Fitch Upgrades Two & Affirms 10 Classes of WaMu 2006-SL1

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has upgraded two and affirmed 10 classes of WaMu Commercial Mortgage Securities Trust 2006-SL1, small balance commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrades follow the continued deleveraging of the pool, as 26 loans have repaid from the trust since the last rating action. These payoffs have contributed $37.5 million in unscheduled principal to the paydown of the class A-1A certificate. Given the increased credit enhancement and better than expected recoveries on specially serviced loans, Fitch has upgraded the class C and D certificates to reflect Fitch's current loss expectations.

Fitch modeled losses of 8.2% of the remaining pool, compared to 11.8% at the last rating action. Driving the reduction in estimated losses is the liquidation of what were previously the two largest loans in special servicing. Both loans had been major contributors to Fitch's projected loss at the last review and liquidated from the trust with higher than expected recoveries. Current expected losses on the original pool balance total 7.3%, including $24.6 million (4.8% of the original balance) in realized losses to date. There is one specially serviced asset remaining, down from seven at the last rating action.

The pool's aggregate principal balance has been reduced by 69.7% since issuance. No loans are defeased. Interest shortfalls are currently affecting classes E through N.

The pool comprises 174 small balance loans secured by commercial properties. Given this composition, the pool is considered diverse in terms of loan count and size, with only 32.6% of the pool balance represented in the largest 15 loans. The pool is, however concentrated in terms of geography and property type with 69.7% of the pool represented by multifamily assets and 56.2% of the pool located in California.

Twenty-eight loans (25.3% of the pool) are scheduled to mature in 2016, after which there are no scheduled maturities for at least ten years. The majority of the outstanding loans are scheduled to come due in 2036 (73.7% of the pool), though not all of these loans are fully amortizing. Fitch expects the bulk of collateral reduction in the next several years will be a result of prepayments as the scheduled principal collected monthly is minimal.

RATING SENSITIVITIES

The Rating Outlooks on classes A-1A, B and C are Stable. While amortization has increased the credit support to these bonds, future scheduled paydown beyond 2016 will be limited and many of the pooled loans do not remit regular financial reports. Upgrades to these classes may be possible if financial updates are provided and indicate improved collateral performance or if loans continue to prepay and tighten the pool's maturity profile. Downgrades to the distressed classes are possible as losses are realized or if additional defaults occur.

DUE DILIGENCE USAGE

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

Fitch has upgraded the following classes:

--$14.7 million class C to 'Bsf' from 'CCCsf'; Outlook Stable assigned;

--$10.2 million class D to 'CCCsf' from 'CCsf'; RE 100%;

Fitch has affirmed the following ratings:

--$106.6 million class A-1A at 'Asf'; Outlook Stable;

--$10.2 million class B at 'BBsf'; Outlook Stable;

--$7 million class E at 'CCsf'; RE 50%;

--$3.8 million class F at 'Csf'; RE 0%;

--$2.2 million 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%;

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

The class A certificate has been paid in full. Fitch does not rate the class N certificate. Fitch previously withdrew the rating on the interest-only class X certificate.

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=1000663

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1000663

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/20160309006124/en/

Fitch Ratings, Inc.
Primary Analyst
Roxanna Tangen
Associate Director
+1-312-368-3116
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
or
Committee Chairperson
R. Brook Sutherland
Senior Director
+1-312-606-2346
or
Media Relations
Sandro Scenga, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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