NEW YORK--()--Fitch Ratings has placed four classes of Morgan Stanley Capital I Trust 2007-HQ13 (MSCI 2007-HQ13) on Rating Watch Negative.
KEY RATING DRIVERS
The placement on Rating Watch Negative reflects concerns surrounding the transaction's largest loan in the pool, the Real Estate Owned (REO) Pier at Caesars (10.8%). The servicer, Wells Fargo Bank, N.A., informed Fitch that, in anticipation of the special servicer's acceptance of an appraisal significantly below the total exposure, they expect to recoup all or a portion of the approximately $11 million in outstanding advances on the loan through the transaction's waterfall. As a result, interest shortfalls are expected to impact all classes for approximately three months.
The loan transferred to special servicing in 2009 due to the borrower's notice that it would no longer cover operating shortfalls. The decline in performance is mostly attributed to low tenant sales. Significant losses are expected upon liquidation of this loan. The master servicer had previously declared a nonrecoverable advance determination; outstanding advances are those previously advanced.
Fitch expects to resolve the Rating Watch Negative status within the next several months following a complete review of the transaction including updated valuation details and collateral/workout discussions with the loan servicers.
The classes placed on Rating Watch Negative may be downgraded by one or more rating categories. In accordance with Fitch's global criteria for rating caps, the classes currently rated 'AAAsf' would likely be downgraded to 'Asf' at best due to interest shortfalls ('Criteria for Rating Caps in Global Structured Finance Transactions', dated Aug. 2, 2012).
Fitch places the following classes on Rating Watch Negative:
--$115.9 million class A-1A 'AAAsf';
--$53.5 million class A-2 'AAAsf';
--$334.5 million class A-3 'AAAsf';
--$103.9 million class A-M 'BBB-sf';
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 '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);
--'Criteria for Rating Caps in Global Structured Finance Transactions' (Aug. 2, 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
Criteria for Rating Caps in Global Structured Finance Transactions
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria