NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded one class, downgraded two classes, and affirmed 11 classes of LB-UBS Commercial Mortgage Trust commercial mortgage pass-through certificates, series 2004-C6 (LBUBS 2004-C6). A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The downgrades to classes D and E are attributable to prior interest shortfalls as well as the continued risk of interest shortfalls should additional loans transfer to the special servicer. The previous interest shortfalls were predominantly related to the $26.7 million University Park Tech III/IV and Westchase Commons loan that paid off in March 2014. A special servicing fee of approximately 1% was collected at payoff causing interest shortfalls to classes D through H for the first time. The shortfalls have since been recovered for classes D, E and F. Fitch will not assign or maintain 'AAAsf' or 'AAsf' ratings for bonds that it believes have a high level of vulnerability to interest shortfalls and will generally only consider 'Asf' or 'BBBsf' ratings for bonds that are not expected to incur interest shortfalls. See 'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions', dated May 28, 2014, for more details.
Although these classes have high credit enhancement due to amortization and loan payoffs, several larger loans are underperforming with maturities in 2014 and may transfer to the special servicer.
The upgrade and affirmations are based on increased credit enhancement and continued paydown of the underlying collateral pool.
Fitch modeled losses of 27.5% of the remaining pool, including $13.3 million (1% of the original pool balance) in realized losses to date. Fitch has designated 16 loans (73.9%) as Fitch Loans of Concern, which includes four specially serviced assets (30.1%). As of the June 2014 distribution date, the pool's aggregate principal balance has been reduced by 83.7% to $219.4 million from $1.35 billion at issuance. Per the servicer reporting, three loans (9.2% of the pool) are defeased. Interest shortfalls are currently affecting classes H through T. Only 29 of the original 94 loans remain. Of the remaining performing loans, all but 4 loans (6.9% of the pool) are set to mature in 2014.
The largest contributor to expected losses is the specially-serviced Northridge Business Park loan (15.3% of the pool), which is secured by a seven-building office property totaling 471,034 square feet (sf) in Atlanta, GA. The loan had originally transferred to special servicing in 2009 upon the borrower's request for a loan modification. The property experienced a significant decline in performance when the largest tenant, representing 45% of net rentable area (NRA), vacated in February 2011. The loan became real estate owned (REO) in February 2012. The property is 50% occupied as of March 2014. The servicer is actively working to lease and stabilize the property prior to marketing the property to disposition.
The next largest contributor to expected losses is the specially-serviced Stockdale Tower loan (9.4%), which is secured by a 176,144 sf office tower located in Bakersfield, CA. The asset transferred to special servicing in December 2009 for payment default and became REO in February 2013. The April 2014 rent roll reported occupancy at 87%. Since becoming REO, several improvements have been made to lobby and outside area. The servicer is actively working to lease and stabilize the property prior to disposition.
Rating Outlooks on classes A-6 through F are Stable as no additional rating changes are expected due to increasing credit enhancement which offsets concerns with concentration and the potential for maturity defaults. The Rating Outlook on class G is Negative as the class may be subject to a downgrade if there is further deterioration to the pool should loans transfer to special servicing or expected losses increase. Additional downgrades to the distressed classes (those rated below 'B') are expected as losses are realized.
Fitch upgrades the following classes as indicated:
--$13.5 million class B to 'AAAsf' from 'AA+sf'; Outlook Stable.
Fitch downgrades the following classes and removes them from Rating Watch Negative:
--$15.1 million class D to 'Asf' from 'AA-sf'; assigns Stable Outlook;
--$13.5 million class E to 'BBBsf' from 'Asf'; assigns Stable Outlook.
Fitch affirms the following class and removes it from Rating Watch Negative:
--$15.1 million class F at 'BBsf'; assigns Stable Outlook.
Fitch affirms the following classes and assigns Recovery Estimates (RE) as indicated:
--$56.7 million class A-6 at 'AAAsf'; Outlook Stable;
--$11.1 million class A-1A at 'AAAsf'; Outlook Stable;
--$23.6 million class C at 'AAsf'; Outlook Stable;
--$11.8 million class G at 'B-sf'; Outlook Negative;
--$11.8 million class H at 'CCsf'; RE 0%;
--$8.4 million class J at 'Csf'; RE 0%;
--$16.8 million class K at 'Csf'; RE 0%;
--$1.7 million class L at 'Csf'; RE 0%;
--$6.7 million class M at 'Csf'; RE 0%;
--$5 million class N at 'Csf'; RE 0%.
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 28, 2014);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013);
--'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions' (May 28, 2014).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions