Fitch Downgrades One Distressed Class of MLMT 2005-CIP1

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has downgraded one class and affirmed 15 classes of Merrill Lynch Mortgage Trust (MLMT) commercial mortgage pass-through certificates series 2005-CIP1. A detailed list of rating actions follows at the end of this press release. The downgrade reflects further certainty regarding losses to loans in special servicing.

KEY RATING DRIVERS

Fitch modeled losses of 10% of the remaining pool; expected losses on the original pool balance total 10.9%, including $134.9 million (6.6% of the original pool balance) in realized losses to date. Fitch has designated 25 loans (25.9%) as Fitch Loans of Concern, which includes five specially serviced assets (9.3%).

As of the March 2014 distribution date, the pool's aggregate principal balance has been reduced by 58.4% to $855.7 million from $2.06 billion at issuance. Per the servicer reporting, 16 loans (14.5% of the pool) are defeased. There is significant upcoming maturity with 80% of the remaining pool balance maturing in 2015.

The corrected March 2015 remittance shows interest shortfalls affecting classes B through Q. Prior to the correction, a workout fee caused shortfall to reach up to the 'AAA' rated AM class. The servicer, when notified of the shortfall, immediately advanced funds to have the interest payments reinstated on the investment grade rated AM and AJ classes. The advance will be recovered from the below investment grade rated class's interest distributions in the coming months. The 1% workout fee was associated with the Glenbrook Square Mall which was modified and extended as part of the GGP bankruptcy. The loan paid off this month.

The largest contributor to expected losses is the specially-serviced Residence Portfolio 1 (5.1% of the pool), which consists of a four property, previously Residence Inn flagged hotel portfolio located in TX, FL and NY. The loan was transferred SS due to imminent default as a result of the Marriott management agreements expiring in March 2014. Lender and borrower agreed to a consensual foreclosure and all four assets are now REO. The properties have been reflagged as Wyndham and the special servicer is exploring disposition options.

The next largest contributor to expected losses is the Morgan RV Portfolio loan (4%), which is secured by three manufactured housing recreational vehicle parks with two located in upstate New York and one located in New Hampshire. The properties have struggled since issuance. The servicer has reported that the subject properties experience seasonal peaks and are out of season until April or May each year. The combined servicer reported year to date (YTD) September 2014 and year end (YE) 2013 debt service coverage ratio (DSCR) was 0.65x and 0.61x, respectively. The servicer reported occupancy at 75% as of September 2014.

The third largest contributor to expected losses (1.5%) is secured by a limited service hotel in Yardley, PA. The borrower changed management companies without lender consent and terminated the clearing account without lenders knowledge. The loan is in monetary default and the special servicer is pursuing foreclosure.

RATING SENSITIVITIES

Rating Outlooks on classes A-4 through B remain Stable due to increasing credit enhancement and paydown. No rating changes are expected to these classes and it is likely that classes A-4 and AM will be paid in full by year end. The Rating Outlook on class C is negative due to potential negative rating migration should loans not refinance at maturity and transfer to special servicing.

Fitch downgrades the following classes as indicated:

--$25.7 million class E to 'Csf' from 'CCsf'; RE 0%.

Fitch affirms the following classes but assigns or revises Rating Outlooks as indicated:

--$18 million class C at 'B-sf'; Outlook to Negative from Stable.

Fitch affirms the following classes as indicated:

--$373.4 million class A-4 at 'AAAsf'; Outlook Stable;

--$205.7 million class AM at 'AAAsf'; Outlook Stable;

--$138.8 million class AJ at 'BBBsf'; Outlook Stable;

--$43.7 million class B at 'Bsf'; Outlook Stable;

--$38.6 million class D at 'CCCsf'; RE 40%;

--$11.8 million class F at 'Dsf'; RE 0%;

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

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

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

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

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

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

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

--$0 class P at 'Dsf'; RE 0%.

The class A-1, A-2, A-3A, A-3B and A-SB certificates have paid in full. Fitch does not rate the class Q certificates. Fitch previously withdrew the ratings on the interest-only class XC and XP certificates.

Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 10, 2014 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 then CMBS then Criteria Reports

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

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (Aug. 2014);

--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

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

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=981909

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
R. Brook Sutherland
Director
+1 312-606-2346
Fitch Ratings, Inc.
70 West Madison
Chicago, IL 60602
or
Committee Chairperson
Christopher Bushart
Senior Director
+1 212-908-0606
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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