S&P: First Union-Lehman Brothers Commercial Mortgage Trust Series 1997-C2 Rating Raised On Class J
Our upgrade on the certificates follow our analysis of the transaction, primarily using our criteria for rating U. S. and Canadian CMBS transactions, which included a review of the credit characteristics and performance of the remaining loans in the pool, the transaction’s structure, and the liquidity available to the trust. The raised rating also reflects our expectation of theavailable credit enhancement for this class, which we believe is greater than our most recent estimate of necessary credit enhancement for the respective rating levels and the reduced trust balance.
While available credit enhancement levels suggest further positive rating movement on class J, our analysis also considered the susceptibility of the class to interest shortfalls given the low expected liquidity support ($6,819). In addition, we also considered the transaction's exposure to primarily single-tenant-occupied properties securing the loans, three ($5.2 million, 13.1%) of which faces upcoming maturity in 2017. They are the Ralphs 67th Street, Rite-Aid Pharmacy - Manhattan Blvd, and Rite-Aid Pharmacy – Main Street loans.
As of the July 18, 2016, trustee remittance report, the collateral pool balance was $40.1 million, which is 1.8% of the pool balance at issuance. The pool currently includes 19 loans, down from 422 loans at issuance. One of these loans ($11.4 million, 28.5%) is defeased, seven ($4.3 million, 10.8%) are on the master servicer's watchlist, and no loans are reported with the special servicer. The master servicer, Wells Fargo Bank N. A., reported financial information for 87.8% of the nondefeased loans in the pool, of which81.7% was year-end 2015 data, and the remainder was year-end 2014 data.
Excluding the defeased loan, we calculated a 1.08x S&P Global Ratings' weighted average debt service coverage (DSC) and 42.0% S&P Global Ratings' weighted average loan-to-value (LTV) ratio using a 7.76% S&P Global Ratings' weighted average capitalization rate for the remaining loans. The top 10 nondefeased loans have an aggregate outstanding pool trust balance of $26.6 million (66.4%). Using servicer-reported numbers, we calculated a S&P Global Ratings' weighted average DSC and LTV of 1.10x and 39.6%, respectively, for the top 10 nondefeased loans.
To date, the transaction has experienced $64.7 million in principal losses, or2.9% of the original pool trust balance.