Fitch Upgrades BSCMS 2003-TOP12

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has upgraded all classes of Bear Stearns Commercial Mortgage Securities Trust series 2003-TOP12 (BSCMS 2003-TOP12). A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrades follow significant deleveraging of the collateral, increased credit support to the outstanding bonds, as well as a reduction in expected losses. In the last 12 months, two loans repaid from the trust, including one loan which was a previous contributor to Fitch's projected loss estimate. The senior certificate, class H, is likely to be repaid in full within the next six months based on monthly scheduled distributions, after which class J would be nearly fully covered by defeasance. The most junior Fitch-rated class has 28.9% credit enhancement.

Better than Expected Recovery: The fifth largest loan at the last review successfully refinanced and repaid in full in June 2016. This loan was the largest contributor to Fitch's modeled loss at the last review. Its payoff has significantly reduced Fitch's overall loss projection for the pool going forward.

Low Leverage: The pool has experienced 97.5% collateral reduction since issuance and continues to amortize. Loans representing 54.2% of the pool are fully amortizing. The Fitch stressed weighted-average LTV is 43.5%, and the current weighted-average debt yield for the pool is 50.7%. There are four fully defeased assets, representing 18.8% of the pool.

Expected Refinance Outlook: One defeased loan (12.3% of the pool) is scheduled to mature in 2017 and an additional 61.7% of the pool will mature in 2018. The collateral remaining beyond 2018, should no defaults occur, will be contained to the unrated portion of the capital stack.

Concentration: The pool is heavily concentrated, with the largest loan representing 39.1% of the pool. Additionally, 17.2% of the pool is secured by single-tenant properties. While this concentration poses a significant binary risk to the trust, all of these loans have strong mitigating factors, such as credit tenants, leases extending well beyond maturity and fully amortizing debt, and are considered healthy candidates for refinance.

The largest loan in the pool is Eagle Plaza Shopping Center, which is a grocery-anchored power center located 13 miles east of Philadelphia in Voorhees, New Jersey. The grocery anchor is Acme Supermarket, which occupies 29.3% of the NRA through February 2022. Other major tenants include Ross Dress for Less (10.9% of the NRA through January 2023), Office Depot (9.8% of the NRA through December 2019) and Wine Warehouse (5% of the NRA through December 2024). Acme Supermarkets recently extended its lease an additional five years ahead of its February 2017 expiration, and Office Depot extended its lease an additional three years ahead of its December 2016 expiration. This loan is scheduled to mature in August 2018 and is currently levered at $49.50 psf. The occupancy has been stable, between 87% to 87.9% for the last several reporting periods. The DSCR for YE2015 was reported to be 2.32x, up from 2.11x at YE2014 and 1.98x at YE2013.

RATING SENSITIVITIES

The Rating Outlook for all classes is Stable. The upgrades to classes L, M and N reflect high expectation of pay off. However, due to the transaction's concentration and small class size which increases the potential for interest shortfalls, a rating cap of 'A' was applied. The Stable Outlooks on classes L and M reflect Fitch's opinion that future upgrades are unlikely due to concentration.

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 upgraded the following classes and assigned/revised Rating Outlooks as indicated:

--$3 million class H to 'AAAsf' from 'AAsf'; Outlook Stable;

--$5.8 million class J to 'AAAsf' from 'Asf'; Outlook Stable;

--$2.9 million class K to 'AAAsf' from 'BBBsf'; Outlook Stable;

--$2.9 million class L to 'Asf' from 'BBsf'; Outlook revised to Stable from Positive;

--$2.9 million class M to 'Asf' from 'BBsf'; Outlook revised to Stable from Positive;

--$2.9 million class N to 'Asf' from 'Bsf'; Outlook Stable.

The class A-1, A-2, A-3, A-4, B, C, D, E, F and G certificates have been fully repaid. Fitch does not rate the class O certificate. Fitch previously withdrew the ratings on the interest only class X-1 and X-2 certificates.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)

https://www.fitchratings.com/site/re/886006

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 Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1014650

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1014650

Endorsement Policy

https://www.fitchratings.com/regulatory

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Source: Fitch Ratings

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