DBRS Confirms Seven Classes and Downgrades Four others of Merrill Lynch Financial Assets Inc., Series 2001-Canada 5

DBRS has today confirmed Classes A-1 though E, with Stable trends. Additionally, DBRS has downgraded the ratings of four classes of Merrill Lynch Financial Assets Inc., Series 2001-Canada 5:

-- Class F downgraded to CCC from BB
-- Class G downgraded to C from B
-- Class H downgraded to C from CCC
-- Class J downgraded to C from CCC

Class J has Interest in Arrears and is noted as such. ,

The downgrades are a result of anticipated losses from three loans in special servicing (combined 9.2% of the pool): Skeena Mall, Ramada Coral Inn, and Ramada All-Suite. Despite the status of these three loans, the performance of the propoderance of the remaining collateral has been stable. Since issuance, the transaction’s collateral has been reduced by 32.6% and currently 19.4% of the pool is secured by Government of Canada securities. The pool also has a significant number of upcoming maturities with 22 non-defeased loans (59.8% of the pool) coming due through 2011. However, the maturing loans reporting preceding financials have an average debt yield of 25.1% and will benefit from reduced leverage levels after ten years of seasoning.

The Skeena Mall loan is secured by a shopping centre in Terrace, British Columbia and transferred to the special servicer because of payment default in March 2007. The property is located in a remote area that was hit hard by the closing of its major employer in 2001. Since then, many tenants, including the former anchor, Zellers, have vacated and as a result, the subject is currently only 60.8% occupied. The loan is scheduled to mature in February 2011 and at this time, DBRS estimates losses from this loan could ultimately exceed 45%, based on current cash flows and market dynamics.

The Ramada Coral Inn loan is secured by a 129-room hotel in Niagara Falls, Ontario, approximately 4 kilometres west of the falls, and transferred to the special servicer in January 2008. The borrower for this loan and Ramada All-Suite are affiliated. The hotels are connected by an above ground walkway and are currently closed. Both properties were in the beginning phases of a significant renovation when the borrower ran out of funds, and since then, the condition of the properties has deteriorated. DBRS expects both of these loans to incur losses of nearly 100%.

Further commentary on the loans in special servicing, in addition to the rest of the transaction, can be found in the updated Surveillance Report.

Note:
All figures are in Canadian 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 CMBS rating.