Fitch Downgrades 2 Classes of HFCMC Series 1999-PH1; Assigns Outlooks

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded Heller Financial Commercial Mortgage Asset Corp.'s (HFCMC) mortgage pass-through certificates, series 1999 PH-1, as follows:

--$15.1 million class L to 'B-' from 'B' and assigned a distressed recovery (DR) rating of 'DR1'.

In addition, Fitch has downgraded the following:

--$7.6 million class M to 'CC/DR3' from 'CCC/DR1'.

In addition, Fitch has affirmed and assigned Outlooks to the following classes:

--$118.8 million class A-2 at 'AAA'; Outlook Stable;

--Interest-only class X at 'AAA'; Outlook Stable;

--$22.7 million class B at 'AAA'; Outlook Stable;

--$20.2 million class C at 'AAA'; Outlook Stable;

--$53.0 million class D at 'AAA'; Outlook Stable;

--$12.6 million class E at 'AAA'; Outlook Stable;

--$37.9 million class F at 'AAA'; Outlook Stable;

--$17.7 million class G at 'AA+'; Outlook Stable;

--$35.3 million class H at 'A-'; Outlook Stable;

--$20.2 million class J at 'BBB-'; Outlook Negative;

--$7.6 million class K at 'BB+'; Outlook Negative.

The $5.3 million class N is not rated by Fitch. Class A-1 has paid in full.

The downgrade is the result of additional specially serviced loans and an increase in Fitch expected losses on the specially serviced loans. Rating Outlooks reflect the likely direction of any rating changes over the next one to two years. As of the October 2008 distribution date, the pool's balance has been reduced 63.0% to $374.0 million from $1 billion at issuance. Seventeen loans (13.6%) are defeased.

Eighteen loans (29.3%) are considered Fitch Loans of Concern, including six that are specially serviced (4.1%) with losses expected. The largest specially serviced asset (0.9%) is secured by a 436-unit multifamily property in Houston, TX. The special servicer is evaluating disposition strategies.

Three other specially serviced assets (0.9%) are secured by a portfolio of three, cross-collateralized apartment buildings in Colorado Springs, CO. Two of the three real-estate owned (REO) assets have been sold, however, losses to the trust are expected upon disposition of the final asset. Fitch expects losses from specially serviced loans to deplete class N and effect class M.

The largest Fitch Loan of Concern (5.1%) is an office property located in Franklin Township, NJ. The property is physically vacant, but the tenants are continuing to make lease payments through the lease expiration in April 2009. The anticipated repayment date of this loan is May 2009.

Fitch reviewed the performance and underlying collateral of the two shadow-rated loans in the pool: South Plains Mall (15.5%), a 1 million square foot (sf) retail mall in Lubbock, TX and the Station Plaza Office Complex (3.7%) in Trenton, NJ. Based on their stable performance, both loans remain investment grade.

Fitch is monitoring the upcoming maturity dates and anticipated repayment dates (ARD) of the remaining loans. Approximately 19.6% of the remaining non-defeased loans, including all the specially serviced loans, were scheduled to mature or reach their ARD in 2008 and an additional 57.7% of the non-defeased loans are scheduled to mature or reach their ARD in 2009. Weighted average debt service coverage ratio (DSCR) of the non-defeased and non-specially serviced loans with upcoming maturities or ARD is 1.90 times (x) as of year-end (YE) 2007 reporting with a weighted average coupon of 7.32%.

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