Fitch Places 3 Classes of Wachovia 2006-Whale 7 on Watch Negative

CHICAGO--(BUSINESS WIRE)--Fitch Ratings has placed the following classes of Wachovia 2006-Whale 7 on Rating Watch Negative:

--$25.4 million class K 'BB'; Rating Watch Negative;

--$28.3 million class L 'BB-'; Rating Watch Negative;

--$3.3 million class WA 'B'; Rating Watch Negative.

Additionally Fitch affirms the following classes and revises the Rating Outlooks as follows:

--$1,180.5 million class A-1 at 'AAA'; Outlook Stable;

--$573.5 million class A-2 at 'AAA'; Outlook Stable;

--Interest-only class X-1A at 'AAA'; Outlook Stable;

--Interest-only class X-1B at 'AAA'; Outlook Stable;

--$98.6 million class B at 'AA+'; Outlook Stable;

--$95 million class C at 'AA'; Outlook Stable;

--$76.8 million class D at 'AA'; Outlook Stable;

--$75.2 million class E at 'AA-'; Outlook Stable;

--$70.4 million class F at 'A+'; Outlook Stable;

--$71.8 million class G at 'A'; Outlook Stable;

--$64.9 million class H at 'BBB'; Outlook Negative;

--$21.9 million class J at 'BB+'; Outlook Negative;

--$68.9 million class KH-1 at 'BB'; Outlook Negative;

--$54.1 million class KH-2 at 'BB-'; Outlook Negative;

--$18 million class BH-1 at 'A-'; Outlook Stable;

--$28 million class BH-2 at 'BBB+'; Outlook Stable;

--$56 million class BH-3 at 'BBB-'; Outlook Stable;

--$46 million class BH-4 at 'BB+; Outlook Stable;

--$2 million class BP-1 at 'BB+'; Outlook Negative;

--$2.2 million class BP-2 at 'BB'; Outlook Negative;

--$5 million class WB at 'BB'; Outlook Stable;

--$2.3 million class MB-1 at 'BBB+'; Outlook Stable;

--$2.6 million class MB-2 at 'BBB'; Outlook Stable;

--$2.6 million class MB-3 at 'BBB-'; Outlook Stable;

--$2.5 million class MB-4 at 'BBB-'; Outlook Stable;

--$1.2 million class CM at 'BB+'; Outlook Negative.

Rake class UV has paid in full.

Two loans have transferred to the special servicer since the last rating action. While the transfers were anticipated at Fitch's last review in November 2008, it now appears that losses could exceed those previously expected. The Westin Aruba (3.5%) and Leestown Square (0.7%) transferred on Nov. 18 and Dec. 12, 2008, respectively. Fitch has placed two classes on Rating Watch Negative and assigned Negative Outlooks to two additional classes pending additional information about the workout strategy and an updated valuation for the Westin Aruba.

The Westin Aruba loan is secured by a 478 room hotel in Palm Beach, Aruba. The loan was foreclosed upon by the mezzanine position in May 2007. In addition, the property failed to meet the requirements for a loan extension at its initial maturity date (April 2008). Negotiations are still underway for potential extension and modification of the loan agreement. Additionally, an operational shortfall at the property caused a termination of the management agreement by Starwood. The servicer has since advanced the funds for the shortfall, and the manager remains in place. The special servicer is in discussions with the borrower on a workout strategy. The loan is currently 60 days past due, and Fitch believes that eventual losses are probable on this loan.

The Leestown Square loan is secured by an office property in Kentucky leased to various Kentucky state government offices. As of Oct. 27, 2008 occupancy had decreased to 72.8% from 100% at issuance. The borrower is in negotiations with the State of Kentucky to lease the remaining space in the building; however, no lease has been signed. The loan transferred to special servicing on Dec. 12, 2008 due to a maturity default. With the current market conditions and the vacancy the borrower has not been able to refinance the loan. The special servicer is in preliminary discussions with all relevant parties to determine the best course of action. Fitch will continue to monitor both specially serviced loans.

The remaining loans are performing consistently with Fitch's November 2008 review. The Rating Outlooks reflect the likely rating changes over the next one to two years. The following loans are Fitch Loans of Concern: Kyo-ya Hotel Portfolio, The Westin Aruba Resort and Spa, Broadreach Office Portfolio, Colonial Mall Myrtle Beach and Leestown Square.

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.