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--Primary servicer rating to 'CPS2-' from 'CPS2';
--Master servicer rating to 'CMS3+' from 'CMS2';
--Special servicer rating to 'CSS2-' from 'CSS2'.
In addition, all three servicer ratings have been removed from Rating Watch Negative.
The primary and master servicer ratings downgrades are due to Wachovia's inability to provide quality service to CMBS market participants on a consistent basis. Wachovia's CMBS servicing portfolio is heavily weighted in recent vintage transactions and complex loans that entail a high level of administration. In many instances Wachovia has poorly handled loan document covenants and triggers that characterize these loans. Additionally, data delivery of its CMBS investor reporting website is uneven and the site is much weaker than those of other Fitch rated master servicers.
The special servicer rating downgrade is due to the new structure of Wachovia's CMBS special servicing group. The current manager of the CMBS special servicing group lacks an appreciable level of CMBS or commercial real estate workout experience. He reports directly to the head of commercial mortgage servicing at Wells Fargo who had no commercial real estate experience prior to joining the group earlier this year. While Wachovia's specially serviced portfolio has few loans, the loans are complicated and highly structured and the group is reliant upon limited, albeit highly skilled, resources to workout distressed assets.
On Oct. 3, 2008, Wells Fargo Bank (Wells Fargo) announced that it reached a definitive agreement to merge with Wachovia Corporation, parent company of Wachovia. On Nov. 25, 2008, Fitch placed the CMBS servicer ratings of both Wachovia and Wells Fargo on Rating Watch Negative due to the uncertainty surrounding the integration. Under the new manager, who has extensive experience running large operational businesses at Wells Fargo, the bank is progressing in its plan to integrate the two servicing platforms and has designated a senior management team that is a combination of both legacy Wells Fargo and Wachovia managers. Until the integration is completed each servicing shop will maintain their separate servicer ratings. All three servicer ratings have been removed from Rating Watch Negative because the integration is progressing as planned.
The ratings of the CMBS transactions serviced by Wachovia are not expected to be negatively impacted by the servicer downgrade. Fitch will continue to closely monitor the integration of Wells Fargo with the legacy Wachovia Securities' servicing operation and will take ratings actions or provide further commentary, as necessary.
Fitch rates commercial mortgage primary, master, and special servicers on a scale of 1 to 5, with 1 being the highest rating. Within each of these rating levels, Fitch further differentiates ratings by plus (+) and minus (-) as well as the flat rating. For more information about Fitch commercial mortgage servicer ratings or rating criteria, refer to the report titled 'U.S. Commercial Mortgage Servicer Rating Criteria' dated June 19, 2009, which is available on Fitch's web site at www.fitchratings.com.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.
SOURCE: Fitch Ratings
Fitch Ratings Stephanie Petosa, +1-212-908-0720 (New York) Richard Carlson, +1-312-606-2373 (Chicago) Sandro Scenga, +1-212-908-0278 (Media Relations, New York) sandro.scenga@fitchratings.com
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