DBRS Upgrades Five Classes and Confirms Four Others of Merrill Lynch Financial Assets Inc., Series 2003-Canada 10

DBRS has today upgraded the ratings on five classes of Merrill Lynch Financial Assets Inc., Series 2003-Canada 10 as follows:

-- Class F to AAA (sf) from AA (sf)
-- Class G to AAA (sf) from A (high) (sf)
-- Class H to AA (sf) from A (low) (sf)
-- Class J to A (sf) from BBB (low) (sf)
-- Class K to BBB (low) (sf) from BB (sf)

In addition, DBRS has confirmed the ratings for the remaining classes as follows:

-- Class E-1 at AAA (sf)
-- Class E-2 at AAA (sf)
-- Class XC-1 at AAA (sf)
-- Class XC-2 at AAA (sf)

All trends are Stable.

The rating upgrades reflect the strong performance that the pool continues to exhibit, with 50 loans having been successfully repaid since issuance out of the original loan count of 55. As of the June 2014 remittance report, approximately 94.6% of the collateral has been reduced, with 7.6% of collateral reduction having occurred since June 2013. The performance of the five remaining loans is strong as they are reporting a weighted-average debt service coverage ratio (DSCR) and debt yield of 1.49 times and 28.4%, respectively.

There are no loans in special servicing and there are two loans on the servicer’s watchlist, representing 12.5% of the current pool balance. These loans remain current and are being monitored for a low DSCR.

The largest loan in the pool, The Junction (55.5% of the current pool balance), is secured by a grocery-anchored retail centre in Mission, British Columbia. According to the January 2014 rent roll, the property was 92.6% occupied, anchored by Save-On-Foods and London Drugs, which have lease expirations in November 2018 and November 2019, respectively. The centre also benefits from being located adjacent to a smaller retail centre anchored by Famous Players and Staples. The loan is scheduled to mature in November 2014, and based on the YE2013 net cash flow, the loan has an exit debt yield of 33.6%. Based on the loan’s strong financials, DBRS believes it likely that the borrower will be able to secure refinancing capital at maturity.

As part of its review, DBRS analyzed all five remaining loans in the transaction.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction. The June 2014 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.

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.