Fitch Takes Various Rating Actions on Wachovia 2003-C3; Assigns Outlooks and LS Ratings

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings affirms, revises Rating Outlooks and assigns Loss Severity (LS) ratings to the following Wachovia Bank Commercial Mortgage Trust, series 2003-C3 commercial mortgage pass-through certificates as indicated:

--$54.6 million class A-1 at 'AAAsf/LS1'; Outlook Stable;

--$477.8 million class A-2 at 'AAAsf/LS1'; Outlook Stable;

--$36.3 million class B at 'AAAsf/LS3'; Outlook Stable;

--$12.8 million class C at 'AAAsf/LS3'; Outlook Stable;

--$25.7 million class D at 'AAAsf/LS3'; Outlook to Negative from Stable.

In addition, Fitch downgrades, revises Rating Outlooks and assigns LS ratings and Recovery Ratings (RR) to the following classes as indicated:

--$11.7 million class E to 'AAsf/LS3' from 'AAAsf/LS5'; Outlook to Negative from Stable;

--$10.5 million class F to 'Asf/LS3' from 'AAAsf/LS5'; Outlook Negative;

--$12.8 million class G to 'BBBsf/LS3' from 'AAsf/LS5'; Outlook Negative;

--$12.8 million class H to 'BBsf/LS3' from 'BBBsf/LS5'; Outlook Negative;

--$22.2 million class J to 'CCCsf/RR1' from 'BBsf/LS4';

--$9.3 million class K to 'CCCsf/RR1' from 'B-sf/LS5';

--$7 million class L to 'CCsf/RR1' from 'B-sf/LS5';

--$2.3 million class M to 'CCsf/RR3' from 'B-sf/LS5';

--$7 million class N to 'Csf/RR4' from 'CCCsf';

--$4.6 million class O to 'Csf/RR6' from 'CCsf'.

Class IO-II has paid in full. Fitch does not rate class P.

Fitch withdraws the rating of the interest only class IO-I. (For additional information, see 'Fitch Revises Practice for Rating IO & Pre-Payment Related Structured Finance Securities', dated June 23, 2010.)

The downgrades are the result of an increase in Fitch expected losses following Fitch's prospective review of potential stresses and expected losses associated with specially serviced assets. Fitch expects potential losses of 4.5% of the remaining pool balance from loans in special servicing and loans that are not expected to refinance at maturity based on Fitch's refinance test. The majority of Fitch expected losses are from loans currently in special servicing with the sixth and 35th largest loan representing approximately 1.6% of Fitch's expected losses. Rating Outlooks reflect the likely direction of any rating changes over the next one or two years.

As of the July 2010 distribution, the pool has paid down 22% to $726 million from $937 million at issuance. Of the original 130 loans, 115 remain in the transaction. Nineteen loans (18.8%) are currently defeased. Fitch has identified 22 Loans of Concern (15.5%), including nine loans in special servicing (9.9%), as well as other loans with deteriorating performance.

The largest specially serviced loan (2.9%) is a multifamily property located in Tampa, FL. The loan transferred to special servicing in February 2010 due to delinquency. The borrower is requesting a loan modification and the special servicer is pursuing foreclosure.

The second largest specially serviced loan (1.45%) is a multifamily property located in San Antonio, TX. The loan was transferred to the special servicer because of deferred maintenance and poor performance. The loan is current and Fitch does not expect any potential losses.

Fitch stressed the cash flow of the remaining non-defeased loans by applying a 10% reduction to 2008 fiscal year end net operating income and applying an adjusted market cap rate between 7.25% and 10.5% to determine value.

Similar to Fitch's prospective analysis of recent vintage CMBS, each loan also underwent a refinance test by applying an 8% interest rate and 30-year amortization schedule based on the stressed cash flow. Loans that could refinance to a debt service coverage ratio of 1.25 times or higher were considered to pay off at maturity. Under this scenario, eighteen loans did not pass the refinance test.

Additional information on Fitch's amended criteria for analyzing recent vintage U.S. CMBS is available in the July 7, 2009 report, 'Surveillance Methodology for Recent Vintage U.S. CMBS,' which is available at 'www.fitchratings.com'.

Additional information is available at www.fitchratings.com.

Related Research:

--'Global Structured Finance Rating Criteria' (Aug. 13, 2010);

--'Special-Purpose Vehicles in Structured Finance Transactions' (Sept. 17, 2009);

--'Surveillance Methodology for Recent Vintage U.S. CMBS' (July 7, 2009);

--'U.S. CMBS Surveillance Criteria' (Oct. 7, 2008);

--'Rating Criteria for Fitch's U.S. CMBS Multiborrower Rating Model' (Jan. 4, 2008);

--'Wachovia Bank Commercial Mortgage Trust, Series 2003-C3' (Jan. 21, 2003).

Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547326

Special-Purpose Vehicles in Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=466618

Surveillance Methodology for Recent Vintage U.S. CMBS

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=457782

U.S. CMBS Surveillance Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=408326

Rating Criteria for Fitch's U.S. CMBS Multiborrower Rating Model

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=367170

Wachovia Bank Commercial Mortgage Trust, Series 2003-C3 - commercial mtge pass-thru ctfs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=164728

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