Ratings

This presale report is based on information as of Nov. 2, 2009. The ratings shown are preliminary. This report does not constitute a recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings.

Preliminary Ratings As Of Nov. 2, 2009
Class Preliminary rating* Preliminary amount ($)
A1 AAA 560,000,000
A2 NR 72,000,000
B NR 165,000,000
A1-A¶ AAA 420,000,000
A1-B¶ AAA 140,000,000
A2-A¶ NR 36,000,000
A2-B¶ NR 36,000,000
B-A¶ NR 82,500,000
B-B¶ NR 82,500,000
*The rating on each class of securities is preliminary and subject to change at any time. The certificates will be issued to qualified institutional buyers according to Rule 144A of the Securities Act of 1933. ¶Exchangeable certificates. NR--Not rated. N/A--Not applicable.

Transaction Details
Expected closing date Nov. 6, 2009.
Distribution date Two business days after the 15th of each month; the first distribution date will be Nov. 18, 2009.
Legal final maturity date July 2056.
Total security amount ($) 797,000,000.
Rated security amount ($) 560,000,000.
Structure The transaction will pay interest sequentially to the A1 and A2 classes and then principal to the A1 class until the A1 class is paid off. It will then pay principal to the A2 class until that class is paid off. Then it will pay principal to the B class, which receives no interest. The class A1, A2, and B certificates are exchangeable.
Collateral 159 CMBS interest-only (IO) certificates from 151 different fixed-rate CMBS securitizations.

Participants
Underwriter Morgan Stanley & Co. Inc.
Depositor Morgan Stanley Atlas Inc.
Trustee Wells Fargo Bank N.A.

Rationale

The preliminary ratings assigned to Morgan Stanley Re-REMIC Trust 2009-IO�??s $797.0 million re-REMIC pass-through certificates reflect the expected performance of the collateral under our 'AAA' stress scenario, the liquidity provided by the trustee, and the transaction structure. Standard & Poor's Ratings Services stressed the underlying interest-only (IO) certificates in the pool by applying the methodology outlined in the existing criteria for rating U.S. conduit/fusion commercial mortgage-backed securities (CMBS) pools. We also applied various stress scenarios varying the timing of defaults and recoveries and the resultant interest that would be received.

Strengths

In our view, transaction exhibits the following strengths:

The IO certificates are backed by a diverse pool of securities from a wide range of vintages; and
IO certificates are generally senior in underlying CMBS interest proceeds distribution waterfalls.

Potential risks and mitigating factors

In our opinion, the transaction exhibits the following potential risk and mitigating factor:

The cash flows from the underlying certificates are less predictable than typical CMBS principal and interest certificates and can be reduced by prepayments, appraisal reductions, and liquidations of defaulted loans. To mitigate this risk, Standard & Poor's applied its conduit/fusion criteria to the loans and layered on additional stresses, which included stressing the timing of defaults and recoveries.

Transaction Overview

On the closing date, Morgan Stanley Atlas Inc., the depositor, will transfer the underlying certificates to the trustee, Wells Fargo Bank N.A., in exchange for these certificates and will sell the certificates to Morgan Stanley & Co. Inc. (as the initial purchaser).

The trustee is entitled to receive all distributions from the related underlying certificates on the same dates as the related underlying distribution dates; the first distribution date will be Nov. 18, 2009.

Underlying Securities

Tables 1 and 2 provide information about the underlying securities as of Oct. 26, 2009. More information on the transactions that Standard & Poor's rates is available on RatingsDirect at www.ratingsdirect.com.

Table 1 Underlying Securities
Deal name Class CUSIP Vintage S & P current rating
ASC95D01 A1CS 045424AC2 1995 NR
ASC97D04 PS1 045424DU9 1997 NR
ASC97D05 PS1 045424FJ2 1997 NR
BACM0302 XC 05947UME5 2003 AAA
BACM0401 XC 05947UQY7 2004 AAA
BACM0404 XP 05947UVQ8 2004 AAA
BACM0503 XC 05947US82 2005 AAA
BACM0601 XC 05947U7E2 2006 AAA
BACM0605 XC 05950XBN5 2006 AAA
BACM0605 XP 05950XAG1 2006 AAA
BACM0801 XW 05952AAJ3 2008 AAA
BASS02X1 XC 05947UGF9 2002 AAA
BSC00WF1 X 07383FDB1 2000 AAA
BSC03T10 X2 07383FQZ4 2003 AAA
BSC04PW3 X1 07383FYN2 2004 AAA
BSC04PW3 X2 07383FYP7 2004 AAA
BSC05PW9 X2 07387BAS2 2005 AAA
BSC06P13 X1 07388LAJ9 2006 AAA
BSC06P14 X2 07388PAK7 2006 AAA
BSC06P14 XW 07388PBS9 2006 AAA
BSC06T22 X 07387BGL1 2006 NR
BSC06T24 X1 07388NAX4 2006 NR
BSC07P15 X2 07388RBQ9 2007 AAA
BSC07P16 X 07388YAJ1 2007 NR
CAM02CA2 X 12477MAA8 2002 AAA/Watch Neg
CCSC97C2 X 161505BM3 1997 NR
CCSC99C2 X 161505DL3 1999 AAA
CD07CD4 XC 12513YBD1 2007 AAA
CMAC98C1 X 201728CV2 1998 AAA
CMAC98C2 X 201728DM1 1998 AAA
CMAT99C1 X 201730AJ7 1999 AAA
CMFU9901 X 161582AC5 1999 AAA
CMLB01C1 X 201736AE5 2001 AAA
COB06C01 IO 190749AG6 2006 AAA
COM03LN1 X1 126175AG3 2003 AAA
COM05C06 XC 126171AP2 2005 AAA
COM06C07 X 20047QAL9 2006 AAA
CSF01CF2 AX 22540AK31 2001 AAA
CSF01CK3 AX 22540A2P2 2001 NR
CSF01CK5 AX 22540VDK5 2001 AAA
CSF02CK4 AX 22541NNJ4 2002 AAA
CSF02CP5 AX 22541NVA4 2002 AAA
CSF03C03 AX 22541QEP3 2003 AAA
CSF03C04 AX 22541QSY9 2003 AAA
CSF04C02 AX 22541SLE6 2004 AAA
CSF04C03 ASP 22541SXC7 2004 NR
CSF04C03 AX 22541SXB9 2004 NR
CSF04C05 AX 22541S3Y2 2004 AAA
CSF97C02 AX 22540AET1 1997 NR
CSF98C01 AX 22540AFU7 1998 AAA
CSF98C02 AX 22540AJN9 1998 NR
CSM06C03 AX 22545DAY3 2006 AAA
CSM06C04 AX 22545MAZ0 2006 AAA
CSM07C02 AX 22545YBS9 2007 AAA
CTG04C02 XC 173067EL9 2004 AAA
DLJ00CK1 S 23322BNY0 2000 NR
DLJ97CF2 S 23321PF60 1997 NR
FULB97C2 IO 33736LAW5 1997 NR
FUNB00C1 IO 33736XAH2 2000 AAA
FUNB00C2 IO 33736XBN8 2000 AAA
FUNB99C2 IO 337366AC2 1999 NR
GCC04GG1 XC 396789GK9 2004 AAA
GECC0001 X 36158YAC3 2000 NR
GECC03C1 X1 36828QAG1 2003 AAA
GECC04C1 X1 36828QDR4 2004 AAA
GECC04C3 X1 36828QJK3 2004 AAA
GMAC02C1 X1 361849UF7 2002 AAA
GMAC02C2 X1 361849UW0 2002 AAA
GMAC04C1 X1 361849D58 2004 AAA
GMAC04C3 X2 361849K27 2004 AAA
GMAC97C2 X 361849CG5 1997 NR
GMAC98C1 X 361849DD1 1998 NR
GMAC99C1 X 361849ER9 1999 AAA
GSM205G4 XC 36228CWD1 2005 AAA
GSM206G8 X 362332AR9 2006 NR
GSM299C1 X 36228CDE0 1999 AAA
JPC02C02 X1 46625MPS2 2002 AAA
JPC06LD8 X 46629MAJ4 2006 AAA
JPC07C01 X1 46630DAJ1 2007 AAA
JPC07C18 X 46629YAE9 2007 AAA
JPC07L10 X 46630JAH2 2007 NR
JPM00C10 X 617059JJ0 2000 NR
JPM01CI1 X1 46625MAJ8 2001 AAA
JPMC00C9 X 617059GZ7 2000 NR
JPMC97C5 X 617059DK3 1997 NR
JPMC99C7 X 617059FC9 1999 AAA/Watch Neg
LAS06MF4 X 51804VAA0 2006 NR
LBC07C03 X 50177AAP4 2007 AAA
LBC98C01 IO 501773AY1 1998 NR
LBC98C04 X 501773CG8 1998 AAA
LBC99C01 X 501773CX1 1999 NR
LBUB01C2 X 52108HDK7 2001 NR
LBUB01C3 X 52108HFH2 2001 AAA
LBUB02C7 XCL 52108HNT7 2002 AAA
LBUB03C1 XCL 52108HQH0 2003 AAA
LBUB03C3 XCP 52108HSH8 2003 AAA
LBUB03C5 XCL 52108HUE2 2003 AAA
LBUB04C7 XCL 52108HR97 2004 AAA
LBUB05C5 XCL 52108H7T5 2005 AAA
LBUB06C3 XCL 52108MGP2 2006 AAA
LBUB06C6 XCL 50179MAQ4 2006 AAA
LBUB06C6 XCP 50179MAP6 2006 AAA
LBUB06C7 XCP 50180CAN0 2006 AAA
LBUB06C7 XW 50180CAU4 2006 AAA
LBUB07C6 X 52109PAQ8 2007 AAA
LBUB08C1 XW 50180LAM2 2008 AAA
MLCF0603 XC 60687VBC8 2006 NR
MLCF0604 XC 55312VBD9 2006 AAA
MLCF0604 XP 55312VAQ1 2006 AAA
MLCF0705 X 55312YBD3 2007 AAA
MLCF0709 XP 60688CAR7 2007 AAA
MLM96C02 IO 589929MK1 1996 NR
MLM98C02 IO 589929QG6 1998 AAA
MLM98C03 IO 589929TD0 1998 AAA
MLT02MW1 XC 59022HAR3 2002 AAA
MLT03KY1 XC 59022HCL4 2003 AAA
MSC03IQ6 X2 61745MUF8 2003 AAA
MSC04HQ3 X2 61745MXK4 2004 AAA
MSC04HQ4 X2 61745MU27 2004 AAA
MSC05HQ5 X2 61745M3G6 2005 AAA
MSC05HQ6 X2 61745M6J7 2005 AAA
MSC05IQ9 X2 61745M2S1 2005 AAA
MSC05T17 X2 61745MW58 2005 AAA
MSC06H10 X1 61750HAL0 2006 NR
MSC06H10 X2 61750HAM8 2006 NR
MSC06HQ8 X 617451FU8 2006 AAA
MSC06HQ9 61750CAP2 2006 AAA
MSC06T21 X 617451CU1 2006 AAA
MSC06T23 X 61749MAA7 2006 AAA
MSC07H11 X 61751NAP7 2007 AAA
MSC07I14 X 61754KAM7 2007 NR
MSC07I15 X 61755YAM6 2007 AAA
MSC07T27 X1 61754JAJ7 2007 AAA
MSC198H2 X 61745MJW4 1998 NR
MSC198HF X 61745MFH1 1998 AAA
MSC198W2 X 61745MGY3 1998 AAA
MSC199F1 X 61745MLU5 1999 AAA/Watch Neg
MSC199R1 X 61745MLE1 1999 NR
MSD03HQ2 X2 61746WD98 2003 AAA
MSDW01PP X 61746WFH8 2001 AAA
MSDW01T1 X1 61746WFP0 2001 AAA
MSDW02I2 X1 61746WQT0 2002 AAA
NAS98D06 PS1 655356JJ3 1998 NR
NLFC9901 X 63859CBT9 1999 AAA/Watch Neg
PCM03PW1 X1 74432GAE7 2003 AAA
PMAC99C1 X 69574EAS9 1999 NR
PNC99CM1 S 69348HAA6 1999 AAA
SVG07C01 X 84604KAA7 2007 NR
WAMU06S1 X 933633AA7 2006 AAA
WAMU07S2 X 933632AA9 2007 NR
WAMU07S3 X 93364LAA6 2007 AAA
WBC03C05 XC 929766GV9 2003 AAA
WBC05C16 XC 929766ZE6 2005 AAA
WBC05C17 XP 929766C92 2005 AAA
WBC06C29 IO 92978PAG4 2006 AAA
WBC07C30 XW 92978QBZ9 2007 AAA
WBC07C31 IO 92978TBU4 2007 AAA
WBC07C33 IO 92978NAH7 2007 AAA
WMA03C01 X 93934DAA5 2003 AAA

Table 2 Delinquency Statistics
Deal name Class Total delinquency (%) One-month delinquent (%) Two-months delinquent (%) Three months delinquent (%) Foreclosure in process (%) REO (%)
ASC95D01 A1CS 0.00 0.00 0.00 0.00 0.00 0.00
ASC97D04 PS1 0.82 0.00 0.00 0.54 0.28 0.00
ASC97D05 PS1 10.08 0.00 6.74 1.20 0.00 2.14
BACM0302 XC 3.04 0.00 0.00 0.00 1.54 1.49
BACM0401 XC 2.29 0.00 0.00 1.01 0.00 1.27
BACM0404 XP 5.64 0.88 0.00 1.21 3.55 0.00
BACM0503 XC 8.44 6.29 0.00 0.31 0.80 1.04
BACM0601 XC 4.81 0.31 0.40 4.09 0.00 0.00
BACM0605 XC 4.46 0.19 0.46 3.81 0.00 0.00
BACM0605 XP 4.46 0.19 0.46 3.81 0.00 0.00
BACM0801 XW 2.15 0.00 0.00 1.65 0.50 0.00
BASS02X1 XC 13.40 6.15 0.00 3.53 3.71 0.00
BSC00WF1 X 9.99 0.00 0.00 2.31 1.99 5.69
BSC03T10 X2 0.00 0.00 0.00 0.00 0.00 0.00
BSC04PW3 X1 0.31 0.00 0.00 0.00 0.31 0.00
BSC04PW3 X2 0.31 0.00 0.00 0.00 0.31 0.00
BSC05PW9 X2 7.20 0.00 6.57 0.62 0.00 0.00
BSC06P13 X1 2.31 0.00 0.00 0.70 1.61 0.00
BSC06P14 X2 1.86 0.00 0.00 1.25 0.61 0.00
BSC06P14 XW 1.86 0.00 0.00 1.25 0.61 0.00
BSC06T22 X 0.20 0.00 0.00 0.00 0.20 0.00
BSC06T24 X1 6.62 0.00 0.00 2.33 4.29 0.00
BSC07P15 X2 4.50 0.18 0.00 3.03 1.29 0.00
BSC07P16 X 3.53 0.64 0.60 0.98 1.32 0.00
CAM02CA2 X 0.00 0.00 0.00 0.00 0.00 0.00
CCSC97C2 X 0.00 0.00 0.00 0.00 0.00 0.00
CCSC99C2 X 5.67 0.00 0.00 0.00 5.67 0.00
CD07CD4 XC 7.13 0.34 0.25 0.66 5.88 0.00
CMAC98C1 X 0.00 0.00 0.00 0.00 0.00 0.00
CMAC98C2 X 3.23 0.00 0.00 2.43 0.00 0.80
CMAT99C1 X 2.10 0.26 0.00 0.35 0.39 1.11
CMFU9901 X 6.57 0.00 0.00 0.00 4.11 2.45
CMLB01C1 X 0.00 0.00 0.00 0.00 0.00 0.00
COB06C01 IO 6.16 0.05 1.04 2.76 1.06 1.24
COM03LN1 X1 3.61 0.00 0.91 1.06 1.63 0.00
COM05C06 XC 6.35 0.28 0.00 0.00 4.75 1.32
COM06C07 X 0.80 0.00 0.25 0.31 0.06 0.17
CSF01CF2 AX 3.90 0.05 1.78 0.00 0.61 1.46
CSF01CK3 AX 4.29 1.79 0.13 0.93 1.43 0.00
CSF01CK5 AX 0.17 0.00 0.09 0.08 0.00 0.00
CSF02CK4 AX 8.11 4.44 0.00 2.46 0.69 0.52
CSF02CP5 AX 1.35 0.00 0.00 0.44 0.91 0.00
CSF03C03 AX 1.74 0.16 0.33 0.28 0.97 0.00
CSF03C04 AX 3.75 0.00 0.00 3.51 0.24 0.00
CSF04C02 AX 1.02 0.60 0.34 0.00 0.08 0.00
CSF04C03 ASP 6.71 0.49 0.00 4.31 1.12 0.79
CSF04C03 AX 6.71 0.49 0.00 4.31 1.12 0.79
CSF04C05 AX 1.80 0.35 0.36 0.93 0.15 0.00
CSF97C02 AX 0.00 0.00 0.00 0.00 0.00 0.00
CSF98C01 AX 8.42 0.00 0.00 3.28 0.00 5.13
CSF98C02 AX 1.96 1.96 0.00 0.00 0.00 0.00
CSM06C03 AX 2.48 0.19 0.00 0.90 1.40 0.00
CSM06C04 AX 10.31 0.79 0.35 5.61 3.32 0.24
CSM07C02 AX 4.02 0.00 0.14 3.88 0.00 0.00
CTG04C02 XC 1.94 0.94 0.00 0.00 0.00 1.00
DLJ00CK1 S 1.22 0.41 0.00 0.49 0.32 0.00
DLJ97CF2 S 8.04 0.00 0.00 0.00 8.04 0.00
FULB97C2 IO 3.81 0.00 3.81 0.00 0.00 0.00
FUNB00C1 IO 2.06 0.37 0.00 0.00 0.00 1.69
FUNB00C2 IO 3.42 0.00 0.00 2.65 0.76 0.00
FUNB99C2 IO 1.42 0.00 0.00 1.42 0.00 0.00
GCC04GG1 XC 0.93 0.00 0.00 0.93 0.00 0.00
GECC0001 X 0.31 0.31 0.00 0.00 0.00 0.00
GECC03C1 X1 1.96 0.00 0.00 0.27 1.69 0.00
GECC04C1 X1 3.20 0.00 0.30 0.77 1.93 0.20
GECC04C3 X1 1.64 1.40 0.00 0.00 0.24 0.00
GMAC02C1 X1 6.42 0.00 0.00 4.70 0.77 0.95
GMAC02C2 X1 1.17 0.00 0.00 0.00 1.17 0.00
GMAC04C1 X1 2.11 1.27 0.00 0.84 0.00 0.00
GMAC04C3 X2 7.30 3.57 1.47 0.64 0.36 1.26
GMAC97C2 X 0.00 0.00 0.00 0.00 0.00 0.00
GMAC98C1 X 51.55 0.00 0.00 51.55 0.00 0.00
GMAC99C1 X 8.18 3.19 2.11 0.00 0.00 2.87
GSM205G4 XC 3.30 1.08 0.00 0.14 2.09 0.00
GSM206G8 X 13.27 3.25 0.63 8.21 0.75 0.43
GSM299C1 X 23.11 5.85 0.00 8.81 3.35 5.11
JPC02C02 X1 7.06 0.00 2.71 2.16 2.19 0.00
JPC06LD8 X 1.42 0.38 0.12 0.00 0.85 0.06
JPC07C01 X1 11.43 1.55 0.49 9.39 0.00 0.00
JPC07C18 X 4.37 0.16 0.00 2.33 1.75 0.14
JPC07L10 X 5.65 2.29 0.53 1.51 1.32 0.00
JPM00C10 X 9.73 0.71 4.67 1.18 3.16 0.00
JPM01CI1 X1 3.29 0.00 0.23 1.95 1.11 0.00
JPMC00C9 X 5.58 2.32 0.00 3.26 0.00 0.00
JPMC97C5 X 1.15 0.00 0.00 1.15 0.00 0.00
JPMC99C7 X 0.00 0.00 0.00 0.00 0.00 0.00
LAS06MF4 X 17.76 3.92 3.34 8.06 1.83 0.61
LBC07C03 X 7.94 2.91 0.00 5.03 0.00 0.00
LBC98C01 IO 11.75 0.00 2.32 2.79 0.00 6.64
LBC98C04 X 18.01 0.00 0.00 0.00 11.27 6.74
LBC99C01 X 7.06 0.00 0.00 0.00 7.06 0.00
LBUB01C2 X 4.41 0.00 0.08 0.06 2.37 1.89
LBUB01C3 X 0.00 0.00 0.00 0.00 0.00 0.00
LBUB02C7 XCL 1.84 0.52 0.00 0.14 0.24 0.94
LBUB03C1 XCL 0.95 0.00 0.00 0.60 0.35 0.00
LBUB03C3 XCP 0.57 0.00 0.00 0.00 0.00 0.57
LBUB03C5 XCL 0.33 0.00 0.33 0.00 0.00 0.00
LBUB04C7 XCL 0.44 0.00 0.00 0.30 0.14 0.00
LBUB05C5 XCL 0.55 0.32 0.24 0.00 0.00 0.00
LBUB06C3 XCL 2.60 0.00 0.12 1.44 1.04 0.00
LBUB06C6 XCL 2.42 1.10 0.08 1.03 0.20 0.00
LBUB06C6 XCP 2.42 1.10 0.08 1.03 0.20 0.00
LBUB06C7 XCP 5.31 0.13 0.00 0.40 4.40 0.37
LBUB06C7 XW 5.31 0.13 0.00 0.40 4.40 0.37
LBUB07C6 X 3.06 1.17 1.24 0.65 0.00 0.00
LBUB08C1 XW 5.81 1.10 0.00 0.00 4.71 0.00
MLCF0603 XC 5.62 1.19 0.00 3.61 0.82 0.00
MLCF0604 XC 3.76 0.81 0.00 1.57 1.07 0.31
MLCF0604 XP 3.76 0.81 0.00 1.57 1.07 0.31
MLCF0705 X 2.20 0.56 0.00 0.82 0.83 0.00
MLCF0709 XP 7.12 5.49 0.09 0.97 0.36 0.22
MLM96C02 IO 24.41 0.00 0.00 24.41 0.00 0.00
MLM98C02 IO 10.99 7.60 2.33 1.05 0.00 0.00
MLM98C03 IO 7.20 0.00 0.00 7.20 0.00 0.00
MLT02MW1 XC 1.20 0.00 0.27 0.00 0.94 0.00
MLT03KY1 XC 0.00 0.00 0.00 0.00 0.00 0.00
MSC03IQ6 X2 0.00 0.00 0.00 0.00 0.00 0.00
MSC04HQ3 X2 0.51 0.00 0.00 0.00 0.00 0.51
MSC04HQ4 X2 3.43 0.00 0.00 0.00 3.43 0.00
MSC05HQ5 X2 2.10 0.45 0.00 1.28 0.00 0.37
MSC05HQ6 X2 2.95 0.55 0.00 0.00 2.16 0.23
MSC05IQ9 X2 2.13 0.00 0.00 2.13 0.00 0.00
MSC05T17 X2 0.83 0.00 0.00 0.83 0.00 0.00
MSC06H10 X1 5.27 0.00 2.71 2.11 0.45 0.00
MSC06H10 X2 5.27 0.00 2.71 2.11 0.45 0.00
MSC06HQ8 X 4.03 0.58 0.00 1.60 1.86 0.00
MSC06HQ9 X 3.82 0.11 0.09 3.12 0.51 0.00
MSC06T21 X 1.45 0.00 0.68 0.31 0.00 0.46
MSC06T23 X 3.25 0.00 0.00 3.25 0.00 0.00
MSC07H11 X 3.07 0.25 0.61 0.33 1.88 0.00
MSC07I14 X 7.93 0.12 0.00 3.31 4.50 0.00
MSC07I15 X 6.52 1.84 0.00 0.08 1.41 3.19
MSC07T27 X1 1.37 0.00 0.00 0.17 1.14 0.06
MSC198H2 X 4.73 0.00 0.00 0.00 0.00 4.73
MSC198HF X 10.09 3.53 0.00 6.56 0.00 0.00
MSC198W2 X 1.44 0.00 0.00 1.44 0.00 0.00
MSC199F1 X 21.65 21.65 0.00 0.00 0.00 0.00
MSC199R1 X 9.24 7.38 0.00 0.00 1.85 0.00
MSD03HQ2 X2 1.66 0.00 0.00 1.66 0.00 0.00
MSDW01PP X 0.00 0.00 0.00 0.00 0.00 0.00
MSDW01T1 X1 7.54 0.00 0.00 0.00 3.63 3.91
MSDW02I2 X1 1.74 0.00 0.00 0.00 1.74 0.00
NAS98D06 PS1 4.00 1.44 0.00 0.53 2.03 0.00
NLFC9901 X 0.00 0.00 0.00 0.00 0.00 0.00
PCM03PW1 X1 0.92 0.00 0.00 0.00 0.92 0.00
PMAC99C1 X 0.00 0.00 0.00 0.00 0.00 0.00
PNC99CM1 S 9.54 0.00 0.00 0.00 0.94 8.60
SVG07C01 X 4.75 0.87 0.35 1.45 1.94 0.14
WAMU06S1 X 4.69 0.15 0.07 2.36 1.77 0.34
WAMU07S2 X 3.68 1.09 0.15 1.03 1.41 0.00
WAMU07S3 X 3.96 0.25 0.03 2.42 1.27 0.00
WBC03C05 XC 1.09 0.57 0.00 0.25 0.28 0.00
WBC05C16 XC 1.77 1.52 0.25 0.00 0.00 0.00
WBC05C17 XP 1.63 0.38 0.97 0.28 0.00 0.00
WBC06C29 IO 5.45 0.97 1.63 2.26 0.59 0.00
WBC07C30 XW 1.83 0.52 0.15 0.51 0.64 0.00
WBC07C31 IO 6.18 3.62 0.00 2.50 0.00 0.06
WBC07C33 IO 3.49 0.19 0.08 2.13 1.10 0.00
WMA03C01 X 0.00 0.00 0.00 0.00 0.00 0.00
Total 4.54 0.82 0.35 2.06 1.09 0.22
REO--Real estate owned. Deals are weighted by cash flow assuming no prepayments.

We published a request for comment proposing changes to the IO criteria on June 1, 2009 (see "Request for Comment: Methodology For Rating Interest-Only Certificates"). After we finalize our criteria review, we may revise our current criteria. Any change in our criteria may affect outstanding ratings, including the ratings on the IO certificates underlying this transaction. However, ratings actions related to the change in criteria would not necessarily result in rating actions on this transaction.

Table 3 provides the collateral distribution for the year of issuance.

Table 3 Cash Flow By Deal Vintage
Vintage Deal count % of cash flow
2008 2 2.3
2007 21 23.7
2006 31 35.1
2005 11 7.3
2004 17 11.3
2003 15 7.0
2002 10 4.8
2001 9 2.0
2000 7 1.2
1999 13 1.4
1998 13 2.8
1997 8 1.0
1996 1 0.1
1995 1 0.0
Total 159 100
Note: Deals are weighted by cash flow assuming no prepayments.

Rating Methodology

Standard & Poor's applied its criteria for rating conduit/fusion pools (please see, "U.S. CMBS Rating Methodology And Assumptions For Conduit/Fusion Pools," published on June 26, 2009). We excluded deals with fewer than 40 loans and deals where the majority of the transaction's loans were close to maturity from our analysis and did not give credit for these cash flows. We then utilized Trepp's cash flow model to project the cash flows on the underlying certificates. We looked to a number of scenarios that stressed the timing of defaults and recoveries, but primarily relied on the following:

We assumed that all loans, except for specially serviced loans, that defaulted during their term based on our 'AAA' criteria would default between months 13 and 18 with a 12 month recovery;
We also assumed 100% prepayment after the penalty period is over;
Specially serviced loans were defaulted immediately with a 12-month recovery; and
Given the less stable nature of the collateral cash flows, we relied on the first five years of cash flow from the IO certificates to pay principal and interest on the 'AAA' bonds.

Based on the output from Trepp and the stressed scenario outlined herein, we determined that the class A1 certificates, and the related exchangeable certificates, classes A1-A and A1-B, would be paid off after the expenses and interest payable that are senior in the waterfall in our 'AAA' scenario.

Scenario Analysis

As part of our analysis, we reviewed the underlying IO securities associated with the rated offered certificates and subjected them to various stressed loss scenarios based on our conduit/fusion criteria and modeled them as outlined above. We further stressed the timing of the cash flows by assuming that all of the term loan defaults occur in the underlying CMBS transactions in the next 18 months and applied recoveries 12 months after default. Furthermore, we only relied on the first five years of cash flow from the underlying CMBS IO securities.

Standard & Poor's stressed cash flow analysis, excluding several transactions as outlined in the Rating Methodology section above, equates to a 19 constant default rate (CDR) stress on the loans in the underlying transactions, assuming a 40% loss severity, a 12-month recovery period, and a 100% conditional prepayment rate (CPR) after penalties. We expect the actual cash flows from the underlying IO transactions to be well in excess of those derived in our 'AAA' stress scenario, and in our opinion, the ratings should be able to withstand significant volatility in the cash flows from the underlying transactions.

On an ongoing basis, Standard & Poor's will compare the actual cash flows received to the cash flows expected in our stressed scenario. We will re-analyze the transaction in accordance with the methodology outlined herein and may take rating actions if, at any time, we feel that actual principal and interest payments are at risk of being lower than the cash flow generated by the stressed scenario.

Extraordinary Expenses

Extraordinary expenses are capped at a $200,000 calendar-year limit, and a $1,000,000 lifetime limit, which the trustee withdraws from the certificate account to reduce the available interest remittance amount.

In modeling the transaction, Standard & Poor's assumed that this expense would be paid each year.

Exchangeable Certificates

All or a portion of the class A1 certificates may be exchanged for proportionate interests in the class A1-A and A1-B certificates. All or a portion of the class A2 certificates may be exchanged for proportionate interests in the class A2-A and A2-B certificates. All or a portion of the class B certificates may be exchanged for proportionate interests in the class B-A and B-B certificates.

Payment Priority

On each distribution date, the trustee will make disbursements and transfers from the related group's available funds in the order of priority shown in chart 1.

Related Research

�??U.S. CMBS Rating Methodology And Assumptions For Conduit/Fusion Pools,�?? published June 26, 2009.