Fitch Downgrades Four Classes of MSCI 2005-IQ9

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has downgraded four and affirmed 10 classes of Morgan Stanley Capital I Trust's commercial mortgage pass-through certificates, series 2005-IQ9. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The downgrades reflect the concentration of the pool and potential for future losses. The affirmations of the remaining Fitch rated classes reflect sufficient credit enhancement to the classes. Fitch modeled losses of 26.9% of the remaining pool; expected losses on the original pool balance total 5.8%, including $29.8 million (2% of the original pool balance) in realized losses to date. Currently there are no specially serviced loans; however there are six Fitch Loans of Concern (54.2% of the pool) that exhibit current and/or potential performance declines including the largest loan, the Central Mall Portfolio, which accounts for 51.6% of the pool.

As of the August 2016 distribution date, the pool's aggregate principal balance has been reduced by 85.5% to $222.4 million from $1.53 billion at issuance. There are currently 58 loans remaining in the pool with the top 10 loans accounting for 74.3%; the largest loan represents 51.6% of the pool. One loan is defeased (0.5%). Remaining maturities are concentrated in 2017 (19.7% of the pool), 2018 (55.2%), and 2019 (15.1%). Interest shortfalls are currently affecting classes K through P.

The Central Mall Portfolio is secured by three malls (1,752,673 square feet [sf]) located in tertiary markets (Lawton, OK, Texarkana, TX, and Port Arthur, TX); anchor tenants in each mall include Sears, JC Penney, and Dillard's. The loan had previously transferred to special servicing in October 2014 for imminent maturity default after the borrower expressed concerns over its ability to refinance the portfolio, prior to its December 2014 maturity date. While in special servicing the loan maturity date was extended three times: first to June 2015, second to June 2016 and third to June 2018, with an option to extend to June 2019. Pursuant to the third modification agreement the borrower will make interest-only payments until February 2017 and will resume making principal and interest payments in March 2017. The loan returned to the master servicer in August 2016. As of year-end (YE) 2015 reported portfolio occupancy and NOI DSCR was 92% and 1.28x, respectively, but as of May 2016 portfolio-wide sales are on a declining trend.

RATING SENSITIVITIES

The ratings of classes A-J and class B are expected to remain stable as credit enhancement is sufficient relative to the ratings and classes will pay down through loan payoffs and amortization. Future upgrades to class B are unlikely due to the possibility of interest shortfalls to occur as the pool becomes more concentrated. Additionally, concerns remain with the largest loan. Fitch applied stresses to the Central Mall Portfolio, which indicated that classes B and below are sensitive to fluctuations in loan performance. Rating Outlooks on classes C, D, E, and F are Negative as they may be subject to future rating actions should realized losses, particularly on the Central Mall Portfolio, be greater than expected.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

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

Fitch has downgraded the following classes and revised Rating Outlooks as indicated:

--$26.8 million class D to 'BBBsf' from 'BBB+sf', Outlook to Negative from Stable;

--$15.3 million class E to 'BBsf' from 'BBBsf', Outlook Negative;

--$15.3 million class F to 'Bsf' from 'BBsf', Outlook Negative;

--$11.5 million class G to 'CCCsf', RE 0% from 'Bsf'.

Fitch has affirmed the following classes and revised Rating Outlooks as indicated:

--$76 million class A-J at 'AAAsf', Outlook Stable;

--$32.6 million class B at 'Asf', Outlook Stable;

--$11.5 million class C at 'Asf', Outlook to Negative from Stable;

--$17.2 million class H at 'CCCsf', RE 0%;

--$5.7 million class J 'CCsf', RE 0%;

--$7.7 million class K 'Csf', RE 0%;

--$2.8 million class L at 'Dsf', RE 0%;

--$0 class M at 'Dsf', RE 0%;

--$0 class N at 'Dsf', RE 0%;

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

The class A-1, A-1A, A-2, A-3, A-4, A-AB and A-5 certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the ratings on the interest-only class X-1, X-2 and X-Y certificates.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)https://www.fitchratings.com/site/re/884963

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)https://www.fitchratings.com/site/re/882401

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)https://www.fitchratings.com/site/re/883130

U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)https://www.fitchratings.com/site/re/873395

Additional Disclosures

Dodd-Frank Rating Information Disclosure Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1010894

Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1010894

Endorsement Policyhttps://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160826005777/en/

Fitch Ratings
Primary Analyst
Associate Director
Martin Nunnally, +1-212-908-0871
or
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Managing Director
Mary MacNeill, +1-212-908-0785
or
Media Relations
Sandro Scenga, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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