Fitch Affirms TimberStar Trust I, Series 2006-1

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed all classes of TimberStar Trust I, series 2006-1, commercial mortgage pass-through certificates. A complete list of rating actions follows at the end of this release.

KEY RATING DRIVERS

Collateral performance is affected by fluctuations of supply and demand and pricing in the wood products market. The two sectors of the economy that most directly influence the demand for timber are housing and pulp and paper. The decline in home construction during the recession has adversely impacted the performance of the portfolio but current indicators point to a recovery in that sector. Should timber demand increase over the coming years the Rating Outlooks on classes D, E and F could become stable. Upgrades are unlikely given the volatility of the timber market. Should the cash flow show further deterioration downgrades to classes D, E and F are possible.

The transaction is a single borrower, interest-only loan with an expected repayment date of Oct. 15, 2016. As of the November 2015 distribution date, the transaction balance is $800 million, unchanged since issuance.

Collateral for the loan is a first-priority mortgage lien on timberlands located in Texas (43% of the total acreage), Louisiana (31%), and Arkansas (26%).

At issuance total acreage was 874,490 of which 99,993 was non-mortgage acreage considered higher and better use (HBU) land that is expected to be sold. Timber growing on the HBU land is pledged as security for the trust; however, any proceeds from the sale of the land will not be pledged to the trust. As of September 2015, HBU has been reduced by 60,381 acres to 39,612 acres, resulting in total acreage of 813,899.

The servicer reported September 2015 trailing 9 month debt service ratio was 1.17x compared to issuance of 1.41x. The total harvest volume for this same period was just over 2 million tons. Harvest volume has been kept intentionally low due to low demand as a result of the economic downturn and continued weakness in home building. Fitch reviewed the borrower prepared September 2015 trailing-nine-month financial statements, 2015 budget and harvest plan, and a December 2014 appraisal. The annual appraised value as of YE 2014 was up approximately 5% from YE 2013 due primarily to natural forest growth combined with lower than anticipated harvest volumes. Fitch will review the full year 2015 financial statements and YE 2015 appraisal when they become available.

RATING SENSITIVITIES

While the appraised value has improved since issuance, affirmations and the Negative Outlook on classes D, E and F are warranted due to the significant volatility recently exhibited in commodity prices and the continued depressed demand for wood and paper products. Although demand is projected to increase, these classes remain vulnerable to downgrades until a sustained uptrend in performance occurs.

DUE DILIGENCE USAGE

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

Fitch has affirmed the ratings as follows:

--$400,000,000 class A at 'AAA'; Outlook Stable;

--$80,000,000 class B at 'AA'; Outlook Stable;

--$80,000,000 class C at 'A'; Outlook Stable;

--$80,000,000 class D at 'BBB'; Outlook Negative;

--$30,000,000 class E at 'BBB-'; Outlook Negative;

--$130,000,000 class F at 'BB'; Outlook Negative.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 27 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870009

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

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

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=996343

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=996343

Endorsement Policy

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

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151209006336/en/

Fitch Ratings, Inc.
Primary Analyst
R. Brook Sutherland
Senior Director
+1-312-606-2346
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations
Sandro Scenga, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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