Fitch Downgrades 2 Classes of Morgan Stanley Series 1999-FNV1

NEW YORK--(BUSINESS WIRE)--Fitch Ratings downgrades and assigns a distressed recovery (DR) rating to Morgan Stanley Capital I Inc., Commercial Mortgage Pass-Through Certificates, Series 1999-FNV1, as follows:

--$7.9 million class K to 'B-/DR1' from 'B';

--$6.3 million class L to 'CC/DR4' from 'CCC/DR3'.

In addition, Fitch affirms the following classes:

--$141.6 million class A-2 at 'AAA';

--Interest only class X at 'AAA';

--$33.2 million class B at 'AAA';

--$26.9 million class C at 'AAA';

--$12.6 million class D at 'AAA';

--$30.0 million class E at 'AAA';

--$14.2 million class F at 'AAA';

--$20.5 million class G at 'A-';

--$7.9 million class H at 'BBB';

--$9.5 million class J at 'BB-'.

The $1.9 million class M remains at 'C/DR6'. Class N remains at 'C/DR6' and has been fully depleted by realized losses.

Although there has been 29.8% additional pay down since Fitch's last rating action, the transaction is experiencing adverse selection warranting affirmations of the current ratings. As of the August 2008 distribution date, the pool's aggregate collateral balance has been reduced 50.5%, to $312.6 million from $632.1 million at issuance. Twenty-one loans (38.6%) have defeased, including three of the top five loans (16.8%).

Fitch is monitoring the upcoming scheduled maturities of the remaining pool. Of the remaining non-defeased loans, 41.2% and 42.7% are scheduled to mature in 2008 and 2009, respectively, with a servicer reported weighted average debt service coverage ratio (DSCR) of 1.71 times (x) and 1.49x, respectively.

Fitch has identified eleven Loans of Concern (12.5%), including two specially serviced assets (3.4%) with losses expected. The largest specially serviced asset (2.5%) is a real estate owned (REO) retail center located in Sevierville, TN.

The largest non-defeased loan (6.1%) is secured by a multifamily property located in Tampa, FL. The loan is scheduled to mature in 2013. Servicer reported occupancy as of June 2008 was 93.1%, compared to 92% at issuance.

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