NEW YORK--()--Fitch Ratings has downgraded seven and affirmed 14 classes of ML-CFC Commercial Mortgage Trust, series 2007-9 (ML-CFC 2007-9), commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The downgrades reflect an increase in Fitch modeled losses across the pool, due to further deterioration of loan performance, most of which involves significantly higher losses on the specially serviced loans, as well as several loans in the top 15 with continued underperformance. Fitch modeled losses of 15.1% of the remaining pool; expected losses on the original pool balance total 15.5%, including losses already incurred. The Negative Outlook on classes AM and AM-A reflects the uncertainty surrounding the workout on many of the specially serviced loans and the possibility for further underperformance on loans in the top 15.
As of the December 2012 distribution date, the pool's aggregate principal balance has been reduced by 20% to $2.25 billion from $2.81 billion at issuance. Approximately $467.48 million (16.6%) were principal paydowns and approximately $94.45 million (3.4%) were realized losses. No loans have defeased since issuance. Interest shortfalls totaling $23.6 million are currently affecting classes AJ through T.
Fitch has designated 98 loans (51.7%) as Fitch Loans of Concern, which includes 19 specially serviced assets (13.8%). Seven of the top 15 loans (26.2%) are or have been in special servicing, including three loans in the top 15 (16.1%) which have been modified and returned to the master servicer. These loans are currently performing under the terms of the modification.
The largest contributors to modeled losses are three (7.7%) of the top 15 loans in the pool, all of which are specially serviced.
The largest contributor to modeled losses is the DLJ West Coast Hotel Portfolio loan (3.8%). The loan was transferred to special servicing in May 2009 due to imminent default. The loan was initially secured by six cross-collateralized and cross-defaulted hotel properties totaling 1,159 rooms located in California and Oregon. The hotels operated under the Residence Inn, Hawthorne Suites, Courtyard Marriot, and Hilton Garden Inn flags.
All six properties were foreclosed upon between August 2011 and September 2011. According to the special servicer, five of the six properties have already been sold to date. The remaining hotel has not been marketed to allow for an improvement in property performance and thus an increase in the property's value. Recent valuations on the remaining hotel property indicate significant losses to the loan upon liquidation as the outstanding loan balance already reflects the five properties that were sold being written down.
The next largest contributor to modeled losses is the St. Louis Flex Office Portfolio loan (2.3%). The loan was transferred to special servicing in November 2010 for imminent default due to cash flow issues. The asset consists of a portfolio of six industrial/flex properties totaling 864,540 square feet located in the St. Louis, Missouri MSA. All six properties became real-estate owned in May 2012. The special servicer is pursuing a lease-up strategy through the spring of 2013 and will then evaluate the market and property performance at that time. .
The third largest contributor to modeled losses is the Morgan 7 RV Park Portfolio loan (1.6%). The loan was transferred to special servicing in October 2011 for delinquent payments. The loan is secured by a portfolio of seven RV parks (totaling 1,586 RV sites) of various vintage ranging from 1960-1990 located on a total of 306 acres in Maine, Michigan, New Jersey and New York. The special servicer continues pursuing foreclosure and to place the properties under receivership.
Fitch downgrades and revises Rating Outlooks as indicated:
--$210 million class AM to 'BBBsf' from 'Asf', Outlook to Negative from Stable;
--$71 million class AM-A to 'BBBsf' from 'Asf', Outlook to Negative from Stable;
--$31.6 million class B to 'CCsf' from 'CCCsf', RE 0%;
--$21.1 million class C to 'CCsf' from 'CCCsf', RE 0%;
--$28.1 million class D to 'Csf' from 'CCsf', RE 0%;
--$24.6 million class E to 'Csf' from 'CCsf', RE 0%;
--$24.6 million class F to 'Csf' from 'CCsf', RE 0%.
Fitch affirms the following classes as indicated:
--$255.2 million class A-1A at 'AAAsf', Outlook Stable;
--$91.1 million class A-2 at 'AAAsf', Outlook Stable;
--$134.8 million class A-3 at 'AAAsf', Outlook Stable;
--$87.3 million class A-SB at 'AAAsf', Outlook Stable;
--$931 million class A-4 at 'AAAsf', Outlook Stable;
--$168 million class AJ at 'CCCsf', RE 65%;
--$56.8 million class AJ-A at 'CCCsf', RE 65%;
--$28.1 million class G at 'Csf', RE 0%;
--$28.1 million class H at 'Csf', RE 0%;
--$24.6 million class J at 'Csf', RE 0%;
--$31.6 million class K at 'Csf', RE 0%;
--$382,438 class L at 'Dsf', RE 0%;
--$0 class M at 'Dsf', RE 0%;
--$0 class N at 'Dsf', RE 0%.
The class A-1 certificates have paid in full. Fitch does not rate the class P, Q, S and T certificates. Fitch previously withdrew the ratings on the interest-only class XP and XC certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 18, 2012 report, 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is available at 'www.fitchratings.com' under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (June 6, 2012);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 18, 2012).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria