Fitch Downgrades Two Distressed Classes of MSCI 2005-IQ9

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has downgraded two and affirmed 12 classes of Morgan Stanley Capital I Trust's commercial mortgage pass-through certificates, series 2005-IQ9. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The downgrades are due to increased certainty of losses to the already distressed classes. The affirmations of the remaining Fitch rated classes reflect stable performance of the pool and pay down since the last rating action. Fitch modeled losses of 6.9% of the remaining pool; expected losses on the original pool balance total 3.1%, including $29.9 million (2% of the original pool balance) in realized losses to date. There are currently three specially serviced assets (47.7% of the pool) including the largest loan, the Central Mall Portfolio, which accounts for 45.3% of the pool.

As of the August 2015 distribution date, the pool's aggregate principal balance has been reduced by 83.1% to $258.6 million from $1.53 billion at issuance. There are currently 67 loans remaining in the pool with the top 10 loans accounting for 67.5%; the largest loan represents 45% of the pool and is specially serviced. None of the loans are defeased. Excluding the specially serviced loans, remaining maturities are concentrated in 2017 (20.2% of the pool), 2018 (6.8%), and 2019 (13.9%). Interest shortfalls are currently affecting classes K through P.

The largest contributor to expected losses (45.3% of the pool) is the specially-serviced Central Mall Portfolio, which is secured by a three-property mall portfolio (1,752,673 square feet [sf]). The assets are located in tertiary markets (Lawton, OK, Texarkana, TX, and Port Arthur, TX) and anchor tenants in each mall include Sears, JC Penney, and Dillard's. The loan transferred to special servicing in October 2014 for imminent maturity default after the borrower expressed concerns over its ability to refinance the portfolio prior to the December 2014 maturity date. The loan maturity date was initially extended to June 2015 and a second extension was recently approved to June 2016. Per the special servicer, the borrower intends on selling the properties and is in active discussions with potential buyers; however, no sales contracts have been executed to date. As of year-end (YE) 2014, performance was stable with reported portfolio occupancy and NOI DSCR at 96% and 1.71x, respectively.

RATING SENSITIVITIES

The rating of the senior A-J class is expected to remain stable as it is anticipated that credit enhancement will increase due to scheduled pay down from amortization and loan pay-offs at maturity. Future upgrades to classes B and C are unlikely due to the risk of interest shortfalls to recur. Additionally, concerns remain with the largest loan; Fitch applied further stresses to the Central Mall Portfolio, which indicated that classes B and below are sensitive to fluctuations in loan performance. Rating Outlooks on classes E, F and G are Negative as they may be subject to future rating actions should realized losses on the Central Mall Portfolio and other Fitch Loans of Concern be greater than Fitch's expectations.

DUE DILIGENCE USAGE

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

Fitch has downgraded the following ratings:

--$5.7 million class J to 'CCsf' from 'CCCsf', RE 15%;

--$7.7 million class K to 'Csf' from 'CCsf', RE 0%.

Fitch has affirmed the following ratings:

--$112.4 million class A-J at 'AAAsf', Outlook Stable;

--$32.6 million class B at 'Asf', Outlook Stable;

--$11.5 million class C at 'Asf', Outlook Stable;

--$26.8 million class D at 'BBB+sf', Outlook Stable;

--$15.3 million class E at 'BBBsf', Outlook Negative;

--$15.3 million class F at 'BBsf', Outlook Negative;

--$11.5 million class G at 'Bsf', Outlook Negative;

--$17.2 million class H at 'CCCsf', RE 100%.

--$2.6 million class L at 'Dsf', RE 0%;

--$0 class M at 'Dsf', RE 0%;

--$0 class N at 'Dsf', RE 0%;

--$0 class O at 'Dsf', RE 0%.

The class A-1, A-1A, A-2, A-3, A-4, A-AB and A-5 certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the ratings on the interest-only class X-1, X-2 and X-Y certificates.

Additional information is available at www.fitchratings.com.

Applicable Criteria

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

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

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria (pub. 10 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=990685

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=990685

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/20150911005588/en/

Fitch Ratings
Primary Analyst
Martin Nunnally
Associate Director
+1-212-908-0871
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: [email protected]

Source: Fitch Ratings

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