Fitch Takes Various Actions on Bear Stearns 2006-PWR13

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has upgraded one class, downgraded two classes and affirmed 11 classes of Bear Stearns Commercial Mortgage Securities Trust, 2006-PWR13, commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The upgrade to class A-J reflects paydown from loan liquidations and an increase in credit enhancement relative to expected losses. Despite the improved credit enhancement, Fitch limited its upgrade of class A-J and affirmed two other classes based on the high concentration of specially serviced loans with uncertain dispositions, possibility of an increase in interest shortfalls and binary risk associated with the pool's performing loans. The downgrades to two distressed classes are due to the high modeled losses on specially serviced assets.

Fitch modeled losses of 35% of the remaining pool; expected losses on the original pool balance total 8.4%, including realized losses to date. As of the October 2016 distribution date, the pool's aggregate principal balance has been reduced by 92.2% to $227.1 million from $2.9 billion at issuance. Interest shortfalls are currently affecting classes E, F and H through P.

High Percentage of Specially Serviced Loans: As of the October 2016 remittance, 16 loans (65.6% of the pool) are in specially servicing including six of the top 10 loans. The two largest loans in the pool defaulted during the term due to loss of tenants. The largest loan, First Industrial Portfolio (20.9% of the pool), is a portfolio of 21 flex industrial properties located outside of Atlanta, GA. The loan is listed as 30 days delinquent after transferring to special servicing in June 2014 for imminent default due to high vacancy. The second largest loan (11.6%), a mixed-use property located in suburban Wilmington, DE, transferred to special servicing in July 2015 as the largest tenant vacated and the sponsor has not been able to fill the vacancy.

Increased Pool Concentration: As the transaction is 10 years from issuance, the pool has realized approximately $2.5 billion in paydown and only 26 loans remain. Of the remaining loans, 40.1% is collateralized by retail properties and 32.5% by industrial properties.

High Realized Losses to Date: $165.3 million in realized losses which has reached from the non-rated class P up to class E as of the October 2016 remittance.

Defeasance: Three balloon loans (21.4% of the pool) are defeased with scheduled maturity dates in 2020.

RATING SENSITIVITIES

The Rating Outlook on class A-J remains Stable; however, an upgrade may be warranted as paydown occurs from loan liquidations and scheduled amortization prior to the maturity of the defeased loans in 2020. The Outlook for class B is expected to remain Stable as uncertainty regarding dispositions and pool concentrations offset potential increase in credit enhancement. Distressed classes may be subject to downgrades as losses are realized.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

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

Fitch has upgraded the following class as indicated:

--$43.6 million class A-J to 'Asf' from 'BBBsf'; Outlook Stable.

Fitch has downgraded the following classes:

--$40 million class D to 'Csf'from 'CCsf'; RE 25%;

--$29.1 million class E to 'Csf' from 'CCsf'; RE 0%.

Fitch has affirmed the following classes:

--$65.4 million class B at 'Bsf'; Outlook Stable;

--$29.1 million class C at 'CCCsf'; RE 100%;

--$20 million class F at 'Dsf'; RE 0%.

Classes G, H, J, K, L, M, N and O are affirmed at 'Dsf', RE 0% due to realized losses.

Classes A-1, A-2, A-3, A-AB, A-4, A-1A and A-M have paid in full. Fitch does not rate the fully depleted class P. Fitch previously withdrew the rating on the interest-only classes X-1 and X-2.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)

https://www.fitchratings.com/site/re/886006

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)

https://www.fitchratings.com/site/re/882401

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/site/re/883130

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

https://www.fitchratings.com/site/re/873395

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1014294

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1014294

Endorsement Policy

https://www.fitchratings.com/regulatory

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Fitch Ratings
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Source: Fitch Ratings

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