NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed all classes of ML-CFC Commercial Mortgage Trust series 2006-1. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations are primarily due to the overall stable pool performance since Fitch's last rating action. Fitch modeled losses of 9.6% of the remaining pool; expected losses on the original pool balance total 9.5%, including $86.2 million (4% of the original pool balance) in realized losses to date. Fitch has designated 24 loans (21.9%) as Fitch Loans of Concern, 13 of which are specially serviced assets (8.9%).
As of the August 2014 distribution date, the pool's aggregate principal balance has been reduced by 42.5% to $1.23 billion from $2.14 billion at issuance. Four loans (10.2% of the pool) are defeased, including two (9.4%) of the top ten loans (by unpaid principal balance). Interest shortfalls are currently affecting classes F through Q with the exception of class J.
The largest contributor to expected losses is a loan (2.3% of the pool) secured by two office properties located in suburban Atlanta, GA totaling 323,526 sf. The portfolio has been underperforming since year end (YE) 2009 due to the loss of several large tenants. The servicer-reported YE 2013 portfolio debt service coverage ratio (DSCR) was 0.61x with a 74% occupancy rate, compared to a DSCR of 1.29x and 91.5% occupancy rate at issuance. The loan remains current on debt service.
The second largest contributor to expected losses is a loan (1.4%) secured by a resort-oriented strip/neighborhood shopping center located in the Kahana region of Lahaina on the island of Maui, Hawaii that comprises 58,774 sf. The property's performance continues to deteriorate due to declining occupancy. Based on March 2014 rent roll, the property was 60.5% occupied, compared to 63% at YE2013, 67% at YE2012, 70% at YE2012 and 96% at issuance. The loan began amortizing in February 2011, which also affected cash flow due to increased debt service payments. Servicer reported YE 2013 DSCR was 0.64x, compared to 0.74x at YE2012, 0.89x at YE2011 and 1.24x at issuance. The loan remains current on debt service.
The third largest contributor to expected losses is a loan (1.4%) secured by a 275,754 sf multi-tenant business park located in the Tampa, Florida. The loan transferred to special servicing in February 2013 due to imminent default as the borrower was no longer willing to fund the cash flow shortfalls. The loan is now over 90-days delinquent. The special servicer has filed for foreclosure. The loan has a cash management agreement in place. As of May 2014, the property was 53% occupied, compared to 93.3% at issuance.
The 'AAA' rated classes are expected to remain stable due to increased loan defeasance and continued paydown. Future downgrades to the 'BBB-' rated class are possible should pool performance deteriorate and losses on the specially serviced assets exceed expectations. In addition, the distressed classes (rated below 'B') may be subject to further rating actions as losses are realized.
Fitch affirms the following classes as indicated:
--$471.4 million class A-4 at 'AAAsf'; Outlook Stable;
--$200.9 million class A-1A at 'AAAsf'; Outlook Stable;
--$214.2 million class AM at 'AAAsf'; Outlook Stable;
--$82.1 million class AJ at 'BBB-sf'; Outlook Negative;
--$100 million class AN-FL at 'BBB-sf'; Outlook Negative;
--$50.9 million class B at 'CCCsf'; RE70%;
--$21.4 million class C at 'CCCsf';RE0%;
--$29.5 million class D at 'CCsf'; RE0%;
--$16.1 million class E at 'CCsf'; RE0%;
--$24.1 million class F at 'Csf'; RE0%;
--$16.1 million class G at 'Csf'; RE0%;
--$2.2 million class H at 'Dsf'; RE0%;
--$0 class J at 'Dsf'; RE0%;
--$0 class K at 'Dsf'; RE0%;
--$0 class L at 'Dsf'; RE0%;
--$0 class M at 'Dsf'; RE0%;
--$0 class N at 'Dsf'; RE0%;
--$0 class P at 'Dsf'; RE0%.
The class A-1, A-2, A-3, A-3FL, A-3B, and A-SB certificates have paid in full. Fitch does not rate the class Q certificates. Fitch previously withdrew the rating on the interest-only class X certificates.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 20, 2014);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria - Effective from 20 May 2014 to 4 August 2014
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria