(The following statement was released by the rating agency)
Jan 25 - Fitch Ratings has downgraded JLOC 36 LLC’s class D notes due February 2016 to ‘Dsf’ and affirmed the remaining class C1 and C2 notes. The transaction is a Japanese multi-borrower type CMBS securitisation. The rating actions are as follows:
JPY2,293m* Class C1 affirmed at ‘BBB-sf’; Outlook Stable
EUR15m* Class C2 affirmed at ‘BBB-sf’; Outlook Stable
JPY2,830m* Class D downgraded to ‘Dsf’ from ‘Csf’; Recovery Estimate revised to 50% from 45%
*as of 24 January 2013
The downgrade of the class D notes reflects Fitch’s view that the written down principal on the notes will not be recovered. The principal on the class D notes was partially written down on the May and August 2011 payment dates, following the completion of the workout on two defaulted loans. Fitch believes full recovery of the principal is highly unlikely, given the expected loss amount from the remaining two defaulted loans and the already written down amount are unlikely to be recovered by applying the transaction’s reserved cash at the final redemption date.
The affirmations of the class C1 and C2 notes reflect Fitch’s view of possible full redemption due to substantial principal repayment on a sequential basis to date. It also reflects the limited prospect of principal repayment on a pro-rata basis resulting from the prepayment of the underlying loans.
Workout on three defaulted loans has been completed and three other underlying loans have been fully repaid on or prior to their maturity dates since Fitch’s previous rating action in March 2012. As a result, the class A1 to B notes were redeemed in full during 2012.
The transaction was initially backed by 34 loans secured by 99 properties. The transaction is now backed by four non-recourse loans secured by a total of four properties, proceeds from property sales as well as by loan prepayment proceeds.