Fitch Ratings Affirms Salomon CDC Series 2001-CDC Comm Mtge P-T Ctfs

Business Wire, Nov 4, 2002

Business Editors

CHICAGO--(BUSINESS WIRE)--Nov. 4, 2002

Fitch Ratings affirms Salomon Brothers Mortgage securities VII, Inc. CDC Securitization Corp. commercial mortgage pass-through certificates, series 2001-CDC $334.3 million class A at 'AAA', $55.6 million class B at 'AA', $27.4 million class C at 'A' and $4 million class D at 'A-'. In addition, Fitch affirms the following classes: X-1, X-2, X-3A and X-3B at 'AAA'; E-GM, E-JL, E-LE, E-BS, E-US and E-MB at 'BBB '; E-FA, F-JL, F-LE, F-BS, F-US F-MB and E-NM at 'BBB'; G-GM, G-DS, F-FA, G-FA, G-JL, H-JL, G-LE, G-BS, G-US, H-US, G-MB, F-NM and E-TB at 'BBB-'. Fitch does not rate classes F-GM, H-GM, E-DS, F-DS, H-DS, E-GF, F-GF, G-GF, E-DR, F-DR. The ratings affirmations follow Fitch's annual review of the transaction, which closed in May 2001.

The transaction is secured by 12 floating-rate loans which are separated into A, B and C portions. The A and B portions are contributed to the trust while the C portions are held outside the trust. The A portions are pooled and represent classes A, B, C and D. The B portions are not pooled and represent certificate amounts specific to each loan.

As of the October distribution date five loans had paid off reducing the certificate balance by 30% to $536.1 million. The master servicer, Midland Loan Services, collected year-end (YE) 2001 financial information for 100% of the loans remaining in the pool. The Fitch stressed weighted average (WA) debt service coverage ratio (DSCR) for the pool decreased to 1.44 times (x) at YE 2001 from 1.47x at issuance. The Fitch DSCR is calculated using underwritten cash flow adjusted for reserves and a stressed debt service coverage ratio based on the interest rate cap. The decrease in the WA DSCR is due in large part to the deterioration in the GF hotel portfolio loan.

The GF Hotel portfolio (7.6% of the pool) became delinquent and specially serviced in December 2001 following the deterioration in the travel industry. The loan is secured by nine hotels located in five different states. At YE 2001 the Fitch DSCR had fallen to 0.74x from 1.85x at issuance. The special servicer is currently working closely with the borrower to develop a plan that will allow the loan to be brought current. Management has been replaced at all the hotels while some of the underperforming hotels are being sold to cover trust expenses and reduce the principal balance of the loan. At this time no losses are expected to any of the classes within the trust. Fitch does not rate the GF Hotel B-note.

In addition to the GF Hotel loan, Fitch is also concerned with the two addition loans, the Dallas Retail Portfolio and 74 New Montgomery loan. The Dallas Retail portfolio, which is secured by three neighborhood shopping centers, (2.5% of the pool) YE 2001 Fitch DSCR has fallen to 1.35x from 1.65x at issuance. The WA occupancy at the shopping centers has fallen to 79.1% as of August 2002 from 93% at issuance. The borrower is currently working to market the vacant space. Despite the decreased performance the loan remains current. Fitch does not rate the Dallas Retail B-note. The 74 New Montgomery loan, secured by a 7-story office building in the San Francisco CBD, has experienced a drop in the YE 2001 Fitch DSCR to 1.35x from 1.50x at issuance. The property lost tenants earlier in the year but has re-leased some of the space. Occupancy as of July 2002 was 87% an increase from 79% at first quarter 2002. The property's occupancy and rental rates have suffered due to a relatively soft office market in San Francisco.

While Fitch does have concerns with several loans within the transaction, the improved performance in the remaining nine loans was sufficient to offset this decline and allow Fitch to affirm the ratings in this transaction. Fitch will continue to monitor this transaction, as surveillance is ongoing.