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TEXT-S&P cuts 4 Arcap 2004-RR3, 2006-RR7 ratings
July 16, 2012 / 9:09 PM / 5 years ago

TEXT-S&P cuts 4 Arcap 2004-RR3, 2006-RR7 ratings

OVERVIEW 
      -- We lowered our ratings on four classes from ARCap 2004-RR3 
Resecuritization Inc. and ARCap 2006-RR7 Resecuritization Inc., U.S. CMBS 
re-REMIC transactions, and removed them from CreditWatch with negative 
implications.
     -- We lowered our ratings to 'D (sf)' on classes A-D and A from ARCap 
2006-RR7, which reflects the deferred interest that we expect will continue 
for the foreseeable future.
     -- We affirmed our 'CCC- (sf)' ratings on class C and D from ARCap 
2004-RR3 and removed them from CreditWatch with negative implications.
     -- The downgrades and affirmations reflect our analysis of the 
transactions' liability structures and the underlying credit characteristics 
of the collateral, using our global criteria for rating CDOs of pooled 
structured finance assets.
 
NEW YORK (Standard & Poor's) July 16, 2012--Standard & Poor's Ratings Services 
today lowered its ratings on four classes of commercial mortgage-backed 
securities (CMBS) pass-through certificates from ARCap 2004-RR3 
Resecuritization Inc. and ARCap 2006-RR7 Resecuritization Inc. (ARCap 2004-RR3 
and ARCap 2006-RR7), U.S. resecuritized real estate mortgage investment 
conduit (re-REMIC) transactions. At the same time, we removed the ratings from 
CreditWatch with negative implications. This includes our downgrades to 'D 
(sf)' on class A-D and A from ARCap 2006-RR7. We also affirmed our 'CCC (sf)' 
ratings on classes C and D from ARCap 2004-RR3 and removed them from 
CreditWatch with negative implications (see list).

The downgrades and affirmations reflect our analysis of the transactions' 
liability structures and the credit characteristics of the underlying 
collateral using our global criteria for rating collateralized debt 
obligations (CDOs) of pooled structured finance assets. The downgrades to 'D 
(sf)' on class A-D and A from ARCap 2006-RR7 also reflect the deferred 
interest on the classes that we expect will continue for the foreseeable 
future.

The global CDOs of pooled structured finance assets criteria include revisions 
to our assumptions on correlations, recovery rates, and the collateral's 
default patterns and timings. The criteria also include supplemental stress 
tests (largest obligor default test and largest industry default test). The 
rating on class B from ARCap 2004-RR3 is a result of the application of the 
largest obligor test.  

ARCap 2004-RR3 
According to the June 21, 2012, trustee report, ARCap 2004-RR3 was 
collateralized by 42 CMBS classes ($321.3 million, 100%) from 15 distinct 
transactions issued between 1999 and 2004. Approximately 16.3% of the 
collateral are rated or credit estimated to be 'D (sf)'. 

ARCap 2006-RR7
According to the June 27, 2012, trustee report, ARCap 2006-RR7 was 
collateralized by 23 CMBS classes ($125.6 million, 23.9%) from 19 distinct 
transactions issued between 1999 and 2004, as well as 10 re-REMIC classes 
($399.5, 76.1%) from two distinct transactions. Approximately 93.8% of the 
collateral are rated or credit estimated to be 'D (sf)'. 

According to the June trustee report, accumulated deferred interest totaled 
$58.7 million and has affected all classes in the transaction. The deferred 
interest resulted from interest shortfalls on the underlying CMBS 
certificates, primarily due to the master servicer's recovery of prior 
advances, appraisal subordinate entitlement reductions (ASERs), servicers' 
nonrecoverability determinations for advances, and special servicing fees. 
Classes A-D and A have remaining deferred interest of $1.7 million for the 
most recent period. 

Standard & Poor's will continue to review whether, in its view, the ratings 
assigned to the notes remain consistent with the credit enhancement available 
to support them and take rating actions as it determines necessary.
 
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT

SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating 
relating to an asset-backed security as defined in the Rule, to include a 
description of the representations, warranties and enforcement mechanisms 
available to investors and a description of how they differ from the 
representations, warranties and enforcement mechanisms in issuances of similar 
securities. The Rule applies to in-scope securities initially rated (including 
preliminary ratings) on or after Sept. 26, 2011. 

If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this 
credit rating report is available atRELATED CRITERIA AND RESEARCH 
 
     -- Global CDOs Of Pooled Structured Finance Assets: Methodology And 
Assumptions, Feb. 21, 2012
     -- Global Structured Finance Scenario And Sensitivity Analysis: The 
Effects Of The Top Five Macroeconomic Factors, Nov. 4, 2011
     -- Rating U.S. CMBS In The Face Of Interest Shortfalls, Feb. 23, 2006
     -- General Cash Flow Analytics For CDO Securitizations, Aug. 25, 2004 
 
 
RATINGS LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE

ARCap 2004-RR3 Resecuritization Inc.
Commercial mortgage-backed securities pass-through certificates series 
2004-RR3 
                       Rating
Class            To               From
A-2              B (sf)           B+ (sf) / Watch Neg
B                CCC- (sf)        CCC+ (sf) / Watch Neg

ARCap 2006-RR7 Resecuritization Inc.
Commercial mortgage-backed securities pass-through certificates series 
2006-RR7 
                       Rating
Class            To               From
A-D              D (sf)           CCC+ (sf) / Watch Neg
A                D (sf)           CCC+ (sf) / Watch Neg

RATINGS AFFIRMED AND REMOVED FROM CREDITWATCH NEGATIVE

ARCap 2004-RR3 Resecuritization Inc.
Commercial mortgage-backed securities pass-through certificates series 
2004-RR3 
                       Rating
Class            To               From
C                CCC- (sf)        CCC-(sf) / Watch Neg
D                CCC- (sf)        CCC- (sf) / Watch Neg

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