DBRS Upgrades Eight Classes of Merrill Lynch Financial Assets Inc., Series 2005-Canada 16

DBRS has today upgraded the ratings of eight classes of Merrill Lynch Financial Assets Inc., Series 2005-Canada 16 Commercial Mortgage Pass-Through Certificates as follows:

Class B to AA from AAA
Class C to AA from A
Class D1 to A from BBB
Class D2 to A from BBB
Class E1 to A (low) from BBB (low)
Class E2 to A (low) from BBB (low)
Class F to BBB from BB (high)
Class G to BB (high) from BB

DBRS has also confirmed the ratings of nine classes as follows:

Class A-1 at AAA
Class A-2 at AAA
Class XP1 at AAA
Class XP2 at AAA
Class XC at AAA
Class H at BB (low)
Class J at B (high)
Class K at B
Class L at B (low)

All trends for the rated classes of the transaction remain Stable.

The ratings upgrades reflect the increased credit enhancement to the bonds from a collateral reduction of approximately 27% since issuance. Additionally, as of the October 2010 remittance, the weighted-average debt service coverage ratio remains strong at 1.93x.

There is currently one loan, representing 0.99% of the transaction, on the servicer’s watchlist; DBRS has placed this loan on the DBRS HotList.

Prospectus ID#27, 165 Saint Madeleine, is secured by a 117,833 sf anchored retail property located in Cap-de-la-Madeleine, Quebec, approximately 100 kilometers northeast of Montreal. The loan is on the servicer’s watchlist because of a low DSCR due to higher than anticipated vacancy rates, with the YE2009 showing an occupancy rate of 77%. The corresponding YE2009 DSCR was 0.66x with a debt yield of 6%. Despite the declining performance, the loan per square foot of $24 is reasonable. DBRS will keep this loan on the DBRS HotList to monitor leasing updates as they become available.

DBRS has applied a net cash flow stress of 20% across all loans in the pool and when comparing the DBRS required credit enhancement levels to the current credit enhancement to the bond classes, the ratings upgrades are appropriate.

DBRS continues to monitor this transaction on a monthly basis in the Global CMBS Monthly Surveillance report, which can provide more detailed information on the individual loans in the pool.

Notes:
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.