DBRS Places Windermere XII FCC Under Review Negative

DBRS has today placed the Commercial Mortgage Backed Floating Rate Notes, Class A and Class X issued by Windermere XII FCC (Windermere or the Company), Under Review Negative.

The decision to place the classes Under Review Negative is a result of the property’s performance decline and its expected continued erosion into 2010. The transaction is secured by a Class A office building located in Paris’s La Défense Business District, known as Coeur Défense. At issuance, August 2007, the property was 90.9% leased to 17 tenants and was 87.0% occupied by 16 tenants. As of the July 2009 remittance date, the property was 80% occupied. Four of the five largest tenants have given notice that they will be vacating at their respective lease break or expiry date in 2010. Two additional tenants have also given notice of their intent to vacate in 2010. Assuming no lease-up occurs prior to the latest lease termination date in 2010, the subject’s occupancy will plummet to 38%. DBRS is awaiting a full updated financial statement to help determine an accurate impact on overall net cash flow.

The value of the property has plummeted 42% since issuance, based on the appraisal received March 10, 2009, to a reported EUR1.24bn. The resulting LTV of 132% is well over the covenanted level set at 80%. The DBRS value at issuance was in-line with this updated appraised value but knowing another 40% of the NRA will vacate next year, diminishes the value further.

Furthermore, the borrower, up until this month, September 2009, enjoyed "sauvegarde" creditor protection under French insolvency law. Since being granted this protection, in November 2008, the property income had been trapped in a special account blocked from the issuer, which has had to draw on a liquidity facility to meet interest payments on the Class A to H Notes. The sauvegarde expired in September 2009 and the French Commercial Tribunal met to finalize the next steps. DBRS is waiting to review the French Commercial Tribunal’s decision in its entirety before further action is taken.

Note:
All figures are in Euros 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.