Fitch Ratings Affirms ASC 1997-D5

NEW YORK--(BUSINESS WIRE)--Fitch affirms Asset Securitization Corp.'s (ASC) commercial mortgage pass-through certificates, series 1997-D5 as follows:

Fitch affirms the following classes:

--$220.2 million class A-1D at 'AAA';

--$52.6 million class A-1E at 'AAA';

--Interest-only class PS-1 at 'AAA';

--$87.7 million class A-2 at 'AAA';

--$52.6 million class A-3 at 'AAA';

--$26.3 million class A-4 at 'AAA';

--$39.5 million class A-5 at 'AA',

--$43.9 million class A-6 at 'BBB+';

--$21.9 million class A-7 at 'BB+';

--$39.5 million class B-1 at 'B'.

Class B-2 remains at 'CC/DR4'.

Classes A-1A, A-CS1, A-1B and A-1C have paid in full. Classes B-3 through B-7H have been reduced to zero due to realized losses.

The rating affirmations are the result of sufficient credit enhancement in light of future uncertainty surrounding potential interest and principal losses associated with ongoing litigation and specially serviced assets. In total, as of the August 2008 distribution, the transaction has paid down 65% to $625.1 million from $1.8 billion at issuance. In addition, 22 loans, 35.1% of the pool, have defeased, including two shadow rated loans, 3 Penn Plaza (10.3%) and Westin Casuarina (5.4%).

There are currently two loans that are in special servicing (1.2%). The largest loan (0.7%) is collateralized by an office property in Mobile, AL. Foreclosure has been initiated and the property may be purchased at the foreclosure sale. Losses are uncertain at this time. The smaller loan (0.6%) is collateralized by a vacant retail property in Carol Stream, IL. The tenant and borrower continue to negotiate a lease termination fee. Foreclosure has been initiated.

Fitch is also concerned with two separate litigation cases. The first case involves the bankruptcy proceedings of the operating entity of the Dr.'s Hospital loan, which has been resolved from the trust. The special servicer escrowed approximately $2.7 million from the settlement proceeds of the Dr.'s Hospital breach of representations and warranty claim, and approximately $330 thousand remains. Future legal fees associated with this case will not cause interest shortfalls as long as these funds remain.

In addition, there is ongoing litigation filed on behalf of the trust by the special servicer against the loan seller for breach of representations and warranties for seven loans that have been liquidated from the trust, causing $27.7 million in losses. Fitch is concerned that future legal fees associated with this litigation as well as amounts above the $330 thousand currently held in escrow in the bankruptcy proceeds may cause future shortfalls to certain junior classes.

Two non defeased loans (24%), the Saul Centers pool (17.2%) and the Swiss Bank Tower (7.1%) maintain investment grade shadow ratings due to stable performance.

There are no upcoming maturities or anticipated repayment dates (ARD) in 2008. Approximately 17% of the pool has an ARD in 2009, including the Swiss Bank Tower, five defeased loans, and one loan (0.1%) collateralized by a multifamily property in Jackson, MI.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's site, 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.