DBRS Upgrades MLMI, Series 1998-Canada 1, Class D; All Trends Stable

DBRS has today made the following changes to Merrill Lynch Mortgage Loans Inc., Series 1998-Canada 1 ratings:

-- Class B has been discontinued as it was repaid in full
-- Class D has been upgraded to AAA from AA (low)
-- Class F trend changed to Stable from Negative

The remaining classes were confirmed:
-- Class C at AAA
-- Class E at BBB (low)
-- the interest-only Class X at AAA

All trends are Stable.

The change is a reflection of the largest loan in the transaction, Portage Place, refinancing at its maturity on December 1, 2008. Portage Place had long been a loan of concern for DBRS as noted on its Hotlist in previous Performance Updates. As a result of the repayment, credit enhancement to the classes has increased substantially, prompting the upgrade. In addition, the remaining loans in the pool have strong debt yields, above 12%, thus prompting the Trend change of Class F back to Stable.

The transaction concentration has increased. Of the original 32 loans, only six remain. Three loans are fully amortizing, with final maturity dates between 2018 and 2020, and three are ten-year term loans that have already requested or are in the process of extending their respective maturity dates by three to six months. In requesting the extensions, each borrower noted that it is taking longer to arrange take-out financing due to the current lending market.

The three loans with maturity extensions comprise 37.1% of the transaction balance. The first loan, Prospectus ID#10 (Brockville Centre, 24.1% of the pool) is secured by an anchored shopping centre located in Brockville, Ont. The centre is anchored by Zellers, Valu Mart, Brewer’s Retail, Liquor Control Board of Ontario and Pharma Plus. The YE2007 debt service coverage ratio (DSCR) on the loan was 1.61x.

The second loan, Prospectus ID#22 (Chelmsford Plaza, 9.4%) is secured by an anchored shopping centre. Chelmsford is located north of Sudbury, Ont. The property was 100% occupied as of October 2008; its primary tenants include Loeb and HSBC Bank Canada. The YE2007 DSCR for the loan was 1.23x.

The third loan is Prospectus ID#32 (Yorkton, 3.6%) is secured by a 72-unit multifamily property located in Yorkton, Sask., which is 175 kilometres northeast of Regina. Despite its rural location, the loan per unit is low at $13,370.

One loan is in special servicing. Prospectus ID#23 (The Pointe Inn, 8.5%) was originally transferred to special servicing because of a transfer of ownership without lenders’ consent. Since then, there has been litigation within the borrowering entity that is prohibiting the servicer from being able to process the assumption. The property performance is fine, with YE2007 DSCR of 1.90x and the loan remains current. The special servicer is currently monitoring the litigation and the loan is expected to remain in special servicing until the servicer can process the assumption.

DBRS notes that commercial property owners are having more difficulty arranging financing in today’s market than they have experienced in years past. Therefore, requests for maturity date extensions are expected to be common going forward and it is unlikely that the classes will be repaid on or prior to the Scheduled Maturity Dates. DBRS rates to the Final Rated Maturity and not the Scheduled Maturity Date. The Final Rated Maturity of this transaction is December 15, 2030.

Note:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is CMBS Methodology which can be found on our website under Methodologies.

This is a Structured Finance rating.