Fitch Upgrades Wachovia 2006-WHALE 7

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has upgraded two classes and affirmed two classes of Wachovia Bank Commercial Mortgage Trust 2006-WHALE 7. A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The upgrades are the result of property releases of the one remaining loan which resulted in approximately $36 million in unanticipated paydown, as well as improved performance of the remaining portfolio.

The remaining loan is The Jameson Portfolio, originally consisting of $175 million in securitized debt which collateralized 107 properties in 12 states across the Southeast and Midwest operating under the Jameson Inn or Signature Inn flag. After the most recent property sales, the loan was paid down by an additional $36 million resulting in $99.8 million in outstanding debt which now collateralizes 84 properties and approximately 5,500 rooms.

The loan was transferred to special servicing due to imminent maturity default in August 2011. The current borrower and special servicer negotiated a modification and forbearance agreement whereby the loan was paid down by approximately $10 million and $13.4 million of new equity would be used to convert the Jameson hotels under Choice and Wyndham flags. The loan was extended until December 2014 with an additional one-year extension subject to a debt yield test and an interest rate increase. Conversions were completed in early 2014 and the final extension option was exercised in December 2014, as the debt yield test was met based on improved performance and principal paydown. A recent appraisal values both the as-is and stabilized value of the portfolio to be in excess of the securitized debt. The loan continues to be categorized as Performing Matured and has a final maturity date in December 2015.

Per the special servicer, the borrower plans to continue to release properties in bulk sales during 2015 and proceeds will continue to pay down the debt based on the terms of the modification.

The portfolio now operates under mostly Baymont and Quality Inn flags, with several Howard Johnsons, Comfort Inns, and one Days Inn and Jameson hotel each. Fitch received a year-end 2014 operating statement for the remaining properties. Since Fitch's review in 2014, property performance, particularly room revenues, has improved. In the current analysis, Fitch used the in-place cash flow with a stressed mortgage constant of 11.33%. In addition, Fitch applied standard furniture, fixtures and equipment (FF&E) expenses of 5% of revenues, as well as actual franchise fees, which have increased to approximately 5% of revenues since the flag conversions.

RATING SENSITIVITIES

The Rating Outlooks on classes G and H remain Stable as no additional rating changes are anticipated before the loan's extended maturity date in December 2015. Class J could be subject to downgrades if losses are incurred.

Fitch upgrades the following classes as indicated:

--$7.3 million class G to 'Asf' from 'BBBsf'; Outlook Stable;

--$64.9 million class H to 'BBBsf' from 'CCCsf'; Outlook Stable assigned.

The following class is affirmed:

--$21.9 million class J at 'CCCsf'; RE 100%.

The following class is affirmed and the Recovery Rating revised:

--$5.8 million class K at 'Dsf'; RR to RE 50% from RE 0%.

Zero balance classes L, WA, CM, and BP-2 are affirmed at 'Dsf'/RE 0% based on previously incurred realized losses.

Pooled classes A-1 through F, interest-only class X-1A and rake classes KH-1, KH-2, BH-1 through BH-4, BP-1, MB-1 through MB-4 UV and WB have paid in full. Class X-1B was previously withdrawn.

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

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (Aug. 4, 2014);

--'Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions' (Sept. 19, 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

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

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=772328

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=981257

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
Britt Johnson, +1-312-606-2341
Senior Director
Fitch Ratings, Inc.
70 W. Madison
Chicago, IL 60602
or
Committee Chairperson
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations
Sandro Scenga, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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