DBRS Confirms Two Classes of Merrill Lynch Financial Assets Inc., Series 2002-Canada 7

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

-- Class J at BBB (low) (sf)
-- Class X at AAA (sf)

All trends are Stable.

These rating actions reflect the overall stable performance of the three remaining loans in the pool, with a weighted-average debt service coverage ratio (DSCR) of 1.50 times (x) and a weighted-average debt yield of 45.64% as of the YE2012 financials. The pool has seen a significant collateral reduction of 98.8% since issuance. Two of the remaining three loans are fully amortizing with a combined balance of $1.17 million, representing approximately 35.0% of the remaining trust balance. Both of the fully amortizing loans are scheduled to mature in 2016.

The largest loan remaining in the pool has a balance of approximately $2.2 million, representing approximately 65.0% of the remaining pool balance, and is scheduled to mature in October 2014. The loan is secured by a 62,848 sf office building in Kanata, Ontario. The property was 91.4% occupied as of the January 2014 rent roll, with no leases scheduled to expire prior to loan maturity. The loan has strong credit metrics, with a DSCR of 1.49x, based on YE2012 financials.

As there has been significant paydown since issuance for the pool overall, the trust’s exposure is concentrated on a loan-by-loan basis. Given the concentration, DBRS sized each loan individually for the purpose of this review. DBRS stressed existing cash flows and applied higher end cap rates by property type to derive a conservative value for modeling purposes. Despite the stressed scenario, the resulting credit metrics are still strong for the pool overall, providing substantiation for the rating confirmations. In addition, all three of the remaining loans are performing, and no loans are on the servicer’s watchlist or in special servicing, as of the April 2014 remittance report.

For additional detail on the DBRS viewpoint for this transaction, and for details on all of the remaining loans in the pool, please see the April 2014 Monthly CMBS Surveillance Report for this transaction, which will be published shortly.

Notes:
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.