DBRS Confirms 16, Downgrades Eight Classes of J.P. Morgan 2005-LDP4

DBRS has today downgraded eight classes in the J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP4 transaction, Classes G through P. Class G was placed on trend Stable while Classes H through P have been placed on trend Negative. In addition, DBRS has confirmed Classes A-1 through F with Stable trend. The shadow rating on one loan (Plastipak, 3.5%) has also been confirmed.

The downgrades are a result of the following: the most recent annual net cash flows have declined for approximately 32% of the loans from DBRS's NCF at issuance, the number of loans added to the DBRS HotList has increased to 10.7% of the pool and the losses expected from the specially serviced loans (2.4%). While losses from six loans in special servicing are currently projected to be contained to the unrated Class NR, the credit enhancement to the lower rated classes is low and as a result of the significant decline in overall performance for many of the underlying loans, the required credit enhancement at these lower rating categories has increased thus prompting the downgrades. DBRS anticipates further cash flow decline on the underlying assets in 2009 and is therefore leaving Class H through Class P on trend Negative.

DBRS CMBS methodology assumes a mean reverted capitalization rate applied to all loans and therefore the current market's property value deterioration was already accounted for within the DBRS ratings at issuance. The downgrades are a result of loan specific, increased probability of default caused by the deterioration of cash flow for many loans within the transaction as compared to property value declines.

With the exception of Silver City Galleria, which was added to the DBRS Hotlist, the performance of the remaining top ten loans (33.5% of the current pool balance) remains stable, with one (2.1%) having been fully defeased,

There are ten loans (10.7% of the transactions outstanding balance) found on the DBRS HotList. Loans on the HotList are primarily loans secured by retail properties that have lost tenants or have had significant exposure to bankrupt tenants, resulting in a significant decline in property cash flow performance over the last year.

Of the six loans in special servicing, DBRS has estimated a loss to be approximately $6.5 million to Class NR. Several loans are candidates for modifications and therefore the loss estimates on those loans have been constrained to servicing fees and advances. The loss estimate could increase if the modifications are not successful.

As part of its review, DBRS analyzed the top ten loans, the servicer’s watchlist and the six specially serviced loans, which comprises approximately 58% of the current pool balance.

Note:
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.