Fitch Downgrades 2 Distressed Classes of BACM 2004-6

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has downgraded two and affirmed nine distressed classes of Banc of America Commercial Mortgage Inc., commercial mortgage pass-through certificates series 2004-6. A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERSThe downgrades are the result of significant expected losses on the pool. Two (98.5%) of the remaining three assets are real estate owned (REO) retail malls, one of which has recently sold. Limited future paydown is expected as the one performing loan, the Springbrook Plaza, (1.5%) scheduled monthly payment has been used to service fees and expenses. The loan is fully amortizing loan that matures in October 2019.

Fitch is modelling significant losses on the REO mall properties. Modeled losses are 74.5% of the remaining pool; expected losses on the original pool balance total 7.3%, including $10.5 million (1.1% of the original pool balance) in realized losses to date. As of the December 2015 distribution date, the pool's aggregate principal balance has been reduced by 91.7% to $79.9 million from $956.6 million at issuance. No loans are defeased. Interest shortfalls are currently affecting all remaining classes (D through P). Interest shortfalls could continue for the remaining life of the transaction as the trust continues to capture interest payments from the performing loan to service fees and expenses.

The largest contributor to expected losses is the REO Upper Valley Mall (41.6% of the pool), which is 496,895 square feet (sf) of a 750,377 sf regional mall located in Springfield, OH, approximately 25 miles northeast of Dayton. The loan was previously transferred to special servicing in June 2010 due to imminent default. In May 2011, the original $47 million loan was modified and bifurcated into an A note ($27 million) and a B note ($20 million) and the maturity date was extended to July 2014. The loan returned to the master servicer in 2011 but transferred back to the special servicer in March 2014 after the borrower, an affiliate of Simon Property Group, gave notice that it will not be able to repay the loan at maturity. The loan became REO through a deed in lieu of foreclosure in November 2014.

Anchors JCPenney and Macy's closed earlier in 2015 and there is an additional vacant anchor space which has been under a short-term lease to a local museum. Sears is currently in operation in their anchor-owned store. The property sold via auction and is scheduled for completion before year-end 2015. Fitch is expecting significant losses on this asset based on the anticipated low reported sales price.

The next largest contributor to expected losses is the REO Steeplegate Mall (44.8%), a 482,097 sf regional mall located in Concord, NH. The loan was previously transferred to special servicing in April 2009 due to bankruptcy of the loan's sponsor, General Growth Properties. The loan was restructured with the maturity extended from 2009 to 2014. The loan transferred to special servicing again in April 2014 as a result of the borrower sending notice to the master servicer that they would not be able to repay the loan at the October 2014 maturity and became REO in May 2015.

Steeplegate Mall is anchored by Sears (lease maturity July 2020), The Bon Ton (lease maturity Jan. 2020), and JCPenney (lease maturity July 2020). According to the December 2014 rent roll, the property was 84% occupied, compared to 93% at issuance. Property net operating income (NOI) has declined significantly since issuance. The YE2014 NOI is 71% below issuance, which is mainly attributed to lower base rents, lower expense reimbursements, and lower percentage rents. For YE2014, the NOI debt service coverage ratio (DSCR) was 0.57x compared to 1.61x at issuance. The special servicer is working with a broker to finalize terms in order to list the property for sale.

The performing loan, Springbrook Plaza (1.5%), is collateralized by a supermarket anchored retail center located in Newberg, OR. Performance has been consistent since issuance with the subject's current occupancy at 95% and a DSCR of 2.13x as of YE2014. The second largest tenant, Rite Aid, recently exercised their last renewal option and is in negotiation to amend the lease to secure more renewal options. The anchor tenant's lease, Safeway, does not expire until June 2022. The loan is fully amortizing with a maturity date in Oct. 2019.

RATING SENSITIVITIESThe rating of class C reflects the potential for partial recovery from the resolution of the specially serviced loans. If greater than 100% losses are realized before the class is paid off, the rating could be downgraded. The distressed classes are subject to further rating actions as losses are realized.

DUE DILIGENCE USAGE

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

Fitch downgrades the following classes:

--$9.6 million class E to 'CCsf' from 'CCCsf', RE15% from RE 0%;--$14.3 million class F to 'Csf' from 'CCCsf', RE 0%;

Fitch affirms the following classes and revises Recovery Estimates (REs) as indicated:

--$1.9 million class D at 'CCCsf'', RE 100% from 65%;--$9.6 million class G at 'Csf', RE 0%,--$13.2 million class H at 'Csf', RE 0%;--$6 million class J at 'Csf', RE 0%;--$4.8 million class K at 'Csf', RE 0%.--$4.8 million class L at 'Csf', RE 0%;--$3.6 million class M at 'Csf', RE 0%;--$3.6 million class N at 'Csf', RE 0%;--$4.8 million class O at 'Csf', RE 0%.

Classes A-1, A-2, A-3, A-4, A-AB, A-5, A-J, B, and C have repaid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the ratings on the interest-only class X-C and X-P certificates.

Additional information is available at www.fitchratings.com.

Applicable CriteriaGlobal Structured Finance Rating Criteria (pub. 06 Jul 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395

Additional DisclosuresDodd-Frank Rating Information Disclosure Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=996988Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=996988Endorsement Policyhttps://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/20151217006581/en/

Fitch Ratings
Primary Analyst
Jay Bullie, CFA
Associate Director
1-312-368-2079
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Committee Chairperson
Britt Johnson
Senior Director
+1-312-606-2341
or
Media Relations
Sandro Scenga, New York, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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