Fitch Downgrades 3 Distressed Classes of BSCMS 2007-TOP 26

NEW YORK--()--Fitch Ratings has downgraded three classes and affirmed 16 classes of Bear Stearns Commercial Mortgage Securities Trust (BSCMS) Series 2007-TOP26. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

Fitch modeled losses of 10% of the remaining pool; expected losses on the original pool balance total 11.5%, including $74.3 million (3.5% of the original pool balance) in realized losses to date. Fitch has designated 41 loans (21.4%) as Fitch Loans of Concern, which includes six specially serviced assets (1.5%).

As of the December 2013 distribution date, the pool's aggregate principal balance has been reduced by 20.3% to $1.68 billion from $2.11 billion at issuance. Per the servicer reporting, three loans (0.3% of the pool) are defeased. Interest shortfalls are currently affecting classes F through P.

The largest contributor to expected losses is the Viad Corporate Center loan (3.3% of the pool), which is secured by a 476,424 sf office property located in Phoenix, AZ. The loan transferred back to the master servicer in August 2011 after being modified in May 2011 with terms that included a principal write-down of $9 million to $56 million, and establishing an $8 million capital expense escrow for tenant improvements, leasing commissions and repairs. The servicer reported year-end 2012 DSCR was 0.17x and as of the October 2013 rent roll the property is 62% occupied. The borrower recently executed a lease of approximately 70,000 sf for a twelve-year term. Leases representing only 1% of net rentable area (NRA) expire through year-end 2014.

The next largest contributor to expected losses is the 909 A Street loan (2.9%), which is secured by a 210,186 sf office property located in Tacoma, WA. The loan recently transferred back to the master servicer in August 2013 after initially being transferred to the special servicer in February 2012. The loan originally transferred to the special servicer due to the lease expiration in November 2013 of the sole tenant. The borrower has since signed a new lease for the entire building to State Farm that expires in December 2018.

The third largest contributor to expected losses is the Overlook II loan (1.9%), which is secured by a 260,467 sf office property located in Atlanta, GA. Occupancy as of the October 2013 rent roll is 65% which declined from 80% as of year-end 2012. The DSCR as of year-end 2012 is 1.12x and possible rollover through year-end 2014 is approximately 15%. The loss associated with this property is due to reduced cashflow from declining occupancy and rent concessions.

RATING SENSITIVITY

Rating Outlooks on classes A-3 through A-1A remain stable due to increasing credit enhancement and continued paydown. The Rating Outlook on class A-M is Negative as the class may be subject to further downgrade if there is further deterioration of the pool's cash flow performance and/or decrease in the value of specially serviced loans. Additional downgrades to the distressed classes (those rated below 'B') are expected as losses are realized on specially serviced loans.

Fitch downgrades the following classes as indicated:

--$42.1 million class B to 'CCsf' from 'CCCsf', RE 0%;

--$29 million class D to 'Csf' from 'CCsf', RE 0%;

--$15.8 million class E to 'Csf' from 'CCsf', RE 0%.

Fitch affirms the following classes and assigns Recovery Estimates (RE) as indicated:

--$18.3 million class A-3 at 'AAAsf', Outlook Stable;

--$991.9 million class A-4 at 'AAAsf', Outlook Stable;

--$54.5 million class A-AB at 'AAAsf', Outlook Stable;

--$120.4 million class A-1A at 'AAAsf', Outlook Stable;

--$210.6 million class A-M at 'AAsf', Outlook Negative;

--$160.6 million class A-J at 'CCCsf', RE 85%;

--$18.4 million class C at 'CCsf', RE 0%;

--$17.8 million class F at 'Dsf', RE 0%;

--$0 class G at 'Dsf', RE 0%;

--$0 class H at 'Dsf', RE 0%;

--$0 class J at 'Dsf', RE 0%;

--$0 class K at 'Dsf', RE 0%;

--$0 class L at 'Dsf', RE 0%;

--$0 class M at 'Dsf', RE 0%;

--$0 class N at 'Dsf', RE 0%;

--$0 class O at 'Dsf', RE 0%.

The class A-1 and A-2 certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the ratings on the interest-only class X-1 and X-2 certificates.

Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 11, 2013 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'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 24, 2013);

--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724961

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=813283

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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Darren Liss, +1-212-908-0753
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson
Britt Johnson, +1-312-606-2341
Senior Director
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908 0526
elizabeth.fogerty@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Darren Liss, +1-212-908-0753
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson
Britt Johnson, +1-312-606-2341
Senior Director
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908 0526
elizabeth.fogerty@fitchratings.com