Fitch Upgrades 2 Classes of BSCMS 2003-TOP12

NEW YORK--()--Fitch Ratings has upgraded two and affirmed nine classes of Bear Stearns Commercial Mortgage Securities Trust, series 2003-TOP12 (BSCM 2003-TOP12). A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrades and affirmations are based on the stable performance of the underlying collateral pool and the considerable amount of loans paying off. Since the prior review, 71 loans in the amount of $381.8 million have either paid in full or liquidated with losses totaling $142,183. Fitch modeled losses of 12.4% of the remaining pool; expected losses on the original pool balance total 1.3%, including $3.3 million (0.3% of the original pool balance) in realized losses to date. Twenty-two loans remain in the transaction. Given the concentration of the remaining collateral pool, Fitch has stressed the remaining loans by applying an additional reduction to the net operating income and applying a higher stressed cap rate to each loan to determine value.

As of the February 2014 distribution date, the pool's aggregate principal balance has been reduced by 92.2% to $90.6 million from $1.16 billion at issuance. Per the servicer reporting, four loans (15.8% of the pool) are defeased. Interest shortfalls are currently affecting classes K through O. Fitch has designated five loans (28%) as Fitch Loans of Concern, which includes two specially serviced assets (12.8%).

The largest contributor to expected losses is a specially-serviced loan (7.4% of the pool), which is secured by a three-building, 60,492 square foot (sf) retail property located in Naperville, IL. The property is part of an overall larger shopping center which was shadow anchored by a 74,000 square foot Dominick's Grocery Store that has since closed. As of January 2014 the property was 75% occupied. The loan was transferred to special servicing due to a maturity default as the borrower was unable to refinance at the September 2013 maturity. On Dec. 3, 2013, the borrower filed for Chapter 11 bankruptcy protection.

The next largest contributor to expected losses is a seven-story, 102,309 sf office property located along US-1 in Boca Raton, FL. The expected losses are a result of the largest tenant, Waddell & Reed Ivy Investment (39.9% of net rentable area), vacating upon their lease expiration in February 2013. The year-to-date net operating income debt service coverage ratio (NOI DSCR) as of third quarter 2013 was 1.12x. As a result of Waddell & Ivy leaving, the DSCR decreased when compared to prior year analysis which reported a DSCR of 2.32x. The property was 41% occupied as of third quarter 2013, down from 84% as of year-end 2012.

RATING SENSITIVITY

Rating Outlooks on class C and classes E through K are expected to remain Stable due to increasing credit enhancement from continued paydown. The Positive Rating Outlook on class D is a result of the sizeable paydown the pool has experienced since last review; should the performance continue, an upgrade to the class D is likely. The Rating Outlook on class L remains Negative due to the potential for losses from the specially serviced loans and the Fitch Loans of Concern.

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

--$17 million class C to 'AAAsf' from 'AA+sf', Outlook Stable;

--$7.3 million class F to 'Asf' from 'A-sf', Outlook to Stable from Negative.

Fitch affirms the following classes and revises Rating Outlooks and REs as indicated:

--$13.1 million class D at 'AAsf', Outlook to Positive from Stable;

--$14.5 million class E at 'Asf', Outlook Stable;

--$7.3 million class G at 'BBBsf', Outlook to Stable from Negative;

--$5.8 million class H at 'BBsf', Outlook to Stable from Negative;

--$5.8 million class J at 'BBsf', Outlook to Stable from Negative;

--$2.9 million class L at 'Bsf', Outlook Negative;

--$2.9 million class M at 'CCCsf', RE 100%;

--$2.9 million class K at 'Bsf', Outlook to Stable from Negative;

--$2.9 million class N at 'CCCsf', RE 90%.

Fitch does not rate the class O 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=822972

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, Inc.
Primary Analyst
Darren Liss, +1-212-908-0753
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com

Sharing

Contacts

Fitch Ratings, Inc.
Primary Analyst
Darren Liss, +1-212-908-0753
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com