(The following statement was released by the rating agency)
Oct 01 - Fitch Ratings has downgraded JCREF CMBS 2007-1 GK's class E notes due December 2015 and affirmed the rest. The transaction is a Japanese multi-borrower type CMBS securitisation. The details of the rating actions are as follows:
JPY18.4bn* Class A notes affirmed at 'Asf'; Outlook Stable JPY6bn* Class B notes affirmed at 'BBBsf'; Outlook Negative JPY5.2bn* Class C notes affirmed at 'Bsf'; Outlook Negative JPY4.6bn* Class D notes affirmed at 'CCCsf'; Recovery Estimate revised to 0% from 50% JPY2.6bn* Class E notes downgraded to 'CCsf' from 'CCCsf'; Recovery Estimate 0% *as of 28 September 2012
The downgrade of the class E notes reflects Fitch's view that the probability of principal loss has increased. The agency has revised down the valuations of 14 of the 28 remaining collateral properties. Six out of the eight underlying loans are in default and Fitch does not believe that all defaulted loan principal will be fully recovered, based on the workout activities to date.
Classes A through C have been affirmed as the negative impact from Fitch's downward revisions of the property values has been offset by the progress of the notes principal repayment to date. Since the previous rating action in October 2011, given the sufficient remaining period to the legal final maturity, the servicer was able to sell 12 properties at higher values on average than Fitch's expectations and the sales proceeds have been applied to the principal repayment of the class A notes.
Fitch expects principal repayment of the class A notes to continue due to the progress of the property sales activities on defaulted loans, resulting in the Stable Outlook for this class of notes. Negative Outlooks for the class B and C notes reflect the uncertain outcome to the workout on the defaulted loans as the cash flow of certain properties has yet to stabilise.
The affirmation of the class D notes reflects Fitch's view that the probability of principal loss remains unchanged; however, Recovery Estimate for this class of notes has been revised to 0% based on Fitch's valuation.
Fitch assigned ratings to this transaction in November 2007. At closing, the notes were secured by nine loans or Tokutei Mokuteki Kaisha bonds (collectively, 'underlying loans') collateralised by 56 properties. The transaction is now backed by eight underlying loans backed by 28 properties.