OREANDA-NEWS. February 29, 2016. Fitch Ratings has downgraded four and affirmed 11 classes of ML-CFC Commercial Mortgage Trust, series 2006-1. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The downgrades are primarily due to the poor quality of the remaining collateral as a result of adverse selection of the pool. The transaction has experienced significant paydown since August 2015 as performing loans paid off at maturity. As such, the transaction has become highly concentrated with only 29 loans remaining, 21 of which (84.9% of the remaining pool) have been identified as Fitch loans of concern either due to performance issues or maturity default risks. Fitch has modeled total losses of 9.5% on the original pool balance, including realized losses of \\$96.7 million (4.5% of the original pool balance).

As of the February 2016 distribution date, the pool's aggregate principal balance has been reduced by 90.4% to \\$204.8 million from \\$2.14 billion at issuance and 82.1% from \\$1.14 billion at last review. Fifteen loans (65.3%) are currently in special servicing, including 10 (56.9%) of the top 15 loans. Interest shortfalls totaling \\$10.9 million are currently affecting class B and below.

The largest contributor to expected losses is the largest loan in the pool (18.1%) which is secured by a 394,578 square foot (sf) office property located in Hyattsville, MD. The property is 99% occupied by U.S. Department of Treasury (GSA) with lease expiring in April 2016. The other tenant (1%) is a cafeteria whose lease terms are reliant on the GSA lease. The loan was most recently transferred to special servicing in November 2015 due to imminent maturity default. The loan matured in December 2015 and was not paid off. The borrower has had difficulty obtaining refinance as the GSA tenant intends to vacate by May 2017 and relocate to a nearby property. The Borrower and the GSA tenant are currently in negotiations for a one year lease extension. The special servicer is pursuing foreclosure. The as-is value of the property based on full vacancy indicates significant losses on the loan.

The second largest contributor to expected losses is the second largest loan in the pool (10.9%) which is secured by a 170,796 sf, Class-B, retail center located in Reno, NV. The property became a real estate owned asset (REO) in June 2015 due to foreclosure. The property is shadow-anchored by Costco Wholesale (not part of the collateral). Currently the property is only 55% occupied, compared to 95.5% at issuance. The servicer is working to stabilize the property through leasing up activities.

The third largest contributor to expected losses is the fourth largest loan in the pool (5.8%) which is secured by a 130,000 sf retail center located in Norcross, GA. The property became a REO asset in May 2014 due to foreclosure. The property's anchor is grocer, Kroger (48% of the property with lease expiring in 2022). The property occupancy rate has improved significantly since becoming REO. The property is currently 94% occupied compared to 78% at June 2014. The special servicer is looking to renew additional leases and will subsequently determine the timing of a disposition.

RATING SENSITIVITIES

The Negative Outlooks indicate that future downgrades are possible should more loans transfer to special servicing, and/or losses on the specially serviced assets exceed expectations. In addition, the distressed classes (rated below 'B') may be subject to further rating actions as losses are realized.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

Fitch downgrades the following classes as indicated:

--\\$24.9 million class AJ to 'BBsf' from 'BBB-sf', Outlook Negative;
--\\$30.3 million class AN-FL to 'BBsf' from 'BBB-sf', Outlook Negative;
--\\$21.4 million class C to 'CCsf' from 'CCCsf', RE0%;
--\\$29.5 million class D to 'Csf' from 'CCsf', RE0%;

Fitch affirms the following classes as indicated:

--\\$50.9 million class B at 'CCCsf', RE50%;
--\\$16.1 million class E at 'Csf', RE0%.
--\\$24.1 million class F at 'Csf', RE0%;
--\\$7.7 million class G at 'Dsf', RE0%;
--\\$0 class H at 'Dsf', RE0%;
--\\$0 class J at 'Dsf', RE0%;
--\\$0 class K at 'Dsf', RE0%;
--\\$0 class L at 'Dsf', RE0%;
--\\$0 class M at 'Dsf', RE0%;
--\\$0 class N at 'Dsf', RE0%;
--\\$0 class P at 'Dsf', RE0%.

The class A-1, A-2, A-3, A-3FL, A-3B, A-SB, A-4, A-1A, and AM certificates have paid in full. Fitch does not rate the class Q certificates. Fitch previously withdrew the rating on the interest-only class X certificates.