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Interest Shortfalls Impact CMBS Ratings

NEW YORK (Standard & Poor's) Dec. 4, 2001--Standard & Poor's announced today that interest shortfalls in CMBS transactions may prompt rating actions. To date, six transactions have been downgraded due to interest shortfalls on rated classes; five of the six transactions are publicly rated.

Moreover, there are approximately 80 multiborrower transactions with accumulated interest shortfalls out of a population of 248 deals rated by Standard & Poor's. In most instances, unrated subordinated certificates have been affected. However, transaction reviews could be warranted if it seems that the shortfalls will grow and impact rated certificates; such reviews could result in rating actions.

"The severity and expected recoverability of interest shortfalls can have a definitive impact on the outstanding ratings of impacted certificates," said Eric Thompson, an associate director in Standard & Poor's CMBS Surveillance group.

"If interest shortfalls continue to accumulate and a timely recovery is not expected, the certificate's rating may be lowered. It's important to note that the rating could be lowered to 'D' even if a transaction has no loans in monetary default," Mr. Thompson continued.

The reasons behind the interest shortfalls vary from deal to deal. In a report released today, titled "Interest Shortfalls and Their Impact on CMBS Ratings," authors Mr. Thompson and Roy Chun, director of Standard & Poor's CMBS Surveillance group, discuss the shortfalls and the circumstances that caused them.

The report is available on www.standardandpoors.com. Click on Forum; then, under Ratings Commentaries, click on Structured Finance, and finally, CMBS. It is also available on RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com.

Lisa Tibbits, media relations manager
[email protected]

Contact: Eric Thompson, New York

Roy Chun, New York

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