Fitch Takes Various Actions on WBCMT 2005-C17

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has upgraded two classes, downgraded two distressed classes and affirmed two classes of Wachovia Bank Commercial Mortgage Trust commercial mortgage pass-through certificates series 2005-C17. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrades reflect the increase in credit enhancement in the last 12 months as 155 loans have repaid in full. The repayments contributed to the paydown of classes A-1A, A-4, A-J, B, C, D and E, all of which were outstanding at Fitch's last rating action. The downgrades reflect higher certainty of losses given the high concentration of specially serviced loans.

Fitch modelled losses of 26.1% of the remaining pool; expected losses on the original pool balance total 3.3%, including $62.6 million (2.3% of the original pool balance) in realized losses to date. Fitch has designated nine loans (65.1% of the current pool balance) as Fitch Loans of Concern, which includes six specially serviced assets (53.2% of the current pool balance), and two that were previously modified.

As of the June 2015 remittance, the pool has experienced 96.2% of collateral reduction since issuance and has an aggregate collateral balance of $103 million, down from an issuance pool balance of $2.7 billion. Of the outstanding loans, those that were scheduled to mature in 2015 and prior are either in special servicing or have anticipated repayment dates (ARD) that have passed. The remaining eight loans, representing 20% of the pool, are scheduled to mature between October 2016 and January 2027. Loans representing 11.2% of the pool are subject to single-tenant exposure and 99.4% of the pool is secured by retail properties. In the last year, four loans have been liquidated from the trust and five loans have transferred to special servicing. The new transfers include four loans (41.6% of the current pool balance) which are currently in the top 15.

The largest contributor to expected losses is also the largest loan in the pool. The loan which was scheduled to mature in March 2015 transferred to special servicing in September 2014. It is secured by a mixed use (office/retail) property in Toledo, Ohio. Major tenants include Burlington Coat Factory (35.9% of the NRA), Athena Career Academy (15.2% of the NRA) and Michael's (10.8% of the NRA). Vacant units include a 25,000 sf box that is seasonally occupied by a Halloween store, and a large outparcel that was previously occupied by Pier 1 Imports. The borrower's offers for a discounted payoff have been rejected and the loan is reportedly being dual tracked for note sale and foreclosure. A September 2014 appraisal valued the property below the debt and the master servicer applied an appraisal reduction in the amount of $4.7 million with the April 2015 remittance. However, the appraisal subordinate entitlement reduction (ASER) has not yet been applied.

The second largest contributor to expected losses is the third largest loan, which is not currently in special servicing but was modified and transferred back to the master servicer in June 2014. The loan is secured by an enclosed regional mall in Burlington, Iowa near the Illinois and Missouri borders. The mall is anchored by Younkers (19.7% of the NRA), Marshall's (7.3% of the NRA) and CEC Theatres (8.5% of the NRA). Two anchor spaces, previously occupied by J.C. Penney and McGregor's Furniture, are currently vacant. McGregor's Furniture's lease expired in 2014, and although J.C. Penney continues to pay rent on its space (27.1% of the NRA) which is leased through March 2017, it closed its store here in April 2015 and the unit is now dark. There is moderate tenant roll in the next 12 months, and many of the inline tenants are considered temporary, according to the borrower's rent roll. Terms of the loan's 2014 modification included an extension of the maturity date from January 2015 to January 2018, a conversion of the amortization schedule to IO payments, and a reduction in the accrued interest rate. The original trust loan was also bifurcated into an A/B note structure, with a $10.5 million A-note and a $6.4 million B-note. The most recent appraisal is dated July 2013 and valued the property below the combined A/B note debt.

RATING SENSITIVITIES

The Stable Outlooks for classes F and G are based on the expectation that the ratings will not be subject to further rating changes. Downgrades are unlikely given the expectation that credit enhancement will continue to increase due to paydown. However, upgrades may be unlikely due to the high concentration of loans in special servicing and the third largest loan being collateralized by a previously modified, weakly performing mall located in a tertiary market. Additional downgrades to the distressed classes are possible as losses are realized.

Fitch upgrades the following classes:

--$9.9 million class F to 'BBBsf' from 'BBsf', Outlook Stable;

--$30.6 million class G to 'BBsf' from 'Bsf', Outlook Stable.

Fitch downgrades the following classes and assigns Recovery Estimates (RE):

--$6.8 million class J to 'CCsf' from 'CCCsf', RE 70%;

--$10.2 million class K to 'Csf' from 'CCsf', RE 0%;

Fitch affirms the following classes and assigns RE:

--$37.5 million class H at 'CCCsf', RE 100%;

--$8.9 million class L at 'Dsf', RE 0%.

The class A-1, A-2, A-3, A-4, A-1A, A-PB, A-J, B, C, D and E certificates have paid in full. Fitch does not rate the class P certificate. Fitch previously withdrew the ratings on the interest-only class X-P and X-C certificates

DUE DILIGENCE USAGE

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

Additional information is available at www.fitchratings.com.

Applicable Criteria

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria (pub. 10 Dec 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608

Additional Disclosures

Dodd-Frank Rating Information Disclosure Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=988069

Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=988069

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/20150716006538/en/

Fitch Ratings
Primary Analyst:
R. Brook Sutherland, +1-312-606-2346
Senior Director
Fitch Ratings, Inc.
70 West Madison
Chicago, IL 60602
or
Committee Chairperson:
Mary MacNeill, +1-212-908-0785
Managing Director
or
Sendhil Selvaraj, +44 (0) 207 682 7218
Media Relations
[email protected]

Source: Fitch Ratings

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