NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded one and affirmed one class of TIAA Real Estate CDO 2003-1, Ltd. (TIAA 2003-1) as a result of increased credit enhancement to the notes from principal paydowns. A complete list of rating actions follows at the end of this release.
KEY RATING DRIVERS
Since the last rating action in September 2014, the class C notes have paid-in-full and the class D notes have received $2.8 million in paydowns. Over this period, approximately 4.3% of the collateral has been downgraded and 30.1% has been upgraded. Currently, 69.9% of the portfolio has a Fitch derived rating below investment grade and 34.5% has a rating in the 'CCC' category and below, compared to 60.6% and 26.1%, respectively, at the last rating action. Since issuance the transaction has experienced approximately $266.8 million in paydowns.
This transaction was analyzed under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model (PCM) for projecting future default levels for the underlying portfolio. Fitch also analyzed the structure's sensitivity to the assets that are distressed, experiencing interest shortfalls, and those with near-term maturities. Additionally, a deterministic analysis was performed where the recovery estimate on the distressed collateral was modeled in accordance with the principal waterfall. An asset by asset analysis was then performed for the remaining assets to determine the collateral coverage for the remaining liabilities. Based on these analyses, the D notes pass at or above the assigned rating below and have been upgraded to reflect the likelihood of continued delevering over the next year.
For the class E notes, Fitch analyzed the class' sensitivity to the default of the distressed assets ('CCC' and below). Given the notes are undercollateralized, the class E notes have been affirmed at 'Csf', indicating that default is inevitable.
In addition to the sensitivities discussed above, further negative migration and defaults beyond those projected by SF PCM as well as increasing concentration in assets of a weaker credit quality could lead to downgrades. The senior notes are expected to continue to amortize as 33.4% of the collateral are senior positions in their respective underlying transactions. The Stable Outlook on the class D notes reflects Fitch's view that the transaction will continue to delever.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has upgraded the following class:
--$10,710,893 class D notes to 'Bsf' from 'CCCsf'; Assign Outlook Stable.
Fitch has affirmed the following class:
--$15,051,168 class E notes at 'Csf'.
The class A-1MM, B-1, B-2, C-1, and C-2 notes have all paid in full. The Preferred Equity is not rated.
TIAA 2003-1 is a static collateralized debt obligation (CDO) that closed on Nov. 6, 2003. The current portfolio consists of 10 bonds from nine obligors, of which 85.5% are commercial mortgage backed securities (CMBS) and 14.5% are structured finance CDOs.
Additional information is available at www.fitchratings.com.
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
Global Surveillance Criteria for Structured Finance CDOs (pub. 13 Jul 2015)
Dodd-Frank Rating Information Disclosure Form