Fitch Takes Various Actions on ML-CFC 2007-5
KEY RATING DRIVERS
The upgrades reflect recent pay down from the Peter Cooper Village/Stuyvesant Town (PCV/ST) sale. The downgrade to the already distressed class is due to realized losses from the disposition of other specially serviced assets. Fitch modeled losses of 10.7% of the remaining pool; expected losses on the original pool balance total 13.9%, including $363 million (8.2% of the original pool balance) in realized losses to date. Fitch has designated 61 loans (23.5% of the pool) as Fitch Loans of Concern, which includes 11 specially serviced assets (8% of the pool).
PCV/ST was formerly the largest loan in the transaction (previously 24.2% of the pool). The recent sale of PCV/ST resulted in a full recovery of the transaction's former $800 million portion of the $3 billion loan and additional 'gain on sale' proceeds of $64.1 million were used to pay back interest shortfalls to classes AJ through D.
As of the January 2016 distribution date, the pool's aggregate principal balance has been reduced by 46.2% to $2.39 billion from $4.44 billion at issuance. Per the servicer reporting, 20 loans (14.5% of the pool) are defeased. There are currently 225 loans remaining in the pool with the top 10 loans accounting for 30.3%; the largest loan represents 7.1% of the pool and is defeased. Remaining maturities are concentrated in 4Q16 (25.8% of the pool) and 1Q17 (68.7%). Interest shortfalls are currently affecting classes E through Q.
The largest contributor to expected losses is the specially serviced HSA Memphis Industrial Portfolio loan (2.6% of the pool). At issuance the loan was secured by 15 industrial/flex/office buildings (1,586,544 sf) located in Memphis, TN. The loan transferred to special servicing in September 2010 due to imminent monetary default and foreclosure was held in October 2011. One of the properties was sold in late 2013, five of the properties were sold in early 2014, and four of the buildings were sold in late 2014 leaving five properties as the remaining collateral. Proceeds from the previous property sales were applied to servicing advances and delinquent P&I payments. The special servicer continues to lease/manage the assets in order to stabilize the properties. The remaining five properties are approximately 19% occupied per the November 2015 rent rolls. Limited to no recovery is anticipated on the outstanding principal balance.
RATING SENSITIVITIES
Rating Outlooks on classes A-4, A-4FL, and A-1A are expected to remain Stable as it is anticipated that credit enhancement will increase due to scheduled pay down from amortization and loan pay-offs at maturity. Despite high credit enhancement, further upgrades on classes AM and AM-FL are not anticipated due to adverse selection. The distressed classes are subject to downgrades should losses increase on the remaining specially serviced loans and Fitch Loans of Concern.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has removed from Rating Watch Positive and upgraded the following classes:
--$341.7 million class AM to 'Asf' from 'BBsf', Outlook Stable;
--$100 million class AM-FL to 'Asf' from 'BBsf', Outlook Stable.
Fitch has downgraded the following class:
--$23.4 million class D to 'Dsf' from 'Csf', RE 0%;
Fitch has affirmed the following classes:
--$951.5 million class A-4 at 'AAAsf', Outlook Stable;
--$213.8 million class A-4FL at 'AAAsf', Outlook Stable;
--$264.7 billion class A-1A at 'AAAsf', Outlook Stable;
--$211.5 million class AJ at 'CCCsf', RE 80%;
--$175 million class AJ-FL at 'CCCsf', RE 80%;
--$77.3 million class B at 'Csf', RE 0%;
--$33.1 million class C at 'Csf', RE 0%;
--$0 class E at 'Dsf', RE 0%;
--$0 class F at 'Dsf', RE 0%;
--$0 class G at 'Dsf', RE 0%;
--$0 class H at 'Dsf', RE 0%;
--$0 class J at 'Dsf', RE 0%;
--$0 class K at 'Dsf', RE 0%;
--$0 class L at 'Dsf', RE 0%;
--$0 class N at 'Dsf', RE 0%.
The class A-1, A-2, A-2FL, A-2FX, A-3, and A-SB certificates have paid in full. Fitch does not rate the class M, P and Q certificates. Fitch previously withdrew the rating on the interest-only class X certificates.
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