Fitch Upgrades FUNC 1999-C2

NEW YORK--()--Fitch Ratings has upgraded two and affirmed two classes issued by First Union National Bank-Chase Manhattan Bank Commercial Mortgage Trust (FUNC 1999-C2) commercial mortgage pass-through certificates, series 1999-C2. A complete list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrades reflect that the class J and K notes are covered by defeased collateral. The affirmation of the class L notes reflects increasing concentration and reliance on collateral backed by single-tenant retail properties. There are 25 loans remaining in the pool, 13 of which are defeased (52.5% of the pool). Fitch has designated one loan (4.6%) as a Fitch Loan of Concern. Fitch modeled losses of 2.4% of the remaining pool; expected losses on the original pool balance total 2.1%, including losses already incurred. The pool has experienced $23.8 million (2% of the original pool balance) in realized losses to date.

As of the April 2014 distribution date, the pool's aggregate principal balance has been reduced by 96.9% to $35.8 million from $1.2 billion at issuance. Interest shortfalls are currently affecting classes M and N.

The largest loan in the pool is defeased. The second largest loan in the pool is backed by a 250-unit multifamily development (10.2% of the pool) located in Charlotte, NC. The property's occupancy was 86.8% as of year-end 2013 and was covering at a net operating income debt service coverage ratio (DSCR) of 1.34x.

Of the pool, 35.5% represents single-tenant property loans, including four loans with exposure to Rite Aid (19%; rated 'B', Outlook Stable by Fitch), four with Walgreens (10.7%; not rated by Fitch), one with CVS (3.2%), and one with IHOP (2.6%).

RATING SENSITIVITIES

The Stable Outlook on the class J and K notes reflects Fitch's outlook on the rating of the United States of America as the bonds are covered by defeasance collateral. The rating on the class L notes is expected to be stable as the credit enhancement remains high. However, an upgrade to the notes is not anticipated due to the concentration of loans in secondary and tertiary markets and the reliance on collateral backed by single-tenant retail properties.

Fitch has taken the following actions as indicated:

--$3.5 million class J notes upgraded to 'AAAsf' from 'AAsf'; Outlook Stable;

--$11.8 million class K notes upgraded to 'AAAsf' from 'BB+sf'; Outlook Stable;

--$11.8 million class L notes affirmed at 'Bsf'; Outlook Stable;

--$8.7 million class M notes affirmed at 'Dsf'; RE 90%.

Fitch does not rate the class NR notes and previously withdrew the ratings on the IO notes. Classes A-1, A-2, B, C, D, E, F, G, and H have paid in full.

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:

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

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

Global Structured Finance Rating Criteria

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=827555

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 Surveillance Analyst
Matthew McGowan, +1-212-908-0733
Associate 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 (New York)
sandro.scenga@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Surveillance Analyst
Matthew McGowan, +1-212-908-0733
Associate 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 (New York)
sandro.scenga@fitchratings.com