Fitch Upgrades MSCI 2004-HQ4

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has upgraded one class and affirmed eight classes of Morgan Stanley Capital I Trust's (MSCI) commercial mortgage pass-through certificates, series 2004-HQ4. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrade is due to defeasance covering 98.1% of the class balance and sufficient support from the subordinate class to absorb losses. The pool has become increasingly concentrated with only two loans remaining in the pool.

As of the September 2015 distribution date, the pool's aggregate principal balance has been reduced by 99.4% (including 3.6% of realized losses) to $7.8 million from $1.37 billion at issuance. Approximately $8.5 million in paydown has occurred since the last rating action with an additional $1.8 million in losses. Interest shortfalls in the amount of $127,544 are currently affecting class J.

Of the original 117 loans, two remain. One of the loans (47.7%), Raceway Shopping Center, is in special servicing. The other loan (52.3%) is fully defeased with an August 2016 maturity.

Raceway Shopping Center is a 46,688 square foot (sf) neighborhood retail property located in Calumet Park, Illinois. The borrower did not pay off the loan at the anticipated repayment date (ARD) of May 1, 2014 and the actual maturity date is not until May 2034. This loan was transferred to special servicing Aug. 27, 2015 due to an imminent monetary default. The net operating income (NOI) debt service coverage ratio (DSCR) for year-end 2014 was reported at 0.73x, down from 1.65x at year-end 2013. The decline is primarily due to a decline in occupancy from 100% to 67% as a result of tenants vacating in 2013. Occupancy remains unchanged as of June 2015. The special servicer is exploring a loan modification with the borrower, but foreclosure is still an option.

RATING SENSITIVITIES

The Rating Outlook remains Stable as the majority of the class is expected to pay in full by the defeased loan at maturity with sufficient support from the subordinate class to absorb losses. Further upgrades to the class were limited by the potential for interest shortfalls and the uncertainty related to resolution of the remaining asset in special servicing.

DUE DILIGENCE USAGE

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

Fitch upgrades the following class and assigns Rating Outlooks as indicated:

--$4.1 million class H to 'BBsf' from 'CCCsf'; Outlook Stable Assigned.

Fitch affirms the following classes as indicated:

--$3.6 million class J at 'Dsf', RE 5%;

--$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 O at 'Dsf', RE 0%;

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

The classes A1 to A-7, B, C, D, E, F, and G certificates have paid in full. Fitch does not rate the class Q and S certificates. 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

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 Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=992371

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=992371

Endorsement Policy

https://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/20151015006557/en/

Fitch Ratings
Primary Analyst
David Ro, +1-312-368-3132
Director
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Committee Chairperson
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations, New York
Sandro Scenga, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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