March 14, 2012 / 8:38 PM / 6 years ago

TEXT-S&P raises Merrill Lynch Mortgage 1998-C3 class E rating

March 14 - OVERVIEW	
     -- We raised our rating to 'AA (sf)' from 'AA- (sf)' on class E from 	
Merrill Lynch Mortgage Investors Inc.'s series 1998-C3, a U.S. CMBS 	
transaction.	
     -- We also affirmed our ratings on five other classes from the same 	
transaction.	
     -- Our rating actions reflect our analysis of the transaction, including 	
a review of the credit characteristics of the remaining collateral, the 	
transaction structure, and the liquidity available to the trust. The upgrade 	
further reflects increased credit enhancement, as well as the transaction's 	
overall strong credit metrics.	
 	
NEW YORK (Standard & Poor's) March 14, 2012--Standard & Poor's Ratings 	
Services today raised its rating to 'AA (sf)' from 'AA- (sf)' on the class E 	
commercial mortgage pass-through certificate from Merrill Lynch Mortgage 	
Investors Inc.'s series 1998-C3, a U.S. commercial mortgage-backed securities 	
(CMBS) transaction. In addition, we affirmed our ratings on five other classes 	
from the same transaction.	
	
Our rating actions reflect our analysis of the transaction, including a review 	
of the credit characteristics of the remaining collateral, the transaction 	
structure, and the liquidity available to the trust. The upgrade of class E 	
further reflects increased credit enhancement, as well as the transaction's 	
overall strong credit metrics. Excluding five defeased loans ($15.8 million, 	
16.2%), we calculated a weighted average debt service coverage (DSC) of 1.87x 	
for the remaining loans in the trust based on servicer-reported figures. Our 	
adjusted DSC and loan-to-value (LTV) ratio were 1.42x and 56.4%, respectively. 	
We also considered the amount of nondefeased loans maturing through year-end 	
2013 ($63.2 million, 64.8%).	
	
The affirmed ratings reflect subordination and liquidity support levels that 	
are consistent with the current ratings. We affirmed our 'AAA (sf)' rating on 	
the class IO interest-only (IO) certificate based on our current criteria.	
	
TRANSACTION SUMMARY	
	
As of the Feb. 16, 2012, trustee remittance report, the collateral pool 	
balance was $97.7 million, which is 15.3% of the balance at issuance. The pool 	
includes 21 loans, down from 139 loans at issuance. There are five fully 	
defeased loans in the pool ($15.8 million, 16.2%). The master servicer, Wells 	
Fargo Commercial Mortgage Servicing (Wells Fargo), provided financial 	
information for 99.2% of the nondefeased pool balance, 27.1% of which was 	
full-year 2010 data and the reminder was partial-year 2011. 	
	
According to the Feb. 16, 2012, trustee remittance report, the transaction has 	
experienced $39.3 million in realized losses to date from 11 assets. There are 	
currently no loans with the special servicer, or on the master servicer's 	
watchlist. All of the loans have reported DSCs greater than 1.00x.	
	
SUMMARY OF TOP 10 LOANS SECURED BY REAL ESTATE	
	
The top 10 loans secured by real estate have an aggregate outstanding balance 	
of $76.4 million (78.2%). Using servicer-reported numbers, we calculated a 	
weighted average DSC of 1.89x for the top 10 loans. Our adjusted DSC and LTV 	
ratio for the top 10 loans are 1.41x and 56.9%, respectively. Details of the 	
three largest loans ($57.8 million, 59.1%) are as follows:	
	
The 1700 Broadway loan ($46.8 million, 47.9%) is the largest loan in the pool 	
and is secured by a 581,354 sq.-ft. office building in New York. The master 	
servicer reported a DSC of 2.09x for nine months ended Sept. 30, 2011, and 	
86.6% occupancy according to the September 2011 rent roll. The loan has an 	
anticipated repayment date of Sept. 1, 2013.	
	
The BJ's Wholesale Club loan ($5.8 million, 5.9%) is secured by a 	
104,708-sq.-ft. retail property in Philadelphia and is 100% occupied by BJ's 	
Wholesale Club. The master servicer reported a DSC of 1.35x for year-end 2010. 	
The balloon loan and matures on Oct. 1, 2013.	
	
The Republic Beverage Building loan ($5.2 million, 5.3%) is secured by a 	
384,895-sq.-ft. industrial property in Grand Prarie, Texas, and is 100% 	
occupied by Republic Beverage Building Co. The master servicer reported a DSC 	
of 1.16x for year-end 2010. The fully amortizing loan matures on Nov. 1, 2018.	
	
Standard & Poor's stressed the remaining collateral in the pool according to 	
its current criteria. The resultant credit enhancement levels are consistent 	
with our raised and affirmed ratings.	
	
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 Reports included in this 	
credit rating report are available atRELATED CRITERIA AND RESEARCH	
 	
     -- Global Structured Finance Scenario And Sensitivity Analysis: The 	
Effects Of The Top Five Macroeconomic Factors, published Nov. 4, 2011.	
     -- U.S. Government Support In Structured Finance And Public Finance 	
Ratings, published Sept. 19, 2011.	
     -- Updated Defeasance Criteria For U.S. CMBS Transactions, published Aug. 	
16, 2011.	
     -- U.S. CMBS Rating Methodology And Assumptions For Conduit/Fusion Pools, 	
published Nov. 3, 2010.	
     -- Methodology And Assumptions For Analyzing The Major Property Types In 	
U.S. CMBS Transactions, published June 14, 2010.	
     -- Global Methodology For Rating Interest-Only Securities, published 	
April 15, 2010.	
     -- U.S. CMBS 'AAA' Scenario Loss And Recovery Application, published July 	
21, 2009.	
     -- Standard & Poor's Defeasance Criteria For U.S. CMBS Transactions, 	
published April 4, 2003.	
 	
 	
RATING RAISED	
	
Merrill Lynch Mortgage Investors Inc.	
Commercial mortgage pass-through certificates series 1998-C3	
            Rating	
Class    To         From      Credit enhancement (%)	
E        AA (sf)    AA- (sf)                   46.13	
 	
RATINGS AFFIRMED	
	
Merrill Lynch Mortgage Investors Inc.	
Commercial mortgage pass-through certificates series 1998-C3	
	
Class      Rating        Credit enhancement (%)	
C          AAA (sf)                       93.52	
D          AA+ (sf)                       54.30	
F          BB (sf)                        10.17	
G          B (sf)                          5.27	
IO         AAA (sf)                         N/A	
 	
N/A-Not applicable.

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