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Fitch Affirms MSCI 2006-TOP23

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed 18 classes of Morgan Stanley Capital I Trust (MSCI) commercial mortgage pass-through certificates series 2006-TOP23. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The affirmations reflect the stable performance of the transaction since Fitch's last rating action. Fitch modeled losses of 4% of the remaining pool; expected losses on the original pool balance total 4.8%, including $26.7 million (1.7% of the original pool balance) in realized losses to date. Fitch has designated 32 loans (16.5%) as Fitch Loans of Concern, which includes three specially serviced assets (3%).

As of the July 2014 distribution date, the pool's aggregate principal balance has been reduced by 20.3% to $1.3 billion from $1.6 billion at issuance. Per the servicer reporting, five loans (2.1% of the pool) are defeased. Interest shortfalls are currently affecting classes H through P.

The largest contributor to Fitch's modeled losses is secured by a 155,012 square foot (sf) mixed use property (1.3% of the transaction) located in Savannah, GA. The loan transferred to the special servicer in July 2013 after a payment default. The special servicer is working to lease up the property and is addressing deferred maintenance issues at the property.

The second largest contributor to Fitch's modeled losses is secured by a 260 unit multifamily property (0.8%) built in 2004 and located in Phoenix, AZ. The loan was placed on the servicer watchlist due to declining occupancy, rents, and debt service coverage ratio. The net operating income debt service coverage ratio (NOI DSCR) of the loan dropped from 2.10x at issuance to 0.52x as of year-end 2013. Occupancy at the property was 81% as of year-end 2013. Both the DSCR and occupancy represent declines from year-end 2012 when the DSCR was 0.67x and occupancy was 92%. Despite the low coverage ratio, the loan remains current.

The third largest contributor to Fitch's modeled losses is secured by a portfolio of industrial properties (0.6%) in Illinois. The loan transferred to the special servicer January 2013 due to the borrower's failure to remit the November 2012 payment. One of the five properties was sold in June 2013 with the net proceeds applied to the loan. The special servicer is currently pursuing foreclosure.

RATING SENSITIVITY

Rating Outlooks on classes A-3 through D are expected to remain Stable due to increasing credit enhancement and continued paydown. The distressed class E through K notes are more susceptible to further downgrades as losses are realized.

Fitch affirms the following classes and revises Outlooks as indicated:

--$37.6 million class A-3 at 'AAAsf'; Outlook Stable;

--$23.9 million class A-AB at 'AAAsf'; Outlook Stable;

--$812.1 million class A-4 at 'AAAsf'; Outlook Stable;

--$161.4 million class A-M at 'AAAsf'; Outlook Stable;

--$113 million class A-J at 'Asf'; Outlook Stable;

--$32.3 million class B at 'BBB-sf'; Outlook Stable;

--$16.1 million class C at 'BBsf'; Outlook to Stable from Negative;

--$26.2 million class D at 'Bsf'; Outlook to Stable from Negative;

--$14.1 million class E at 'CCCsf'; RE 100%;

--$12.1 million class F at 'CCCsf'; RE 85%;

--$14.1 million class G at 'CCsf'; RE 0%;

--$10.1 million class H at 'CCsf'; RE 0%;

--$4 million class J at 'Csf'; RE 0%;

--$4 million class K at 'Csf'; RE 0%;

--$1.1 million class L at 'Dsf'; RE 0%;

--$0 class M at 'Dsf', RE 0%;

--$0 class N at 'Dsf', RE 0%;

--$0 class O at 'Dsf', RE 0%.

The class A-1 and A-2 certificates have paid in full. Fitch does not rate the class P 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

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=840016

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