-pooled components of the trust:

--$375.7 million class SV-A1 at 'AAAsf'; Outlook Stable;

--$126 million class SV-A2 at 'AAAsf'; Outlook Stable;

--$61 million class SV-B at 'AA+sf'; Outlook Stable;

--$31 million class SV-C at 'AAsf'; Outlook Stable;

--$31 million class SV-D at 'AA-sf'; Outlook Stable;

--$30 million class SV-E at 'A+sf'; Outlook Stable;

--$31 million class SV-F at 'Asf'; Outlook Stable;

--$30 million class SV-G at 'A-sf'; Outlook Stable;

--$54 million class SV-H at 'BBB+sf'; Outlook Stable;

--$34 million class SV-J at 'BBBsf'; Outlook Negative;

--$39 million class SV-K at 'BBsf';' Outlook Negative.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (Aug. 13, 2010);

--'Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions' (Dec. 2, 2010);

--'Criteria for Structured Finance Loss Severity Ratings' (Feb. 17, 2009);

--'Criteria for Structured Finance Recovery Ratings', (Aug. 17, 2009).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547326

Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=579165

Criteria for Structured Finance Loss Severity Ratings

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=426038

Criteria for Structured Finance Recovery Ratings

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=462434

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