TEXT-S&P rating actions on Column Canada Issuer 2006-WEM
(The following statement was released by the rating agency) OVERVIEW -- We raised our ratings on eight classes from Column Canada Issuer Corp.'s series 2006-WEM, a Canadian CMBS transaction, and removed them from CreditWatch with positive implications. -- Concurrently, we lowered our rating on class K and removed it from CreditWatch with negative implications and affirmed our 'AAA (sf)' ratings on three other classes from the same transaction. -- The collateral in this stand-alone transaction consists of a fixed-rate amortizing first mortgage bond. -- The rating actions reflect our analysis of the transaction, which included our revaluation of the collateral and follows our analysis of the transaction using our recently updated criteria for rating U.S. and Canadian CMBS transactions. NEW YORK (Standard & Poor's) Nov. 20, 2012--Standard & Poor's Ratings Services today raised its ratings on eight classes of multiclass pass-through certificates from Column Canada Issuer Corp.'s series 2006-WEM, a Canadian commercial mortgage-backed securities (CMBS) transaction, and removed them from CreditWatch with positive implications, where we placed them on Sept. 5, 2012. Concurrently, we lowered our rating on class K and removed it from CreditWatch with negative implications. In addition, we affirmed our 'AAA (sf)' ratings on three other classes from the same transaction (see list). The rating actions follow our analysis of the transaction using our recently updated criteria for rating U.S. and Canadian CMBS transactions, and the application of the criteria was the primary driver of the rating actions. The analysis of stand-alone (single borrower) transactions is predominantly a recovery-based approach that assumes a loan default. Reflecting this approach, our property-level analysis included a revaluation of the shopping and entertainment complex totaling 4.2 million sq. ft. (which includes a 2.5 million-sq.-ft. super regional mall, a 12-story, 355-room hotel, and entertainment and amusement facilities totaling 557,037 sq. ft.) in Edmonton, Alberta, Canada securing the first mortgage bond in the trust. Based on our analysis, we derived our sustainable net cash flow, which we then divided by a weighted average capitalization rate of 6.93% to determine our expected-case value. This yielded a loan-to-value ratio of 54.6%. We based the downgrade of class K to 'BB+ (sf)' on our recently updated criteria for rating U.S. and Canadian CMBS transactions, which applies a credit enhancement minimum equal to 1% of the transaction or loan amount to address the potential for unexpected trust expenses that may be incurred during the life of the loan or transaction. These potential unexpected trust expenses may include servicer fees, servicer advances, workout or corrected mortgage fees, and potential trust legal fees. The affirmed 'AAA (sf)' ratings on the principal and interest certificate classes reflect subordination and liquidity support levels that are consistent with the outstanding ratings. We affirmed our 'AAA (sf)' rating on the class A-X interest-only (IO) certificates based on our current criteria. We based our analysis, in part, on a review of the borrower's operating statements for the collateral for the years ended July 31, 2012 and 2011, and the July and October 2012, rent rolls for the retail portion. The reported occupancy was 91.7% as of the Oct. 15, 2012, rent roll for the retail portion and 76.9% according to the July 31, 2012, borrower's statements for the hotel portion. The master servicer, Midland Loan Services, reported a debt service coverage (DSC) of 2.18x for the year ended July 31, 2012. As of the Nov. 15, 2012, trustee remittance report, the first mortgage bond has a trust and whole-loan balance of C$565.4 million. The first mortgage bond amortizes on a 30-year schedule, with IO payments for the first two years, and pays interest based on 5.66% per annum. The mortgage bond matures on Sept. 15, 2016. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Reports included in this credit rating report are available at "here" RELATED CRITERIA -- Rating Methodology And Assumptions For U.S. And Canadian CMBS, Sept. 5, 2012 -- CMBS Global Property Evaluation Methodology, Sept. 5, 2012 -- Global Methodology For Rating Interest-Only Securities, April 15, 2010 -- U.S. CMBS Legal And Structured Finance Criteria: Property-Specific And Large Loan Transactions, May 1, 2003 RELATED RESEARCH -- Industry Economic and Ratings Outlook: U.S. Commercial Real Estate Trends Are Improving And CMBS Performance Is Stabilizing, Nov. 5, 2012 -- U.S. And Canada CMBS Tranches Affected By The Sept. 5, 2012, CreditWatch Placements, Sept. 5, 2012 -- Application of CMBS Global Property Evaluation Methodology In U.S. and Canadian Transactions Property Commentary, Sept. 5, 2012 -- The Application Of Standard & Poor's Revised U.S. And Canadian CMBS Criteria For The Sept. 5, 2012, CreditWatch Actions, Sept. 5, 2012 RATINGS RAISED AND REMOVED FROM CREDITWATCH POSITIVE Column Canada Issuer Corp. Multiclass pass-through certificates series 2006-WEM Rating Class To From B AAA (sf) AA+ (sf)/Watch Pos C AAA (sf) AA (sf)/Watch Pos D AAA (sf) AA- (sf)/Watch Pos E AA+ (sf) A+ (sf)/Watch Pos F AA (sf) A (sf)/Watch Pos G A+ (sf) A- (sf)/Watch Pos H A- (sf) BBB+ (sf)/Watch Pos J BBB+ (sf) BBB (sf)/Watch Pos RATING LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE Column Canada Issuer Corp. Multiclass pass-through certificates series 2006-WEM Rating Class To From K BB+ (sf) BBB- (sf)/Watch Neg RATINGS AFFIRMED Column Canada Issuer Corp. Multiclass pass-through certificates series 2006-WEM Class Rating A-1 AAA (sf) A-2 AAA (sf) A-X AAA (sf) (New York Ratings Team)
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