DBRS Confirms All Classes of Merrill Lynch Financial Assets Inc., Series 2005-Canada 15

DBRS has today confirmed the ratings of all classes of Merrill Lynch Financial Assets Inc., Series 2005-Canada 15 Commercial Mortgage Pass-Through Certificates, Series 2005-Canada 15 as follows:

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

All the trends are Stable.

The rating confirmations reflect the performance of the remaining loans in the pool and the high single-tenant concentration in relation to the improvement in credit enhancement to the bonds resulting from a collateral reduction of approximately 38.7% since issuance. As of the September 2013 remittance report, 16 loans have paid out of the pool since issuance, leaving 42 loans remaining in the transaction. The transaction also benefits from defeasance collateral, as six loans, representing 27.1% of the current pool balance, are fully defeased. Overall pool performance remains stable as the largest 15 loans in the transaction, excluding defeasance collateral, have a weighted-average debt service coverage ratio and weighted-average debt yield of 1.68 times (x) and 14.0%, respectively.

As of the October 2013 remittance report, there are four loans on the servicer’s watchlist, representing 9.0% of the current pool balance. The DBRS analysis considered that a few of these loans have an elevated probability of default as a result of these performance issues. There are no loans in special servicing.

The transaction has specific exposure to RONA inc. (RONA) as nine loans in the pool are secured by a RONA home and garden retail store. The loans are not cross-collateralized or cross-defaulted and represent 24.2% of the current pool balance. The properties are located in various cities throughout Ontario and Québec, and the RONA leases are not scheduled to expire until November 2019, five years past the respective loan maturities. H&R Real Estate Investment Trust (H&R REIT; rated BBB with a Stable trend by DBRS) serves as the non-recourse sponsor for each loan secured by a RONA store. In June 2013, RONA announced 11 store closings throughout Ontario and British Columbia, scheduled to occur in October and December 2013. The Windsor, Ontario, property that secures Prospectus ID#17 in this transaction was included in this closure list. This loan represents 3.0% of the current pool balance. DBRS is awaiting information from the servicer in regards to H&R REIT’s strategy with the subject property as the loan has an upcoming maturity in 2014. The loan is expected to remain current through maturity because of the long-term nature of the lease to RONA, even though RONA will no longer be occupying the space. DBRS downgraded its rating of RONA in March 2013 to BB (high) with a Negative trend. For more information on the DBRS rating of RONA, please see the press release dated March 12, 2013, which can be found at www.dbrs.com.

As part of its review, DBRS analyzed the largest 15 loans in the pool, the three loans on the servicer’s watchlist and the loans secured by RONA retail properties, which comprise approximately 77.1% of the current pool balance.

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 largest loans in the pool, specially serviced loans and loans on the servicer’s watchlist. The September 2013 Monthly CMBS Surveillance Report for this transaction will be published shortly. If you are interested in receiving this report, contact us at info@dbrs.com.

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

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

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