Printer Friendly

Fitch Affirms Wachovia CRE CDO 2006-1.

NEW YORK -- Fitch Ratings has affirmed all classes of Wachovia CRE CDO 2006-1 (Wachovia CRE CDO) floating-rate notes as follows:

--$616,500,000 class A-1A at 'AAA';

--$68,500,000 class A-1B at 'AAA';

--$145,000,000 class A-2A at 'AAA';

--$145,000,000 class A-2B at 'AAA';

--$53,300,000 class B at 'AA';

--$39,000,000 class C at 'A+';

--$12,350,000 class D at 'A';

--$13,650,000 class E at 'A-';

--$24,700,000 class F at 'BBB+';

--$16,900,000 class G at 'BBB';

--$35,100,000 class H at 'BBB-';

--$13,000,000 class J at 'BB+';

--$14,950,000 class K at 'BB';

--$9,100,000 class L at 'BB-';

--$34,450,000 class M at 'B+';

--$16,250,000 class N at 'B';

--$6,500,000 class O at 'B-'.

Fitch's affirmation of the above classes is based on the stability of its performance parameters including maintaining an adequate reinvestment cushion and remaining within its other covenants.

Deal Summary:

Wachovia CRE CDO is a revolving commercial real estate (CRE) cash flow collateralized debt obligation (CDO) that closed on July 11, 2006. It was incorporated to issue $1,300,000,000 of floating-rate notes and preferred shares. Based on the April 17, 2008 trustee report and using Fitch categorizations, the CDO is substantially invested as follows: whole loans/A-notes (82%), B-notes and Junior Participations (6%), mezzanine loans (0.2%), and uninvested proceeds (11.8%). The CDO is also permitted to invest in commercial mortgage-backed securities (CMBS), CRE CDOs, real estate investment trust (REIT) debt, and synthetic assets.

The collateral asset manager is Structured Asset Investors, LLC (SAI), a wholly owned subsidiary of Wachovia Corporation. An affiliate, Wachovia Bank N.A.'s Structured Finance Group (SFG), is serving as sub-advisor. SFG is responsible for selecting assets and monitoring the portfolio. Wachovia CRE CDO has a five year reinvestment period, during which, if all reinvestment criteria are satisfied, principal proceeds may be used to invest in substitute collateral. The reinvestment period ends in September 2011.

Collateral Asset Manager:

The Structured Finance Group (SFG) is a commercial real estate loan (CREL) portfolio management team located within Wachovia Bank. SFG (rated 'CAM2-' as a CRE CDO asset manager by Fitch) focuses on providing non-recourse, transitional, and high leverage capital to the bank's CRE customer base. SFG benefits from the commercial bank's robust internal procedures and controls. Additionally, its lending activities are supported by the bank's commercial mortgage loan servicing unit Wachovia Securities (rated 'CPS2+/CMS2/CSS2' by Fitch).

For more details, refer to the Fitch's Asset Manager Profile on Wachovia Bank N.A.'s Structured Finance Group, available on the Fitch Ratings web site at www.fitchratings.com.

Performance Summary:

Since the last review, the Fitch as-is poolwide expected loss (PEL) has decreased slightly to 21.875% compared to the covenant of 25.875%. The CDO's reinvestment cushion of 4% remains below average. While no new loans have been purchased by the CDO since last review, three have been paid off (4.2%), including a prior Fitch Loan of Concern. The removal of these loans, which had a weighted average expected loss of 33.4%, resulted in the overall improved PEL. The majority of the loans remaining in the pool continue to progress towards stabilization; however, some loans have not met operating expectations. Expected losses for these loans were adjusted to account for their stalled or delayed business plans.

Although the cushion is below average relative to other CRE CDOs, the expectation is that the portfolio will continue to be well diversified, weighted predominantly in whole loans and A-notes, and secured by traditional property types. Wachovia's CREL origination platform is diverse and well established.

Additionally, the overcollateralization (OC) and interest coverage (IC) ratios of all classes have remained above their covenants, as of the April 2008 trustee report.

Collateral Analysis:

As of the April 2008 trustee report, the CDO is 88.1% invested in assets, including 7% allocated to future funding obligations. Due to loan payoffs, the percentage of whole loans and subordinate debt have both decreased slightly to 82% and 6.2%, respectively, since Fitch's last review. Uninvested proceeds have increased to 11.8% from 7.3% due to no new assets being purchased by the CDO since last review.

As of the April 2008 trustee report and based on Fitch categorizations, the CDO is within all its property type covenants. Office loans comprise the largest percentage of assets at 31.8% with multifamily the second largest at 24.1%. Non-traditional property type concentrations consist of land at 12.8% and hotels at 10.5%. The CDO is also within all its geographic location covenants with the highest percentage of assets located in California at 29.1%.

The pool has above average loan diversity relative to other CRE CDOs. Based on Fitch categorizations the pool currently consists of 64 loans and the Fitch Loan Diversity (LDI) score is 203, compared to the covenant of 244. No loan represents more than 5% of the ramped portfolio.

For a summary of the Fitch Loans of Concern and the 10 largest loans, please refer to the 'Wachovia Real Estate CDO 2006-1 CREL Surveyor Snapshot' on the Fitch Research web site, which will be available beginning June 4, 2008.

Rating Definitions:

The ratings of the class A and B notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the aggregate outstanding amount of principal by the stated maturity date. The ratings of the class C, D, E, F, G, H, J, K, L, M, N, and O notes address the likelihood that investors will receive ultimate interest and deferred interest payments, as per the governing documents, as well as the aggregate outstanding amount of principal by the stated maturity date.

Ongoing Surveillance:

Upgrades during the reinvestment period are unlikely given the pool could still migrate to the PEL covenant. The Fitch PEL is a measure of the hypothetical loss inherent in the pool at the 'AA' stress environment before taking into account the structural features of the CDO liabilities. Fitch PEL encompasses all loan, property, and poolwide characteristics modeled by Fitch.

Fitch will continue to monitor and review this transaction and will issue an updated Snapshot report after each committeed review. The surveillance team will conduct a review whenever there is approximately 15% change in the collateral composition, or semi-annually.

For more information on the Fitch Rating Methodology for CREL CDOs, see 'Rating Methodology for U.S. Revolving Commercial Real Estate Loan CDOs' dated Dec. 20, 2007, which is also available at www.fitchratings.com.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
COPYRIGHT 2008 Business Wire
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2008 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:Business Wire
Date:May 30, 2008
Words:1172
Previous Article:College, University Students Tackle Global, Local Water Issues Through Southern California World Water Forum.
Next Article:Fitch Takes Various Actions on 12 J.P. Morgan Alt-A Transactions.


Related Articles
Fitch Assigns Ratings to Wachovia CRE CDO 2006-1, Ltd.
Fitch Affirms Wachovia Bank CRE CDO 2006-1.
Fitch Affirms Wachovia Bank's CRE CDO Asset Manager Rating at 'CAM2-'.
Fitch Affirms Wachovia Bank CRE CDO 2006-1.
Fitch Affirms Vertical CRE CDO 2006-1.
The evolution of CRE CDOs: the volume of U.S. commercial real estate CDOs is expected to hit $50 billion this year. CRE CDOs are playing an...
Gramercy closes $1.1b CDO.
Fitch Affirms Guggenheim Structured Real Estate Funding 2006-3.
Fitch Affirms Wachovia CRE CDO 2006-1.
Fitch Affirms Marathon Real Estate CDO 2006-1, Ltd./LLC.

Terms of use | Copyright © 2017 Farlex, Inc. | Feedback | For webmasters