Kmart-Linked CMBS Classes Downgraded

Six classes in five commercial mortgage-backed security transactions have been downgraded by Fitch Ratings in connection with recently announced Kmart store closings.The downgrades are as follows: Credit Suisse First Boston series 1998-C1, class I, from B-minus to CCC; DLJ Commercial Mortgage Corp. series 2000-CKP1, class B-7, from B-plus to B-minus; First Union Commercial Mortgage Trust series 2000-C1, class M, from B-minus to CCC; Mortgage Capital Funding Inc. series 1997-MC1, class H, from B to CCC; and Mortgage Capital Funding Inc. series 1987-MC2, class J, from B to B-minus, and class K, from B-minus to CCC. In addition, class G of CSFB series 1997-C2 was placed on Rating Watch Negative. Fitch said it reviewed 40 multiborrower CMBS deals containing loans involving Kmart stores now scheduled to close. Kmart announced Jan. 14 that it will close an additional 326 stores and seek bankruptcy court approval for the rejection of the leases. "Given the size and scope of the Kmart default, the fact that there have been so few downgrades serves as testament to the resilience and effectiveness of the structure and loan diversity of conduit CMBS," said Karen Trebach, a Fitch director. The rating agency can be found online at http://www.fitchratings.com.