DBRS Upgrades Two Classes and Confirms Two Classes of Falcon Trust, Series 2003-SMU

DBRS has today upgraded the ratings of two classes of Falcon Trust, Series 2003-SMU as follows:

Class B to AAA (sf) from AA (sf)
Class C to AAA (sf) from A (sf)

Additionally, DBRS has confirmed the ratings of two classes as follows:

Class D at BBB (sf)
Class X at AAA (sf)

The trends for all classes of the transaction are Stable.

The ratings confirmations reflect the increased credit enhancement levels within the transaction due to amortization and loan pay offs. Since issuance, the collateral has been reduced by approximately 78% with a current transaction balance of approximately $37.9 million, with 14 loans remaining, as of the October 2010 remittance report.

Financial performance for the pool remains strong with a weighted-average debt service coverage ratio (WADSCR) of 2.16x as of the October 2010 remittance report. Additionally, the leverage for the remaining loans remains in line with issuance, with a weighted-average loan-to-value ratio (WALTV) of 64.5% as of the October 2010 remittance report.

The collateral for the transaction consists of 14 cross-collateralized and cross-defaulted loans secured by industrial properties in various cities in Ontario, Alberta and Québec. One remaining loan matures in December 2010 and the refinance outlook for that loan is strong, with a YE2009 debt yield of 20% and a DSCR of 2.32x. The remaining loans mature in December 2013. Additionally, the loans have 100% recourse to the borrower, ING Summit Industrial Fund LP (currently rated BBB by DBRS with a Stable trend).

DBRS has applied a cash flow stress of 20% to all the loans remaining in the pool and when comparing the DBRS model required credit enhancement to the current credit enhancement to the bonds, the ratings upgrades are appropriate.

DBRS continues to monitor this transaction on a monthly basis in the Monthly Global CMBS 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.