TEXT-S&P puts 4 JPMorgan Mortgage 2006-fl1 ratings on watch negative
OVERVIEW -- We placed our ratings on four classes from JPMorgan Chase Commercial Mortgage Securities Corp.'s series 2006-FL1, a U.S. CMBS transaction, on CreditWatch with negative implications. -- The CreditWatch placements reflect our expectations of additional interest shortfalls on these classes due to an appraisal reduction amount that we expect to be affected on the sole remaining collateral in the trust as early as the next reporting cycle. NEW YORK (Standard & Poor's) Dec. 18, 2012--Standard & Poor's Ratings Services today placed its ratings on four classes of commercial mortgage pass-through certificates from JPMorgan Chase Commercial Mortgage Securities Corp.'s series 2006-FL1, a U.S. commercial mortgage-backed securities (CMBS) transaction, on CreditWatch with negative implications (see list). The negative CreditWatch placements reflect our expectations of additional interest shortfalls on these classes due to an appraisal reduction amount (ARA) that we expect to be affected on the sole remaining specially serviced collateral, the Independence Mall loan, in the trust as early as the next reporting cycle. According to the special servicer, C-III Asset Management LLC (C-III), an updated appraisal value has recently been finalized. C-III stated that it is currently working on the ARA calculation based on the recent appraisal value. Standard & Poor's believes that there likely will be a significant decline in the value of the property, in view of the continued decline in occupancy and expected decrease in net cash flow (see below for details). As of the Dec. 17, 2012, trustee remittance report, the trust consisted of one remaining floating-rate amortizing loan indexed to one-month LIBOR, the Independence Mall loan. The one-month LIBOR rate was 0.208% according to the Dec. 2012 trustee remittance report. The Independence Mall loan has a trust and whole-loan balance of $71.2 million and a total reported trust exposure of $72.0 million. The loan was transferred to the special servicer on Aug. 27, 2012, due to its impending maturity. The loan matures on Feb. 9, 2013. The payment status of the loan is currently reported as 30 days delinquent. C-III indicated that it is currently waiting on the borrower's proposal for a loan modification. The loan is secured by 679,705 sq. ft. of an 830,158-sq.-ft. regional mall in Kingston, Mass. The master servicer, Wells Fargo Bank N.A., reported a 0.96x debt service coverage for the three months ended March 31, 2012, and occupancy for the collateral dropped to 61.4%, according to the Sept. 30, 2012, rent roll, following H&M Group's vacancy (34,000 sq. ft.) in 2012, compared with 67.5% as of the Dec. 31, 2011, rent roll. Anchor tenants in the collateral include Target Corp. (126,000 sq. ft.), Sears holding Corp. (79,441 sq. ft.), and Regal Cinema (58,115 sq. ft.), according to the September 2012 rent roll. The loan amortizes on a 20-year schedule. Standard & Poor's will resolve the CreditWatch negative placements as more information regarding the potential workout of the loan becomes available and after we review the credit characteristics of the remaining collateral in the trust as well as available liquidity remaining in the trust. If we lower our rating on class G below AA- (sf), we will withdraw our 'AAA (sf)' rating on the class X-2 interest-only (IO) certificates in accordance with our IO criteria. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Reports included in this credit rating report are available at "RELATED CRITERIA AND RESEARCH -- JPMorgan Chase Commercial Mortgage Securities Series 2006-FL1 Ratings Raised On Four Classes; Seven Affirmed, March 22, 2012 -- Global Methodology For Rating Interest-Only Securities, April 15, 2010 -- Rating U.S. CMBS In The Face Of Interest Shortfalls, Feb. 23, 2006 RATINGS PLACED ON CREDITWATCH NEGATIVE JPMorgan Chase Commercial Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2006-FL1 Rating Class To From G AA- (sf)/Watch Neg AA- (sf) H A-(sf)/Watch Neg A- (sf) J BB (sf)/Watch Neg BB (sf) K CCC (sf)/Watch Neg CCC (sf)
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