News Column

Fitch Upgrades 1 Class of LBCMT 1998-C1

June 16, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has upgraded one class and affirmed two classes of Lehman Brothers (LB) Commercial Mortgage Trust's commercial mortgage pass-through certificates, series 1998-C1. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrade to class J reflects the stable performance of the remaining pool, continued expected paydown (67% of the pool is fully amortizing), defeased collateral, and increased credit enhancement. Upgrades were limited to 'BBsf' given the pool's high concentration with only 20 loans remaining; the top three loans represent 39.5% of the pool.

As of the May 2014 distribution date, the pool's aggregate principal balance has been reduced by 97.2% to $48.8 million from $1.73 billion at issuance. Fitch modeled losses of 6.9% of the remaining pool; expected losses on the original pool balance total 3.3%, including $53.3 million (3.1% of the original pool balance) in realized losses to date. Fitch has designated six loans (32.8%) as Fitch Loans of Concern, which includes one specially serviced asset (7.4%), five loans are defeased (12.1%). Interest shortfalls are currently affecting the distressed classes K through M.

The largest loan in the pool is a multifamily property located in Largo, FL (17.8%). The property caters to residents 55 and over. The most recent DSCR and occupancy as of YE 2013 was reported at 1.89x and 95%. The second largest loan is an industrial park in Blauvelt, NY (9.4%); Fitch considers this a Loan of Concern as the property has not reported financials and occupancy since 2011.

The largest contributor to expected losses is a specially-serviced loan (7.4% of the pool), which is secured by a 194-bed senior housing facility in Long Beach, NY. The loan transferred to special servicing in August 2009 due to monetary default. According to the servicer, negotiations between the borrower and a new third party operator to manage the property are ongoing. The Servicer could not confirm that necessary post Superstorm Sandy repair work was completed by the Borrower. Further, occupancy remains low at 35% as of February 2014. The servicer's legal counsel is continuing to proceed with legal remedies.

RATING SENSITIVITY

The Rating Outlook on class J remains Stable due to the overall low leverage and continued amortization of the remaining loans in the pool. Further upgrades to class J may be limited due to the highly concentrated nature of the pool and secondary market location of the collateral.

Fitch upgrades the following class:

--$37.3 million class J to 'BBsf' from 'Bsf'; Outlook Stable.

Fitch affirms the following classes:

--$11.5 million class K at 'Dsf'; RE 35%;

--$0 class L at 'Dsf', RE 0%.

The class A-1, A-2, A-3, B, C, D, E, F, G and H certificates have paid in full. Fitch does not rate the class M certificate. Fitch previously withdrew the rating on the interest-only class IO certificate.

Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 11, 2013 report, 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is available at 'www.fitchratings.com' under the following headers:

Structured Finance >> CMBS >> Criteria Reports

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

Applicable Criteria and Related Research:

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

--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013);

--'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions' (May 28, 2014).

Applicable Criteria and Related Research:

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748781

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724961

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=834841

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

Media Relations

Sandro Scenga, New York

Tel: +1 212-908-0278

Email: sandro.scenga@fitchratings.com

or

Primary Analyst

Tiffany Pierce

Associate Director

+1-212-908-9107

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Committee Chairperson

Mary MacNeill

Managing Director

+1-212-908-0785



Source: Fitch Ratings


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