DBRS Upgrades Seven Classes of Merrill Lynch 2001-Canada 6

DBRS has today upgraded the ratings of seven classes of Merrill Lynch Financial Assets Inc. Commercial Mortgage Pass-Through Certificates, Series 2001-Canada 6 (Merrill Lynch 2001-Canada 6) as follows:

-- Class C upgraded to AAA from AA (high)
-- Class D upgraded to AA from A (high)
-- Class E upgraded to AA (low) from “A”
-- Class F upgraded to A (low) from BBB
-- Class G upgraded to BBB from BBB (low)
-- Class H upgraded to BB (low) from B (high)
-- Class J upgraded to B (high) from B

In addition, DBRS has confirmed four classes of Merrill Lynch 2001-Canada 6 as follows:

-- Class A-1 at AAA
-- Class A-2 at AAA
-- Class X at AAA
-- Class B at AAA

The upgrades follow the repayment since the last performance update (January 2007) of 11 loans at maturity, including the second largest loan, La Rousselière. These loans represented 21.5% of the original pool balance.

DBRS notes that the transaction consists of 25 of the original 40 commercial mortgage loans, totalling $153,067,094. The weighted-average debt service coverage ratio (DSCR) for the pool has improved to 1.64 times (x) from 1.44x at issuance and the weighted-average loan-to-value has improved from 70.2% at issuance to 59.8%. Four loans (10.7% of the pool) have been defeased with Government of Canada securities. The deal is concentrated with 70% of the pool in the largest ten loans and 64% of the pool secured by retail properties. The deal has a moderate level of loans (65% of the pool) that have recourse to their respective borrowers.

There are three loans on the servicer’s watchlist. Westridge Shopping Centre (16.1% of the pool) is the largest loan in the pool and has been placed on the watchlist due to the largest tenant, Linens ’n Things (LNT), filing for bankruptcy protection and recently announcing that it was seeking to liquidate its operations. When LNT leaves the subject, the DSCR would still be approximately 1.12x and the property manager is not aware of any co-tenancy clauses related to LNT. In addition, the loan has 25% recourse to two separate entities rated investment grade by DBRS.

Bricore - Albert Street Blanket (2.1% of the pool) is on the watchlist because it reached maturity in September 2008 without securing new financing. A six-month extension is being processed by the servicer and the borrower continues to make debt service payments. The loan is secured by two unanchored shopping centres located in Regina. Occupancy, based on the July 2008 rent roll, was 96% and the DSCR, based on trailing six months ending June 30, 2008, was relatively high at 1.75x.

Causeway Shopping Centre (1.1% of the pool) did not pay off at its maturity date in June 2008, received a six-month extension and is now due on December 1, 2008. Although the servicer site inspection from June 2008 noted significant deferred maintenance at the property, the YE2007 DSCR was 1.39x, with a high corresponding debt yield of 18%.

Note:
All figures are in Canadian dollars unless otherwise noted.
The applicable methodology is CMBS Rating Methodology, which can be found on our website under Methodologies.
This is a Structured Finance rating.