DBRS Confirms the Ratings of Merrill Lynch Financial Assets, Inc., Series 2002 – Canada 7

DBRS has today confirmed the ratings of Merrill Lynch Financial Assets, Inc., Series 2002 – Canada 7 as follows:

• Class A-1 at AAA (sf)
• Class A-2 at AAA (sf)
• Class B at AAA (sf)
• Class C at AAA (sf)
• Class X at AAA (sf)
• Class D at AA (low) (sf)
• Class E at A (sf)
• Class F at BBB (low) (sf)
• Class G at BB (high) (sf)
• Class H at B (sf)
• Class J at B (low) (sf)

All trends are Stable.

The confirmations reflect the stable performance of the transaction overall, with significant collateral reduction and defeasance collateral representing 39% of the current pool balance. Four of the defeased loans are within the top ten largest loans in the pool, as of the April 2011 remittance report. Of the original 49 loans, 35 remain in the transaction, reporting a weighted-average DSCR of 1.34x. Although the transaction has reported stable performance on a cumulative basis, there are currently ten loans on the servicer’s watchlist, representing approximately 23% of the pool. All of the loans on the servicer’s watchlist are current and DBRS has not placed any of those loans on the DBRS HotList.

Additionally, there are two specially serviced loans in the transaction, representing approximately 4.4% of the current pool balance.

Prospectus ID#13, Holiday Inn Brampton Select (3.1% of the current pool balance) is secured by 145-room full-service Holiday Inn hotel located in Brampton, Ontario. This loan transferred to the special servicer because the borrower was not making the required monthly FF&E reserve payments. According to the special servicer, the borrower was in the process of converting the property to a Holiday Inn Select and was therefore investing substantial capital into the asset that exceeded the FF&E reserve requirements. The loan has an anticipated repayment date of June 1, 2011. Based on the leverage point of approximately $39,000, on a per-key basis, in addition to borrower’s commitment to the property as demonstrated on the capital reinvested in the property to complete the renovations, DBRS views the refinance of this loan to be favourable.

Prospectus ID#26, Sussex Mall (1.26% of the current pool balance) is secured by a 130,623 sf anchored shopping centre in Sussex, New Brunswick and transferred to the special servicer due to maturity default on May 1, 2009. The guarantor passed away in March 2009 and their accounts were frozen. The centre is 100% vacant and in Poor condition. A receiver was appointed and the property was marketed for sale. Based on the current loan balance of approximately $5.2 million and the April 2011 appraised value of $975,000, DBRS expects that losses associated with this loan could likely indicate a loss severity in excess of 80%. Although this loss severity is substantial, the dollar amount of that loss is expected to be contained to the unrated Class K.

Although there is concern with the above two specially serviced loans, the weighted-average DSCR for the portfolio of 1.34x suggests stable performance. DBRS will continue to monitor this transaction on a monthly basis and expects the servicer to report more YE2010 financials over the coming months. DBRS has applied loan level cash flow stresses up to 25% decline across the entire transaction in its current analysis to confirm the ratings. As YE2010 financials become available, DBRS will measure the actual reported figures against our stressed figures but DBRS does not expect loan level cash flow declines to exceed the current stresses assumed by DBRS. Given the increased credit enhancement levels in the transaction and the resiliency against the model output in the DBRS stressed scenario, the ratings confirmations are appropriate.

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.