NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded three classes and affirmed seven classes of Merrill Lynch Mortgage Trust's (MLMT) commercial mortgage pass-through certificates series 2003-KEY1. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The upgrades reflect sufficient credit enhancement to offset the concentrated pool as only four of the original 80 loans remain. Fitch modeled losses of less than 1% of the remaining pool; expected losses on the original pool balance total 4%, including $42.6 million (4% of the original pool balance) in realized losses to date. The three largest loans in the pool are currently in special servicing (87.6%) and have been designated Fitch Loans of Concerns; however, remain current as of the February 2015 payment date.
As of the February 2015 distribution date, the pool's aggregate principal balance has been reduced by 97.6% to $25.7 million from $1.08 billion at issuance. No loans are defeased. Interest shortfalls are currently affecting classes H through Q. The three largest loans had anticipated repayment dates (ARD) in 2014, with final maturities in 2028 (73% of pool) and 2033 (14.6%). The fourth largest loan (12.4%) is scheduled to mature in 2018.
The Rating Outlooks for classes E and F are Stable, reflecting Fitch's expectation of future affirmations. The ratings reflect the probability of full principal payoff, as well as the class's previously incurred interest shortfalls. Fitch will not assign or maintain 'AAAsf' or 'AAsf' ratings for notes that it believes have a high level of vulnerability to interest shortfalls or deferrals, even if permitted under the terms of the documents (see 'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions', dated May 28, 2014, for more details).
The two largest loans in the pool, Circa Capital East Pool (42%; 'East Pool') and Circa Capital West Pool (30.9%; 'West Pool'), are cross defaulted and cross collateralized. The pools were originally securitized by six Holiday Inns with the East Pool's assets located in Billings, MT, Fort Smith, AR and Lubbock, TX; the West Pool's assets were located in Cheyenne, WY, Lubbock, TX and Fresno, CA. The loans had originally transferred to special servicing in May 2013 and were modified in September 2013 with a reduced interest rate and the ability to allow partial property releases. Since the loan modifications, two properties (Fort Smith, AR and Lubbock, TX) were released from the East Pool and one property (Lubbock, TX) was released from the West Pool, with sales proceeds used to pay down the respective loans. The remaining assets reported net operating income (NOI) debt service coverage ratio (DSCR) for trailing 12 month (TTM) September 2014 at 1.93x for the East pool, and 1.82x for the West Pool. Both loans had an ARD for August 2014, with final maturity dates scheduled for August 2028. The loans remain current as of the February 2015 remittance date.
Fitch upgrades the following classes as indicated:
--$182,883 class E to 'Asf' from 'BBBsf'; Outlook Stable;
--$11.9 million class F to 'Asf' from 'Bsf'; Outlook Stable;
--$7.9 million class G to 'CCCsf' from 'CCsf'; RE 100%.
Fitch affirms the following classes as indicated:
--$5.7 million 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 P at 'Dsf'; RE 0%.
The class A-1, A-2, A-3, A-4, A-1A, B, C, D and interest-only class X-P certificates have paid in full. Fitch does not rate class Q. Fitch also does not rate the rake classes WW-1, WW-2, WW-3, and interest only WW-X certificates. Fitch previously withdrew the rating on the interest-only class XC certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 10, 2014, 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' (Aug. 4, 2014);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 10, 2014);
-- '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