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Fitch Affirms TIAA Real Estate CDO 2003-1, Ltd.

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed seven classes of TIAA Real Estate CDO 2003-1, Ltd. (TIAA 2003-1) as a result of increased credit enhancement to the notes from principal paydowns. A complete list of rating actions follows at the end of this release.

Since Fitch's last rating action in November 2011, approximately 11.2% of the underlying collateral has been downgraded and 4.4% upgraded. Currently, 38.7% of the portfolio has a Fitch derived rating below investment grade and 23.8% has a rating in the 'CCC' category and below, compared to 32% and 17.6% at the last rating action. Over this time, the class A-1MM notes have received $45.5 million for a total of $150.7 million in principal paydowns since issuance.

This transaction was analyzed under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model (PCM) for projecting future default levels for the underlying portfolio. The default levels were then compared to the breakeven levels generated by Fitch's cash flow model of the CDO under the various default timing and interest rate stress scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in CDOs'. Fitch also analyzed the structure's sensitivity to the assets that are distressed, experiencing interest shortfalls, and those with near-term maturities. Based on this analysis, the class A through C notes' breakeven rates are generally consistent with the ratings assigned below.

For the class D and E notes, Fitch analyzed the class' sensitivity to the default of the distressed assets ('CCC' and below). Given the high probability of default of these assets and expected limited recovery prospects upon default, the class D notes have been affirmed at 'CCCsf', indicating that default is possible. Similarly, the class E notes have been affirmed at 'Csf', indicating that default is inevitable.

The Stable Outlook on the class A-1MM and B notes reflects Fitch's view that the transaction will continue to delever. The Negative Outlook on the class C notes reflects the potential for adverse selection as the portfolio continues to amortize.

TIAA 2003-1 is a static collateralized debt obligation (CDO) that closed on Nov. 6, 2003. The current portfolio consists of 49 bonds from 43 obligors, of which 78.5% are commercial mortgage backed securities (CMBS), 19.4% are real estate investment trust (REIT) debt securities, and 2.1% are structured finance CDOs.

Fitch has affirmed the following classes as indicated:

--$71,342,070 class A-1MM notes at 'Asf'; Outlook Stable;

--$10,000,000 class B-1 notes at 'BBBsf'; Outlook to Stable from Negative;

--$2,000,000 class B-2 notes at 'BBBsf'; Outlook to Stable from Negative;

--$16,000,000 class C-1 notes at 'Bsf'; Outlook Negative;

--$14,000,000 class C-2 notes at 'Bsf'; Outlook Negative;

--$13,500,000 class D notes at 'CCCsf';

--$13,901,132 class E notes at 'Csf'.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (June 6, 2012);

--'Global Rating Criteria for Structured Finance CDOs' (Oct. 3, 2012);

--'Global Criteria for Cash Flow Analysis in CDOs' (Sept. 13, 2012).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923

Global Rating Criteria for Structured Finance CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=690203

Global Criteria for Cash Flow Analysis in CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=688518

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Fitch Ratings
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Matthew McGowan, +1 212-908-0733
Analyst
Fitch, Inc.
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Mary MacNeill, +1 212-908-0785
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Source: Fitch Ratings