Fitch Upgrades Seven Classes of CSMC 2006-C1

The following is from Fitch Ratings on January 29:

Fitch Ratings has upgraded seven and affirmed nine classes of Credit Suisse Commercial Mortgage Trust (CSMC) commercial mortgage pass-through certificates, series 2006-C1. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

Upgrades to classes A-J through G reflect increased credit enhancement to the classes from significant loan payoffs as 206 loans, $1.3 billion, have paid in full since the last rating action. An additional $12.8 million in proceeds were received in connection with the liquidation of two specially serviced assets and the late payoff of one maturing loan.

Fitch modeled losses of 16.2 percent of the remaining pool; expected losses on the original pool balance total 5.1 percent, including $103.3 million (3.4 percent of the original pool balance) in realized losses to date. There are currently 14 loans (14.9 percent of the pool) in special servicing, seven of which are new transfers since the prior review in September 2015. Loan maturities are concentrated over the next year, with approximately 48 percent of the pool maturing through the end of February (including loans maturing this month) and 12 percent through the remainder of 2016.

As of the January 2016 distribution date, the pool's aggregate principal balance has been reduced by 90 percent to $300.7 million from $3.01 billion at issuance. Per the servicer reporting, two loans (3 percent of the pool) are defeased. Interest shortfalls are currently affecting classes H through S.

The largest contributor to expected losses (5.6 percent of the pool) is a multi-note loan secured by a 179,947 square foot (sf) office property located in Tampa, FL. The loan was previously in special servicing between April 2010 and April 2013 due to imminent default. The loan was modified in November 2011 and bifurcated into an A/B note structure with a $12 million A note and $4.7 million B note. The modification also included a 12-month term extension to March 2017. The loan is performing under the modification and the servicer-reported debt service coverage ratio (DSCR) was 1.13x on the A note as of second quarter 2015. Times Publishing Company occupies 12 percent of the property's net rentable area (NRA) with a lease expiration date in February 2016. Per servicer watchlist commentary, the borrower has been contacted for property updates and the latest rent roll, but no other information was provided. Occupancy at the property remains low and was reported at 66 percent as of July 2015, compared to 63.6 percent at year-end (YE) 2014. Fitch modeled a significant loss based on the loan's total leverage.

The second largest contributor to expected losses is a Fitch Loan of Concern (5.5 percent of the pool) secured by a 439,224 sf regional mall located in Muskogee, OK. The mall is anchored by Dillard's (17.1 percent NRA through May 2019), JC Penney (11.8 percent NRA through September 2017), and Dickinson Theaters (7.5 percent NRA through January 2018). The property's performance declined in 2015 after Sears (17.5 percent NRA) vacated upon their December 2014 lease expiration. The servicer-reported occupancy and DSCR were 69.3 percent and 1.11x, respectively, as of third quarter 2015, down from 88 percent and 1.31x at YE 2014. The loan is scheduled to mature on March 1. Per servicer commentary, the borrower has stated that they will not be able to refinance or sell the property to pay off the loan. While not currently on the servicer's watchlist, the loan has been designated as a Fitch Loan of Concern due to the uncertainty of the upcoming maturity and declining property performance.

The third largest contributor to expected losses is a specially-serviced loan (2.7 percent of the pool), which is secured by a 129,899 sf office building located in Arlington, TX. The loan initially transferred to special servicing between May 2010 and January 2011 due to imminent default, during which time a loan modification was completed, including a 72-month term extension to a new maturity date of November 2016. The loan transferred back to special servicing in July 2015 due to imminent default. Per special servicer commentary, the property was 8 percent occupied as of December 2015, as the largest tenant, Southwestern Bell Telephone (53 percent NRA) vacated upon their lease expiration in June 2015. The special servicer is now reportedly pursuing foreclosure.

RATING SENSITIVITIES

The Stable Outlooks on classes A-J through G reflect the increasing credit enhancement and expected continued paydown of the classes. Upgrades were limited due to the significant percentage of Fitch Loans of Concern, including upcoming maturities and several of the top 15 loans with occupancy declines, as well as specially serviced loans. Further upgrades to classes A-J through G are possible if the specially serviced assets are disposed and losses are lower than expected. Downgrades are possible if additional loans transfer to special servicing and losses are higher than expected. Fitch will continue to monitor the changing collateral given the large percentage of the pool maturing in the near future. Ratings on the distressed classes may be subject to further downgrades as losses are realized.

DUE DILIGENCE USAGE

No third-party due diligence was provided or reviewed in relation to this rating action.

Fitch has upgraded the following classes and assigns or revises Rating Outlooks as indicated:

--$40 million class A-J to 'AAAsf' from 'AAsf'; Outlook Stable;

--$18.8 million class B to 'AAAsf' from 'AAsf'; Outlook Stable;

--$37.5 million class C to 'AAAsf' from 'Asf'; Outlook Stable;

--$33.8 million class D to 'AAsf' from 'BBBsf'; Outlook Stable;

--$22.5 million class E to 'BBBsf' from 'BBsf'; Outlook Stable;

--$33.8 million class F to 'BBsf' from 'Bsf'; Outlook Stable;

--$30 million class G to 'Bsf' from 'CCCsf'; Outlook Stable.

Fitch has affirmed the following classes as indicated:

--$33.8 million class H at 'CCCsf'; RE 95 percent.

--$30 million class J at 'CCsf'; RE 0 percent;

--$20.6 million class K at 'Dsf'; RE 0 percent;

--$0 class L at 'Dsf'; RE 0 percent;

--$0 class M at 'Dsf'; RE 0 percent;

--$0 class N at 'Dsf'; RE 0 percent;

--$0 class O at 'Dsf'; RE 0 percent;

--$0 class P at 'Dsf'; RE 0 percent;

--$0 class Q at 'Dsf'; RE 0 percent.

Classes L, M, N, O, P, and Q have been reduced to zero due to realized losses and are affirmed at 'Dsf', RE 0 percent. The class A-1, A-2, A-3, A-AB, A-4, A-1-A, and A-M certificates have paid in full. Fitch does not rate the class S or CCA certificates. Fitch previously withdrew the ratings on the interest-only class A-X and A-Y certificates.

Additional information is available at fitchratings.com.

Applicable Criteria

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)

https://fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=998663

Solicitation Status

https://fitchratings.com/gws/en/disclosure/solicitation?pr_id=998663

Endorsement Policy

https://fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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