DBRS Discontinues One Class and Confirms Three in Merrill Lynch Financial Assets Inc., Series 2001-Canada 5

DBRS has today confirmed the following classes of Merrill Lynch Financial Assets Inc., Series 2001-Canada 5:

-- Class X at AAA (sf)
-- Class D at BBB (sf)
-- Class E at B (sf)

The trend on all classes is Stable. In addition, DBRS has discontinued its rating of Class C, as this class has been repaid in full with the February 2013 remittance.

There are four loans remaining in the pool, and all are scheduled to mature on or before May 1, 2013.

The pool is concentrated in three loans, which together make up the Plaza Group Rollup (Prospectus ID#7, 33, 53, 74.9% of the current pool balance). The largest of these crossed loans, Lansdowne Place, is secured by an anchored retail property in Saint John, New Brunswick. This property lost its two largest tenants, Zellers and Eddie Bauer, in 2010 and 2011, respectively. These tenants accounted for almost half of the property’s base rental income, and as of the March 2012 rent roll, the borrower has not been able to back fill these spaces, leaving the property almost 50% vacant. The loan benefits from cross-collateralization with two other assets in the pool, which have continued to exhibit stable performance. These three loans have a full recourse guarantee to the original sponsor, Plazacorp Retail Properties Limited, and have no history of delinquency. The combined debt service coverage ratio (DSCR) for all three properties was 1.48 times (x) for YE2011.

The pool also contains an outstanding loan secured by a 143,117 square foot (sf) industrial building in Scarborough, Ontario. This property was 93.3% occupied as of the May 2012 rent roll and the loan is scheduled to mature on April 1, 2013. The YE2011 DSCR was reported to be 3.5x and the corresponding debt yield was 41.5%. DBRS views loans with an exit debt yield in excess of 11% to have a healthy refinance profile.

DBRS used conservative metrics in sizing this pool as a result of the concentration of the four loans remaining, the status of the Lansdowne Place loan and lack of updated 2012 financials. Although the dark anchor space at Lansdowne Place could potentially affect a timely refinance, DBRS views the cross-collateralization and sponsor guarantee of the three Plaza Group properties favourably and does not foresee an immediate risk of monetary default.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction including details on the remaining loans in the pool. The February 2013 Monthly Surveillance Report for this transaction will be published shortly. If you are interested in receiving this report, contact us at info@dbrs.com.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is CMBS Rating Methodology (January 2012) and CMBS North American Surveillance Methodology (November 2012), which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.