Fitch Upgrades Two Classes of BSCMS 2006-BBA7

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded Bear Stearns Commercial Mortgage Securities, Inc. commercial mortgage pass-through certificates, series 2006-BBA7. A detailed list of rating actions follows at the end of this release.

The upgrades are the result of significant paydown since the last rating action. There is one loan remaining, as the former largest loan, Columbia Sussex, has paid in full as of the July 2011 distribution date, reducing the transaction balance by $473 million. The remaining loan is the Citigroup Property Investors Hilton Portfolio (CPI) loan. Fitch analyzed servicer reported operating statements, updated property valuation, STR Reports, and details of the modification.

The CPI interest-only loan was originally collateralized by four Hilton Garden Inns and one Homewood Suites, with a total of 955 rooms. One property, the Hilton Garden Inn Chicago (Hoffman Estates, IL) was released, which reduced the outstanding loan balance by $6.98 million and the total number of rooms to 771. The remaining four properties are located primarily in suburban markets, in or near Atlanta, Denver, Orlando and San Francisco. The loan transferred to special servicing in July 2009 due to imminent default. The special servicer modified the loan and returned it to the master servicer and the loan remains current on debt service payments. The terms of the modification include a maturity extension through Dec. 31, 2011 with three extension options to a final maturity of March 12, 2014, new Preferred Equity of $2.3 million, provisions for an additional $1.5 million in Preferred Equity during the term if extended, continued principal and interest payments to the senior debt, modification to the mezzanine debt including similar extensions as for the senior debt, and interest-only payments including the ability to defer interest to the senior debt. In addition, all fees were paid by the borrower and no interest shortfalls were incurred by the trust.

Per the March 2011 STR Reports, the properties' (excluding the Hoffman Estates property) combined occupancy, ADR and RevPAR were 77.3%, $92.06, and $71.32, which compares to 72.5%, $95.50 and $67.06, respectively, at issuance. Three of the four properties' performance exceeds their competitive set. However, net operating income (NOI) has declined since issuance. As of year-end 2010, the servicer reported NOI has declined 40% since year-end 2007 and approximately 50% from issuance expectations; however, it has improved 19% since yearend 2009.

Fitch upgrades the following classes and revises Rating Outlooks as indicated:

--$13.3 million class H to 'Asf' from 'BBsf'; Outlook to Stable from Negative;

--$8.8 million class J to 'BBsf' from 'Bsf'; Outlook to Stable from Negative.

In addition, Fitch affirms the rating and Recovery Rating of the following certificate:

--$9.6 million class K at 'CCCsf/RR1'.

Classes A-1 through G, and X-1A and X-2 have paid in full.

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

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (Sept. 20, 2009);

--'Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions' (Sept. 27, 2010);

--'Criteria for Structure 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

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=560805

Criteria for Structured Finance Recovery Ratings

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=644902

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.