News Column

Fitch Takes Various Actions on MSCI 2007-XLF

May 20, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has downgraded four classes and affirmed nine classes of Morgan Stanley Capital I Trust series 2007-XLF (MSCI 2007-XLF). A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The portfolio is extremely concentrated with only three loans remaining. The downgrades to the pooled classes are primarily due to the continuing poor performance of the two specially serviced loans, the HRO Hotel Portfolio loan (43.6% of the pool) and the former Le Meridien Cancun (7%).

The HRO Hotel Portfolio loan is secured by five full-service hotels (1,910 keys) located in Stamford, CT; Sonoma, CA; Norfolk, VA; Atlanta, GA; and Southfield, MI. The hotels are currently under the Marriott, Hilton, Sheraton, and Westin flags. However, two of the hotels (the Sheraton Norfolk and the Westin Southfield) have expiring franchise agreements and are at risk of losing their flags. Performance expectations at origination have not been met and the overall valuation of the portfolio has declined. The portfolio matured without repayment at its final extended maturity of October 2013. In January 2014, the loan was further extended through October 2014.

The other specially serviced loan is secured by the former Le MeridienCancun, now known as the Sandos Cancun Luxury Experience Resort, an all-inclusive hotel containing 213 rooms. The property has struggled over the past few years and the servicer-reported YE 2013 normalized net cash flow (NCF) remained negative. Occupancy for 2013 was reported at 50.7%. The loan was recently extended through its final extended maturity date of December 2014.

The largest loan in the transaction is the Crowne Plaza Times Square (44.9% of the pool). The New York City-located hotel contains 795-rooms, and approximately 226,000 square feet (sf) of office and retail space. YE 2010 and 2011 performance significantly improved from YE 2009, which had offline rooms. However, cash flow has declined over the last two years primarily due to an increased ground lease payment, the loss of some commercial revenue, and new franchise fee obligations. The September 2013 servicer-reported NCF debt service coverage ratio remained relatively high at 2.37x. The loan was recently extended through December 2014, and is currently with the Master Servicer.

RATING SENSITIVITIES

The Rating Outlooks for classes B through E are expected to remain Stable. Class F and the distressed classes could be subject to further downgrades should the underlying assets' performance continue to decline and/or should additional losses be realized.

Fitch downgrades the following classes as indicated:

--$25.2 million class D to 'BBBsf' from 'Asf'; Outlook Stable;

--$27.4 million class E to 'BBsf' from 'Asf'; Outlook Stable;

--$26.3 million class F to 'BBsf' from 'BBBsf'; Outlook to Negative from Stable;

--$26.6 million class G to 'CCCsf' from 'BBsf'; RE 35%;

Fitch affirms the following classes as indicated:

--$74.5 million class A-2 at 'AAAsf'; Outlook Negative;

--$41.2 million class B at 'Asf'; Outlook Stable;

--$41.2 million class C at 'Asf'; Outlook Stable;

--$13.5 million class H at 'CCCsf'; RE 0%;

--$10.4million class J at 'Dsf'; RE 0%;

--$0 class K at 'Dsf'; RE 0%;

--$0 class L at 'Dsf'; RE 0%;

--$5.2 million class M-HRO at 'CCCsf'; RE 0%;

--$8 million class N-HRO at 'Dsf'; RE 0%.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

'--'Global Structured Finance Rating Criteria' May 20, 2014;

--'Criteria for Rating Caps in Global Structured Finance Transactions' June 12, 2013;

--'Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions' Nov. 25, 2013.

Applicable Criteria and Related Research:

Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723059

Criteria for Rating Caps in Global Structured Finance Transactions' Effective 9 Aug 2011 to 2 Aug 2012

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648672

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=830987

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst

Stacey McGovern

Director

+1-212-908-0722

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Committee Chairperson

Mary MacNeill

Managing Director

+1-212-908-0785

or

Media Relations

Sandro Scenga, +1-212-908-0278

sandro.scenga@fitchratings.com


Source: Fitch Ratings


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