Fitch Ratings Alerts CMBS Investors To Impact Of Kmart Exposure.

Business Editors

NEW YORK--(BUSINESS WIRE)--Feb. 12, 2002

Fitch Ratings, the international rating agency, today alerts commercial mortgage securities (CMBS) investors about the impact Kmart's bankruptcy filing will have on bonds rated by Fitch. While loans secured by properties with Kmart as a tenant typically represent less than 5% of the total loans within a multi-borrower conduit transaction, Fitch reviewed 104 CMBS deals to assess the Kmart impact. Of those deals, the lower rated classes on nine deals have been put on Rating Watch Negative due to insufficient projected credit enhancement. Deals that Fitch affirms are listed at the end of this press release. Deals that have been put on Rating Watch Negative are listed below. Individual press releases dated Feb. 12, 2002, provide more detail on each transaction.

-- CSFB 1998-C1, 8.11% Kmart exposure, Cls I, 'B-', Rating Watch Negative

-- CSFB 1998-C2, 3.58% Kmart exposure, Cls I, 'B-', Rating Watch Negative

-- DLJ 2000-CKP1, 6.11% Kmart exposure, Cls B-9, 'B-', Rating Watch Negative

-- GS 1998-C1, 2.96% Kmart exposure, Cls J, 'B-', Rating Watch Negative

-- MCF 1997-MC1, 2.97% Kmart exposure, Cls J, 'CCC', Rating Watch Negative

-- MCF 1998-MC2, 2.29% Kmart exposure, Cls K, 'B-', Rating Watch Negative

-- Merrill Lynch 1995-C2, 11.48% Kmart exposure, Cls F, 'B', Rating Watch
Negative

-- PNC 2000-C1, 2.17% Kmart exposure, Cls N, 'CCC', Rating Watch Negative

-- SBMS 2000-C2, 2.12% Kmart exposure, Cls N, 'B-', Rating Watch Negative

In addition to the deals listed above, Fitch Ratings on Jan. 23, 2002 downgraded Kmart Funding Corporation 1994, Kmart Pass-Though Trust 1995, and CNC 1994-1 and on Feb. 11, 2002, Merrill Lynch 1998-C1-CTL. Please see the individual press releases for more information on these deals.

Kmart filed for bankruptcy protection on Jan. 22, 2002, but the full impact of the filing will not be apparent for many months. At the bankruptcy hearing, the court approved the retailer's plan to reject leases on 328 stores. Although filing for Chapter 11 protection allowed Kmart to immediately reject leases, investors will not learn which of the approximately 1,770 remaining stores the company will affirm until the bankruptcy court accepts Kmart's bankruptcy plan.

"Fitch Ratings believes it is shortsighted to focus only on those properties with leases Kmart has publicly announced it will close," said Eileen McDonald, Associate Director, Fitch Ratings. "As the full impact of Kmart's filing is realized, vendors that are standing on the sidelines may ultimately choose to reduce or stop their shipments of merchandise to Kmart, a process that could lead to further declines in consumer satisfaction and ultimately more announcements of store closings."

When determining which bonds are most affected by the Kmart exposure, Fitch compared the amount of credit enhancement to a specific tranche versus an expected loss percentage. The expected loss percentage is based on the store type, from a Kmart CTL to KMART as one tenant in a large center, taking into account rejected leases, adjusted for the diversity of Kmart exposure in the deal and expected loss on other loans in the pool. Fitch's methodology is as follows: (i) a loss factor of 0% to 75% was applied on the percentage loan balance based on Kmart Net Rentable Area (NRA); (ii) a pooling factor was applied based on the number of Kmarts within the pool and (iii) an additional loss factor was taken on the total loans of concern (exclusive of Kmart) within the pool. The calculation resulted in an expected loss for the pool.

Based on the resultant expected loss, Fitch then determined what action should be taken. If the expected loss approximated or was less than the lowest class(es) subordination level, the rating on that class(es) was affirmed. If the expected loss exceeded the lowest class(es) subordination level, the class was put on Rating Watch Negative. Fitch Ratings believes this is an appropriate analysis given the uncertainty of future Kmart closings and the lack of sales figures for the individual stores.

The full impact of Kmart's filing will take some time to unfold. Kmart plans to do a full review of its operations by March 20, 2002 that could result in more store closings. Fitch will continue to closely monitor transactions with Kmart exposure and take the appropriate action as further news is disclosed.

Deals Affirmed by Fitch Ratings:

-- AMRESCO 1997-C1

-- ASC 97-D4

-- Bear Stearns 1998-C1

-- Bear Stearns 1999-WF2

-- Bear Stearns 2000-WF1

-- CBA 1993-C1

-- CAPCO 1998-D7

-- Chase 1996-C1

-- Chase 1997-C1

-- Chase 1998-C2

-- Chase 1999-C2

-- Chase 2000-C1

-- Chase 2000-2

-- Chase 2000-C3

-- CMAC 1996-C1

-- CMAT 1999-C2

-- COMM 1999-1

-- Contract Receivables 1999-1

-- CSFB 1999-C1

-- CSFB 2001-CK1

-- CSFB 2001-CF2

-- CSFB 2001-CK3

-- CSFB 2001-CP4

-- DLJ 1998-CF2

-- DLJ 98-CF1

-- DLJ 98-CG1

-- DLJ 1999-CG1

-- DLJ 1999-CG2

-- First Union Lehman Brothers 1997-C2

-- First Union National Bank 1999-C4

-- FU 1997-C1

-- FUNB-CMB 99-C2

-- FUNB 2000-C2

-- GE Capital MC 2000-1

-- GECCMC 2001-C1

-- GMAC 1997-C1

-- GMAC 1997-C2

-- GMAC 1998-C1

-- GMAC 1998-C2

-- GMAC 1999-C1

-- GMAC 1999-C2

-- GMAC 1999-C3

-- GMAC 2000-C2

-- GMAC 2000-C3

-- GMACCM 1999-CTL

-- GS 1996-PL

-- GS 1997-GL I

-- Heller 2000 PH-1

-- JP Morgan Chase 2001-C1

-- JP Morgan Chase 2001-CIBC2

-- JPM 1997-C5

-- JPM 1999-C7

-- JPM 2000-C9

-- JPM 2001-CIBC 1

-- KRT Origination Corp

-- LB 1999-C1

-- LB-UBS 2000-C3

-- LB-UBS 2001-C2

-- LB-UBS 2001-C3

-- MCF 1996-MC1

-- MCF 1997-MC2

-- MCF 1998-MC1

-- Merrill Lynch 1994-C1

-- Merrill 1996-C1

-- Merrill 1997-C1

-- Merrill Lynch 1997-C2

-- Midland 1996-C1

-- Midland 1996-C2

-- MLMI 1999-C1

-- MLMI 95-C1

-- Morgan Stanley 1998-WF1

-- Morgan Stanley 1998-WF2

-- Morgan Stanley 1998-XL1

-- Morgan Stanley 1999-RM1

-- MS 97-HF1

-- MS 97-XL1

-- MS 98-HF1

-- MS 99-CAM1

-- MSDW 2001-PPM

-- MSDW 2001-Top1

-- MSDW 2001-Top3

-- NASC 96-MDV

-- NationsLink 1999-2

-- Nomura 1998-D6

-- PMAC 1999-C1

-- Pru 1999-NRF1

-- Pru Rock 2001-C1

-- SASCO 1996-CFL

-- SASCO 1997-LL1

-- TIAA 2001-C1

-- Vornado 2000