Fitch Ratings affirms the following classes of Merrill Lynch Mortgage Trust 2008-C1 and assigns Outlooks as follows:
--$16.9 million class A-1 at 'AAA'; Outlook Stable;
--$55.6 million class A-2 at 'AAA'; Outlook Stable;
--$65.6 million class A-3 at 'AAA'; Outlook Stable;
--$32.4 million class A-SB at 'AAA'; Outlook Stable;
--$326.4 million class A-4 at 'AAA'; Outlook Stable;
--$43.7 million class A-1A at 'AAA'; Outlook Stable;
--$122.3 million class A-1AF at 'AAA'; Outlook Stable;
--$71.2 million class AM at 'AAA'; Outlook Stable;
--$6.3 million class AM-A at 'AAA'; Outlook Stable;
--$17.5 million class AM-AF at 'AAA'; Outlook Stable;
--$41.8 million class AJ at 'AAA'; Outlook Stable;
--$3.7 million class AJ-A at 'AAA'; Outlook Stable;
--$10.3 million class AJ-AF at 'AAA'; Outlook Stable;
--Interest-only class X at 'AAA'; Outlook Stable;
--$10.7 million class B at 'AA+'; Outlook Stable;
--$11.9 million class C at 'AA'; Outlook Stable;
--$8.3 million class D at 'AA-'; Outlook Stable;
--$8.3 million class E at 'A+'; Outlook Stable;
--$9.5 million class F at 'A'; Outlook Stable;
--$9.5 million class G at 'A-'; Outlook Stable;
--$10.7 million class H at 'BBB+'; Outlook Stable;
--$11.9 million class J at 'BBB'; Outlook Stable;
--$10.7 million class K at 'BBB-' Outlook Negative;
--$8.3 million class L at 'BB+'; Outlook Negative;
--$3.6 million class M at 'BB'; Outlook Negative;
--$3.6 million class N at 'BB-'; Outlook Negative;
--$3.6 million class P at 'B+'; Outlook Negative;
--$2.4 million class Q at 'B'; Outlook Negative; and
--$3.6 million class S at 'B-'; Outlook Negative.
Fitch does not rate the $17.8 million class T certificates.
The Negative Outlooks are a result of the transfer of ten separate loans representing 9.9% of the pool to special servicing. The loans were transferred due to a technical default when tenant-in-common sponsor and master lessee, DBSI, filed for chapter 11 bankruptcy protection. The Outlooks reflect Fitch's belief that losses will occur as a result of the sponsor's bankruptcy.
Fitch will continue to monitor the workout of the loans and will take additional action as a resolution strategy is developed. Fitch believes that given the complexity of legal structures, it may be some time before a clear resolution strategy is developed. The special servicer is working with the borrower on a resolution strategy.
The tenants-in-common (TIC) structure of the loan will likely require consent of all TIC participants for any changes to the property ownership structure or operations. Although the loans were stable at securitization, Fitch assumed that legal fees from protecting the interests of the trust will ultimately create losses to the trust, although the magnitude is uncertain at this point.
The 10 loans are secured by a mix of property types located throughout the country. The transaction closed in June 2008 and updated performance information on the underlying collateral would not customarily by reported yet. The ten loans had a Fitch stressed weighted average debt service coverage ratio of 1.22 times (x) at issuance, ranging from 1.06x to 1.47x.
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