Fitch Upgrades 3 Classes of LB-UBS 2002-C7
KEY RATING DRIVERS
The upgrades and affirmations are the result of continued paydown and the resolution of three specially serviced real estate owned (REO) assets since Fitch's last rating action despite the pool's concentration as only seven of the original 115 loans remain.
As of the February 2015 distribution date, the pool's aggregate principal balance has been reduced by 97.8% to \$25.7 million from \$1.19 billion at issuance. Per the servicer reporting, two loans (27.6% of the pool) are defeased, including the second largest loan in the pool (24.4%) which has an anticipated repayment date (ARD) of 2017 and a final maturity date of 2032. Interest shortfalls are currently affecting classes T through U. Fitch has designated one Fitch Loan of Concern (31%), the largest asset in the pool and the lone specially serviced REO asset.
The REO asset is a 95,527 square foot (sf) retail center located in Houston, TX. The loan was transferred to special servicing in October 2010 and foreclosure was completed in June 2011. As of year-end 2014, the property was 79% occupied after a new tenant took occupancy in May 2014. Fitch anticipates losses upon the liquidation of the asset based on recent property valuations obtained by the servicer.
RATING SENSITIVITIES
The Rating Outlook on class N remains Stable. Although Fitch expects the class to be paid in full, no further upgrades are warranted at this time given that the class has experienced interest shortfalls previously, as well as the vulnerability to potential interest shortfalls in the future. Fitch will not assign or maintain 'AAAsf' or 'AAsf' ratings for notes that it believes have a high level of vulnerability to interest shortfalls or deferrals, even if permitted under the terms of the documents (see 'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions', dated May 28, 2014, for more details). Downgrades to the pool could occur should the specially serviced REO asset take losses greater than expected or performing loans within the pool are transferred to the special servicer.
Fitch upgrades the following classes as indicated:
--\$2.8 million class N to 'Asf' from 'BBBsf'; Outlook Stable;
--\$8.9 million class P to 'BBsf' from 'Bsf'; Outlook Stable;
--\$3 million class S to 'CCsf' from 'Csf'; RE 100%.
Fitch affirms the following classes as indicated:
--\$4.5 million class Q at 'CCCsf'; RE 100%;
--\$6.5 million class T at 'Dsf'; RE 25%.
The class A-1, A-2, A-3, A-4, A-1b, B, C, D, E, F, G, H, J, K, L and M certificates have paid in full. Fitch does not rate the class U certificates. Fitch previously withdrew the ratings on the interest-only class X-CL and X-CP certificates.
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