(The following statement was released by the rating agency)
Jan 15 - Fitch Ratings has downgraded JLOC 39's class B to D trust beneficiary interests (TBIs) due April 2014 and affirmed the class A TBIs. The transaction is a Japanese multi-borrower type CMBS securitisation. The rating actions are as follows:
JPY3.3bn* Class A TBIs affirmed at 'Asf'; Outlook Stable
JPY5.4bn* Class B TBIs downgraded to 'CCsf' from 'CCCsf'; Recovery Estimate revised to 50% from 55%
JPY3.9bn* Class C TBIs downgraded to 'Csf' from 'CCsf'; Recovery Estimate 0%
JPY1.6bn* Class D TBIs downgraded to 'Dsf' from 'Csf'; Recovery Estimate 0%
*as of 11 January 2013
The downgrade of class D TBIs reflects the write-down of their principal on the January 2013 payment date, after the workout activity of a defaulted loan resulted in only partial recovery.
The downgrade of the class B and C TBIs reflects Fitch's view of the increased probability of principal loss on these TBIs. Only one defaulted loan, backed by an office building in Tokyo, now remains in the transaction. The increased risk of principal loss reflects downward revision of Fitch's valuation of this property and follows more clarity on recovery prospects as a result of a workout strategy being put in place.
The affirmation of the class A TBIs reflects Fitch's expectation that the TBIs will be fully redeemed well in advance of the legal final maturity, given the progress of the workout on the remaining defaulted loan. The class A TBIs have also been mostly redeemed following the completion of workouts on three defaulted loans since Fitch's previous rating action in March 2012.
This transaction is a securitisation of Tokutei Mokuteki Kaisha specified bonds and non-recourse loans issued by and extended to a total of 10 issuers or borrowers (collectively, loans), respectively. At closing, these underlying loans were ultimately secured by 34 properties. The transaction is now secured by one defaulted loan backed by one property.