DBRS Downgrades Six Classes of Morgan Stanley 2007-TOP27, Confirms 17

DBRS today has downgraded the following six classes of Morgan Stanley Capital I Trust, Series 2007-TOP27 Commercial Mortgage Pass-Through Certificates:

– Class J to BB from BB (high).
– Class K to B (high) from BB.
– Class L to B from BB (low).
– Class M to B (low) from B (high).
– Class N to CCC from B.
– Class O to CCC from B (low).

The remaining 17 classes in the transaction have been confirmed. All trends are Stable.

The downgrades are a result of expected losses associated with the increased delinquency and number of loans on the DBRS HotList. The delinquency currently stands at 1.5% of the transaction’s outstanding balance, comprising six loans, three of which are in special servicing for workout. While not all the delinquent loans are in special servicing and not all are expected to take a loss, DBRS estimates losses could be as high as $10 million in the event these loans are liquidated. Losses in that amount will be contained to the unrated Class P, but it would leave insufficient credit enhancement to several classes, which has prompted the downgrades.

As part of its review, DBRS analyzed the top ten loans, the 17 shadow-rated loans, the servicer’s watchlist and the delinquent loans in detail, which comprise greater than 43% of the pool balance. The performance of the top ten and shadow-rated loans remains stable, with the exception of one loan that was originally shadow-rated BBB (low), Prospectus ID#39, The Fields Apartment Homes (0.7%). The YE2007 DSCR on this loan has declined significantly, while the original LTV was very low at 51% and occupancy has remained high, the loan is no longer considered to carry an investment-grade shadow rating.

DBRS added five loans to its HotList, totaling 1.8% of the current pool balance. Two retail loans (1.4%) were added due to significant exposure to bankrupt tenants, while the remaining three loans (0.5%) were added due to DSCRs below 1.0x and occupancy declines.

The details of DBRS’s analysis can be found in an updated Surveillance Report.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are CMBS Rating Methodology and CMBS Surveillance, which can be found on our website under Methodologies.

This is a Structured Finance rating.