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Fitch Downgrades One Class of Capital Trust 2004-1

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded one and affirmed three classes of Capital Trust RE CDO 2004-1 (Capital Trust 2004-1). A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERS

Since the last rating action in August 2013, the transaction has received $55 million in paydowns. This has resulted in the full repayment of the class B and C notes and $11.4 million of paydowns to the now senior class D notes. Per the indenture, the failure to pay any interest due to the class D notes, if there are no class A, B, or C notes outstanding, is an event of default. On the May 2014 and subsequently the June 2014 payment date, transaction proceeds were insufficient to pay the interest to the class D notes. As a result, the class D notes have been downgraded to 'Dsf'.

Capital Trust 2004-1 is a commercial real estate (CRE) collateralized debt obligation (CDO) managed by CT Investment Management Co., LLC (CTIMCO). The transaction is highly concentrated with only three assets remaining in the portfolio. As of the June 2014 trustee report, the CDO was invested as follows: B-notes (98.9%) and commercial mortgage backed securities (CMBS) (1.1%). Since the last rating action, the transaction has realized losses of approximately $11.4 million.

Under Fitch's methodology, approximately 82.2% of the portfolio is modeled to default in the base case stress scenario, defined as the 'B' stress. Fitch estimates that average recoveries will be 1.4% reflecting the low recovery expectations upon default of the CMBS tranches and real estate loans which are predominantly subordinate positions. Fitch's base case loss expectation for the transaction is 81.1%.

The largest loan remaining in the transaction (71.1%) is secured by a junior position in a condominium interest in an office complex consisting of five office buildings in New Hyde Park, NY. The collateral consists of 920,059 square feet. The loan transferred to special servicing for a second time in September 2013 due to imminent default and subsequently became real estate owned (REO) in June 2014. The special servicer is working to lease up the property from its occupancy of 72% as of June 2014. While the collateral is now REO, the CDO's position is behind senior positions totaling $107 million.

RATING SENSITIVITIES

The ratings for classes E through G are based on a deterministic analysis that considers Fitch's base case loss expectation for the pool and the current percentage of defaulted assets and Fitch Loans of Concern, factoring in anticipated recoveries relative to the credit enhancement of each class.

Fitch has downgraded the following class as indicated:

--$9,664,818 class D to 'Dsf' from 'Csf'; RE 20%.

Fitch has affirmed the following classes as indicated:

--$3,241,000 class E at 'Csf'; RE 0%;

--$6,481,000 class F at 'Csf'; RE 0%;

--$16,204,000 class G at 'Csf'; RE 0%.

The class A-1, A-2, B, and C certificates have paid in full. Fitch does not rate the class H and J certificates or the preferred shares.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions' (Nov. 25, 2013);

--'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

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821

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

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

Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723059

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=839996

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 Analyst:
Matthew McGowan, +1-212-908-0733
Associate Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson:
Mary MacNeill, +1-212-908-0785
Managing Director
or
Sandro Scenga, +1-212-908-0278
Media Relations, New York
sandro.scenga@fitchratings.com