CHICAGO--(BUSINESS WIRE)--Fitch Ratings has downgraded two classes and affirmed eight classes of Credit Suisse First Boston Mortgage Securities Corp., commercial mortgage pass-through certificates series 2004-C2. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations of classes D through K reflect full coverage of these classes by defeased collateral. The downgrades of class N and O reflect realized losses. As of the November 2016 distribution date, the pool's aggregate principal balance has been reduced by 93.5% to $63 million from $966.8 million at issuance. The pool has experienced $16.7 million (1.7% of the original pool balance) in realized losses to date. Interest shortfalls are currently affecting classes K through P.
Defeased Collateral: There are two defeased loans accounting for 91.7% of the pool.
Pool Concentration: The pool is concentrated with two defeased loans, one performing loan (1.3%) and two real estate owned (REO) assets (7.0%) with the special servicer.
Specially Serviced Assets: The downgrades of class N and O reflect experienced losses from a specially serviced asset that was liquidated in October 2016. Losses from the 119,061-square foot (sf) suburban medical office building located in Evergreen Park, IL were higher than expected.
The largest contributor to expected losses is a 64 unit multi-family property located in Wayne, MI, roughly 20 miles from Detroit. The loan was transferred to the special servicer in September 2014 for imminent default and foreclosure was filed. The servicer obtained title to the property and became REO in October 2016. There is no disposition timeline at this time as the servicer is working on stabilizing the asset and addressing deferred maintenance. The property is 83% occupied according to the June 2016 rent roll.
The second largest contributor to expected losses is 16,800-sf retail property located in Puyallup, WA, approximately 36 miles south of Seattle. The loan was transferred to special servicer in February 2013 due to payment default. The loan had previously been in special servicing in 2009 for payment default, but was brought current in early 2011 and returned to the master servicer in mid-2012. A forbearance agreement could not be reached with the borrower and foreclosure was completed in May 2014. The property is now REO, but there are no immediate disposition plans at this time. Per the servicer, the asset is currently in a value-add strategy as tenants are sought to lease the vacant space and the servicer addresses deferred maintenance issues. As of October 2016, the property was reported to be 61% occupied.
RATING SENSITIVITIES
Outlooks on classes D through H remain Stable due to increasing credit enhancement and continued paydown. The balance of these classes is covered by the defeased collateral. The outlook for Class J has been revised to Negative from Stable as a downgrade may be possible if interest shortfalls affect this class. The Class K has been revised to Stable from Negative and is fully covered by defeased collateral, but a rating cap of 'Asf' has been applied due to interest shortfalls currently affecting the class. Class L has also been revised to Stable from Negative. However, although the class is nearly covered by defeased collateral, future upgrades are unlikely given the interest shortfalls, thin subordinate class and reliance on disposition of specially serviced assets to repay the class in full.
DUE DILIGENCE USAGE PURSUANT TO SEC RULE 17G-10
No third party due diligence was provided or reviewed in relation to this rating.
Fitch downgrades the following classes:
--$0 class N to 'Dsf' from 'Csf', RE 0%;
--$0 class O to 'Dsf' from 'Csf'; RE 0%.
Fitch affirms the following classes and revises Rating Outlooks as indicated:
--$6 million class J at 'AAAsf', Outlook revised to Negative from Stable;
--$3.6 million class K at 'Asf', Outlook revised to Stable from Positive;
--$3.6 million class L at 'BBsf'; Outlook revised to Stable from Positive.
Fitch affirms the following classes:
--$4.7 million class D at 'AAAsf', Outlook Stable;
--$9.7 million class E at 'AAAsf', Outlook Stable;
--$9.7 million class F at 'AAAsf', Outlook Stable;
--$9.7 million class G at 'AAAsf', Outlook Stable;
--$10.9 million class H at 'AAAsf', Outlook Stable.
The class A-1, A-1-A, A-2, B and C certificates have paid in full. Fitch does not rate the class M and P certificates. Fitch previously withdrew the ratings on the interest-only class A-X and A-SP certificates.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)
https://www.fitchratings.com/site/re/886006
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)
https://www.fitchratings.com/site/re/882401
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
https://www.fitchratings.com/site/re/883130
North America and Asia-Pacific Multiborrower CMBS Surveillance Criteria (pub. 01 Dec 2016)
https://www.fitchratings.com/site/re/891159
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1016056
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1016056
Endorsement Policy
https://www.fitchratings.com/regulatory
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