Moody's af­firms CMBS Class of DLJ 1997

The Pak Banker - - COMPANIES/BOSS -

Global rat­ing agency Moody's has af­firmed the rat­ing of one class of DLJ Com­mer­cial Mort­gage Trust, Com­mer­cial Mort­gage Pass-Through Cer­tifi­cates, Se­ries 1997-CF2.

The af­fir­ma­tion of the IO Class, Class S, is based on the credit per­for­mance of its ref­er­ence classes.

Moody's rat­ing ac­tion re­flects a base ex­pected loss of 1.8% of the cur­rent bal­ance. Moody's base ex­pected loss plus re­al­ized losses is now 5.0% of the orig­i­nal pooled bal­ance. The per­for­mance ex­pec­ta­tions for a given vari­able in­di­cate Moody's for­ward-look­ing view of the likely range of per­for­mance over the medium term. From time to time, Moody's may, if war­ranted, change th­ese ex­pec­ta­tions. Per­for­mance that falls out­side the given range may in­di­cate that the col­lat­eral's credit qual­ity is stronger or weaker than Moody's had an­tic­i­pated when the re­lated se­cu­ri­ties rat­ings were is­sued. Even so, a de­vi­a­tion from the ex­pected range will not nec­es­sar­ily re­sult in a rat­ing ac­tion nor does per­for­mance within ex­pec­ta­tions pre­clude such ac­tions. The de­ci­sion to take (or not take) a rat­ing ac­tion is de­pen­dent on an as­sess­ment of a range of fac­tors in­clud­ing, but not ex­clu­sively, the per­for­mance met­rics.

Pri­mary sources of as­sump­tion un­cer­tainty are the ex­tent of growth in the cur­rent macroe­co­nomic en­vi­ron­ment given the weak pace of re­cov­ery and com­mer­cial real es­tate prop­erty mar­kets. Com­mer­cial real es­tate prop­erty val­ues are con­tin­u­ing to move in a mod­estly pos­i­tive di­rec­tion along with a rise in in­vest­ment ac­tiv­ity and sta­bi­liza­tion in core prop­erty type per­for­mance. Lim­ited new con­struc­tion and mod­er­ate job growth have aided this im­prove­ment. How­ever, a con­sis­tent up­ward trend will not be ev­i­dent un­til the vol­ume of in­vest­ment ac­tiv­ity steadily in­creases for a sig­nif­i­cant pe­riod, non-per­form­ing prop­er­ties are cleared from the pipe­line, and fears of a Euro area re­ces­sion are abated.

The ho­tel sec­tor is per­form­ing strongly with nine straight quar­ters of growth and the mul­ti­fam­ily sec­tor con­tin­ues to show in­creases in de­mand with a grow­ing renter base and de­clin­ing home own­er­ship. Re­cov­ery in the of­fice sec­tor con­tin­ues at a mea­sured pace with min­i­mal ad­di­tions to sup­ply. How­ever, of­fice de­mand is closely tied to em­ploy­ment, where growth re­mains slow and em­ploy­ers are con­sid­er­ing de­creases in the leased space per em­ployee. Also, pri­mary ur­ban mar­kets are out­per­form­ing sec­ondary sub­ur­ban mar­kets. Per­for­mance in the re­tail sec­tor con­tin­ues to be mixed with re­tail rents de­clin­ing for the past four years, weak de­mand for new space and lack­lus­ter sales driven by in­ter­net sales growth. Across all prop­erty sec­tors, the avail­abil­ity of debt cap­i­tal con­tin­ues to im­prove with ro­bust se­cu­ri­ti­za­tion ac­tiv­ity of com­mer­cial real es­tate loans sup­ported by a mon­e­tary pol­icy of low in­ter­est rates.

Moody's cen­tral global macroe­co­nomic sce­nario calls for US GDP growth for 2013 that is likely to re­main close to 2% as the greater im­pe­tus from the US pri­vate sec­tor is likely to broadly off­set the drag on ac­tiv­ity from more re­stric­tive fis­cal pol­icy. There­after, we ex­pect the US econ­omy to ex­pand at a some­what faster pace than is likely this year, closer to its long-run av­er­age pace of growth. Risks to our fore­casts re­main skewed to the down­side de­spite re­cent pos­i­tive de­vel­op­ments. Moody's be­lieves that the three most im­me­di­ate risks are: i) the risk of a deeper than cur­rently ex­pected re­ces­sion in the euro area ac­com­pa­nied by deeper credit con­trac­tion, po­ten­tially trig­gered by a fur­ther in­ten­si­fi­ca­tion of the sov­er­eign debt cri­sis; ii) slower-than-ex­pected re­cov­ery in ma­jor emerg­ing mar­kets fol­low­ing the re­cent slow­down; and iii) an escalation of geopo­lit­i­cal ten­sions, re­sult­ing in ad­verse eco­nomic de­vel­op­ments.

Moody's re­view in­cor­po­rated the use of the excel-based CMBS Con­duit Model v 2.62 which is used for both con­duit and fu­sion trans­ac­tions. Con­duit model re­sults at the Aa2 (sf) level are driven by prop­erty type, Moody's ac­tual and stressed DSCR, and Moody's prop­erty qual­ity grade (which re­flects the cap­i­tal­iza­tion rate used by Moody's to es­ti­mate Moody's value). Con­duit model re­sults at the B2 (sf) level are driven by a pay down anal­y­sis based on the in­di­vid­ual loan level Moody's LTV ra­tio. Moody's Herfind­ahl score (Herf), a mea­sure of loan level di­ver­sity, is a pri­mary de­ter­mi­nant of pool level di­ver­sity and has a greater im­pact on se­nior cer­tifi­cates. Other con­cen­tra­tions and cor­re­la­tions may be con­sid­ered in our anal­y­sis.

Based on the model pooled credit en­hance­ment lev­els at Aa2 (sf) and B2 (sf), the re­main­ing con­duit classes are ei­ther in­ter­po­lated be­tween th­ese two data points or de­ter­mined based on a mul­ti­ple or ra­tio of ei­ther of th­ese two data points. For fu­sion deals, the credit en­hance­ment for loans with in­vest­ment-grade credit as­sess­ments is melded with the con­duit model credit en­hance­ment into an over­all model re­sult. Fu­sion loan credit en­hance­ment is based on the credit as­sess­ment of the loan which cor­re­sponds to a range of credit en­hance­ment lev­els.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.