Fitch Places 247 U.S. CMBS Bonds From 2005 Vintage on Rating Watch Negative.

NEW YORK -- Fitch Ratings has placed 247 U.S. commercial mortgage-backed securities (CMBS) bonds in 22 fixed-rate, vintage 2005 transactions on Rating Watch Negative. The Rating Watch Negative placements are the result of Fitch's initial review of the entire 2005 fixed-rate vintage based prospective future performance.

Fitch rates 794 classes in 34 fixed-rate, vintage 2005 transactions. Prior to this review 80 classes in seven deals had been placed on Rating Watch Negative due to performance issues. Senior and mezzanine 'AAA' classes are expected to maintain their ratings.

In total, $9.3 billion of bonds have been placed on Rating Watch Negative or are already on Rating Watch Negative as follows:

--$3 billion A-J or below classes, currently rated 'AAA';

--$1.4 billion of classes currently rated 'AA';

--$1.4 billion of classes currently rated 'A';

--$2 billion of classes currently rated 'BBB';

--$883.5 million of classes currently rated 'BB';

--$642.9 million of classes currently rated 'B'.

On average, these transactions have 4.3% of loans in special servicing and 13.1% Fitch Loans of Concern, compared to recent vintages as follows:

2006: 7.2% specially serviced, 18.3% loans of concern;

2007: 7.1% specially serviced, 25.9% loans of concern;

2008: 9.6% specially serviced, 23.7% loans of concern.

While these transactions are currently performing better than those recently reviewed and benefit from defeasance (a weighted average of 5.4%), all vintages are now susceptible to the severe economic conditions experienced over the past few years. Fitch recently reviewed the 2006-2008 vintages using stressed cash flow and market values declines using a revised set of criteria as published in 'Surveillance Methodology for Recent Vintage U.S. CMBS', published July 9, 2009. In reviewing the 2005 vintage, Fitch modified this criteria slightly to determine defaults and losses.

To determine potential defaults for each loan Fitch assumed cash flow would decline 10% from year-end 2008, which is consistent with the analysis used in its review of the recent vintage transactions whereby cash flow was assumed to decline 15% from year-end 2007 projected over a three year period. If the stressed cash flow would cause the loan to fall below 0.95 times (x), Fitch assumed the loan would default during the term.

To determine losses, Fitch used the above stressed cash flow, and applied a market cap rate, ranging between 7.5% and 9.5%, for each specific property type. If the loan balance at default is less than the stressed cash flow the loan would realize that loss.

The Rating Watch Negative placements will be resolved when Fitch performs an in-depth review of each transaction. The in-depth review, again similarly to the 2006 through 2008 vintage review, would involve a thorough analysis of the top 15 loans, any specially serviced loans and additional Fitch Loans of Concern. Fitch expects the majority of the classes will be downgraded approximately one category when the Negative Watch is resolved.

A complete list of today's Rating Watch Negative placements can be found at Fitch Ratings> Special Reports> 2005 Rating Watch Negative, 22 Oct. 2009.

Additional information is available at www.fitchratings.com.

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