Fitch Upgrades One Class of MSCI 2007-HQ13

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has upgraded one class and affirmed 13 classes of Morgan Stanley Capital I Trust (MSCI) commercial mortgage pass-through certificates series 2007-HQ13. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrade to class A-3 reflects improving credit enhancement due to higher than expected recoveries on disposed assets and delevering of the transaction (class A-2 repaid in full and class A-1A and class A-3 have been reduced by 8.4% and 9.5%, respectively, since the last rating action).

Fitch modeled losses of 5.3% of the remaining pool; expected losses on the original pool balance total 18.9%, including $167.4 million (16.1% of the original pool balance) in realized losses to date. Fitch has designated five loans (6.9%) as Fitch Loans of Concern, which includes one specially serviced asset (3.2%).

As of the February 2016 distribution date, the pool's aggregate principal balance has been reduced by 46.9% to $551.7 million from $1.04 billion at issuance. Per the servicer reporting, five loans (12.2% of the pool) are defeased. Interest shortfalls are currently affecting classes A-J through P.

The largest contributor to expected losses is a specially-serviced loan secured by a 176,240 sf office property located in Milford, CT (3.2% of the pool). The loan transferred to the special servicer in July 2014 due to imminent default. The servicer-reported debt service coverage ratio (DSCR) was well below 1.0x and occupancy was 23% as of year-to-date (YTD) Sept. 30 2015. Legal proceedings are ongoing, and Fitch will continue to monitor the loan's resolution process.

The next largest contributor to expected losses is secured by a 58,039 sf office building located in Ft. Lauderdale, FL (1.6% of the pool). Occupancy significantly declined following the downsizing of the sole tenant in 2014. The Art Institute of Ft. Lauderdale leased 100% of the space until 2014, and now represents 31.1% of total space. Per the February 2016 rent roll, the property was 41.8% leased including one new lease (7% of net rentable area [NRA]) scheduled to commence March 1, 2016 and another (3.6%) in May 2016. The servicer-reported DSCR was 0.58x as of YTD Sept. 30, 2015 compared to 1.16x as of year-end (YE) 2014. The servicer indicated the remaining vacant suites continue to be marketed on a monthly basis.

RATING SENSITIVITIES

The upgrade to class A-3 reflects the de-levering of the transaction as loans paid off resulting in higher than expected recoveries and the class' senior position in the capital stack. While interest shortfalls were experienced from March through August 2013, Fitch does not anticipate future interest shortfalls to the class. Fitch applied additional stresses to maturing loans when considering the upgrade to account for refinance risk. Further upgrades were limited due to the pool's maturity concentration through 2017 (96.3%). The Stable Rating Outlook on classes A-1A and A-3 reflect the increasing credit enhancement and expected continued pay down to the classes.

The distressed class A-M is subject to further downgrade should more loans transfer to special servicing and/or additional losses are realized. The class could be upgraded should recoveries on the loans be better than anticipated.

DUE DILIGENCE USAGE

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

Fitch upgrades the following class:

--$302.8 million class A-3 to 'AAsf' from 'Asf'; Outlook Stable.

Fitch affirms the following classes as indicated:

--$104.4 million class A-1A at 'AAsf'; Outlook Stable;

--$103.9 million class A-M at 'CCCsf'; RE 90%;

--$40.5 million class A-J at 'Dsf'; RE 0%;

--$0 class B at 'Dsf'; RE 0%;

--$0 class C at 'Dsf'; RE 0%;

--$0 class D at 'Dsf'; RE 0%;

--$0 class E at 'Dsf'; RE 0%;

--$0 class F at 'Dsf'; RE 0%;

--$0 class G at 'Dsf'; RE 0%;

--$0 class H at 'Dsf'; RE 0%;

--$0 class J at 'Dsf'; RE 0%;

--$0 class K at 'Dsf'; RE 0%;

--$0 class L at 'Dsf'; RE 0%.

The class A-1 and A-2 certificates have paid in full. Fitch does not rate the class M, N, O and P certificates. Fitch previously withdrew the rating on the interest-only class X 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. 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 Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1000681

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1000681

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/20160309006287/en/

Fitch Ratings
Primary Analyst
Tiffany Pierce
Associate Director
+1-212-908-9107
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Brook Sutherland
Senior Director
+1-312-606-2346
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
[email protected]

Source: Fitch Ratings

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Unseenlabs Announces its Second Generation of Satellite for RF Detection Dedicated to Multi-domain Awareness
• Btclov Accelerates U.S. Compliance Expansion with Multi-State MTL Applications to Strengthen Digital Asset Infrastructure
• HSG Laser Unveils TL3 PRO: One Tube Cutter For All Tube Sizes