/raid1/www/Hosts/bankrupt/TCR_Public/181118.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Sunday, November 18, 2018, Vol. 22, No. 321
Headlines
AASET TRUST 2018-2: Fitch Assigns BB Rating on Class C Notes
ADAMS OUTDOOR 2018-1: Fitch Assigns BBsf Rating on Class C Debt
AMERICREDIT AUTOMOBILE 2018-3: DBRS Assigns (P)BB Rating on E Notes
BEAR STEARNS 2004-PWR6: Moody's Affirms Ca Rating on Cl. N Certs
BENCHMARK 2018-B7: DBRS Assigns Prov. B Rating on H-RR Certs
BLUEMOUNTAIN CLO 2012-2: S&P Assigns Prelim BB Rating on E-R2 Notes
CANTOR COMMERCIAL 2016-C6: Fitch Affirms B- on Class F Certs
CD 2017-CD6: DBRS Confirms BB(low) Rating on Class G-RR Certs
COMM 2005-LP5: Moody's Lowers Class G Certs Rating to Ca
COMMERCIAL MORTGAGE 1999-C2: Moody's Affirms Caa3 on Class H Certs
CREDIT SUISSE 2006-C3: Moody's Affirms Caa3 at Class A-J Certs
CREDIT SUISSE 2016-NXSR: Fitch Affirms B-sf Rating on Cl. E Certs
ELLINGTON FINANCIAL 2018-1: S&P Gives Prelim B Rating on B-2 Certs
FIRST INVESTORS 2018-2: S&P Assigns B Rating on Cl. F Notes
FLAGSHIP CREDIT 2018-4: DBRS Gives Prov. BB Rating on Cl. E Notes
FREDDIE MAC 2018-4: DBRS Gives Prov. B(low) Rating on Class M Certs
GALTON FUNDING 2018-2: S&P Assigns B- Rating on Class B5 Certs
GS MORTGAGE 2013-PEMB: S&P Assigns BB Rating on Cl. E Certs
GS MORTGAGE 2014-GC26: DBRS Confirms B Rating on Class X-D Certs
HALCYON LOAN 2018-2: Moody's Assigns (P)B3 Rating on Class E Notes
HARBOR PARK: S&P Assigns Prelim BB- Rating on Class E Notes
IMPACT FUNDING 2014-1: DBRS Confirms B Rating on Class F Certs
JAMESTOWN CLO IV: Moody's Affirms Ba3 Rating on Class D Notes
JP MORGAN 2018-LTV1: Moody's Assigns (P)B3 Rating on Cl. B-5 Debt
JPMBB COMMERCIAL 2014-C26: DBRS Gives BB(high) Rating on HOW Certs
LB COMMERCIAL 1998-C1: Moody's Affirms C Rating on Class IO Certs
LB-UBS COMMERCIAL 2005-C7: S&P Affirms B- Rating on SP-7 Certs
LB-UBS COMMERCIAL 2006-C3: S&P Raises Class F Certs Rating to CCC
LCM XVI: S&P Assigns Prelim BB- Rating on $28MM Class E-R2 Notes
MAGNETITE LTD XI: Moody's Hikes Class D Notes Rating to Ba3(sf)
MARINER FINANCE 2018-A: S&P Assigns BB Rating on Cl. D Notes
MORGAN STANLEY 2008-TOP29: Fitch Lowers 2 Tranches to Csf
MORGAN STANLEY 2013-C11: Moody's Lowers Class D Certs Rating to Ba2
NATIONSLINK FUNDING 1999-LTL-1: Moody's Affirms B2 Rating on X Debt
NATIONSTAR HECM 2018-3: Moody's Gives (P)Ba3 Rating on Cl. M4 Debt
NEUBERGER BERMAN XVIII: S&P Assigns BB- Rating on Class D-R2 Notes
NORTHWOODS CAPITAL XIV-B: Moody's Rates $6MM Class F Notes 'B2'
OCTAGON INVESTMENT 28: S&P Assigns Prelim BB- Rating on E-R Notes
OHA CREDIT X-R: S&P Assigns Prelim. B- Rating on Cl. F Notes
RAIT TRUST 2017-FL8: DBRS Confirms B Rating on Cl. F Notes
TCI-SYMPHONY CLO 2016-1: Moody's Rates $20MM Class E-R Notes Ba3
VENTURE 35: Moody's Assigns Ba3 Rating on $30MM Class E Notes
VOYA CLO 2015-3: S&P Assigns Prelim BB- Rating on Class D-R Notes
WELLS FARGO 2016-NXS5: Fitch Affirms BB-sf Rating on Class F Certs
WFRBS COMMERCIAL 2012-C10: Moody's Cuts Class E Certs Rating to B1
WFRBS COMMERCIAL 2012-C7: Moody's Affirms B1 Rating on 2 Tranches
WORLD OMNI 2018-1: Fitch Assigns BBsf Rating on Class E Notes
WORLD OMNI 2018-1: S&P Assigns BB Rating on Class E Notes
[*] DBRS Reviews 55 Ratings From 13 US Structured ABS Transactions
[*] Moody's Takes Action on $2.7BB GSE CRT RMBS Issued in 2016
[*] Moody's Withdraws $341.8MM RMBS Issued 2005 to 2009
[*] S&P Takes Various Actions on 96 Classes From 21 US RMBS Deals
*********
AASET TRUST 2018-2: Fitch Assigns BB Rating on Class C Notes
------------------------------------------------------------
Fitch Ratings has assigned the following ratings and Outlooks to
the AASET 2018-2 Trust notes:
-- $488,309,000 class A asset-backed notes 'Asf'; Outlook
Stable;
-- $73,430,000 class B asset-backed notes 'BBBsf'; Outlook
Stable;
-- $51,401,000 class C asset-backed notes 'BBsf'; Outlook
Stable.
The notes issued from AASET 2018-2 will be backed by lease payments
and disposition proceeds on a pool of 35 mid- to end-of-life
aircraft. Apollo Aviation Management Limited, a wholly-owned
subsidiary of Apollo Aviation Holdings Limited, will be the
servicer. Note proceeds will finance the purchase of the aircraft
from certain funds managed by affiliates of Apollo. AASET 2018-2 is
the third AASET transaction rated by Fitch and will be the sixth
aircraft ABS transaction to be sponsored and serviced by Apollo
since 2014. Fitch does not rate Apollo or AAML.
SASOF IV, the primary seller of the assets to AASET 2018-2, will
retain a position as a beneficial holder of an E certificate,
consistent with similar investments made by funds managed by
affiliates of Apollo in prior AASET transactions. Therefore, Apollo
will have a vested interest in performance of the transaction
outside of merely collecting servicing fees due to the
European-style waterfall in SASOF IV. Fitch views this positively
since Apollo has a significant interest in generating positive cash
flows through management of the assets over the life of the
transaction.
The aircraft in the pool will be transferred from SASOF IV to the
aircraft owning entity (AOE) issuers during a delivery period
ending 270 days after the closing of the transaction. However,
there are certain aircraft in the pool that are currently not owned
by SASOF IV or its affiliates that may be acquired by the AOE
issuers from the third-party sellers after close. If aircraft in
the pool (or replacement aircraft) are not transferred to the AOE
issuers within 270 days of closing, the applicable amount
attributable to each aircraft not transferred will be used to
prepay the notes without premium, consistent with prior AASET and
other aircraft ABS transactions.
Citibank, N.A. will act as trustee, security trustee, and operating
bank and Canyon Financial Services Limited will act as managing
agent.
KEY RATING DRIVERS
Stable Asset Quality: The pool has a weighted average (WA) age of
13.9 years and contains 66.6% good quality A320 and B737 family
current-generation aircraft, consistent with AASET 2018-1. Further,
the pool features an improved mix of widebody aircraft relative to
2018-1. The WA remaining lease term is 3.6 years, and 55.6% of the
pool is on lease until at least 2022, a positive for future cash
flow generation.
Weak Lessee Credits: Most of the 30 lessees in the pool are either
unrated or speculative-grade credits, typical of aircraft ABS.
Fitch assumed unrated lessees would perform consistent with either
a 'B' or 'CCC' Issuer Default Rating (IDR) to reflect default risk
in the pool. Ratings were further stressed during future recessions
and once aircraft reach Tier 3 classification.
Technological Risk Exists: The A320 and B737 current generation
aircraft face replacement programs over the next decade from the
A320neo and B737 MAX. The A330 family also faces future replacement
and competition from the A330neo, B777X and A350. While new
variants will pressure current aircraft values and lease rates,
mitigants exist.
Consistent Transaction Structure: Credit enhancement (CE) comprises
overcollateralization (OC), a liquidity facility and a cash
reserve. The initial loan to value (LTV) ratios for the class A, B
and C notes are 66.5%, 76.5% and 83.5%, respectively, based on the
average of maintenance-adjusted base values. These levels are in
line with AASET 2018-1.
Capable Servicing History and Experience: Fitch believes AAML has
the ability to collect lease payments, remarket and repossess
aircraft in an event of lessee default, and procure maintenance to
retain values and ensure stable performance. Fitch considers AAML
to be a capable servicer, as evidenced by prior securitization
performance and its servicing experience of aviation assets and
Apollo's managed aviation funds.
Adequate Structural Protections: Each class of notes makes full
payment of interest and principal in the primary scenarios
commensurate with their expected ratings after applying Fitch's
stressed asset and liability assumptions. Fitch also created
multiple alternative cash flows to evaluate the structure
sensitivity to different scenarios, detailed later in the report.
High Industry Cyclicality: Commercial aviation has been subject to
significant cyclicality due to macroeconomic and geopolitical
events. Fitch's analysis assumes multiple periods of significant
volatility over the life of the transaction.
Asset Value and Lease Rate Volatility: Downturns are typically
marked by reduced aircraft utilization rates, values and lease
rates, as well as deteriorating lessee credit quality. Fitch
employs aircraft value stresses in its analysis, which takes into
account age and marketability to simulate the decline in lease
rates expected over the course of an aviation market downturn, and
the decrease to potential residual sales proceeds.
Rating Cap of 'Asf': Fitch limits aircraft operating lease ratings
to a maximum cap of 'Asf' due to the factors detailed, and the
potential volatility they produce.
RATING SENSITIVITIES
Due to the correlation between global economic conditions and the
airline industry, the ratings may be affected by global
macro-economic or geopolitical factors over the remaining term of
the transaction. Therefore, Fitch evaluated various sensitivity
scenarios that could affect future cash flows from the pool and
recommended ratings for the notes.
Fitch performed a sensitivity analysis assuming a 25% decrease to
Fitch's lease rate factor curve to observe the impact of depressed
lease rates on the pool. This scenario highlights the effect of
increased competition in the aircraft leasing market, particularly
for mid to end-of-life aircraft over the past few years, and
stresses the pool to a higher degree by assuming lease rates well
below observed market rates. Under this scenario, the A notes could
be subject to a downgrade of one to two categories, the class B
notes to one category, and the class C notes to two categories.
Fitch evaluated a scenario in which all unrated airlines are
assumed to carry a 'CCC' rating. This scenario mimics a prolonged
recessionary environment in which airlines are susceptible to an
increased likelihood of default. This would, in turn, subject the
aircraft pool to more downtime and expenses as repossession and
remarketing events would increase. Under this scenario, the notes
show some sensitivity to the increase in expenses due to increased
defaults. Under such a scenario, each class could possibly
experience a downgrade of up to one category.
Fitch created a scenario in which the A330-200s in the pool
encounter a considerable amount of stress to their residual values.
Fitch removed outlier appraisal values for each A330-200 in the
pool and took the average of the lower two appraisals to determine
maintenance-adjusted base values for modeling. All the A330-200s
were assumed to be Tier 3 aircraft to stress recessionary value
declines, and Fitch placed a higher 25% haircut on residual
proceeds. Under this scenario the A330-200s are only granted
part-out value at the end of their useful lives, and the notes show
some sensitivity that could result in downgrades of up to one
category.
ADAMS OUTDOOR 2018-1: Fitch Assigns BBsf Rating on Class C Debt
---------------------------------------------------------------
Fitch Ratings has assigned the following ratings and Rating
Outlooks to Adams Outdoor Advertising Limited Partnership, Secured
Billboard Revenue Notes, Series 2018-1:
-- $395,800,000 class A 'Asf'; Outlook Stable;
-- $35,000,000 class B 'BBBsf'; Outlook Stable;
-- $74,200,000 class C 'BBsf'; Outlook Stable.
The transaction represents a securitization in the form of notes
backed by approximately 9,789 outdoor advertising displays.
The ratings reflect a structured finance analysis of the cash flows
from advertising structures, not an assessment of the corporate
default risk of the ultimate parent, Adams Outdoor Advertising.
The ratings are based on information provided by the issuer as of
Nov. 8, 2018. All classes are being privately placed pursuant to
Rule 144A.
KEY RATING DRIVERS
Non-Traditional Asset Type; Rating Cap: Due to the specialized
nature of the collateral consisting primarily of outdoor
advertising displays and lack of mortgages, the senior classes of
this transaction do not achieve ratings above 'Asf'.
Cash Flow and Leverage: Fitch's net cash flow on the pool is $61.6
million, implying a Fitch stressed debt service coverage ratio of
1.45x (inclusive of amortization credit). The debt multiple
relative to Fitch's NCF is 8.2x, which equates to a debt yield of
12.2%.
Dominant Market Share: AOA primarily operates in midsize markets
where it is the dominant provider of outdoor advertising, with an
average 83.7% market share. This dominant market share adds to the
predictability of cash flow by minimizing pricing pressure from
competition.
High Barriers to Entry: AOA faces limited competition in its market
as a result of the billboard permitting process and significant
federal, state and local regulations that limit supply and prohibit
new billboards.
Diverse Number of Assets: AOA currently operates 9,789 billboard
faces, including 3,432 bulletins, 6,048 posters, 265 digital
displays and 44 other displays, in 12 primary markets in nine
states. In addition, no customer accounts for greater than 2.4% of
revenues, and no industry accounts for greater than 12.8% of
revenues.
RATING SENSITIVITIES
For this transaction, Fitch's NCF was 7.8% below the TTM ended
August 2018 NCF. Included in Fitch's presale report are numerous
Rating Sensitivities that describe the potential impact given
further NCF declines below Fitch's NCF. Fitch evaluated the
sensitivity of the ratings for class A and found that a 30% decline
would result in a downgrade to 'Bsf'.
AMERICREDIT AUTOMOBILE 2018-3: DBRS Assigns (P)BB Rating on E Notes
-------------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the following classes of
notes issued by AmeriCredit Automobile Receivables Trust 2018-3
(AMCAR 2018-3 or the Issuing Entity):
-- $161,000,000 of Class A-1 at R-1 (high) (sf)
-- $152,500,000 of Class A-2-A at AAA (sf)*
-- $152,500,000 of Class A-2-B at AAA (sf)*
-- $261,450,000 of Class A-3 at AAA (sf)
-- $78,950,000 of Class B at AA (sf)
-- $98,010,000 of Class C at A (sf)
-- $96,380,000 of Class D at BBB (sf)
-- $25,590,000 of Class E at BB (sf)
*The total Class A-2 size is expected to be $305,000,000, split
between Classes A-2-A and A-2-B. Class A-2-B will be floating rate
and will not exceed 50% of total Class A-2 issuance.
The provisional ratings are based on DBRS's review of the following
analytical considerations:
-- Transaction capital structure, proposed ratings and form and
sufficiency of available credit enhancement.
-- The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms under which
they have invested. For this transaction, the ratings address the
timely payment of interest on a monthly basis and principal by the
legal final maturity date.
-- AmeriCredit Financial Services, Inc.'s (AmeriCredit)
capabilities with regard to originations, underwriting and
servicing and ownership by General Motors Company.
-- The credit quality of the collateral and performance of
AmeriCredit's auto loan portfolio.
-- The legal structure and presence of legal opinions that will
address the true sale of the assets to the Issuing Entity, the
non-consolidation of the special-purpose vehicle with AmeriCredit
and that the Issuing Entity has a valid first-priority security
interest in the assets and the consistency with DBRS's "Legal
Criteria for U.S. Structured Finance" methodology.
The receivables securitized in AMCAR 2018-3 will be subprime auto
loan contracts secured by new and used automobiles, light-duty
trucks and vans.
This transaction is being structured as a public transaction
offering four classes of notes: Class A (split into three
sequential tranches – Classes A-1, A-2 and A-3), Class B, Class C
and Class D. The Class E Notes are not being publicly offered and
will initially be retained by the depositor or an affiliate
thereof. Initial Class A credit enhancement of 35.20% will include
a reserve account (2.00% of the initial pool balance, funded at
inception and non-declining), overcollateralization (OC) of 5.75%
and subordination of 27.45% of the initial pool balance. Initial
Class B enhancement of 27.95% will include a 2.00% reserve account,
5.75% OC and 20.20% subordination. Initial Class C enhancement of
18.95% will include OC of 5.75%, subordination of 11.20% and a
reserve account of 2.00%. Initial Class D enhancement of 10.10%
will include OC of 5.75%, subordination of 2.35% and a reserve
account of 2.00%. OC will build to a target of 14.75% of the pool
balance, less the amount on deposit in the reserve account, based
on excess spread available in the structure and will be subject to
a floor of 0.50% of the initial pool balance.
BEAR STEARNS 2004-PWR6: Moody's Affirms Ca Rating on Cl. N Certs
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on two classes
and affirmed the ratings on ten classes in Bear Stearns Commercial
Mortgage Securities Trust 2004-PWR6 as follows:
Cl. C, Affirmed Aaa (sf); previously on Oct 27, 2017 Affirmed Aaa
(sf)
Cl. D, Affirmed Aaa (sf); previously on Oct 27, 2017 Affirmed Aaa
(sf)
Cl. E, Affirmed Aaa (sf); previously on Oct 27, 2017 Affirmed Aaa
(sf)
Cl. F, Affirmed Aaa (sf); previously on Oct 27, 2017 Affirmed Aaa
(sf)
Cl. G, Upgraded to Aaa (sf); previously on Oct 27, 2017 Affirmed
Aa1 (sf)
Cl. H, Upgraded to A2 (sf); previously on Oct 27, 2017 Affirmed
Baa1 (sf)
Cl. J, Affirmed Ba1 (sf); previously on Oct 27, 2017 Affirmed Ba1
(sf)
Cl. K, Affirmed B1 (sf); previously on Oct 27, 2017 Affirmed B1
(sf)
Cl. L, Affirmed B2 (sf); previously on Oct 27, 2017 Affirmed B2
(sf)
Cl. M, Affirmed Caa1 (sf); previously on Oct 27, 2017 Affirmed Caa1
(sf)
Cl. N, Affirmed Ca (sf); previously on Oct 27, 2017 Downgraded to
Ca (sf)
Cl. X-1, Affirmed B3 (sf); previously on Oct 27, 2017 Affirmed B3
(sf)
RATINGS RATIONALE
The ratings on two P&I classes were upgraded primarily due to an
increase in credit support since Moody's last review. The pool has
paid down by 7.8% since Moody's last review. In addition, loans
constituting 24% of the pool, with debt yields exceeding 12.0%, are
scheduled to mature within the next 12 months.
The ratings on four P&I classes were affirmed because the
transaction's key metrics, including Moody's loan-to-value ratio,
Moody's stressed debt service coverage ratio and the transaction's
Herfindahl Index, are within acceptable ranges.
The ratings on five P&I classes were affirmed because the ratings
are consistent with Moody's expected loss.
The rating on the IO class was affirmed based on the credit quality
of the referenced classes.
Moody's rating action reflects a base expected loss of 2.3% of the
current pooled balance, compared to 2.1% at Moody's last review.
Moody's base expected loss plus realized losses is now 1.5% of the
original pooled balance, unchanged from the prior review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating Bear Stearns Commercial
Mortgage Securities Trust 2004-PWR6, Cl. C, Cl. D, Cl. E, Cl. F,
Cl. G, Cl. H, Cl. J, Cl. K, Cl. L, Cl. M, and Cl. N was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in July 2017. The methodologies used in rating Bear
Stearns Commercial Mortgage Securities Trust 2004-PWR6, Cl. X-1
were "Moody's Approach to Rating Large Loan and Single Asset/Single
Borrower CMBS" published in July 2017 and "Moody's Approach to
Rating Structured Finance Interest-Only (IO) Securities" published
in June 2017.
DEAL PERFORMANCE
As of the October 11, 2018 distribution date, the transaction's
aggregate certificate balance has decreased by 91% to $91.4 million
from $1.07 billion at securitization. The certificates are
collateralized by 12 mortgage loans ranging in size from less than
1% to 24% of the pool. One loan, constituting 10% of the pool, has
an investment-grade structured credit assessment. Four loans,
constituting 44% of the pool, have defeased and are secured by US
government securities.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of four, compared to five at Moody's last review.
Two loans, constituting 34% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Eight loans have been liquidated from the pool, contributing to an
aggregate realized loss of $13.6 million (for an average loss
severity of 47%). The only specially serviced loan is the Northway
Plaza Shopping Center Loan ($2.53 million -- 2.8% of the pool),
which is secured by a 79,000 square foot (SF) grocery-anchored
retail center located in Columbia, South Carolina. The loan had an
anticipated repayment date (ARD) in July 2014 and transferred to
the special servicer in October 2016 due to cash flow being
insufficient to cover the required waterfall. Property performance
has deteriorated since securitization and was 55% leased as of July
2018.
Moody's received full year 2017 operating results for 100% of the
pool, and full or partial year 2018 operating results for 100% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 55%, compared to 50% at Moody's
last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 19% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 9.4%.
Moody's actual and stressed conduit DSCRs are 1.47X and 2.24X,
respectively, compared to 1.51X and 2.94X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The loan with a structured credit assessment is the Berry Plastics
Manufacturing Plant Loan ($9.3 million -- 10.2% of the pool), which
is secured by a portfolio of four industrial properties located
across three states, Arizona (1), Illinois (2), and New York (1).
The portfolio is 100% leased to Berry Global, Inc. through November
2023. The loan is fully amortizing and has paid down 56% since
securitization. Moody's analysis incorporated a Lit/Dark approach
to account for the single-tenant exposure. Moody's structured
credit assessment and stressed DSCR are aaa (sca.pd) and 3.16X,
respectively.
The top three conduit loans represent 37% of the pool balance. The
largest loan is the Plymouth Square Shopping Center Loan ($21.9
million -- 24% of the pool), which is secured by a 276,000 SF
grocery-anchored retail center located in Conshohocken,
Pennsylvania, approximately 15 miles northwest of Philadelphia. The
property was 68% leased as of June 2018 and is on the watchlist due
to low occupancy. The borrower is currently moving forward with a
multi-million dollar renovation of the property. The loan benefits
from amortization and has paid down 22% since securitization.
Moody's LTV and stressed DSCR are 74% and 1.38X, respectively,
compared to 71% and 1.34X at the last review.
The second largest loan is the Shaklee Corporation Loan ($8.2
million -- 9.0% of the pool), which is secured by 124,000 SF office
building located in Pleasanton, California. The property is 100%
leased to Shaklee Corporation through May 2024. The loan is fully
amortizing and has paid down 56% since securitization. Moody's
analysis incorporated a Lit/Dark approach to account for the
single-tenant exposure. Moody's LTV and stressed DSCR are 31% and
3.15X, respectively, compared to 34% and 2.88X at the last review.
The third largest loan is the Castle Rock Portfolio Loan ($4.1
million -- 4.5% of the pool), which is secured by a portfolio of
six industrial properties and two parcels of land located in
Arizona (1) and Colorado (7). The portfolio is 100% leased to
Karcher North America, Inc. through June 2024. The loan is fully
amortizing and has paid down 56% since securitization. Moody's
analysis incorporated a Lit/Dark approach to account for the
single-tenant exposure. Moody's LTV and stressed DSCR are 31% and
3.29X, respectively, compared to 35% and 2.87X at the last review.
BENCHMARK 2018-B7: DBRS Assigns Prov. B Rating on H-RR Certs
------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the following classes of
Commercial Mortgage Pass-Through Certificates, Series 2018-B7 to be
issued by Benchmark 2018-B7 Mortgage Trust:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class A-M at AAA (sf)
-- Class B at AA (high) (sf)
-- Class X-B at AA (sf)
-- Class C at AA (low) (sf)
-- Class D at A (sf)
-- Class X-D at A (low) (sf)
-- Class E at BBB (high) (sf)
-- Class X-F at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class G-RR at BB (sf)
-- Class H-RR at B (sf)
Classes X-B, X-D, X-F, D, E, F, G-RR and H-RR will be privately
placed. The X-A, X-B, X-D and X-F balances are notional.
The collateral consists of 51 fixed-rate loans, secured by 227
commercial and multifamily properties. The transaction is a
sequential-pay-pass-through structure. The conduit pool was
analyzed to determine the provisional ratings, reflecting the
long-term probability of loan default within the term and its
liquidity at maturity. Trust assets contributed from six loans,
representing 26.0% of the pool, are shadow-rated investment grade
by DBRS. Proceeds for the shadow-rated loans are floored at their
respective rating within the pool. When the combined 26.0% of the
pool has no proceeds assigned below the rating floor, the resulting
pool subordination is diluted or reduced below that rated floor.
When the cut-off loan balances were measured against the DBRS
Stabilized net cash flow (NCF) and their respective actual
constants, seven loans, representing 9.5% of the total pool, had a
DBRS Term debt service coverage ratio (DSCR) below 1.15 times (x),
a threshold indicative of a higher likelihood of mid-term default.
Additionally, to assess refinance (refi) risk given the current low
interest-rate environment, DBRS applied its refinance constants to
the balloon amounts. This resulted in 34 loans, representing 69.2%
of the pool, having whole-loan refinance DSCRs below 1.00x and 20
loans, representing 41.1% of the pool, having whole-loan refinance
DSCRs below 0.90x. DUMBO Heights Portfolio, Aventura Mall and
Workspace, three of the pool's loans with a DBRS Refi DSCR below
0.90x, which represent 14.6% of the transaction balance, are
shadow-rated investment grade by DBRS and have a large piece of
subordinate mortgage debt outside the trust.
Ten loans, representing 29.6% of the pool, are located in urban and
super-dense urban gateway markets with increased liquidity that
benefit from consistent investor demand, even in times of stress.
Urban markets represented in the deal include Chicago; New York;
Brooklyn, New York; Sunnyvale, California; and New Orleans,
Louisiana. Furthermore, there is limited rural and tertiary
concentration with only eight loans, representing 6.8% of the pool.
Six loans – DUMBO Heights Portfolio, Moffett Towers E, F, G,
Aventura Mall, Aon Center, Workspace and 636 11th Avenue –
representing a combined 26.0% of the pool, exhibit credit
characteristics consistent with investment-grade shadow ratings.
DUMBO Heights Portfolio exhibits credit characteristics consistent
with an A (high) shadow rating, Moffett Towers E, F, G exhibits
credit characteristics consistent with a BBB (low) shadow rating,
Aventura Mall exhibits credit characteristics consistent with a BBB
(high) shadow rating, Aon Center exhibits credit characteristics
consistent with an A (high) shadow rating, Workspace exhibits
credit characteristics consistent with an AA (low) shadow rating
and 636 11th Avenue exhibits credit characteristics consistent with
an BBB (low) shadow rating.
Term default risk is moderate as indicated by the strong
weighted-average (WA) DBRS Term DSCR of 1.64x. In addition, 21
loans, representing 55.4% of the pool, have a DBRS Term DSCR above
1.50x. Even when excluding the six investment-grade shadow-rated
loans, the deal exhibits an acceptable WA DBRS Term DSCR of 1.53x.
Only four loans, representing 6.4% of the pool, have sponsorship
and/or loan collateral with a prior loan default, limited liquidity
relative to loan obligation, a historical negative credit event or
have a prior or pending litigation issue with the respective
property. None of these loans are in the top 15 and this is a
significantly smaller concentration compared with recent conduit
securitizations. DBRS increased the probability of default (POD)
for the loan with identified sponsorship concerns.
Twenty-two loans, representing 57.3% of the pool, including ten of
the largest 15 loans, are structured with full-term interest-only
(IO) payments. An additional 18 loans, comprising 23.9% of the
pool, have partial-IO periods ranging from 12 months to 60 months.
As a result, the transaction's scheduled amortization by maturity
is only 5.4%, which is generally below other recent conduit
securitizations. The DBRS Term DSCR is calculated using the
amortizing debt service obligation and the DBRS Refi DSCR is
calculated considering the balloon balance and lack of amortization
when determining refinance risk. DBRS determines POD based on the
lower of term or refinance DSCRs; therefore, loans that lack
amortization are treated more punitively. Ten of the full-term IO
loans, representing 51.6% of the full-IO concentration in the
transaction, are located in urban or super-dense urban markets.
Additionally, all six loans that are shadow-rated investment grade
by DBRS are full-term IO and they represent 45.3% of the full-term
IO concentration.
Nine loans, representing 12.2% of the transaction balance, are
secured by properties that are either fully or primarily leased to
a single tenant. This includes two of the largest 15 loans: Moffett
Towers E, F, G and 636 11th Avenue. Loans secured by properties
occupied by single tenants have been found to suffer higher loss
severities in an event of default. Two of the largest single-tenant
loans are leased to tenants that are rated investment grade or have
investment-grade-rated parent companies. This includes Moffett
Towers E, F, G, which is fully leased by Amazon.com, Inc., and 636
11th Avenue, which is fully leased by The Ogilvy Group, Inc., a
subsidiary of WPP plc, which backs the lease. In addition, DBRS
applied a penalty for single-tenant properties that resulted in
higher loan-level credit enhancement. The majority of the loans
have been structured with cash flow sweeps prior to tenant expiry
if the lease expires during, at or just beyond loan maturity.
There are seven loans, totaling 17.0% of the pool, secured by
hotels, which are vulnerable to high NCF volatility because of
their relatively short-term leases compared with other commercial
properties, which can cause the NCF to quickly deteriorate in a
declining market. Two of the largest 15 loans are secured by
hospitality properties – Hotel Erwin (3.9% of the pool) and
Courtyard at The Navy Yard (3.4% of the pool). The concentration
penalty applied to this pool incorporates property type
concentration as well as concentration by loan size and geographic
location. Such loans exhibit a WA DBRS Debt Yield and DBRS Exit
Debt Yield of 10.7% and 12.3%, respectively, which compare
favorably with the overall deal. Additionally, six of the seven
loans (92.7% of the hotel concentration) are in established urban
or suburban markets that benefit from increased liquidity and more
stable performance.
The transaction's WA DBRS Refi DSCR is 0.95x, indicating higher
refinance risk on an overall pool level. In addition, 34 loans,
representing 69.2% of the pool, have DBRS Refi DSCRs below 1.00x,
including eight of the top ten loans and 11 of the top 15 loans.
Twenty of these loans, comprising 41.1% of the pool, have DBRS Refi
DSCRs less than 0.90x, including five of the top ten loans. These
credit metrics are based on whole-loan balances. When measured
against A-note balances only, the pool WA DBRS Refi DSCR rises
significantly to 1.05x. Three of the pool's loans with a DBRS Refi
DSCR below 0.90x – DUMBO Heights Portfolio, Aventura Mall and
Workspace, which represent 14.6% of the transaction balance – are
shadow-rated investment grade by DBRS and have large pieces of
subordinate mortgage debt outside the trust. The pool's DBRS Refi
DSCRs for these loans are based on a WA stressed refinance constant
of 9.79%, which implies an interest rate of 9.15%, amortizing on a
30-year schedule. This represents a significant stress of 4.27%
over the WA contractual interest rate of the loans in the pool.
Classes X-A, X-B, X-D and X-F are IO certificates that reference a
single rated tranche or multiple rated tranches. The IO rating
mirrors the lowest-rated reference tranche adjusted upward by one
notch if senior in the waterfall.
BLUEMOUNTAIN CLO 2012-2: S&P Assigns Prelim BB Rating on E-R2 Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-R2, B-R2, C-R2, D-R2, and E-R2 replacement notes from
BlueMountain CLO 2012-2 Ltd., a collateralized loan obligation
(CLO) originally issued in 2012, which was refinanced in 2016 and
is managed by BlueMountain Capital Management LLC. The replacement
notes will be issued via a proposed supplemental indenture.
S&P said, "The preliminary ratings reflect our opinion that the
credit support available is commensurate with the associated rating
levels. Subsequent information may result in the assignment of
final ratings that differ from the preliminary ratings.
"On the Nov. 20, 2018, refinancing date, the proceeds from the
issuance of the replacement notes are expected to redeem the
original notes. At that time, we anticipate withdrawing the ratings
on the original notes and assigning ratings to the replacement
notes. However, if the refinancing doesn't occur, we may affirm the
ratings on the original notes and withdraw our preliminary ratings
on the replacement notes.
"The replacement notes are being issued via a proposed supplemental
indenture, which, in addition to outlining the terms of the
replacement notes, will also reduce the floating spread on all of
the refinanced classes and extend the non-call period by one year.
"Our review of this transaction included a cash flow analysis,
based on the portfolio and transaction as reflected in the trustee
report, to estimate future performance. In line with our criteria,
our cash flow scenarios applied forward-looking assumptions on the
expected timing and pattern of defaults, and recoveries upon
default, under various interest rate and macroeconomic scenarios.
In addition, our analysis considered the transaction's ability to
pay timely interest or ultimate principal, or both, to each of the
rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and we will take further rating actions
as we deem necessary."
PRELIMINARY RATINGS ASSIGNED
BlueMountain CLO 2012-2 Ltd.
Replacement class Rating Amount (mil. $)
A-R2 AAA (sf) 382.20
B-R2 AA (sf) 68.10
C-R2 A (sf) 48.90
D-R2 BBB (sf) 30.10
E-R2 BB (sf) 25.25
CANTOR COMMERCIAL 2016-C6: Fitch Affirms B- on Class F Certs
------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of Cantor Commercial Real
Estate's CFCRE 2016-C6 commercial mortgage pass-through
certificates.
KEY RATING DRIVERS
Stable Performance and Loss Expectations: Pool performance has been
as expected and relatively stable since issuance. The pool has two
specially serviced loans (4%) that are also considered Fitch Loans
of Concern (FLOC). The largest specially serviced loan, the
Waterstone Portfolio (3%), is in special servicing for a
non-permitted transfer/non-monetary default. Loan performance has
improved since issuance; therefore, expected losses are minimal.
The other FLOC, Mandeville Marketplace (1%), has experienced a
large decline in occupancy due to its anchor, Winn-Dixie (NRA 80%),
vacating the property in March 2018. The loan is currently 90+ days
delinquent.
The largest loan in the pool, Hill7 Office (9%), is collateralized
by an office development situated in the central business district
(CBD) of Seattle. The reported year-end 2017 NOI was 36% lower than
issuance; however, the decline is due to rent abatements during
2017 and physical vacancy as certain tenants have yet to occupy
their space. The property is expected to reach 100% occupancy in
January 2019 when current tenant RedFin Corporation (currently 29%
NRA) expands into the vacant fourth floor.
Stable Credit Enhancement Since Issuance: No material changes due
to minimal amortization. As of the October 2018 distribution date,
the pool's aggregate principal balance has been reduced 1.2% from
$787.5 million at issuance to $777.9 million with 45 loans
remaining. No loans have defeased, paid off or been disposed. 63%
of the pool is either full or currently partial IO.
ADDITIONAL CONSIDERATIONS:
Fitch Loans of Concern (FLOC): Waterstone Portfolio (3%) is a
retail portfolio with six properties; five located across New
Hampshire and one in Massachusetts. Three properties in the
portfolio are single tenant properties, including the Rite Aid and
two West Marine stores. The loan was transferred to special
servicing in March 2018 due to a non-permitted transfer. According
to the servicer, discussions are ongoing with the borrower
regarding a potential consent and modification of the loan. The
loan continues to perform in line with expectations at issuance.
Fitch expects minimal losses at this time. As of September 2018,
the servicer reported occupancy and NOI DSCR were 97% and 2.01x,
respectively.
Mandeville Marketplace (1%) is a neighbourhood shopping center
located in the New Orleans suburb of Mandeville, LA. At issuance,
the property was anchored by Winn-Dixie (NRA 80%), with a total
occupancy of 94% and a DSCR NOI of 1.53x. Southeastern Grocers, the
parent company of Winn-Dixie, filed for bankruptcy in March 2018
and included the subject's store among the closings. A termination
agreement was accepted and cash management was immediately
implemented. Per the June 2018 operating statement, year-to-date
occupancy and NOI DSCR was 12% and 0.75x, respectively. As of the
October 2018 reporting period, the loan is 90+ delinquent and the
borrower has signed the negotiation agreement. Discussions are
ongoing. Based on low occupancy, Fitch has assumed there are
significant losses, as the servicer has not provided an appraisal
or detailed update.
There are six loans (13.5%) on the servicer's watchlist due to
tenant bankruptcy, decline in performance, deferred maintenance or
upcoming lease rollover, none of which are considered FLOC. The
watchlist loans include Potomac Mills (9%), which is included due
to the Toys R Us bankruptcy.
Retail Concentration: The pool currently has 17 loans (39%), of
which six loans (28%) are in the Top 15. Additionally, the pool has
two regional malls (14%), both in the Top 5.
Potomac Mills (9%) is secured by approximately 1.46 million of 1.84
million square foot (sf) regional outlet mall in Woodbridge, VA
along the I-95 corridor, between Washington D.C. and Richmond, VA.
IKEA and Burlington Coat Factory are non-collateral anchors. Larger
collateral anchors include Costco Warehouse, J.C. Penney and an
18-screen AMC movie theatre. Performance continues to be in line
with issuance levels. At issuance, this loan received an
investment-grade credit opinion of 'BBBsf' on a standalone basis.
Fresno Fashion Fair Mall (5%) is the dominant mall in its primary
trade area of an approximately seven-mile radius in Fresno, CA.
Anchor tenants include Macy's (non-collateral), JC Penney (29%),
Forever 21 (non-collateral), and Macy's Men's and Children's. Of
note, is that except for Forever 21, the anchor tenants perform
above their respective national sales average.
RATING SENSITIVITIES
The Rating Outlooks on all classes remain Stable due to overall
stable pool performance. Future rating upgrades may occur with
improved pool performance and additional defeasance or paydown.
Rating downgrades to the classes are possible should overall pool
performance decline.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has affirmed the following ratings:
-- $21.3 million class A-1 at 'AAAsf'; Outlook Stable;
-- $33.2 million class A-SB at 'AAAsf'; Outlook Stable;
-- $220 million class A-2 at 'AAAsf'; Outlook Stable;
-- $267.1 million class A-3 at 'AAAsf'; Outlook Stable;
-- $59.1 million class A-M at 'AAAsf'; Outlook Stable;
-- $39.4 million class B at 'AA-sf'; Outlook Stable;
-- $37.4 million class C at 'A-sf'; Outlook Stable;
-- $42.3 million class D at 'BBB-sf'; Outlook Stable;
-- $19.7 million class E at 'BB-sf'; Outlook Stable;
-- $7.9 million class F at 'B-sf'; Outlook Stable;
-- $541.7* million class X-A at 'AAAsf'; Outlook Stable.
-- $98.4* million class X-B at 'AA-sf'; Outlook Stable.
-- $19.7* million class X-E at 'BB-sf'; Outlook Stable.
-- $7.9* million class X-F at 'B-sf'; Outlook Stable.
* Notional amount and interest only.
Fitch does not rate the class G and class X-G certificates.
CD 2017-CD6: DBRS Confirms BB(low) Rating on Class G-RR Certs
-------------------------------------------------------------
DBRS Limited confirmed all ratings on the following classes of
Commercial Mortgage Pass-Through Certificates, Series 2017-CD6
issued by CD 2017-CD6 Mortgage Trust:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-M at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class X-D at A (high) (sf)
-- Class D at A (sf)
-- Class E-RR at BBB (sf)
-- Class F-RR at BB (high) (sf)
-- Class G-RR at BB (low) (sf)
All trends remain Stable.
The rating confirmations reflect the overall stable performance of
the transaction, which has remained in line with DBRS's
expectations since issuance. The subject transaction closed in
November 2017 and originally consisted of 58 fixed-rate loans
secured by 125 commercial and multifamily properties with an
original trust balance of $1,061 million. As of the October 2018
remittance, there has been a collateral reduction of 0.6% since
issuance because of scheduled loan amortization with all 58 loans
remaining in the pool.
Three loans, representing 9.0% of the pool – Burbank Office
Portfolio (Prospectus ID#3; 4.7% of the pool), Moffett Place
Building 4 (Prospectus ID#15; 2.4% of the pool) and Colorado Center
(Prospectus ID#23; 1.9% of the pool) – exhibit performance
consistent with investment-grade loan characteristics. Furthermore,
term default risk is moderate as indicated by the relatively strong
weighted-average (WA) DBRS Term debt service coverage ratio (DSCR)
of 1.76 times (x). The pool is highly concentrated by property type
as the office concentration is 41.1% of the pool balance; however,
approximately 21.9% of the office concentration is shadow-rated
investment-grade. Fifteen loans, representing 34.4% of the pool,
including six of the largest 15 loans, are structured with
full-term interest-only (IO) payments. Five of these loans,
representing 32.1% of the full-IO concentration, are located in
urban markets.
As of the October 2018 remittance, there were two loans – Hampton
Inn Majestic Chicago (Prospectus ID#20; 2.0% of the pool) and
Sierra Center (Prospectus ID#24; 1.8% of the pool) – on the
servicer's watch list. Both loans were placed on the servicer's
watch list because of lower-than-projected DSCRs; however, both
properties are currently stabilized and were placed on the
servicer's watch list based on partial-year financial figures.
Performance is expected to improve as the loans season.
As of the October 2018 remittance, there were five loans,
representing 7.6% of the pool balance, reporting year-end (YE) 2017
financials with 54 loans, representing 93.7% of the pool, reporting
partial-year 2018 figures. One loan in the top 15 reported YE2017
financials, representing 2.5% of the pool. The limited financial
reporting for the deal is expected, given the recent vintage and
fourth-quarter closing date. In general, the partial-year 2018
figures reported are in line with DBRS's expectations at issuance.
Classes X-A, X-B and X-D are IO certificates that reference a
single rated tranche or multiple rated tranches. The IO rating
mirrors the lowest-rated applicable reference obligation tranche
adjusted upward by one notch if senior in the waterfall.
COMM 2005-LP5: Moody's Lowers Class G Certs Rating to Ca
--------------------------------------------------------
Moody's Investors Service has affirmed the ratings on six classes
and downgraded the ratings on two classes in COMM 2005-LP5
Commercial Mortgage Pass-Through Certificates as follows:
Cl. F, Downgraded to B3 (sf); previously on Oct 12, 2017 Downgraded
to B1 (sf)
Cl. G, Downgraded to Ca (sf); previously on Oct 12, 2017 Downgraded
to Caa1 (sf)
Cl. H, Affirmed C (sf); previously on Oct 12, 2017 Downgraded to C
(sf)
Cl. J, Affirmed C (sf); previously on Oct 12, 2017 Affirmed C (sf)
Cl. K, Affirmed C (sf); previously on Oct 12, 2017 Affirmed C (sf)
Cl. L, Affirmed C (sf); previously on Oct 12, 2017 Affirmed C (sf)
Cl. M, Affirmed C (sf); previously on Oct 12, 2017 Affirmed C (sf)
Cl. X-C, Affirmed C (sf); previously on Oct 12, 2017 Affirmed C
(sf)
RATINGS RATIONALE
The ratings on five P&I classes were affirmed because the ratings
are consistent with Moody's expected loss plus realized losses.
The ratings on two P&I classes, Cl. F and Cl. G, were downgraded
due to an increase in expected losses from the loan in special
servicing. The specially serviced loan, Lakeside Mall, represents
84% of the pool balance and is already real estate owned.
The rating on the IO class, Cl. X-C, was affirmed based on the
credit quality of its referenced classes.
Moody's rating action reflects a base expected loss of 78.9% of the
current pooled balance, compared to 69.3% at Moody's last review.
Moody's base expected loss plus realized losses is now 5.2% of the
original pooled balance, the same as at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating COMM 2005-LP5 Commercial
Mortgage Pass-Through Certificates, Cl. F, Cl. G, Cl. H, Cl. J, Cl.
K, Cl. L and Cl. M was "Moody's Approach to Rating Large Loan and
Single Asset/Single Borrower CMBS" published in July 2017. The
methodologies used in rating COMM 2005-LP5 Commercial Mortgage
Pass-Through Certificates, Cl. X-C were "Moody's Approach to Rating
Large Loan and Single Asset/Single Borrower CMBS" published in July
2017 and "Moody's Approach to Rating Structured Finance
Interest-Only (IO) Securities" published in June 2017.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 84% of the pool is in
special servicing. In this approach, Moody's determines a
probability of default for each specially serviced and troubled
loan that it expects will generate a loss and estimates a loss
given default based on a review of broker's opinions of value (if
available), other information from the special servicer, available
market data and Moody's internal data. The loss given default for
each loan also takes into consideration repayment of servicer
advances to date, estimated future advances and closing costs.
Translating the probability of default and loss given default into
an expected loss estimate, Moody's then applies the aggregate loss
from specially serviced to the most junior class(es) and the
recovery as a pay down of principal to the most senior class(es).
DEAL PERFORMANCE
As of the October 10, 2018 distribution date, the transaction's
aggregate certificate balance has decreased by 96% to $73.9 million
from $1.70 billion at securitization. The certificates are
collateralized by 12 mortgage loans ranging in size from less than
1% to 84% of the pool. One loan, constituting less than 1% of the
pool, has defeased and is secured by US government securities.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of one, compared to a Herf of two at Moody's last
review.
Four loans, constituting 2% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Nineteen loans have been liquidated from the pool, resulting in or
contributing to an aggregate realized loss of $30.8 million (for an
average loss severity of 14%). One loan, constituting 84% of the
pool, is currently in special servicing. The specially serviced
loan is the Lakeside Mall Loan ($61.7 million -- 83.5% of the
pool), which represents a pari-passu portion of a $123.5 million
senior mortgage loan. The loan transferred to special servicing in
May 2016 per the borrower's request, as the loan failed to pay off
at its June 2016 maturity date. The deed in lieu of foreclosure
closed on June 30, 2017 and the asset is now REO. The loan is
secured by a 643,000 square foot (SF) portion of a 1.5 million SF
regional mall located in Sterling Heights, Michigan. The mall's
anchors include JC Penney, Macy's, Lord & Taylor and Macy's Mens &
Home, as well as a now vacant former Sears anchor space. Macy's
Mens & Home is the only anchor tenant that is part of the
collateral. As of March 2017, the collateral was 82% leased. The
property faces significant competition from three competing retail
properties in the area. Moody's anticipates a significant loss on
this loan.
As of the October 10, 2018 remittance statement cumulative interest
shortfalls were $2.6 million on the rated classes. Moody's
anticipates interest shortfalls will continue because of the
exposure to specially serviced loans and/or modified loans.
Interest shortfalls are caused by special servicing fees, including
workout and liquidation fees, appraisal entitlement reductions
(ASERs), loan modifications and extraordinary trust expenses.
The top three conduit loans represent 12% of the pool balance. The
largest loan is the 30 East 65th Street Loan ($6.0 million -- 8.1%
of the pool), which is secured by a 64-unit multifamily cooperative
building, located on 65th Street and Madison Avenue in Manhattan.
The building is located one block from the Central Park zoo.
Moody's LTV is 19%.
The second largest loan is the Pacific American Fish Company Loan
($1.8 million -- 2.4% of the pool), which is secured by a 106,000
square foot (SF) industrial building located in Vernon, California.
The building's sole tenant, Pacific American Fish Co., has a lease
expiration date in March 2020. The loan is a fully amortizing loan
and has amortized 84% since securitization. Due to the single
tenant exposure, Moody's value incorporates a lit / dark analysis.
Moody's LTV is 10%.
The third largest loan is the Hunters Chase Apartments Loan ($1.4
million -- 1.9% of the pool), which is secured by a 112-unit
multifamily property located in Thomasville, Georgia. Property
performance has been stable and the loan benefits from
amortization. The loan has amortized 20% since securitization and
Moody's LTV and stressed DSCR are 42% and 2.13X, respectively.
COMMERCIAL MORTGAGE 1999-C2: Moody's Affirms Caa3 on Class H Certs
------------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on two classes
in Commercial Mortgage Asset Trust 1999-C2, Commercial Mortgage
Pass-Through Certificates, Series 1999-C2 as follows:
Cl. H, Affirmed Caa3 (sf); previously on Nov 3, 2017 Upgraded to
Caa3 (sf)
Cl. X, Affirmed C (sf); previously on Nov 3, 2017 Affirmed C (sf)
RATINGS RATIONALE
The rating on the principal and interest class, Cl. H, was affirmed
because the rating is consistent with Moody's expected loss plus
realized losses. Class H has already experienced a 21% realized
loss as result of previously liquidated loans.
The rating on the interest only (IO) class, Cl. X, was affirmed
based on the credit quality of the referenced classes.
Moody's rating action reflects a base expected loss of 0% of the
current pooled balance, the same at Moody's last review. Moody's
does not anticipate losses from the remaining collateral in the
current environment. However, over the remaining life of the
transaction, losses may emerge from macro stresses to the
environment and changes in collateral performance. Its ratings
reflect the potential for future losses under varying levels of
stress. Moody's base expected loss plus realized losses is now 7.7%
of the original pooled balance, compared to 7.6% at the last
review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating Commercial Mortgage Asset
Trust 1999-C2, Cl. H was "Moody's Approach to Rating Large Loan and
Single Asset/Single Borrower CMBS" published in July 2017. The
methodologies used in rating Commercial Mortgage Asset Trust
1999-C2, Cl. X were "Moody's Approach to Rating Large Loan and
Single Asset/Single Borrower CMBS" published in July 2017 and
"Moody's Approach to Rating Structured Finance Interest-Only (IO)
Securities" published in June 2017.
DEAL PERFORMANCE
As of the October 17, 2018 distribution date, the transaction's
aggregate certificate balance has decreased by more than 99% to
$2.6 million from $775 million at securitization. The certificates
are collateralized by one mortgage loan.
Fifteen loans have been liquidated from the pool, resulting in or
contributing to an aggregate realized loss of $59.4 million (for an
average loss severity of 50%).
The remaining loan is the Regal Cinema Loan ($2.6 million), which
is secured by a stadium-style movie theater in Medina, Ohio. The
lease expires in December 2018, approximately nine months prior to
the loan's anticipated repayment date of September 2019. The loan
has amortized 63% since securitization and Moody's current LTV and
stressed DSCR are 48% and 2.48X, respectively, compared to 51% and
2.35X at last review. Moody's stressed DSCR is based on Moody's NCF
and a 9.25% stress rate the agency applied to the loan balance.
CREDIT SUISSE 2006-C3: Moody's Affirms Caa3 at Class A-J Certs
--------------------------------------------------------------
Moody's Investors Service has affirmed the rating on one class in
Credit Suisse Commercial Mortgage Trust Commercial Mortgage
Pass-Through Certificates Series 2006-C3:
Cl. A-J, Affirmed Caa3 (sf); previously on Nov 10, 2017 Affirmed
Caa3 (sf)
RATINGS RATIONALE
The rating of the Class A-J was affirmed because the rating is
consistent with Moody's expected loss plus realized losses.
Moody's rating action reflects a base expected loss of 70.7% of the
current pooled balance, compared to 54.0% at Moody's last review.
Moody's base expected loss plus realized losses is now 14.9% of the
original pooled balance, the same as the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the rating include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the rating include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in this rating was "Moody's Approach
to Rating Large Loan and Single Asset/Single Borrower CMBS"
published in July 2017.
Moody's analysis incorporated a loss and recovery approach in this
rating. In this approach, Moody's determines a probability of
default for each specially serviced and troubled loan that it
expects will generate a loss and estimates a loss given default
based on a review of broker's opinions of value (if available),
other information from the special servicer, available market data
and Moody's internal data. The loss given default for each loan
also takes into consideration repayment of servicer advances to
date, estimated future advances and closing costs. Translating the
probability of default and loss given default into an expected loss
estimate, Moody's then applies the aggregate loss from specially
serviced and troubled loans to the most junior class and the
recovery as a pay down of principal to the most senior class.
DEAL PERFORMANCE
As of the October 17, 2018 distribution date, the transaction's
aggregate certificate balance has decreased by 99% to $7.2 million
from $1.9 billion at securitization. The certificates are
collateralized by three mortgage loans ranging in size from 6.3% to
75.4% of the pool.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of two, compared to three at Moody's last review.
One loan, constituting 18.2% of the pool, is on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Thirty loans have been liquidated from the pool at a loss,
contributing to an aggregate realized loss of $283 million (for an
average loss severity of 70%). One loan is currently in special
servicing. The Manatee Village Loan ($4.8 million -- 75.4% of the
pool), which is secured by a 104,000 square feet (SF) retail center
located in Tarpon Springs, Florida, approximately 30 miles
northwest of the Tampa CBD. The loan transferred to the special
servicer in May 2016 due to maturity default. The borrower was
unable to refinance the loan as the former anchor, Winn-Dixie
closed its store in April 2014 (with a lease expiration in October
2016). Occupancy at the property has dropped significantly. As of
March 2016, the property had an economic occupancy of 100% (55%
physical), and as of September 2018, occupancy fell to 15%. As of
September 2017, the property was appraised for $3.45 million. The
servicer has recognized $2.3 million appraisal reduction.
The two remaining loans represent 24.6% of the pool balance. The
largest loan is the Gardens at Duncan Apartment Loan ($1.1 million
-- 18.2% of the pool), which is secured by a 90 unit, Class B,
garden-style multifamily property located in Duncan, Oklahoma
approximately 100 miles southwest of Oklahoma City. The property's
unit mix consists of one, two, and three-bedroom units. The
property was 80% leased as of December 2017 compared to 84% as of
2016 and 96% as of 2015. Property performance and occupancy have
declined due to significant reduction in the energy and oil
workforce in Oklahoma over the past couple of years. The loan is on
the servicer's watchlist. Moody's has identified this as a troubled
loan.
The second largest loan is the Poway Garden Self Storage Loan ($0.4
million -- 6.3% of the pool), which is secured by a 51,700 SF
self-storage facility located in Poway, California, approximately
20 miles northeast of the San Diego CBD. The loan is fully
amortizing and has paid down 75% since securitization. Moody's LTV
and stressed DSCR are 11% and more than 4.00X, respectively.
Moody's has assumed a high default probability for the specially
serviced loan and troubled loan, constituting 84% of the pool, and
has estimated an aggregate loss of $3.6 million (a 61% expected
loss on average) from these loans.
CREDIT SUISSE 2016-NXSR: Fitch Affirms B-sf Rating on Cl. E Certs
-----------------------------------------------------------------
Fitch Ratings has affirmed all classes of Credit Suisse Commercial
Mortgage Securities Corp. commercial mortgage pass-through
certificates, series 2016-NXSR.
KEY RATING DRIVERS
Stable Performance and Loss Expectations: The affirmations reflect
the overall stable performance and loss expectations with no
material changes to pool metrics since issuance. There are no
delinquent loans and no loans have transferred to special
servicing. Fitch designated three loans (11.2% of pool) as Fitch
Loans of Concern (FLOC) due to performance related issues. The
largest FLOC, Gurnee Mills (9.7%), is a 1,683,915 sf class B
regional mall located in Gurnee, IL. Collateral occupancy declined
over the past several years: 91.1% (2016), 84.2% (year-end 2017)
and 77.7% (March 2018). Sears Grand (12% NRA; 6.4% of total base
rent) was previously the largest collateral tenant and recently
vacated in 2Q18 prior to its April 2019 lease expiration. Neiman
Marcus Last Call, (1.8% NRA) vacated its space in 1Q18 prior to its
January 2020 lease expiration date.
Limited Change to Credit Enhancement: There has been minimal change
to credit enhancement since issuance. As of the October 2018
distribution date, the pool's aggregate balance has been reduced by
1.2% to $599.5 million from $606.8 million at issuance. All
original 33 loans remain in the pool. Nine loans, representing
48.2% of the pool, are full-term interest only (including four
loans comprising 22.2% of the pool which have an ARD structure
following the interest-only term), and eight loans, representing
11% of the pool, are partial interest only. Based on the scheduled
balance at maturity, the pool will pay down by only 9.3%.
ADDITIONAL CONSIDERATIONS
Fitch applied a 20% loss on Gurnee Mills to reflect declining
occupancy and tenant sales. However, there was no impact on any of
the classes.
Pool Concentration: The top 10 loans comprise 66.3% of the pool.
The largest property type in the transaction is retail, comprising
of 37.4% of the pool, followed by office at 16.4%, hotel properties
at 16%, mixed use at 13.3% , multi-family at 9.8%, industrial at
4.5% and self storage at 2.6% of the pool balance.
RATING SENSITIVITIES
The Rating Outlooks on all classes remain Stable given the
relatively stable performance of the transaction since issuance.
Fitch does not foresee positive or negative ratings migration until
a material economic or asset-level event changes the transaction's
overall portfolio level metrics.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has affirmed the following ratings:
-- $15,415,404 class A-1 'AAAsf'; Outlook Stable;
-- $85,980,000 class A-2 'AAAsf'; Outlook Stable;
-- $65,000,000 class A-3 'AAAsf'; Outlook Stable;
-- $224,907,000 class A-4 'AAAsf'; Outlook Stable;
-- $26,116,000 class A-SB 'AAAsf'; Outlook Stable;
-- $447,760,404 (b) class X-A 'AAAsf'; Outlook Stable;
-- $30,324,000 class A-S 'AAAsf'; Outlook Stable;
-- $447,760,404(c) class V1-A 'AAAsf'; Outlook Stable;
-- $40,961,000 class B 'AA-sf'; Outlook Stable;
-- $40,961,000(b) class X-B 'AA-sf'; Outlook Stable;
-- $40,961,000(c) class V-1B 'AA-sf'; Outlook Stable;
-- $31,100,000 class C 'A-sf'; Outlook Stable;
-- $31,100,000(c) class V-1C 'A-sf'; Outlook Stable;
-- $31,100,000(a) class D 'BBB-sf'; Outlook Stable;
-- $31,100,000(a)(c) class V1-D 'BBB-sf'; Outlook Stable;
-- $18,963,000(a)(b) class X-E 'BB-sf'; Outlook Stable;
-- $6,827,000(a)(b) class X-F 'B-sf'; Outlook Stable;
-- $18,963,000(a) class E 'BB-sf'; Outlook Stable;
-- $6,827,000(a) class F 'B-sf'; Outlook Stable.
(a) Privately placed and pursuant to Rule 144A.
(b) Notional amount and interest-only.
(c) Exchangeable certificates
A vertical credit risk retention interest representing 5% of each
class is retained as part of risk retention compliance. Fitch does
not rate the $22,757,039 NR class, the $22,757,039 X-NR class, the
$48,547,039 class V1-E or the $599,468,443class V2.
ELLINGTON FINANCIAL 2018-1: S&P Gives Prelim B Rating on B-2 Certs
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Ellington
Financial Mortgage Trust 2018-1's mortgage pass-through
certificates.
The certificate issuance is a residential mortgage-backed
securities transaction backed by U.S. residential mortgage loans.
The ratings reflect:
-- The pool's collateral composition;
-- The credit enhancement provided for this transaction;
-- The transaction's associated structural mechanics;
-- The representation and warranty framework for this transaction;
and
-- The mortgage aggregator.
RATINGS ASSIGNED
Ellington Financial Mortgage Trust 2018-1
Class Rating(i) Type Interest Amount ($)
rate(ii)
A-1FX AAA (sf) Senior 4.140% 100,000,000
A-1FLA AAA (sf) Senior 1-mo. LIBOR
+ 0.75 40,569,000
A-1FLB AAA (sf) Senior 1-mo. LIBOR
+ 0.90 21,845,000
A-2 AA (sf) Senior 4.293% 9,765,000
A-3 A (sf) Senior 4.394% 34,181,000
M-1 BBB (sf) Mezzanine 4.874% 9,765,000
B-1 BB (sf) Subordinate 5.574% 7,208,000
B-2 B (sf) Subordinate Net WAC 6,046,000
B-3 NR Subordinate Net WAC 3,138,770
A-IO-S NR Excess servicing (iii) Notional(iv)
X NR Monthly excess (v) Notional(iv)
cash flow
R NR Residual N/A N/A
Note: The collateral and structural information in this report
reflects the private placement memorandum dated Nov. 9, 2018.
(i) The ratings address the ultimate payment of interest and
principal.
(ii) Interest can be deferred on the classes. All coupons are
subject to the pool's net WAC. Class B-2 and B-3 equal net WAC.
(iii) Excess servicing strip minus compensating interest and
advances owed to the servicer.
(iv) Notional amount equals the loans' aggregate stated principal
balance.
(v) Net WAC over classes with fixed coupons.
WAC--Weighted average coupon.
1-mo. LIBOR--One month LIBOR.
NR--Not rated.
N/A--Not applicable.
FIRST INVESTORS 2018-2: S&P Assigns B Rating on Cl. F Notes
-----------------------------------------------------------
S&P Global Ratings assigned its ratings to First Investors Auto
Owner Trust 2018-2's asset backed notes.
The note issuance is an asset-backed securities transaction backed
by subprime auto loan receivables.
The ratings reflect:
-- The availability of approximately 42.6%, 36.8%, 28.6%, 22.2%,
18.1%, and 14.4% credit support for the class A, B, C, D, E, and F
notes, respectively, based on stressed cash flow scenarios
(including excess spread). These credit support levels provide
approximately 3.50x, 3.00x, 2.30x, 1.75x, 1.40x, and 1.10x coverage
of S&P's 11.75%-12.25% expected cumulative net loss (CNL) range for
the class A, B, C, D, E, and F notes, respectively.
-- The timely interest and principal payments made under stressed
cash flow modeling scenarios that are appropriate for the ratings.
-- S&P's expectation that under a moderate ('BBB') stress
scenario, all else being equal, the ratings on the class A and B
notes would not drop by more than one rating category, and the
ratings on the class C and D notes would not drop by more than two
rating categories. The class E and F notes (rated 'BB- (sf)' and 'B
(sf)') will remain within two rating categories of the assigned
rating during the first year, but will eventually default under the
'BBB' stress scenario. These potential rating movements are
consistent with S&P's rating stability criteria.
-- The collateral characteristics of the pool being securitized
with direct loans accounting for approximately 44% of the
statistical pool. These loans historically have lower losses than
the indirect-originated loans.
-- Prefunding will be used in this transaction in the amount of
approximately $34 million, about 17% of the pool. The subsequent
receivables are expected to be transferred into the trust within
three months from the closing date.
-- First Investors Financial Services Inc.'s (First Investors)
28-year history of originating and underwriting auto loans, 17-year
history of self-servicing auto loans, and track record of
securitizing auto loans since 2000.
-- First Investors' 13 years of origination static pool data,
segmented by direct and indirect loans.
-- Wells Fargo Bank N.A.'s experience as the committed back-up
servicer.
-- The transaction's sequential payment structure, which builds
credit enhancement based on a percentage of receivables as the pool
amortizes.
RATINGS ASSIGNED
First Investors Auto Owner Trust 2018-2
Class Rating Amount (mil. $)
A-1 AAA (sf) 110.00
A-2 AAA (sf) 18.00
B AA (sf) 15.40
C A (sf) 19.60
D BBB (sf) 16.30
E BB- (sf) 10.10
F B (sf) 8.80
FLAGSHIP CREDIT 2018-4: DBRS Gives Prov. BB Rating on Cl. E Notes
-----------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the following classes of
notes to be issued by Flagship Credit Auto Trust 2018-4 (the
Issuer):
-- $190,780,000 Class A Notes at AAA (sf)
-- $25,480,000 Class B Notes at AA (sf)
-- $33,750,000 Class C Notes at A (sf)
-- $27,300,000 Class D Notes at BBB (sf)
-- $20,090,000 Class E Notes at BB (sf)
The provisional ratings are based on a review by DBRS of the
following analytical considerations:
(1) Transaction capital structure, proposed ratings and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization
(OC), subordination, amounts held in the reserve fund and excess
spread. Credit enhancement levels are sufficient to support the
DBRS-projected cumulative net loss assumption under various stress
scenarios.
(2) The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms under which
they have invested. For this transaction, the ratings address the
timely payment of interest on a monthly basis and the payment of
principal by the legal final maturity date.
(3) The consistent operational history of Flagship Credit
Acceptance LLC (Flagship) and the strength of the overall company
and its management team.
-- The Flagship senior management team has considerable experience
and a successful track record within the auto finance industry.
(4) The capabilities of Flagship with regard to originations,
underwriting and servicing.
-- DBRS has performed an operational review of Flagship and
considers the entity to be an acceptable originator and servicer of
subprime automobile loan contracts with an acceptable backup
servicer.
(5) DBRS exclusively used the static pool approach because the
Company has enough data to generate a sufficient amount of static
pool projected losses.
-- DBRS was conservative in the loss forecast analysis that was
performed on the static pool data, and no seasoning was given to
this collateral.
(6) The legal structure and presence of legal opinions that will
address the true sale of the assets to the Issuer, the
non-consolidation of the special-purpose vehicle with Flagship,
that the trust has a valid first-priority security interest in the
assets and the consistency with the DBRS "Legal Criteria for U.S.
Structured Finance."
Flagship is an independent full-service automotive financing and
servicing company that provides (1) financing to borrowers who do
not typically have access to prime credit-lending terms for the
purchase of late-model vehicles and (2) refinancing of existing
automotive financing.
The rating on the Class A Notes reflects the 37.40% of initial hard
credit enhancement provided by the subordinated notes in the pool
of 35.55%, the Reserve Account of 1.00% and OC of 0.85%. The
ratings on the Class B, Class C, Class D and Class E Notes reflect
28.90%, 17.65%, 8.55% and 1.85% of initial hard credit enhancement,
respectively. Additional credit support may be provided from excess
spread available in the structure.
FREDDIE MAC 2018-4: DBRS Gives Prov. B(low) Rating on Class M Certs
-------------------------------------------------------------------
DBRS, Inc. assigned a provisional rating to the following
Mortgage-Backed Security, Series 2018-4 (the Certificate) to be
issued by Freddie Mac Seasoned Credit Risk Transfer Trust (SCRTT),
Series 2018-4 (the Trust):
-- $63.4 million Class M at B (low) (sf)
The B (low) (sf) rating on the Certificate reflects 4.50% of credit
enhancement provided by subordinated certificates in the pool.
Other than the specified class above, DBRS does not rate any other
classes in this transaction.
This transaction is a securitization of a portfolio of seasoned
re-performing first-lien residential mortgages funded by the
issuance of the certificates, which are backed by 9,782 loans with
a total principal balance of $1,952,043,342 as of the Cut-Off Date
(September 30, 2018).
The mortgage loans were either purchased by Freddie Mac from
securitized Freddie Mac Participation Certificates or retained by
Freddie Mac in whole-loan form since their acquisition. The loans
are currently held in Freddie Mac's retained portfolio and will be
deposited into the Trust on the Closing Date (November 15, 2018).
The portfolio contains 100% modified loans. Each mortgage loan was
modified under either a government-sponsored enterprise (GSE) Home
Affordable Modification Program (HAMP) or a GSE non-HAMP
modification program. Within the pool, 4,631 mortgages have
forborne principal amounts as a result of modification, which
equates to 13.2% of the total unpaid principal balance as of the
Cut-Off Date. For 95% of the modified loans, the modifications
happened more than two years ago. The loans are approximately 143
months seasoned, and all are current as of the Cut-Off Date.
Furthermore, 86.3% of the mortgage loans have been zero times 30
days delinquent for at least the past 24 months under the Mortgage
Bankers Association delinquency methods. None of the loans are
subject to the Consumer Financial Protection Bureau's Qualified
Mortgage rules.
The mortgage loans will be serviced by Specialized Portfolio
Servicing, Inc. There will not be any advancing of delinquent
principal or interest on any mortgages by the Servicer; however,
the Servicer is obligated to advance to third parties any amounts
necessary for the preservation of mortgaged properties or
real-estate¬-owned properties acquired by the Trust through
foreclosure or a loss mitigation process.
Freddie Mac will serve as the Sponsor, Seller and Trustee of the
transaction, as well as Guarantor of the senior certificates (the
Class HT, Class HA, Class HB, Class HV, Class HZ, Class MT, Class
MA, Class MB, Class MV, Class MZ, Class M55D, Class M55E and Class
M55I Certificates). Wilmington Trust, National Association will
serve as the Trust Agent. Wells Fargo Bank, N.A. will serve as the
Custodian for the Trust. U.S. Bank National Association will serve
as the Securities Administrator for the Trust and will act as
Paying Agent, Registrar, Transfer Agent, and Authenticating Agent.
Freddie Mac, as the Seller, will make certain representations and
warranties (R&W) with respect to the mortgage loans. It will be the
only party from which the Trust may seek indemnification (or, in
certain cases, a repurchase) as a result of a breach of R&Ws. If a
breach review trigger occurs during the warranty period, the Trust
Agent, Wilmington Trust, will be responsible for the enforcement of
R&Ws. The warranty period will only be effective through November
12, 2021 (approximately three years from the Closing Date), for
substantially all R&Ws other than the REMIC R&Ws, which will not
expire.
This transaction removes a breach review trigger for loans that are
180 days or more delinquent that existed in previous
securitizations. Other breach review triggers with respect to
foreclosure sale, short sale, deed-in-lieu, charge-off or
modifications are still in effect.
The mortgage loans will be divided into three loan groups: Group H,
Group M and Group M55. The Group H loans (20.6% of the pool) were
subject to step-rate modifications. Group M loans (75.3% of the
pool) and Group M55 loans (4.1% of the pool) were subject to either
fixed-rate modifications or step-rate modifications that have
reached their final step dates as of August 31, 2018, and the
borrowers have made at least one payment after such loans reached
their final step dates as of the Cut-Off Date. Each Group M loan
has a mortgage interest rate less than or equal to 5.5% or has
forbearance. Each Group M55 loan has a mortgage interest rate
greater than 5.5% and has no forbearance. Principal and interest
(P&I) on the senior certificates (the Guaranteed Certificates) will
be guaranteed by Freddie Mac. The Guaranteed Certificates will be
backed by collateral from each group, respectively. The remaining
Certificates (including the subordinate, non-guaranteed,
interest-only mortgage insurance and residual Certificates) will be
cross-collateralized among the three groups.
The transaction employs a pro rata pay cash flow structure with a
sequential-pay feature among the subordinate certificates. Certain
principal proceeds can be used to cover interest shortfalls on the
rated Class M certificates. Senior classes benefit from guaranteed
P&I payments by the Guarantor, Freddie Mac; however, such
guaranteed amounts, if paid, will be reimbursed to Freddie Mac from
the P&I collections prior to any allocation to the subordinate
certificates. The senior principal distribution amounts vary
subject to the satisfaction of a step-down test. Realized losses
are allocated sequentially in reverse order.
The rating reflects transactional strengths that include underlying
assets that have generally performed well through the crisis (86.3%
of the pool has remained consistently current in the past 24
months), good credit quality relative to other re-performing pools
reviewed by DBRS and a strong servicer. Additionally, a third-party
due diligence review, albeit on less than 100% of the portfolio
with respect to regulatory compliance and payment histories, was
performed on a sample that exceeds DBRS's criteria. The due
diligence results and findings on the sampled loans were
satisfactory.
This transaction employs a weak R&W framework that includes a
36-month sunset without an R&W reserve account, substantial
knowledge qualifiers and fewer mortgage loan representations
relative to DBRS's criteria for seasoned pools. In addition, a
breach review trigger for loans that are 180 days or more
delinquent (delinquency review trigger) that existed in previous
securitizations has been removed from this transaction. DBRS
increased loss expectations from the model results to capture the
weaknesses in the R&W framework. Other mitigating factors include
(1) significant loan seasoning and very clean performance history
in the past two years, (2) Freddie Mac as the R&W provider and (3)
a satisfactory third-party due diligence review.
The lack of P&I advances on delinquent mortgages may increase the
possibility of periodic interest shortfalls to the note holders;
however, certain principal proceeds can be used to pay interest to
the rated Certificate, and subordination levels are greater than
expected losses, which may provide for interest payments to the
rated Certificate.
Notes: All figures are in U.S. dollars unless otherwise noted.
GALTON FUNDING 2018-2: S&P Assigns B- Rating on Class B5 Certs
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to 50 classes from Galton
Funding Mortgage Trust 2018-2's mortgage pass-through
certificates.
The note issuance is a residential mortgage-backed securities
(RMBS) transaction backed by first-lien, fixed-rate, and
adjustable-rate mortgage loans secured by one- to four-family
residential properties, condominiums, and planned-unit developments
to primarily prime borrowers.
The ratings reflect:
-- The high-quality collateral in the pool;
-- The available credit enhancement;
-- The 100% due diligence sampling results, which is consistent
with the represented loan characteristics;
-- The representation and warranty framework for this transaction;
and
-- The transaction's associated structural mechanics.
RATINGS ASSIGNED
Galton Funding Mortgage Trust 2018-2
Class Rating Amount ($)
A11 AA+ (sf) 411,471,000
AX11 AA+ (sf) 411,471,000(i)
A12 AA+ (sf) 411,471,000
AX12 AA+ (sf) 411,471,000(i)
A13 AA+ (sf) 411,471,000
AX13 AA+ (sf) 411,471,000(i)
A21 AAA (sf) 362,132,000
AX21 AAA (sf) 362,132,000(i)
A22 AAA (sf) 362,132,000
AX22 AAA (sf) 362,132,000(i)
A23 AAA (sf) 362,132,000
AX23 AAA (sf) 362,132,000(i)
A31 AA+ (sf) 49,339,000
AX31 AA+ (sf) 49,339,000(i)
A32 AA+ (sf) 49,339,000
AX32 AA+ (sf) 49,339,000(i)
A33 AA+ (sf) 49,339,000
AX33 AA+ (sf) 49,339,000(i)
A41 AAA (sf) 289,705,600
AX41 AAA (sf) 289,705,600(i)
A42 AAA (sf) 289,705,600
AX42 AAA (sf) 289,705,600(i)
A43 AAA (sf) 289,705,600
AX43 AAA (sf) 289,705,600(i)
A51 AAA (sf) 72,426,400
AX51 AAA (sf) 72,426,400(i)
A52 AAA (sf) 72,426,400
AX52 AAA (sf) 72,426,400(i)
A53 AAA (sf) 72,426,400
AX53 AAA (sf) 72,426,400(i)
A61 AAA (sf) 54,319,800
AX61 AAA (sf) 54,319,800(i)
A62 AAA (sf) 54,319,800
AX62 AAA (sf) 54,319,800(i)
A63 AAA (sf) 54,319,800
AX63 AAA (sf) 54,319,800(i)
A71 AAA (sf) 18,106,600
AX71 AAA (sf) 18,106,600(i)
A72 AAA (sf) 18,106,600
AX72 AAA (sf) 18,106,600(i)
A73 AAA (sf) 18,106,600
AX73 AAA (sf) 18,106,600(i)
AX AA+ (sf) 411,471,000(i)
B1 AA- (sf) 7,017,000
BX1 AA- (sf) 7,017,000(i)
B2 A- (sf) 13,353,000
BX2 A- (sf) 13,353,000(i)
B3 BBB- (sf) 9,054,000
B4 BB- (sf) 4,979,000
B5 B- (sf) 3,847,000
B6 NR 2,943,294
XS NR 452,664,294.13(i)
R NR 0
LT-R NR 0
(i) Notional balance.
NR--Not rated.
GS MORTGAGE 2013-PEMB: S&P Assigns BB Rating on Cl. E Certs
-----------------------------------------------------------
S&P Global Ratings affirmed its ratings on five classes of
commercial mortgage pass-through certificates from GS Mortgage
Securities Corp. Trust 2013-PEMB, a U.S. commercial mortgage-backed
securities (CMBS) transaction.
For the affirmations, S&P's credit enhancement expectation was in
line with the affirmed rating levels.
This is a stand-alone (single borrower) transaction backed by a
$260.0 million, fixed-rate, interest-only (IO) mortgage loan that
serves as collateral for the transaction. Our analysis included a
review of the collateral, which consists of a fee interest in
748,818 sq. ft. of an approximately 1.1 million-sq.-ft. regional
mall in Pembroke Pines, Fla.
S&P said, "Our property-level analysis included a re-valuation of
the retail property that secures the mortgage loan in the trust. We
also considered the stable-to-slightly-increasing servicer-reported
net operating income and occupancy for the full years ended 2015,
2016, and 2017. In addition, we considered our occupancy cost ratio
estimate of 18.9% for comparable in-line tenants, based on our
calculation of $498 per sq. ft. in sales for the trailing twelve
months ended June 2018. We compared this to a 16.4% occupancy cost
and sales for comparable inline tenants of $519 per sq. ft. at
issuance. If occupancy cost continues to increase, we will consider
the impact, if any, on the reported performance and our analysis,
and we may revise accordingly. We then derived our sustainable
in-place net cash flow, which we divided by a 6.75% capitalization
rate to determine our expected-case value." This yielded an overall
S&P Global Ratings loan-to-value ratio and debt service coverage
(DSC) of 76.6% and 2.44x, respectively, on the trust balance.
According to the Nov. 7, 2018, trustee remittance report, the IO
mortgage loan has a trust and whole-loan balance of $260.0 million
and pays an annual 3.562% fixed interest rate through its March 1,
2025, maturity. Under the terms of the loan agreement, future
mezzanine debt is permitted under certain conditions. Based on
S&P's confirmation, none has been obtained. To date, the trust has
not incurred any principal losses.
The master servicer, KeyBank Real Estate Capital, reported a DSC of
2.99x on the trust balance for year ending Dec. 31, 2017;
occupancy, based on our calculations using the Sept. 30, 2018 rent
roll, was 97.2%. Based on the September 2018 rent roll, the five
largest collateral tenants comprise 56.9% of the collateral's total
net rentable area (NRA). In addition, 0.5% of the NRA have leases
that expire in 2018, 3.5% have leases that expire in 2019, and 4.9%
have leases that expire in 2020. A large amount of lease rollover
will occur in 2022 and 2023, when 25.7% and 39.0% of space,
measured by NRA, respectively, will experience lease expiration.
This includes the top three collateral tenants at the property,
Sears, Macy's, and Macy's Home Store.
RATINGS AFFIRMED
GS Mortgage Securities Corp. Trust 2013-PEMB
Commercial mortgage pass-through certificates
Class Rating
A AAA (sf)
B AA- (sf)
C A- (sf)
D BBB- (sf)
E BB (sf)
GS MORTGAGE 2014-GC26: DBRS Confirms B Rating on Class X-D Certs
----------------------------------------------------------------
DBRS Limited confirmed the ratings on the following classes of
Commercial Mortgage Pass-Through Certificates, Series 2014-GC26
(the Certificates) issued by GS Mortgage Securities Trust 2014-GC26
(the Trust):
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (high) (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class PEZ at A (sf)
-- Class D at BBB (low) (sf)
-- Class X-C at BB (sf)
-- Class E at BB (low) (sf)
-- Class F at B (sf)
-- Class X-D at B (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of
the transaction. At issuance, the transaction consisted of 92 loans
secured by 133 commercial properties with an original trust balance
of $1.25 billion. As of the October 2018 remittance, 91 loans
secured by 132 commercial properties remained in the pool with an
aggregate principal balance of $1.21 billion, representing a
collateral reduction of 3.3% since issuance as a result of
scheduled amortization and loan repayment. Two loans, representing
0.9% of the pool, are fully defeased. Loans representing 94.4% of
the pool reported year-end (YE) 2017 financials, with a
weighted-average (WA) debt-service coverage ratio (DSCR) and debt
yield of 1.59 times (x) and 9.4%, respectively. Fourteen of the
largest 15 loans reported YE2017 financials, which yielded a WA
DSCR and debt yield of 1.51x and 8.3%, respectively. 5599 San
Felipe (Prospectus ID#3, 7.0% of pool) reported a low YE2017 DSCR
of 0.28x due to the largest tenant at the property, representing
72% of the net rentable area (NRA), receiving temporary rent
abatements through July 2017. Excluding this loan, the top 15 loans
reported a WA YE2017 DSCR and debt yield of 1.71x and 9.4%,
respectively, representing a WA net cash flow growth of 14.5% over
the DBRS issuance figures of 1.46x and 8.0%, respectively.
As of the October 2018 remittance report, there are 12 loans,
representing 8.6% of the pool, on the servicer's watch list, and
three loans, representing 3.7% of the pool, in special servicing.
Only one watch listed loan (Holiday Inn Express & Suites Houston
North; Prospectus ID#51, 0.6% of the pool) is being monitored for
performance related issues, while the remaining loans on the watch
list reported a WA DSCR and debt yield of 1.85x and 10.3%,
respectively. The remaining loans were placed on the watch list for
deferred maintenance, upcoming lease expirations and lack of
financial reporting.
The largest specially serviced loan, 129-131 Greene Street
(Prospectus ID#13, 1.9% of pool), transferred to special servicing
in January 2018 due to the borrower's lack of compliance with cash
sweep provisions, even though the loan continues to perform as the
New York City mixed-use property is 100% leased to a strong credit
tenant (Google LLC) through August 2024. The property is currently
dark, which triggered the cash sweep; however, the borrower did not
comply with the sweep and the loan was transferred to special
servicing. The remaining two specially serviced loans, Staybridge
Suites Lafayette (Prospectus ID#27, 1.1% of pool) and 10500
Richmond (Prospectus ID#42, 0.7% of pool), transferred to special
servicing due to imminent default. Staybridge Suites Lafayette, an
extended-stay hotel located in Lafayette, Louisiana, experienced
cash flow declines over the last two years due to the depressed oil
and gas industry and the loan is currently 30-59 days delinquent.
The hotel's franchise agreement was originally scheduled to expire
in February 2019; however, the servicer confirmed that the borrower
entered into a Replacement Franchise Agreement in January 2015 that
expires in February 2029. The special servicer is scheduled to
foreclose on the property by YE2017; therefore, DBRS liquidated the
loan from the pool in its analysis based on a May 2018 appraised
value, which resulted a loss severity in excess of 50.0%.
10500 Richmond is secured by a Class B office building located in
Houston, Texas, and was transferred to special servicing because
the property's largest tenant, WorleyParsons Group (98.5% of NRA)
did not renew its lease upon its June 2018 lease expiration. The
property is now 100% vacant and there are no prospective
replacement tenants. As of the October 2018 remittance, the loan is
90-120 days delinquent and a foreclosure sale is anticipated by the
end of the year. Given the market difficulties, DBRS liquidated the
loan from the pool based on the July 2018 appraised value, which
resulted a loss severity in excess of 65.0%.
Classes X-A, X-B, X-C, and X-D are interest-only (IO) certificates
that reference a single rated tranche or multiple rated tranches.
The IO rating mirrors the lowest-rated applicable reference
obligation tranche adjusted upward by one notch if senior in the
waterfall.
Notes: All figures are in U.S. dollars unless otherwise noted.
HALCYON LOAN 2018-2: Moody's Assigns (P)B3 Rating on Class E Notes
------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to four
classes of notes to be issued by Halcyon Loan Advisors Funding
2018-2 Ltd. .
Moody's rating action is as follows:
US$263,000,000 Class A-1A Senior Secured Floating Rate Notes due
2031 (the "Class A-1A Notes"), Assigned (P)Aaa (sf)
US$29,500,000 Class A-1B Senior Secured Floating Rate Notes due
2031 (the "Class A-1B Notes"), Assigned (P)Aaa (sf)
US$20,700,000 Class D Senior Secured Deferrable Floating Rate Notes
due 2031 (the "Class D Notes"), Assigned (P)Ba3 (sf)
US$4,630,000 Class E Secured Deferrable Floating Rate Notes due
2031 (the "Class E Notes"), Assigned (P)B3 (sf)
The Class A-1A Notes, the Class A-1B Notes, the Class D Notes and
the Class E Notes are referred to herein, collectively, as the
"Rated Notes."
Moody's issues provisional ratings in advance of the final sale of
financial instruments, but these ratings only represent Moody's
preliminary credit opinions. Upon a conclusive review of a
transaction and associated documentation, Moody's will endeavor to
assign definitive ratings. A definitive rating, if any, may differ
from a provisional rating.
RATINGS RATIONALE
The provisional ratings reflect the risks due to defaults on the
underlying portfolio of assets, the transaction's legal structure,
and the characteristics of the underlying assets.
Halcyon 2018-2 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 92.5% of the portfolio must consist of
senior secured loans, cash, and eligible investments, and up to
7.5% of the portfolio may consist of second lien loans and
unsecured loans. Moody's expects the portfolio to be approximately
95% ramped as of the closing date.
Halcyon Loan Advisors 2018-2 LLC will direct the selection,
acquisition and disposition of the assets on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's four year reinvestment period.
Thereafter, the Manager may reinvest unscheduled principal payments
and proceeds from sales of credit risk assets, subject to certain
restrictions.
In addition to the Rated Notes, the Issuer will issue three other
classes of secured notes and subordinated notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in August 2017.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $450,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2835
Weighted Average Spread (WAS): 3.35%
Weighted Average Coupon (WAC): 7.50%
Weighted Average Recovery Rate (WARR): 46.5%
Weighted Average Life (WAL): 8.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
August 2017.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
HARBOR PARK: S&P Assigns Prelim BB- Rating on Class E Notes
-----------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Harbor Park
CLO Ltd./Harbor Park CLO LLC's floating- and fixed-rate notes.
The note issuance is a CLO transaction backed primarily by broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans that are governed by collateral quality tests.
The preliminary ratings are based on information as of Nov. 9,
2018. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversified collateral pool, which consists primarily of
broadly syndicated speculative-grade (rated 'BB+' and lower) senior
secured term loans that are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
PRELIMINARY RATINGS ASSIGNED
Harbor Park CLO Ltd./Harbor Park CLO LLC
Class Rating Amount (mil. $)
X AAA (sf) 1.75
A-1 AAA (sf) 412.13
A-2 NR 42.88
B-1 AA (sf) 42.00
B-2 AA (sf) 30.80
C (deferrable) A (sf) 39.20
D (deferrable) BBB- (sf) 43.75
E (deferrable) BB- (sf) 24.50
Subordinated notes NR 79.25
NR--Not rated.
IMPACT FUNDING 2014-1: DBRS Confirms B Rating on Class F Certs
--------------------------------------------------------------
DBRS Limited confirmed the ratings of the following classes of
Affordable Multifamily Commercial Mortgage Pass-Through
Certificates, Series 2014-1 (the Certificates) issued by Impact
Funding Affordable Multifamily Housing Mortgage Loan Trust 2014-1
(the Trust):
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-FX1 at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class X-B at B (high) (sf)
-- Class X-FX2 at B (high) (sf)
-- Class F at B (sf)
All trends are Stable.
Classes A-1, A-2, A-3, X-A and X-FX1 represent the Certificates
that were purchased and guaranteed by Freddie Mac and deposited
into the Trust to back the offered structured pass-through
certificates. Classes B, C, D, E, F, X-B and X-FX2 represent the
non-guaranteed offered certificates.
The rating confirmations reflect the overall stable performance of
the transaction, which closed in November 2014 with 124 fixed-rate
loans secured by 118 multifamily properties. As of the October 2018
remittance report, there has been a collateral reduction of 5.5%
since issuance, with all original loans remaining in the pool. The
collateral properties are Low-Income Housing Tax Credit (LIHTC)
developments with generally low leverage metrics, as reflected in
the weighted-average (WA) debt yield and loan-to-value of 16.0% and
40.5%, respectively, as based on the most recent cash flows and
October 2018 balances. Based on the YE2017 reporting, the WA debt
service coverage ratio (DSCR) for the pool was 1.84 times (x), up
from the WA DBRS Term DSCR figure derived at issuance of 1.41x. The
top 15 loans, which represent 31.0% of the current pool, reported a
WA YE2017 DSCR of 1.55x and healthy WA net cash flow growth of
22.5% over the DBRS issuance figures.
There are 16 loans on the servicer's watch list, representing 10.6%
of the current pool balance. All of these loans are being monitored
for cash flow declines since issuance, with coverage ratios ranging
between 0.22x and 1.08x for the Q2 2018 reporting period. Some of
the collateral properties on the watch list have shown occupancy
declines since issuance, while others have shown stable revenues
with sharp increases in operating expenses. Although these cash
flow declines present additional risk for the respective loans
within the transaction, there are mitigating factors in the value
of the tax credits sold as part of the LIHTC program, which provide
significant incentive for the tax credit investors to fund any cash
flow shortfalls (as necessary) at the collateral properties to
avoid a credit recapture in the event the borrower defaults on the
loan. The largest loan on the watch list (Serrano Woods –
Prospectus ID#7) is being monitored for a low DSCR, driven by
expense increases related to repairs and maintenance and payroll
costs. According to the servicer, the borrower completed interior
maintenance and repairs throughout the first half of 2018, and the
increase in payroll costs were driven by additional personnel hours
spent at the property. The loan reported a Q2 2018 DSCR figure of
1.08x compared with the DBRS Term DSCR of 1.16x. For additional
information on this loan, please see the loan commentary on the
DBRS Viewpoint platform, for which information is provided below.
Classes X-A, X-FX1, X-B and X-FX2 are interest-only (IO)
certificates that reference a single rated tranche or multiple
rated tranches. The IO rating mirrors the lowest-rated reference
tranche adjusted upward by one notch if senior in the waterfall.
JAMESTOWN CLO IV: Moody's Affirms Ba3 Rating on Class D Notes
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Jamestown CLO IV Ltd.:
US$73,800,000 Class A-2-R Senior Secured Floating Rate Notes due
2026, Upgraded to Aaa (sf); previously on November 16, 2017
Assigned Aa1 (sf)
US$26,400,000 Class B-R Senior Secured Deferrable Floating Rate
Notes due 2026, Upgraded to Aa1 (sf); previously on November 16,
2017 Assigned A1 (sf)
US$36,000,000 Class C-R Senior Secured Deferrable Floating Rate
Notes due 2026, Upgraded to Baa1 (sf); previously on November 16,
2017 Assigned Baa2 (sf)
Moody's also affirmed the ratings on the following notes:
US$223,590,000 Class A-1A-R Senior Secured Floating Rate Notes due
2026 (current outstanding balance of $139,010,314.58), Affirmed Aaa
(sf); previously on November 16, 2017 Assigned Aaa (sf)
US$43,500,000 Class A-1B-R Senior Secured Floating Rate Notes due
2026 (current outstanding balance of $27,044,808.28), Affirmed Aaa
(sf); previously on November 16, 2017 Assigned Aaa (sf)
US$66,990,000 Class A-1C-R Senior Secured Floating Rate Notes due
2026 (current outstanding balance of $41,649,004.76), Affirmed Aaa
(sf); previously on November 16, 2017 Assigned Aaa (sf)
US$33,600,000 Class D Senior Secured Deferrable Floating Rate Notes
due 2026, Affirmed Ba3 (sf); previously on August 16, 2017 Affirmed
Ba3 (sf)
US$5,400,000 Class E Senior Secured Deferrable Floating Rate Notes
due 2026, Affirmed Caa1 (sf); previously on August 16, 2017
Downgraded to Caa1 (sf)
Jamestown CLO IV Ltd., issued in June 2014, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans. The transaction's reinvestment period ended in July 2018.
RATINGS RATIONALE
This rating action is primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since the issuance of the
Refinancing Notes in November 2017. The Class A notes were paid
down by 13.9% or $46.4 million on the initial post reinvestment
period payment date in October 2018. Based on Moody's calculations,
the OC ratios for the Class A, Class B, Class C, Class D, and Class
E notes are 143.39%, 131.09%, 117.37%, 106.92% and 105.42%,
respectively, versus levels of 130.92%, 122.96%, 113.55%, 105.98%
and 104.86%, respectively, immediately prior to the November 2017
Refinancing Date.
The deal has benefited from an improvement in the credit quality of
the portfolio since the issuance of the refinancing notes in
November 2017. Based on the trustee's October 2018 report, the
weighted average rating factor is currently 2840 compared to 2906
in November 2017.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor and the weighted average recovery
rate, are based on its published methodology and could differ from
the trustee's reported numbers. In its base case, Moody's analyzed
the collateral pool as having a performing par and principal
proceeds balance of $403.6 million, defaulted par of $1.3 million,
a weighted average default probability of 20.30% (implying a WARF
of 2877), a weighted average recovery rate upon default of 48.76%
and a weighted average spread of 3.25% (before accounting for LIBOR
floors).
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
August 2017.
The Credit Ratings on the notes issued by Jamestown CLO IV Ltd.
were assigned in accordance with Moody's existing Methodology
entitled "Moody's Global Approach to Rating Collateralized Loan
Obligations," dated August 31, 2017. Please note that on November
14, 2018, Moody's released a Request for Comment, in which it has
requested market feedback on potential revisions to its Methodology
for Collateralized Loan Obligations. If the revised Methodology is
implemented as proposed, Moody's does not expect the changes to
affect the Credit Ratings on notes issued by Jamestown CLO IV Ltd.
Please refer to Moody's Request for Comment, titled "Proposed
Update to Moody's Global Approach to Rating Collateralized Loan
Obligations," for further details regarding the implications of the
proposed Methodology revisions on certain Credit Ratings.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings:
1) Macroeconomic uncertainty: CLO performance is subject to a)
uncertainty about credit conditions in the general economy and b)
the large concentration of upcoming speculative-grade debt
maturities, which could make refinancing difficult for issuers.
2) Collateral Manager: Performance can also be affected positively
or negatively by a) the manager's investment strategy and behavior
and b) differences in the legal interpretation of CLO documentation
by different transactional parties owing to embedded ambiguities.
3) Collateral credit risk: A shift towards collateral of better
credit quality, or better credit performance of assets
collateralizing the transaction than Moody's current expectations,
can lead to positive CLO performance. Conversely, a negative shift
in credit quality or performance of the collateral can have adverse
consequences for CLO performance.
4) Deleveraging: An important source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging of the CLO
could accelerate owing to high prepayment levels in the loan market
and/or collateral sales by the manager, which could have a
significant impact on the notes' ratings. Note repayments that are
faster than Moody's current expectations will usually have a
positive impact on CLO notes, beginning with those with the highest
payment priority.
5) Recovery of defaulted assets: Fluctuations in the market value
of defaulted assets reported by the trustee and those that Moody's
assumes as having defaulted could result in volatility in the
deal's OC levels. Further, the timing of recoveries and whether a
manager decides to work out or sell defaulted assets create
additional uncertainty. Realization of higher than assumed
recoveries would positively impact the CLO.
6) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which could
lengthen owing to any decision by the Manager to reinvest into new
issue loans or loans with longer maturities, or participate in
amend-to-extend offerings. Life extension can increase the default
risk horizon and assumed cumulative default probability of CLO
collateral.
7) Weighted Average Spread (WAS): CLO performance can be sensitive
to WAS, which is a key factor driving the amount of excess spread
available as credit enhancement when a deal fails its
over-collateralization or interest coverage tests. A decrease in
excess spread, including as a result of losing the net interest
benefit of LIBOR floors, or because market conditions make it
difficult for the deal to source assets of appropriate credit
quality in order to maintain its WAS target, would reduce the
effective credit enhancement available for the notes.
8) Exposure to assets with low credit quality and weak liquidity:
The historical default rate of assets rated Caa3 with a negative
outlook, Caa2 or Caa3 on review for downgrade or the worst Moody's
speculative grade liquidity (SGL) rating, SGL-4, is higher than the
average. Exposure to such assets subject the notes to additional
risks if these assets default.
JP MORGAN 2018-LTV1: Moody's Assigns (P)B3 Rating on Cl. B-5 Debt
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 25
classes of residential mortgage-backed securities issued by J.P.
Morgan Mortgage Trust 2018-LTV1. The ratings range from (P)Aaa (sf)
to (P)B3 (sf).
The certificates are backed by 694 30-year, fully-amortizing
fixed-rate mortgage loans with a total balance of $459,258,410 as
of the November 1, 2018 cut-off date. Conforming loans comprise
only 0.7% of the pool balance. All the loans are subject to the
Qualified Mortgage (QM) and Ability-to-Repay (ATR) rules and are
categorized as either QM-Safe Harbor or QM-Agency Safe Harbor.
JPMMT 2018-LTV1 is the first JPMMT transaction with the LTV
designation. The weighted average (WA) loan-to-value (LTV) ratio of
the mortgage pool is 86%, which is higher than that of previous
JPMMT transactions which had WA LTVs of about 70% on average. All
the loans have LTVs greater than 75%, and 62% of the loans by
balance have LTVs greater than 80%. None of the loans in the pool
have mortgage insurance. Consistent with previous JPMMT
transactions, the borrowers in the pool have a WA FICO score of 767
and a WA debt-to-income ratio of 35%. The WA mortgage rate of the
pool is 4.9%.
United Shore Financial Services originated 53% of the mortgage
loans by balance and SoFi Lending, Corp. (SoFi) originated 10%. The
remaining originators each account for less than 10% of the
aggregate principal balance of the loans in the pool. About 49% of
the mortgage pool was originated under United Shore's High Balance
Nationwide program, in which, using the Desktop Underwriter (DU)
automated underwriting system, loans are underwritten to Fannie Mae
guidelines with overlays. The loans receive a DU Approve Ineligible
feedback due to the loan amount exceeding the GSE limit for certain
markets.
Shellpoint Mortgage Servicing (Shellpoint) will service 93% of the
pool and loanDepot.com, LLC will service 7%. The servicing fee for
loans serviced by Shellpoint will be based on a step-up incentive
fee structure with a $20 base servicing fee and additional fees for
servicing delinquent and defaulted loans. loanDepot.com, LLC will
be paid a fee of one-twelfth of 0.25% of the remaining principal
balance of the mortgage loans it services. Shellpoint will act as
the interim servicer for 93% of the mortgage pool balance from the
closing date until the servicing transfer date, which is expected
to occur on or about January 2, 2019 (but which may occur after
such date). After the servicing transfer date, these mortgage loans
will be serviced by JPMorgan Chase Bank, N.A.
Wells Fargo Bank, N.A. (Wells Fargo) will be the master servicer
and securities administrator. U.S. Bank Trust National Association
will be the trustee. Pentalpha Surveillance LLC will be the
representations and warranties breach reviewer. Distributions of
principal and interest and loss allocations are based on a typical
shifting interest structure that benefits from senior and
subordination floors.
The complete rating actions are as follows:
Issuer: J.P. Morgan Mortgage Trust 2018-LTV1
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aaa (sf)
Cl. A-5, Assigned (P)Aaa (sf)
Cl. A-6, Assigned (P)Aaa (sf)
Cl. A-7, Assigned (P)Aaa (sf)
Cl. A-8, Assigned (P)Aaa (sf)
Cl. A-9, Assigned (P)Aaa (sf)
Cl. A-10, Assigned (P)Aaa (sf)
Cl. A-11, Assigned (P)Aaa (sf)
Cl. A-12, Assigned (P)Aaa (sf)
Cl. A-13, Assigned (P)Aa1 (sf)
Cl. A-14, Assigned (P)Aa1 (sf)
Cl. A-15, Assigned (P)Aaa (sf)
Cl. A-16, Assigned (P)Aaa (sf)
Cl. A-17, Assigned (P)Aaa (sf)
Cl. A-18, Assigned (P)Aaa (sf)
Cl. A-19, Assigned (P)Aaa (sf)
Cl. A-20, Assigned (P)Aaa (sf)
Cl. B-1, Assigned (P)Aa3 (sf)
Cl. B-2, Assigned (P)A1 (sf)
Cl. B-3, Assigned (P)Baa1 (sf)
Cl. B-4, Assigned (P)Ba2 (sf)
Cl. B-5, Assigned (P)B3 (sf)
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected cumulative net loss on the aggregate pool is 0.75%
in a base scenario and reaches 10.25% at a stress level consistent
with the Aaa (sf) ratings.
Moody's calculated losses on the pool using its US Moody's
Individual Loan Analysis (MILAN) model based on the loan-level
collateral information as of the cut-off date. Loan-level
adjustments to the model results included adjustments to
probability of default for higher and lower borrower debt-to-income
ratios (DTIs), for borrowers with multiple mortgaged properties,
self-employed borrowers, and for the default risk of Homeownership
association (HOA) properties in super lien states. Its final loss
estimates also incorporate adjustments for originator assessments
and the financial strength of Representation & Warranty (R&W)
providers.
Moody's bases its provisional ratings on the certificates on the
credit quality of the mortgage loans, the structural features of
the transaction, its assessments of the aggregators, originators
and servicers, the strength of the third party due diligence and
the representations and warranties (R&W) framework of the
transaction.
Collateral Description
JPMMT 2018-LTV1 is a securitization of a pool of 694 30-year,
fully-amortizing fixed-rate mortgage loans with a total balance of
$459,258,410 as of the cut-off date, with a WA remaining term to
maturity of 356 months and a WA seasoning of 4 months. The WA
current FICO score of the borrowers in the pool is 767. The WA LTV
ratio of the mortgage pool is 86%, which is higher than that of
previous JPMMT transactions which had WA LTVs of about 70% on
average. All the loans have LTVs greater than 75%, and 62% of the
loans by balance have LTVs greater than 80%. None of the loans in
the pool have mortgage insurance. The other characteristics of the
loans in the pool are generally comparable to that of recent JPMMT
transactions.
The mortgage loans in the pool were originated mostly in California
(36% by loan balance). The sponsor is in the process of determining
which loans in the pool are backed by properties that may be
affected by the recent and ongoing California wildfires. The
sponsor will order post-disaster inspection reports for properties
in areas designated for individual assistance by FEMA. To the
extent any of these properties sustained material damage from the
wildfires, the sponsor will repurchase the affected loans from the
pool.
United Shore Financial Services (United Shore) originated 53% of
the mortgage loans by balance and SoFi Lending, Corp. (SoFi)
originated 10%. The remaining originators each account for less
than 10% of the aggregate principal balance of the loans in the
pool. About 49% of the mortgage pool was originated under United
Shore's High Balance Nationwide program, in which, using the
Desktop Underwriter (DU) automated underwriting system, loans are
underwritten to Fannie Mae guidelines with overlays. The loans
receive a DU Approve Ineligible feedback due to the loan amount
exceeding the GSE limit for certain markets.
Servicing Fee Framework
The servicing fee for loans serviced by Chase and Shellpoint (93%
of the mortgage pool by balance) will be based on a step-up
incentive fee structure with a monthly base fee of $20 per loan and
additional fees for servicing delinquent and defaulted loans. All
other servicers will be paid a monthly flat servicing fee equal to
one-twelfth of 0.25% of the remaining principal balance of the
mortgage loans.
While this fee structure is common in non-performing mortgage
securitizations, it is unique to rated prime mortgage
securitizations which typically incorporate a flat 25 basis point
servicing fee rate structure. By establishing a base servicing fee
for performing loans that increases with the delinquency of loans,
the fee-for-service structure aligns monetary incentives to the
servicer with the costs of the servicer. The servicer receives
higher fees for labor-intensive activities that are associated with
servicing delinquent loans, including loss mitigation, than they
receive for servicing a performing loan, which is less
labor-intensive. The fee-for-service compensation is reasonable and
adequate for this transaction because it better aligns the
servicer's costs with the deal's performance. Furthermore, higher
fees for the more labor-intensive tasks make the transfer of these
loans to another servicer easier, should that become necessary. By
contrast, in typical RMBS transactions a servicer can take actions,
such as modifications and prolonged workouts, that increase the
value of its mortgage servicing rights.
The incentive structure includes an initial monthly base servicing
fee of $20 for all performing loans and increases according to the
delinquent and incentive fee schedules outlined in the exhibit.
The delinquent and incentive servicing fees will be deducted from
the available distribution amount and Class B-6 net WAC. The Class
B-6 is first in line to absorb any increase in servicing costs
above the base servicing fee. Once the Class B-6 is written off,
the Class B-5 will absorb any increase in servicing costs. The
transaction does not have a servicing fee cap, so, in the event of
a servicer replacement, any increase in the base servicing fee
beyond the current fee will be paid out of the available
distribution amount.
Third-party Review and Reps & Warranties
Five third party review (TPR) firms verified the accuracy of the
loan-level information that Moody's received from the sponsor.
These firms conducted detailed credit, valuation, regulatory
compliance and data integrity reviews on 100% of the mortgage pool.
The TPR results indicated compliance with the originators'
underwriting guidelines for the vast majority of loans, no material
compliance issues, and no appraisal defects. The loans that had
exceptions to the originators' underwriting guidelines had strong
documented compensating factors such as low DTIs, low LTVs, high
reserves, high FICOs, or clean payment histories. The TPR firms
also identified minor compliance exceptions for reasons such as
inadequate RESPA disclosures (which do not have assignee liability)
and TILA/RESPA Integrated Disclosure (TRID) violations related to
fees that were out of variance but then were cured and disclosed.
Moody's did not make any adjustments to its expected or Aaa (sf)
loss levels due to the TPR results.
JPMMT 2018-LTV1's R&W framework is in line with that of other JPMMT
transactions where an independent reviewer is named at closing, and
costs and manner of review are clearly outlined at issuance. Its
review of the R&W framework takes into account the financial
strength of the R&W providers, scope of R&Ws (including qualifiers
and sunsets) and enforcement mechanisms.
The R&W providers vary in financial strength. The sponsor, J.P.
Morgan Mortgage Acquisition Corp. (JPMMAC), is the R&W provider for
approximately 2% (by loan balance) of the pool. Moody's made no
adjustments to the loans for which JPMMAC provided R&Ws since it is
an affiliate of JPMorgan Chase Bank, N.A. (rated Aa2). In contrast,
the rest of the R&W providers are unrated and/or financially weaker
entities and Moody's applied an adjustment to the loans for which
these entities provided R&Ws. JPMMAC will not backstop any R&W
providers who may become financially incapable of repurchasing
mortgage loans. JPMMAC is the R&W provider for loans originated by
FirstBank of Colorado, Guaranteed Rate Affinity, Inc., NexBank SSB
and Western Bancorp.
For loans that JPMMAC acquired via the MAXEX platform, MAXEX under
the assignment, assumption and recognition agreement with JPMMAC,
will make the R&Ws. The R&Ws provided by MAXEX to JPMMAC and
assigned to the trust are in line with the R&Ws found in the JPMMT
transactions. Five Oaks Acquisition Corp. will backstop the
obligations of MaxEx with respect to breaches of the mortgage loan
representations and warranties made by MaxEx.
Trustee & Master Servicer
The transaction trustee is U.S. Bank Trust National Association.
The custodian, paying agent, and cash management functions will be
performed by Wells Fargo Bank. In addition, as master servicer,
Wells Fargo is responsible for servicer oversight, the termination
of servicers and the appointment of successor servicers. Wells
Fargo is committed to act as successor servicer if no other
successor servicer can be engaged.
Tail Risk & Subordination Floor
This deal has a standard shifting-interest structure, with a
subordination floor to protect against losses that occur late in
the life of the pool when relatively few loans remain (tail risk).
When the total senior subordination is less than 1.85% of the
original pool balance, the subordinate bonds do not receive any
principal and all principal is then paid to the senior bonds. In
addition, if the subordinate percentage drops below 12.00% of
current pool balance, the senior distribution amount will include
all principal collections and the subordinate principal
distribution amount will be zero. The subordinate bonds themselves
benefit from a floor. When the total current balance of a given
subordinate tranche plus the aggregate balance of the subordinate
tranches that are junior to it amount to less than 1.15% of the
original pool balance, those tranches do not receive principal
distributions. Principal those tranches would have received are
directed to pay more senior subordinate bonds pro-rata.
Transaction Structure
The transaction uses the shifting interest structure in which the
senior bonds benefit from a number of protections. Funds collected,
including principal, are first used to make interest payments to
the senior bonds. Next, principal payments are made to the senior
bonds. Next, available distribution amounts are used to reimburse
realized losses and certificate write-down amounts for the senior
bonds (after subordinate bond have been reduced to zero, i.e. the
credit support depletion date). Finally, interest and then
principal payments are paid to the subordinate bonds in sequential
order.
Realized losses are allocated in a reverse sequential order, first
to the lowest subordinate bond. After the balance of the
subordinate bonds is written off, losses from the pool begin to
write off the principal balance of the senior support bond, and
finally losses are allocated to the super senior bonds.
In addition, the pass-through rate on the bonds is based on the net
WAC as reduced by the sum of (i) the reviewer annual fee rate and
(ii) the capped trust expense rate. In the event that there is a
small number of loans remaining, the last outstanding bonds' rate
can be reduced to zero.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Methodology
The principal methodology used in these ratings was "Moody's
Approach to Rating US Prime RMBS" published in February 2015.
JPMBB COMMERCIAL 2014-C26: DBRS Gives BB(high) Rating on HOW Certs
------------------------------------------------------------------
DBRS Limited assigned a rating to the following class of Commercial
Mortgage Pass-Through Certificates, Series 2014-C26 issued by JPMBB
Commercial Mortgage Securities Trust 2014-C26:
-- Class HOW at BB (high) (sf)
The trend is Stable.
Class HOW is a non-pooled rake bond associated solely with the 543
Howard loan's (Prospectus ID#20) $10 million subordinate B-Note.
The underlying collateral consists of the fee interest in a
72,987-square-foot office building located in the South Financial
District of San Francisco. The whole-loan proceeds of $41.0
million, including a $10.0 million subordinate B-Note and borrower
equity of $12,700, were used to retire existing debt; fund upfront
reserves; and pay outstanding tenant improvement (TI)/leasing
commission obligations. The property is 100% occupied across
multiple leases by a Denver-based company known as Galvanize, Inc.,
which provides multi-dimensional working, entertaining and learning
spaces for digital start-ups. The leases for 54.6% of the space
expire in August 2030, with 39.1% of its space expiring in August
2029 and the remaining 6.3% of space expiring in February 2020.
The DBRS Net Cash Flow (NCF) is based on the "DBRS Commercial Real
Estate Property Analysis Criteria." DBRS accepted the in-place
March 2018 rental revenue, applied a vacancy loss of 7.5% and
generally based operating expenses on the figures reported by the
servicer in the YE2017 analysis. The vacancy factor is above the
overall Class B vacancy rate of 5.0% for the South Financial
District submarket, according to CoStar, as of November 2018. DBRS
applied TIs of $40.00 per square foot (psf) and $20.00 psf for new
and renewal tenants, respectively, which are in line with the
assumptions for the 580 Howard loan in the BANK 2017-BNK6
transaction. The resulting DBRS NCF is $3,178,427, representing a
DBRS Term Debt Service Coverage Ratio (DSCR) of 1.10 times (x)
compared with the DBRS Term DSCR at issuance of 0.98x. A letter of
credit of $4.0 million was posted by the tenant at issuance and
will be reduced to $3.0 million in September 2019 and $2.0 million
in September 2024.
The DBRS value of $41.0 million represents a 25.2% discount to the
issuance appraised value of $54.8 million. Per DBRS's "North
American Single-Asset/Single-Borrower Methodology," the typical
range of cap rates for office properties is 7.0% to 10.5%. Given
the subject's asset quality and excellent location in a gateway
market, a cap rate toward the lower end of the range is warranted.
As such, DBRS applied a cap rate of 7.75% to the DBRS NCF, which is
generally in line with the cap rate applied to high-quality trophy
assets in gateway markets, including Market Square, headquarters of
Twitter Inc. (BBCMS 2015-MSQ), and 181 Fremont Street (secured in
various transactions with the largest piece secured in BMARK
2018-B4).
Notes: All figures are in U.S. dollars unless otherwise noted.
LB COMMERCIAL 1998-C1: Moody's Affirms C Rating on Class IO Certs
-----------------------------------------------------------------
Moody's Investors Service has affirmed the rating of one
interest-only class in LB Commercial Mortgage Trust 1998-C1,
Commercial Mortgage Pass-Through Certificates, Series 1998-C1 as
follows:
Cl. IO, Affirmed C (sf); previously on Nov 9, 2017 Affirmed C (sf)
RATINGS RATIONALE
The rating of the IO Class, Cl. IO, was affirmed based on the
credit quality of its referenced classes. The IO class is the only
outstanding Moody's-rated class in this transaction.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:
An IO class may be subject to ratings upgrades if there is an
improvement in the credit quality of its referenced classes,
subject to the limits and provisions of the updated IO methodology.
An IO class may be subject to ratings downgrades if there is (i) a
decline in the credit quality of the reference classes and/or (ii)
paydowns of higher quality reference classes, subject to the limits
and provisions of the updated IO methodology.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in this rating were "Moody's Approach to
Rating Large Loan and Single Asset/Single Borrower CMBS" published
in July 2017 and "Moody's Approach to Rating Structured Finance
Interest-Only (IO) Securities" published in June 2017.
DEAL PERFORMANCE
As of the October 18, 2018 distribution date, the transaction's
aggregate certificate balance has decreased by over 99% to $4.47
million from $1.73 billion at securitization. The certificates are
collateralized by three mortgage loans, which have all defeased and
are secured by US Government securities.
LB-UBS COMMERCIAL 2005-C7: S&P Affirms B- Rating on SP-7 Certs
--------------------------------------------------------------
S&P Global Ratings raised its rating on the class F commercial
mortgage pass-through certificates from LB-UBS Commercial Mortgage
Trust 2005-C7, a U.S. commercial mortgage-backed securities (CMBS)
transaction, to 'A+ (sf)' from 'A- (sf)'. In addition, S&P affirmed
its ratings on seven nonpooled SP raked certificates from the same
transaction.
S&P said, "For the upgrade and affirmations, our expectation of
credit enhancement was in line with the raised and affirmed rating
levels. The upgrade on class F also reflects the reduction in trust
balance.
"While available credit enhancement levels suggest further positive
rating movements on class F, our analysis also considered the
concentration of loans secured by retail properties ($31.4 million,
97.9%) and Texas exposure ($16.5 million, 51.4%).
"The affirmations on the nonpooled SP classes reflect our analysis
of the Station Place I loan, which is the sole cash flow source for
these raked certificates. Our analysis considered the property's
stable historical operating performance as well as market sale
comparable data. However, we also considered the potential lease
rollover risk for the tenant, U.S. Securities and Exchange
Commission (SEC), which occupies 99.6% of the collateral space
under a lease that expires in April 2019. Our property-level
analysis included a re-evaluation of the office property that
secures the mortgage loan and considered the stable
servicer-reported net operating income and occupancy for the past
four years (2014 through 2017) and partial year through June 2018.
Using a 6.75% S&P Global Ratings capitalization rate, our
expected-case value yielded an overall S&P Global Ratings LTV of
66.9% for the whole loan."
TRANSACTION SUMMARY
Pooled Certificates:
As of the Oct. 15, 2018, trustee remittance report, the collateral
pool balance was $32.1 million, which is 1.4% of the pool balance
at issuance. The pool currently includes four loans, down from 134
loans at issuance.
For the four remaining loans, S&P calculated a 1.11x S&P Global
Ratings weighted average debt service coverage (DSC) and 78.6% S&P
Global Ratings weighted average loan-to-value ratio (LTV) using a
7.56% S&P Global Ratings weighted average capitalization rate.
To date, the transaction has experienced $128.8 million in
principal losses on the pooled certificates, or 5.5% of the
original pool trust balance.
Nonpooled Certificates:
The nonpooled SP raked certificates are solely backed by the
Station Place I loan. The loan, which matures in September 2025, is
secured by an 11-story, 707,483 sq.-ft. office property in
Washington, D.C., that is 99.6% leased to the SEC through April
2019. Under the loan terms, the borrower is expected to fund, in
the event the SEC lease is not extended, tenant improvement and
leasing commission reserves collected from the borrower that will
total $21.0 million at the expiration of the SEC lease. S&P will
continue to monitor the leasing negotiations for Station Place I.
As of the Oct. 15, 2018, trustee remittance report, the loan has a
whole-loan balance of $187.2 million that consists of a $124.1
million senior nontrust component and a $63.0 million subordinate
nonpooled trust component, down from a whole-loan balance of $244.7
million at issuance.
RATINGS RAISED
LB-UBS Commercial Mortgage Trust 2005-C7
Commercial mortgage pass-through certificates
Rating
Class To From
F A+ (sf) A- (sf)
RATINGS AFFIRMED
LB-UBS Commercial Mortgage Trust 2005-C7
Commercial mortgage pass-through certificates
Class Rating
SP-1 AA (sf)
SP-2 A+ (sf)
SP-3 A- (sf)
SP-4 BBB+ (sf)
SP-5 BBB (sf)
SP-6 BB+ (sf)
SP-7 B- (sf)
LB-UBS COMMERCIAL 2006-C3: S&P Raises Class F Certs Rating to CCC
-----------------------------------------------------------------
S&P Global Ratings raised its rating on the class F commercial
mortgage pass-through certificates from LB-UBS Commercial Mortgage
Trust 2006-C3, a U.S. commercial mortgage-backed securities (CMBS)
transaction, to 'CCC (sf)' from 'D (sf)'.
S&P said, "Our analysis considered the susceptibility to reduced
liquidity support from the sole specially serviced asset ($3.9
million, 34.3%) as well as the loan on the master servicer's
watchlist, the City Centre loan ($7.6 million, 65.7%; details
below).
"We previously lowered the rating on class F to 'D (sf)' due to
accumulated interest shortfalls that we expected to remain
outstanding for a prolonged time period. We raised our rating from
'D (sf)' because the prior interest shortfalls from specially
serviced assets have been repaid in full since January 2018, and at
this time, we do not believe a further default of the certificate
class is virtually certain."
TRANSACTION SUMMARY
As of the Oct. 17, 2018, trustee remittance report, the collateral
pool balance was $11.5 million, which is 0.7% of the pool balance
at issuance. The pool currently includes one loan, which is also on
the master servicer's watchlist, and one real estate-owned (REO)
asset that is with the special servicer, down from 123 loans at
issuance.
S&P said, "For the sole performing loan, the City Centre loan, we
calculated a 0.68x S&P Global Ratings debt service coverage (DSC)
and 151.9% S&P Global Ratings loan-to-value ratio using a 9.00% S&P
Global Ratings capitalization rate. The loan, which is secured by a
38,970-sq.-ft. retail property in Philadelphia, Pa., is on the
master servicer's watchlist due to a low reported DSC and
occupancy, which were 0.50x and 50.6%, respectively, as of the six
months ended June 30, 2018. Our analysis also considered the recent
increase in occupancy to 72.6% according to the Sept. 29, 2018,
rent rolls as well as the loan's May 11, 2020, maturity."
To date, the pool transaction has experienced $143.5 million in
principal losses, or 8.5% of the original pool trust balance. S&P
expects losses to reach approximately 8.5% of the original pool
trust balance in the near term, based on losses incurred to date
and additional losses it expects upon the eventual resolution of
the specially serviced asset.
CREDIT CONSIDERATIONS
As of the Oct. 17, 2018, trustee remittance report, The New England
Building REO asset is the sole asset in the pool with the special
servicer, C-III Asset Management LLC (C-III), and has a total
reported exposure of $4.0 million. The asset is an 83,967-sq.-ft.
office property in Topeka, Kan. The loan was transferred to the
special servicer in February 2016, due to the borrower's inability
to pay off the loan upon its Feb. 11, 2016, maturity. The property
became REO on April 10, 2018. The master servicer has deemed the
asset nonrecoverable. C-III stated that the property was 96.8%
occupied as of Aug. 1, 2018. S&P expects a moderate loss (26%-59%)
upon this asset's eventual resolution.
LCM XVI: S&P Assigns Prelim BB- Rating on $28MM Class E-R2 Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
X-R, A-1AR2, A-1BR2, A-2R2, B-R2, C-R2, D-R2, and E-R2 replacement
notes from LCM XVI L.P./LCM XVI LLC, a collateralized loan
obligation (CLO), originally issued in June 2014 and partially
refinanced in June 2017, that is managed by LCM Asset Management
LLC. The replacement notes will be issued via a proposed
supplemental indenture.
The preliminary ratings are based on information as of Nov. 9,
2018. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Nov. 19, 2018, refinancing date, the proceeds from the
issuance of the replacement notes are expected to redeem the
original notes. S&P said, "At that time, we anticipate withdrawing
the ratings on the original notes and assigning ratings to the
replacement notes. However, if the refinancing doesn't occur, we
may affirm the ratings on the original notes and withdraw our
preliminary ratings on the replacement notes."
The replacement notes are being issued via a proposed supplemental
indenture. Based on provisions in the supplemental indenture:
-- The transaction will be collateralized by at least 92.5% senior
secured loans, with a minimum of 85.0% of the loan issuers required
to be based in the U.S. or Canada.
-- A maximum of 95.0% of the loans in the collateral pool can be
covenant-lite.
-- The reinvestment period will be reinstated, now ending Oct. 15,
2023.
-- The stated maturity will be extended by 5.25 years to Oct. 15,
2031.
-- The non-call period will be re-established and ending Oct. 15,
2020.
-- New class X-R notes will be issued and are expected to be
repaid with interest proceeds.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction as reflected in
the trustee report, to estimate future performance. In line with
our criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. In addition, our analysis considered the
transaction's ability to pay timely interest or ultimate principal,
or both, to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and we will take further rating actions
as we deem necessary."
PRELIMINARY RATINGS ASSIGNED
LCM XVI L.P./LCM XVI LLC
Replacement class Rating Amount (mil. $)
X-R AAA (sf) 6.90
A-1AR2 AAA (sf) 265.00
A-1BR2 AAA (sf) 7.60
A-2R2 AAA (sf) 166.60
B-R2 AA (sf) 94.30
C-R2 (deferrable) A (sf) 45.70
D-R2 (deferrable) BBB- (sf) 36.80
E-R2 (deferrable) BB- (sf) 28.00
OTHER OUTSTANDING RATINGS
LCM XVI L.P./LCM XVI LLC
Class Rating
Subordinated notes NR
MAGNETITE LTD XI: Moody's Hikes Class D Notes Rating to Ba3(sf)
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Magnetite XI, Limited:
US$63,750,000 Class A-2-R Senior Secured Floating Rate Notes Due
2027, Upgraded to Aaa (sf); previously on April 18, 2017 Assigned
Aa1 (sf)
US$30,750,000 Class B-R Deferrable Mezzanine Floating Rate Notes
Due 2027, Upgraded to A1 (sf); previously on April 18, 2017
Assigned A2 (sf)
Moody's also affirmed the ratings on the following notes:
US$349,250,000 Class A-1-R Senior Secured Floating Rate Notes Due
2027, Affirmed Aaa (sf); previously on April 18, 2017 Assigned Aaa
(sf)
US$33,000,000 Class C-R Deferrable Mezzanine Floating Rate Notes
Due 2027, Affirmed Baa3 (sf); previously on April 18, 2017 Assigned
Baa3 (sf)
US$30,250,000 Class D Deferrable Mezzanine Floating Rate Notes Due
2027, Affirmed Ba3 (sf); previously on December 18, 2014 Assigned
Ba3 (sf)
Magnetite XI, Limited, issued in December 2014, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans. The transaction's reinvestment period will end in January
2019.
These rating actions reflect the benefit of the short period of
time remaining before the end of the deal's reinvestment period in
January 2019. In light of the reinvestment restrictions during the
amortization period which limit the ability of the manager to
effect significant changes to the current collateral pool, Moody's
analyzed the deal assuming a higher likelihood that the collateral
pool characteristics will continue to satisfy certain covenant
requirements. In particular, Moody's assumed that the deal will
benefit from lower WARF compared to the level during the last
rating review. Moody's modeled a WARF of 2623 compared to 3068 at
the last rating review.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
recovery rate, and weighted average spread, are based on its
published methodology and could differ from the trustee's reported
numbers. In its base case, Moody's analyzed the collateral pool as
having a performing par and principal proceeds balance of $543.2
million, no defaulted par, a weighted average default probability
of 19.07% (implying a WARF of 2623), a weighted average recovery
rate upon default of 50.05%, a diversity score of 66 and a weighted
average spread of 2.94% (before accounting for LIBOR floors).
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
August 2017.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings:
1) Macroeconomic uncertainty: CLO performance is subject to
uncertainty about credit conditions in the general economy.
2) Collateral Manager: Performance can also be affected positively
or negatively by a) the manager's investment strategy and behavior
and b) differences in the legal interpretation of CLO documentation
by different transactional parties owing to embedded ambiguities.
3) Collateral credit risk: A shift towards collateral of better
credit quality, or better credit performance of assets
collateralizing the transaction than Moody's current expectations,
can lead to positive CLO performance. Conversely, a negative shift
in credit quality or performance of the collateral can have adverse
consequences for CLO performance.
4) Deleveraging: An important source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will commence and at what pace. Deleveraging of the CLO
could accelerate owing to high prepayment levels in the loan market
and/or collateral sales by the manager, which could have a
significant impact on the notes' ratings. Note repayments that are
faster than Moody's current expectations will usually have a
positive impact on CLO notes, beginning with those with the highest
payment priority.
5) Recovery of defaulted assets: Fluctuations in the market value
of defaulted assets could result in volatility in the deal's
overcollateralization levels. Further, the timing of recovery
realization and whether the manager decides to work out or sell
defaulted assets create additional uncertainty. Realization of
recoveries that are either materially higher or lower than assumed
in Moody's analysis would impact the CLO positively or negatively,
respectively.
6) Post-Reinvestment Period Trading: Subject to certain
requirements, the deal can reinvest certain proceeds after the end
of the reinvestment period, and as such the manager has the ability
to erode some of the collateral quality metrics to the covenant
levels. Such reinvestment could affect the transaction either
positively or negatively.
7) Weighted Average Spread (WAS): CLO performance can be sensitive
to WAS, which is a key factor driving the amount of excess spread
available as credit enhancement when a deal fails its
over-collateralization or interest coverage tests. A decrease in
excess spread, including as a result of losing the net interest
benefit of LIBOR floors, or because market conditions make it
difficult for the deal to source assets of appropriate credit
quality in order to maintain its WAS target, would reduce the
effective credit enhancement available for the notes.
MARINER FINANCE 2018-A: S&P Assigns BB Rating on Cl. D Notes
------------------------------------------------------------
S&P Global Ratings assigned its ratings to Mariner Finance Issuance
Trust 2018-A's asset-backed notes.
The note issuance is an asset-backed securities transaction backed
by personal consumer loan receivables.
The ratings reflect:
-- The availability of approximately 42.43%, 40.36%, 36.90%, and
29.88% credit support to the class A, B, C, and D notes,
respectively, in the form of subordination, overcollateralization,
a reserve account, and excess spread. These credit support levels
are sufficient to withstand stresses commensurate with the ratings
on the notes based on S&P's stressed cash flow scenarios.
-- S&P said, "Our expectation that under a moderate ('BBB') stress
scenario, our ratings on the class A, B, C, and D notes would
remain within two rating categories of the 'A (sf)', 'A- (sf)',
'BBB (sf)', and 'BB (sf)' ratings, respectively, in the next 12
months. These potential rating movements are consistent with our
credit stability criteria, which outline the outer bounds of credit
deterioration as equal to a two-category downgrade within the first
year under moderate stress conditions."
-- S&P's expectation of the timely payment of periodic interest
and principal by the legal final maturity date according to the
transaction documents, based on stressed cash flow modeling
scenarios, using assumptions commensurate with the assigned
ratings.
-- The characteristics of the pool being securitized, which
include loans with smaller balances and shorter original terms
relative to other lenders in the industry. The transaction has a
two-year revolving period in which the loan composition can change.
As such, S&P considered the worst-case conceivable pool according
to the transaction's concentration limits.
-- The operational risks associated with Mariner Finance LLC's
decentralized business model.
-- Significant and rapid loan portfolio growth after the
integration of Sunbelt Credit Corp. of Florida and Security Finance
Corp. of Lincolnton, acquired on June 30, 2014; Pioneer Credit Co.
Inc. and Pioneer Credit Co. of Alabama Inc., acquired on Dec. 1,
2014; Personal Finance Co. LLC (PFC) acquired on April 3, 2017; and
Regency Finance Co. (Regency) acquired on Aug. 31, 2018 (not yet
fully integrated). These recent acquisitions have comparatively
limited loan performance histories since their integration. Loans
originated from PFC and Regency will not be included in the
transaction.
-- The transaction's payment and legal structures.
RATINGS ASSIGNED
Mariner Finance Issuance Trust 2018-A
Class Rating Interest rate (%) Amount (mil. $)
A A (sf) 4.20 232.93
B A- (sf) 4.42 6.78
C BBB (sf) 5.11 11.06
D BB (sf) 6.57 24.23
MORGAN STANLEY 2008-TOP29: Fitch Lowers 2 Tranches to Csf
---------------------------------------------------------
Fitch Ratings has downgraded two classes and affirmed seven classes
of Morgan Stanley Capital I Trust's MSCI 2008-TOP29 commercial
mortgage pass-through certificates.
KEY RATING DRIVERS
Increased Loss Expectations: The pool's expected losses are more
certain as each of the remaining three loans/assets are in special
servicing. Losses are considered inevitable. All three loans in the
pool, Reparto Metropolitano (77% of total pool balance), Greenfield
Commons-Aurora (12%) and Anchor Health Center (11%) are in special
servicing due to monetary default.
High Credit Enhancement: Although credit enhancement has improved
substantially since Fitch's last rating action due to amortization,
loan payoffs, and disposals, the deal is concentrated with only
three loans/assets remaining, all of which are in special servicing
and are considered Fitch Loans of Concern. Since the last Fitch
rating action, 18 loans have paid off or were disposed.
High Balance Concentration: The pool is highly concentrated by pool
balance with the number one loan in the pool, Reparto
Metropolitano, accounting for 77% of the total pool balance.
Fitch Loans of Concern: Reparto Metropolitano (77%) is a 126,462
SF, anchored retail centre located in Rio Pedras, PR. Major tenants
include Plan Practica Medica Intramural Clinic (part of the
University of Puerto Rico) with 37.2% NRA, Supermercados Plaza
Loiza (14.1% NRA), Walgreens (13.5% NRA), and Grand Store (11.8%
NRA). The loan transferred to special servicing in July 2017 due to
Plan Practica Medica Intramural Clinic requesting a rent reduction
from $24.77/SF to $18/SF and the borrower failed to refinance on
the maturity date in January 2018. Additionally, the property
sustained extensive damage due to Hurricane Maria and tenants
returned to the property in January 2018. Insurance is expected to
cover the damages; however, due to the high amount of claims post
hurricane, reconciliation could be delayed. The loan is in
foreclosure and Fitch expected losses upon final disposition.
Greenfield Commons is securitized by a 32,258 SF neighbourhood
shopping centre in Aurora, IL. Built in 2005, the layout consists
of one building occupied by Office Depot (64% NRA) and a vacant
space formerly occupied by Factory Card Outlet (36% NRA), which
left in at the end of its lease in February 2016. The sole tenant,
Office Depot is currently paying month-to-month rent. The loan was
transferred to special servicing on February 2018 due to an
imminent monetary default. As of year-end 2017, the reported NOI
DSCR and occupancy were 0.96x, and 68%, respectively. The loan
matures in November 2018 and is current as of the October 2018
distribution date.
Anchor Health Center is a 15,202 SF medical office property located
in Naples, FL. The sole occupant was Naples Community Hospital MD,
Inc. until it vacated the property in June 2018. The loan
transferred to special servicing in December 2017 due to monetary
default and is now REO. The property receiver is working to
re-lease the property.
RATING SENSITIVITIES
The downgrades to classes F and G reflect the increased
concentration of specially serviced loans. Upgrades are not
expected due to pool concentration.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has downgraded the following classes:
-- $8.1 million class F to 'Csf' from 'CCCsf'; RE 95%;
-- $13.9 million class G to 'Csf' from 'CCCsf'; RE 0%;
In addition, Fitch has affirmed the following classes:
-- $4.3 class H at 'Dsf'; RE 0%;
-- $0 class J at 'Dsf'; RE 0%;
-- $0 class K at 'Dsf'; RE 0%;
-- $0 class L at 'Dsf'; RE 0%;
-- $0 class M at 'Dsf'; RE 0%;
-- $0 class N at 'Dsf'; RE 0%;
-- $0 class O at 'Dsf'; RE 0%.
The class A-1, A-2, A-3, A-AB, A-4, A-4FL, A-M, A-J1, B, C, D, and
E certificates have paid in full. Fitch does not rate the class P
certificates. Fitch had previously withdrawn the ratings on the
interest-only class X certificates.
MORGAN STANLEY 2013-C11: Moody's Lowers Class D Certs Rating to Ba2
-------------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on nine classes
and downgraded the ratings on four classes in Morgan Stanley Bank
of America Merrill Lynch Trust 2013-C11, Commercial Mortgage
Pass-Through Certificates as follows:
Cl. A-2, Affirmed Aaa (sf); previously on Apr 27, 2018 Affirmed Aaa
(sf)
Cl. A-AB, Affirmed Aaa (sf); previously on Apr 27, 2018 Affirmed
Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Apr 27, 2018 Affirmed Aaa
(sf)
Cl. A-4, Affirmed Aaa (sf); previously on Apr 27, 2018 Affirmed Aaa
(sf)
Cl. A-S, Affirmed Aaa (sf); previously on Apr 27, 2018 Affirmed Aaa
(sf)
Cl. B, Affirmed Aa3 (sf); previously on Apr 27, 2018 Affirmed Aa3
(sf)
Cl. C, Affirmed A3 (sf); previously on Apr 27, 2018 Affirmed A3
(sf)
Cl. D, Downgraded to Ba2 (sf); previously on Apr 27, 2018 Affirmed
Baa3 (sf)
Cl. E, Downgraded to B3 (sf); previously on Apr 27, 2018 Downgraded
to Ba3 (sf)
Cl. F, Downgraded to Caa3 (sf); previously on Apr 27, 2018
Downgraded to B2 (sf)
Cl. G, Downgraded to C (sf); previously on Apr 27, 2018 Downgraded
to Caa3 (sf)
Cl. PST, Affirmed A1 (sf); previously on Apr 27, 2018 Affirmed A1
(sf)
Cl. X-A, Affirmed Aaa (sf); previously on Apr 27, 2018 Affirmed Aaa
(sf)
RATINGS RATIONALE
The ratings on seven P&I Classes were affirmed because the
transaction's key metrics, including Moody's loan-to-value ratio,
Moody's stressed debt service coverage ratio and the transaction's
Herfindahl Index, are within acceptable ranges.
The ratings on four P&I Classes were downgraded due to anticipated
losses from specially serviced and troubled loans, primarily due to
an increase in the expected loss from the sale of the Matrix
Corporate Center Loan.
The rating on IO Class, Cl. X-A, was affirmed based on the credit
performance of the referenced classes.
The rating on the exchangeable class, Cl. PST, was affirmed due to
the weighted average rating factor of the exchangeable classes.
Moody's rating action reflects a base expected loss of 8.3% of the
current balance, compared to 7.4% at Moody's last review. Moody's
base expected loss plus realized losses is now 7.0% of the original
pooled balance, compared to 6.3% at Moody's last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in rating Morgan Stanley Bank of America
Merrill Lynch Trust 2013-C11, Cl. A-2, Cl. A-3, Cl. A-4, Cl. A-AB,
Cl. A-S, Cl. B, Cl. C, Cl. D, Cl. E, Cl. F, and Cl. G were
"Approach to Rating US and Canadian Conduit/Fusion CMBS" published
in July 2017 and "Moody's Approach to Rating Large Loan and Single
Asset/Single Borrower CMBS" published in July 2017. The principal
methodology used in rating Morgan Stanley Bank of America Merrill
Lynch Trust 2013-C11, Cl. PST was "Moody's Approach to Rating
Repackaged Securities" published in June 2015. The methodologies
used in rating Morgan Stanley Bank of America Merrill Lynch Trust
2013-C11, Cl. X-A were "Approach to Rating US and Canadian
Conduit/Fusion CMBS" published in July 2017, "Moody's Approach to
Rating Large Loan and Single Asset/Single Borrower CMBS" published
in July 2017, and "Moody's Approach to Rating Structured Finance
Interest-Only (IO) Securities" published in June 2017.
DEAL PERFORMANCE
As of the October 17, 2018 distribution date, the transaction's
aggregate certificate balance has decreased by 16.2% to $717.3
million from $856.3 million at securitization. The certificates are
collateralized by 34 mortgage loans ranging in size from less than
1% to 13.9% of the pool, with the top ten loans (excluding
defeasance) constituting 68.3% of the pool. One loan, constituting
2.3% of the pool, has an investment-grade structured credit
assessment. Four loans, constituting 8.1% of the pool, have
defeased and are secured by US government securities.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 13, compared to 14 at Moody's last review.
Four loans, constituting 8.5% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Two loans, constituting 9.3% of the pool, is currently in special
servicing. The largest specially serviced loan is the Matrix
Corporate Center ($58.6 million -- 8.2% of the pool), which is
secured by a 1,046,701 square foot (SF) office complex located just
outside of Danbury, Connecticut, 33 miles northeast of Stamford,
Connecticut. The loan transferred to special servicing in February
2016 due to imminent non-monetary default. The property's occupancy
was reduced to 16% in 2017 after several tenants vacated in 2016
and 2017 including the former largest tenant, Boehringer Ingleheim,
which occupied 19.3% of the net rentable area (NRA). The
securitization loan balance of $85.0 million paid down nearly 31%
since securitization partially due to a settlement relating to an
early lease termination of a former tenant. An REO sale for the
property closed in mid-October for $17.8 million and based on this
Moody's expected loss has increased from last review.
The other specially serviced loan (1.2% of the pool) is secured by
a vacant standalone retail property (former Toys R Us/Babies R Us).
Moody's has also assumed a high default probability for one poorly
performing loan secured by another vacant standalone retail
property, representing less than 0.5% of the pool.
Moody's received full year 2017 operating results for 100% of the
pool, and full or partial year 2018 operating results for 70% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 100.3%, compared to 99.7% at
Moody's last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 20.7% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 10.1%.
Moody's actual and stressed conduit DSCRs are 1.56X and 1.10X,
respectively, compared to 1.58X and 1.10X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The loan with a structured credit assessment is the University
Towers Cooperative Loan ($16.7 million -- 2.3% of the pool), which
is secured by three 15-story coop apartment buildings, containing
549 units, and is located in the Fort Greene section of Brooklyn,
New York. The property is across the street from Long Island
University, a block from Fulton Street and 6 blocks north of
Barclays Center on Atlantic Avenue. The property was 95% occupied
as of December 2017, compared to 96% in December 2016 and 97% at
securitization. Moody's structured credit assessment is aaa
(sca.pd), the same as at last review.
The top three conduit loans represent 33.7% of the pool balance.
The largest loan is the Westfield Countryside Loan ($99.4 million
-- 13.9% of the pool), which represents a pari-passu portion in a
$154.1 million mortgage loan. The loan is secured by a 465,000
square foot (SF) component of an approximately 1.26 million square
foot (SF) super-regional mall located in Clearwater, Florida
approximately 20 miles west of Tampa. The mall is anchored by
Dillard's, Macy's, Sears, and JC Penney, all of which are
non-collateral. The total mall was 93% leased as of December 2017,
however, occupancy dropped after the non-collateral Sears closed in
mid 2018. In 2014, Sears had downsized at this location to
accommodate a 37,000-square-foot Whole Foods Market and was left
with 100,000 SF of space. The net operating income (NOI) declined
in 2017 as compared to both 2016 and 2015. The decline was due to
both a decrease in revenue and an increase in operating expenses.
The loan benefits from amortization and Moody's LTV and stressed
DSCR are 111.8% and 0.97X, respectively, compared to 112.4% and
0.96X at Moody's last review.
The second largest loan is the Mall at Tuttle Crossing Loan ($90.7
million -- 12.6% of the pool), which represents a pari-passu
interest in a $119.3 million loan. The loan is secured by a 385,000
square foot (SF) component of an approximately 1.13 million square
foot (SF) super-regional mall located in Dublin, Ohio approximately
17 miles northwest of Columbus. The mall is currently anchored by
JC Penney, Sears and Macy's (all three of which are
non-collateral). A Macy's Home Store (20% of total mall NRA) closed
in 2017. The total mall was 82% leased as of December 2017,
compared to 87% in December 2016 and 88% in December 2015. Several
national brands including Abercrombie & Fitch, The Limited, Men's
Wearhouse and Panera Bread vacated in 2017. In 2017, the total
comparable tenant sales declined by approximately 8% as compared to
the prior year. Moody's LTV and stressed DSCR are 95.0% and 1.14X,
respectively, compared to 88.2% and 1.23X at the last review.
The third largest loan is the Southdale Center Loan ($51.5 million
-- 7.2% of the pool), which represents a pari-passu interest in a
$145.0 million loan. The loan is secured by a 635,000 square foot
component of a 1.23 million square foot super-regional mall located
in Edina, Minnesota, approximately 9 miles south of the
Minneapolis. While the property is located only six miles away from
the Mall of America, the property serves local consumers, while the
Mall of America is considered to be a tourist shopping
destination.. The mall is currently anchored by a Macy's
(non-collateteral) and 12-screen American Multi-Cinema movie
theater. A former anchor tenant, Herberger's, vacated in August
2018 as a result of the Bon-Ton bankruptcy. Additionally, both JC
Penney (non-collateral) and Gordmans (44,087 SF) closed their
stores in 2017. The December 2017 in-line occupancy was 82%,
compared to 84% in December 2016. The property is owned and managed
by Simon Property Group, Inc. Servicer commentary notes that the
Borrower has indicated there is a wide variety of potential tenants
that have expressed interest in the vacant space. Moody's LTV and
stressed DSCR are 111.9% and 0.92X, respectively, compared to
113.1% and 0.91X at Moody's last review.
NATIONSLINK FUNDING 1999-LTL-1: Moody's Affirms B2 Rating on X Debt
-------------------------------------------------------------------
Moody's Investors Service has affirmed the rating on one interest
only class of NationsLink Funding Corporation 1999-LTL-1 as
follows:
Cl. X, Affirmed B2 (sf); previously on Nov 9, 2017 Affirmed B2 (sf)
RATINGS RATIONALE
The rating on the IO class Cl. X was affirmed based on the credit
quality of the referenced classes. The IO class is the only
outstanding Moody's-rated class in this transaction.
Moody's rating action reflects a base expected loss of 12.7% of the
current balance, compared to 17.9% at Moody's last review. Moody's
base expected loss plus realized losses is now 0.8% of the original
pooled balance, compared to 1.4% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:
An IO class may be subject to ratings upgrades if there is an
improvement in the credit quality of its referenced classes,
subject to the limits and provisions of the updated IO methodology.
An IO class may be subject to ratings downgrades if there is (i) a
decline in the credit quality of the reference classes and/or (ii)
paydowns of higher quality reference classes, subject to the limits
and provisions of the updated IO methodology.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in this rating were "Moody's Approach to
Rating Credit Tenant Lease and Comparable Lease Financings"
published in October 2016 and "Moody's Approach to Rating
Structured Finance Interest-Only Securities" published in June
2017.
DEAL PERFORMANCE
As of the October 22, 2018 distribution date, the transaction's
aggregate certificate balance has decreased by 95% to $23 million
from $492 million at securitization. The Certificates are 100%
collateralized by a Credit Tenant Lease component that includes 16
loans ranging in size from 2% to 18% of the pool.
One loan, representing 4% of the pool, is on the master servicer's
watchlist. The watchlist includes loans which meet certain
portfolio review guidelines established as part of the CRE Finance
Council (CREFC) monthly reporting package. As part of its ongoing
monitoring of a transaction, Moody's reviews the watchlist to
assess which loans have material issues that could impact
performance.
Two loans have been liquidated from the pool, resulting in an
aggregate realized loss of $1.2 million (22% loss severity on
average). No loans are currently in special servicing.
The CTL component consists of 16 loans, secured by properties
leased to seven tenants. The largest exposure is Winn-Dixie ($6.6
million -- 29 % of the pool). Five of the tenants have a Moody's
rating. The bottom-dollar weighted average rating factor (WARF) for
this pool is 3,011. WARF is a measure of the overall quality of a
pool of diverse credits. The bottom-dollar WARF is a measure of the
default probability within the pool.
NATIONSTAR HECM 2018-3: Moody's Gives (P)Ba3 Rating on Cl. M4 Debt
------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to five
classes of residential mortgage-backed securities issued by
Nationstar HECM Loan Trust 2018-3. The ratings range from (P)Aaa
(sf) to (P)Ba3 (sf).
The certificates are backed by a pool that includes 1,369 inactive
home equity conversion mortgages and 200 real estate owned
properties. The servicer for the deal is Nationstar Mortgage LLC.
The complete rating actions are as follows:
Issuer: Nationstar HECM Loan Trust 2018-3
Class A, Assigned (P)Aaa (sf)
Class M1, Assigned (P)Aa3 (sf)
Class M2, Assigned (P)A3 (sf)
Class M3, Assigned (P)Baa3 (sf)
Class M4, Assigned (P)Ba3 (sf)
RATINGS RATIONALE
The collateral backing NHLT 2018-3 consists of first-lien inactive
HECMs covered by Federal Housing Administration (FHA) insurance
secured by properties in the US along with Real-Estate Owned (REO)
properties acquired through conversion of ownership of reverse
mortgage loans that are covered by FHA insurance. If a borrower or
their estate fails to pay the amount due upon maturity or otherwise
defaults, the sale of the property is used to recover the amount
owed. Nationstar acquired the mortgage assets from Ginnie Mae
sponsored HECM mortgage backed (HMBS) securitizations. All of the
mortgage assets are covered by FHA insurance for the repayment of
principal up to certain amounts.
There are 1,569 mortgage assets with a balance of $364,327,641. The
assets are in either default, due and payable, referred,
foreclosure or REO status. Loans that are in default may move to
due and payable; due and payable loans may move to foreclosure; and
foreclosure loans may move to REO. 33.3% of the assets are in
default of which 0.04% (of the total assets) are in default due to
non-occupancy and the remaining are in default due to delinquent
taxes and insurance. 19.2% of the assets are due and payable, 32.9%
of the assets are in foreclosure and 1.7% of the assets are in
referred status. Finally, 12.3% of the assets are REO properties
and were acquired through foreclosure or deed-in-lieu of
foreclosure on the associated loan. If the value of the related
mortgaged property is greater than the loan amount, some of these
loans may be settled by the borrower or their estate.
The collateral composition of NHLT 2018-3 is different from that of
NHLT 2018-2 in several key respects. First, NHLT 2018-3 has a lower
percentage of loans in default and due-and-payable status and a
higher percentage of loans in REO status. In addition, a relatively
large percentage of the collateral in NHLT 2018-3 is inactive due
to tax and/or insurance delinquencies (67.7%). Furthermore, the
weighted average loan-to-value ratio, at 126.1%, is significantly
higher than NHLT 2018-2 transaction. This suggests that borrowers
in this pool tend to have lower equity in their homes compared
which may lead to lower cure and repayment rates.
As with most NHLT transactions Moody's has rated, the pool has a
significant concentration of mortgage assets backed by properties
in New York, New Jersey and Florida. Such states are judicial
foreclosure states with long foreclosure timelines. Also, there are
14 assets (0.7% of the asset balance) in NHLT 2018-3 that are
backed by properties in Puerto Rico, which is still recovering from
Hurricane Maria and suffering from poor economic conditions due to
a public debt crisis and continued out-migration. Its credit
ratings reflect state-specific foreclosure timeline stresses as
well as adjustments for risks associated with the real estate
market in Puerto Rico.
Nationstar has noted that six properties in the pool were in
hurricane Michael and Florence disaster areas. Of these six, five
properties had no damage from the property inspection reports and
one property is still unknown. Moody's made a small adjustment to
account for this property. There are 20 loans backed by properties
located in FEMA declared disaster counties affected by the recent
wildfires in California, representing 2.4% by balance and 1.3% by
loan count of the total pool. Nationstar will order property
inspection reports for properties in FEMA designated areas. In
addition, there are property level representations & warranties
that no mortgaged property has suffered damages due to fire, flood,
windstorm, earthquake, tornado, hurricane, or any other damages.
Transaction Structure
The securitization has a sequential liability structure amongst six
classes of notes with structural subordination. All funds
collected, prior to an acceleration event, are used to make
interest payments to the notes, then principal payments to the
Class A notes, then to a redemption account until the amount on
deposit in the redemption account is sufficient to cover future
principal and interest payments for the subordinate notes up to
their expected final payment dates. The subordinate notes will not
receive principal until the beginning of their respective target
amortization periods (in the absence of an acceleration event). The
notes benefit from structural subordination as credit enhancement,
and an interest reserve account funded with cash received from the
initial purchasers of the notes for liquidity and credit
enhancement.
The transaction is callable on or after six months with a 1.0%
premium and on or after 12 months without a premium. The mandatory
call date for the Class A notes is in November 2020. For the Class
M1 notes, the expected final payment date is in June 2021. For the
Class M2 notes, the expected final payment date is in September
2021. For the Class M3 notes, the expected final payment date is in
November 2021. For the Class M4 notes, the expected final payment
date is in March 2022. Finally, for the Class M5 notes, the
expected final payment date is in October 2022. For each of the
subordinate notes, there are target amortization periods that
conclude on the respective expected final payment dates. The legal
final maturity of the transaction is 10 years.
Available funds to the transaction are expected to primarily come
from the liquidation of REO properties and receipt of FHA insurance
claims. These funds will be received with irregular timing. In the
event that there are insufficient funds to pay interest in a given
period, the interest reserve account may be utilized. Additionally,
any shortfall in interest will be classified as an available funds
cap shortfall. These available funds cap carryover amounts will
have priority of payments in the waterfall and will also accrue
interest at the respective note rate.
Certain aspects of the waterfall are dependent upon Nationstar
remaining as servicer. Servicing fees and servicer related
reimbursements are subordinated to interest and principal payments
while Nationstar is servicer. However, servicing advances will
instead have priority over interest and principal payments in the
event that Nationstar defaults and a new servicer is appointed.
Third-Party Review
A third party firm conducted a review of certain characteristics of
the mortgage assets on behalf of Nationstar. The review focused on
data integrity, FHA insurance coverage verification, accuracy of
appraisal recording, accuracy of occupancy status recording,
borrower age documentation, identification of excessive corporate
advances, documentation of servicer advances, and identification of
tax liens with first priority in Texas. Also, broker price opinions
(BPOs) were ordered for 286 properties in the pool.
The TPR firm conducted an extensive data integrity review. Certain
data tape fields, such as the mortgage insurance premium (MIP)
rate, the current UPB, current interest rate, and marketable title
date were reviewed against Nationstar's servicing system. However,
a significant number of data tape fields were reviewed against
imaged copies of original documents of record, screen shots of
HUD's HERMIT system, or HUD documents. Some key fields reviewed in
this manner included the original note rate, the debenture rate,
foreclosure first legal date, and the called due date.
The results of the third-party review (TPR) are comparable to
previous NHLT transactions in many respects. However, the number of
exceptions related to the accuracy of reported valuations, and
foreclosure and bankruptcy attorney fees was higher than in most
other recently rated NHLT transactions. NHLT 2018-3's TPR results
showed an 7.8% initial-tape exception rate related to the accuracy
of reported valuations and a 36.2% initial-tape exception rate
related to foreclosure and bankruptcy attorney fees. In its
analysis of the pool, Moody's applied adjustments to account for
the TPR results in certain areas.
Reps & Warranties (R&W)
Nationstar is the loan-level R&W provider and is rated B2 (Stable).
This relatively weak financial profile is mitigated by the fact
that Nationstar will subordinate its servicing advances, servicing
fees, and MIP payments in the transaction and thus has significant
alignment of interests. Another factor mitigating the risks
associated with a financially weak R&W provider is that a
third-party due diligence firm conducted a review on the loans for
evidence of FHA insurance.
Nationstar represents that the mortgage loans are covered by FHA
insurance that is in full force and effect. Nationstar provides
further R&Ws including those for title, first lien position,
enforceability of the lien, and the condition of the property.
Although Nationstar provides a no fraud R&W covering the
origination of the mortgage loans, determination of value of the
mortgaged properties, and the sale and servicing of the mortgage
loans, the no fraud R&W is made only as to the initial mortgage
loans. Aside from the no fraud R&W, Nationstar does not provide any
other R&W in connection with the origination of the mortgage loans,
including whether the mortgage loans were originated in compliance
with applicable federal, state and local laws. Although certain
representations are knowledge qualified, the transaction documents
contain language specifying that if a representation would have
been breached if not for the knowledge qualifier then Nationstar
will repurchase the relevant asset as if the representation had
been breached.
Upon the identification of an R&W breach, Nationstar has to cure
the breach. If Nationstar is unable to cure the breach, Nationstar
must repurchase the loan within 90 days from receiving the
notification. Moody's believes the absence of an independent third
party reviewer who can identify any breaches to the R&W makes the
enforcement mechanism weak in this transaction. Also, Nationstar,
in its good faith, is responsible for determining if a R&W breach
materially and adversely affects the interests of the trust or the
value the collateral. This creates the potential for a conflict of
interest.
When analyzing the transaction, Moody's reviewed the transaction's
exposure to large potential indemnification payments owed to
transaction parties due to potential lawsuits. In particular,
Moody's assessed the risk that the acquisition trustee would be
subject to lawsuits from investors for a failure to adequately
enforce the R&Ws against the seller. Moody's believes that NHLT
2018-3 is adequately protected against such risk in part because a
third-party data integrity review was conducted on a significant
random sample of the loans. In addition, the third-party due
diligence firm verified that all of the loans in the pool are
covered by FHA insurance.
Trustee & Master Servicer
The acquisition and owner trustee for the NHLT 2018-3 transaction
is Wilmington Savings Fund Society, FSB. The paying agent and cash
management functions will be performed by U.S. Bank National
Association. U.S. Bank National Association will also serve as the
claims payment agent and as such will be the HUD mortgagee of
record for the mortgage assets in the pool.
Methodology
The methodologies used in these ratings were "Moody's Approach to
Rating Securitisations Backed by Non-Performing and Re-Performing
Loans," published in August 2016 and "Moody's Global Approach to
Rating Reverse Mortgage Securitizations," published in May 2015.
The Credit Ratings for NHLT 2018-3 were assigned in accordance with
Moody's existing Methodologies entitled "Moody's Approach to Rating
Securitisations Backed by Non-Performing and Re-Performing Loans,"
dated August 2, 2016 and "Moody's Global Approach to Rating Reverse
Mortgage Securitizations," dated May 27, 2015. Please note that on
November 14, 2018, Moody's released a Request for Comment, in which
it has requested market feedback on potential revisions to its
Methodology for securitizations backed by non-performing and
re-performing loans. If the revised Methodology is implemented as
proposed, the Credit Ratings on NHLT 2018-3 may be neutrally
affected. Please refer to Moody's Request for Comment, titled
"Proposed Update to Moody's Approach to Rating Securitizations
Backed by Non-Performing and Re-Performing Loans," for further
details regarding the implications of the proposed Methodology
revisions on certain Credit Ratings.
Its quantitative asset analysis is based on a loan-by-loan modeling
of expected payout amounts given the structure of FHA insurance and
with various stresses applied to model parameters depending on the
target rating level.
FHA insurance claim types: funds come into the transaction
primarily through the sale of REO properties and through FHA
insurance claim receipts. There are uncertainties related to the
extent and timing of insurance proceeds received by the trust due
to the mechanics of the FHA insurance. HECM mortgagees may suffer
losses if a property is sold for less than its appraised value.
The amount of insurance proceeds received from the FHA depends on
whether a sales based claim (SBC) or appraisal based claim (ABC) is
filed. SBCs are filed in cases where the property is successfully
sold within the first six months after the servicer has acquired
marketable title to the property. ABCs are filed six months after
the servicer has obtained marketable title if the property has not
yet been sold. For an SBC, HUD insurance will cover the difference
between (i) the loan balance and (ii) the higher of the sales price
and 95.0% of the latest appraisal, with the transaction on the hook
for losses if the sales price is lower than 95.0% of the latest
appraisal. For an ABC, HUD only covers the difference between the
loan amount and 100% of appraised value, so failure to sell the
property at the appraised value results in loss.
Moody's expects ABCs to have higher levels of losses than SBCs. The
fact that there is a delay in the sale of the property usually
implies some adverse characteristics associated with the property.
FHA insurance will not protect against losses to the extent that an
ABC property is sold at a price lower than the appraisal value
taken at the six month mark of REO. Additionally, ABCs do not cover
the cost to sell properties (broker fees) while SBCs do cover these
costs. For SBCs, broker fees are reimbursable up to 6.0%
ordinarily. Its base case expectation is that properties will be
sold for 13.5% less than their appraisal value for ABCs. This is
based on the historical experience of Nationstar. Moody's stressed
this percentage at higher credit rating levels. At a Aaa rating
level, Moody's assumed that ABC appraisal haircuts could reach up
to 30.0%.
In its asset analysis, Moody's also assumed there would be some
losses for SBCs, albeit lower amounts than for ABCs. Based on
historical performance, in the base case scenario Moody's assumed
that SBCs would suffer 1.0% losses due to a failure to sell the
property for an amount equal to or greater than 95.0% of the most
recent appraisal. Moody's stressed this percentage at higher credit
rating levels. At a Aaa rating level, Moody's assumed that SBC
appraisal haircuts could reach up to 11.0% (i.e., 6.0% below
95.0%).
Under its analytical approach, each loan is modeled to go through
both the ABC and SBC process with a certain probability. Each loan
will thus have both of the sales disposition payments and
associated insurance payments (four payments in total). All
payments are then probability weighted and run through a modeled
liability structure. Based on the historical experience of
Nationstar, for the base case scenario Moody's assumed that 85% of
claims would be SBCs and the rest would be ABCs. Moody's stressed
this assumption and assumed higher ABC percentages for higher
rating levels. At a Aaa rating level, Moody's assumed that 85% of
insurance claims would be submitted as ABCs.
Liquidation process: each mortgage asset is categorized into one of
four categories: default, due and payable, foreclosure and REO. In
its analysis, Moody's assumes loans that are in referred status to
be either in foreclosure or REO category. The loans are assumed to
move through each of these stages until being sold out of REO.
Moody's assumed that loans would be in default status for six
months. Due and payable status is expected to last six to 12 months
depending on the default reason. Foreclosure status is based on the
state in which that the related property is located and is further
stressed at higher rating levels. The base case foreclosure
timeline is based on FHA timeline guidance. REO disposition is
assumed to take place in six months with respect to SBCs and 12
months with respect to ABCs.
Debenture interest: the receipt of debenture interest is dependent
upon performance of certain actions within certain timelines by the
servicer. If these timeline and performance benchmarks are not met
by the servicer, debenture interest is subject to curtailment. Its
base case assumption is that 95.0% of debenture interest will be
received by the trust. Moody's stressed the amount of debenture
interest that will be received at higher rating levels. Its
debenture interest assumptions reflect the requirement that
Nationstar (B2, Stable) reimburse the trust for debenture interest
curtailments due to servicing errors or failures to comply with HUD
guidelines.
Additional model features: Moody's incorporated certain additional
considerations into its analysis, including the following:
-- In most cases, the most recent appraisal value was used as the
property value in its analysis. However, for seasoned appraisals
Moody's applied a 15.0% haircut to account for potential home price
depreciation between the time of the appraisal and the cut-off
date.
-- Mortgage loans with borrowers that have significant equity in
their homes are likely to be paid off by the borrowers or their
heirs rather than complete the foreclosure process. Moody's
estimated which loans would be bought out of the trust by comparing
each loans' appraisal value (post haircut) to its UPB.
-- Moody's assumed that foreclosure costs will average $4,500 per
loan, two thirds of which will be reimbursed by the FHA. Moody's
then applied a negative adjustment to this amount based on the TPR
results.
-- Moody's estimated monthly tax and insurance advances based on
cumulative tax and insurance advances to date.
Moody's ran additional stress scenarios that were designed to mimic
expected cash flows in the case where Nationstar is no longer the
servicer. Moody's assumes the following in the situation where
Nationstar is no longer the servicer:
-- Servicing advances and servicing fees: While Nationstar
subordinates their recoupment of servicing advances, servicing
fees, and MIP payments, a replacement servicer will not subordinate
these amounts.
-- Nationstar indemnifies the trust for lost debenture interest
due to servicing errors or failure to comply with HUD guidelines.
In the event of a bankruptcy, Nationstar will not have the
financial capacity to do so.
-- A replacement servicer may require an additional fee and thus
Moody's assumes a 25 bps strip will take effect if the servicer is
replaced.
-- One third of foreclosure costs will be removed from sales
proceeds to reimburse a replacement servicer (one third of
foreclosure costs are not reimbursable under FHA insurance). This
is typically on the order of $1,500 per loan.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of stress could
drive the ratings up. Transaction performance depends greatly on
the US macro economy and housing market. Property markets could
improve from its original expectations resulting in appreciation in
the value of the mortgaged property and faster property sales.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of stresses could drive the
ratings down. Transaction performance depends greatly on the US
macro economy and housing market. Property markets could
deteriorate from its original expectations resulting in
depreciation in the value of the mortgaged property and slower
property sales.
NEUBERGER BERMAN XVIII: S&P Assigns BB- Rating on Class D-R2 Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1a-R,
A-2-R2, B-R2, C-R2, and D-R2 replacement notes and new class X-R2
notes from Neuberger Berman CLO XVIII Ltd., a collateralized loan
obligation (CLO) originally issued in 2014 and refinanced in 2016
that is managed by Neuberger Berman Investment Advisers LLC. S&P
withdrew its ratings on the original class A-1-R, A-2-R, B-R, C-R,
and D-R notes following payment in full on the Nov. 14, 2018,
refinancing date.
On the Nov. 14, 2018, refinancing date, the proceeds from the class
A-1a-R, A-2-R2, B-R2, C-R2, and D-R2 replacement note and new class
X-R2 note issuances were used to redeem the original class A-1-R,
A-2-R, B-R, C-R, and D-R notes as outlined in the transaction
document provisions. Therefore, S&P withdrew its ratings on the
original notes in line with their full redemption, and it is
assigning ratings to the replacement notes.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction as reflected in
the trustee report, to estimate future performance. In line with
our criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. In addition, our analysis considered the
transaction's ability to pay timely interest or ultimate principal,
or both, to each of the rated tranches.
"The assigned ratings reflect our opinion that the credit support
available is commensurate with the associated rating levels.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and we will take rating actions as we
deem necessary."
RATINGS ASSIGNED
Neuberger Berman CLO XVIII Ltd.
Replacement class Rating Amount (mil $)
X-R2 AAA (sf) 6.00
A-1a-R2 AAA (sf) 305.00
A-1b-R2 NR 20.00
A-2-R2 AA (sf) 60.00
B-R2 (deferrable) A (sf) 30.00
C-R2 (deferrable) BBB- (sf) 25.00
D-R2 (deferrable) BB- (sf) 19.25
Subordinated notes NR 53.35
RATINGS WITHDRAWN
Neuberger Berman CLO XVIII Ltd.
Rating
Original class To From
A-1-R NR AAA (sf)
B-R NR AA (sf)
C-R (deferrable) NR A (sf)
D-R (deferrable) NR BBB- (sf)
E-R (deferrable) NR BB- (sf)
NR--Not rated.
NORTHWOODS CAPITAL XIV-B: Moody's Rates $6MM Class F Notes 'B2'
---------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to seven
classes of notes issued by Northwoods Capital XIV-B, Limited.
Moody's rating action is as follows:
US$2,000,000 Class X Senior Secured Floating Rate Notes due 2031
(the "Class X Notes"), Definitive Rating Assigned Aaa (sf)
US$320,000,000 Class A Senior Secured Floating Rate Notes due 2031
(the "Class A Notes"), Definitive Rating Assigned Aaa (sf)
US$55,000,000 Class B Senior Secured Floating Rate Notes due 2031
(the "Class B Notes"), Definitive Rating Assigned Aa2 (sf)
US$25,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2031 (the "Class C Notes"), Definitive Rating Assigned A2
(sf)
US$32,500,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2031 (the "Class D Notes"), Definitive Rating Assigned
Baa3 (sf)
US$27,500,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2031 (the "Class E Notes"), Definitive Rating Assigned Ba3 (sf)
US$6,000,000 Class F Junior Secured Deferrable Floating Rate Notes
due 2031 (the "Class F Notes"), Definitive Rating Assigned B2 (sf)
The Class X Notes, the Class A Notes, the Class B Notes, the Class
C Notes, the Class D Notes, the Class E Notes and the Class F Notes
are referred to herein, collectively, as the "Rated Notes."
RATINGS RATIONALE
The ratings reflect the risks due to defaults on the underlying
portfolio of assets, the transaction's legal structure, and the
characteristics of the underlying assets.
Northwoods Capital XIV-B is a managed cash flow CLO. The issued
notes will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 94% of the portfolio must consist
of first lien senior secured loans and eligible investments, and up
to 6% of the portfolio may consist of collateral obligations other
than senior secured loans. Moody's expects the portfolio to be
approximately 87% ramped as of the closing date.
Angelo, Gordon & Co., L.P. will direct the selection, acquisition
and disposition of the assets on behalf of the Issuer and may
engage in trading activity, including discretionary trading, during
the transaction's five-year reinvestment period. Thereafter, the
Manager may reinvest unscheduled principal payments and proceeds
from sales of credit risk assets, subject to certain restrictions.
In addition to the Rated Notes, the Issuer issued interest-only
notes and subordinated notes, which were not rated by Moody's.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in August 2017.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 60
Weighted Average Rating Factor (WARF): 2790
Weighted Average Spread (WAS): 3.68%
Weighted Average Coupon (WAC): 7.0%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 9.2 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
August 2017.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
OCTAGON INVESTMENT 28: S&P Assigns Prelim BB- Rating on E-R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1-R, A-2-R, B-R, C1-R, C2-R, D-R, and E-R replacement notes and
new class X notes from Octagon Investment Partners 28 Ltd., a
collateralized loan obligation (CLO) originally issued in 2016 that
is managed by Octagon Credit Investors LLC. The replacement notes
will be issued via a proposed supplemental indenture.
The preliminary ratings reflect our opinion that the credit support
available is commensurate with the associated rating levels.
The preliminary ratings are based on information as of Nov. 9,
2018. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Nov. 29, 2018, refinancing date, the proceeds from the
issuance of the replacement notes are expected to redeem the
original notes. At that time, we anticipate withdrawing the ratings
on the original notes and assigning ratings to the replacement
notes. However, if the refinancing doesn't occur, we may affirm the
ratings on the original notes and withdraw our preliminary ratings
on the replacement notes.
The replacement notes are being issued via a proposed supplemental
indenture, which, in addition to outlining the terms of the
replacement notes, will also:
-- Split the original class A notes into replacement class A-1-R
and A-2-R notes.
-- Combine the original class B-1 (floating rate) and B-2
(fixed-rate) notes into replacement class B-R notes with an
expected lower spread than that of the class B-1 notes.
-- Combine the original class E-1 and E-2 floating-rate notes into
replacement class E-R notes with an expected lower spread than that
of both of the current class E notes.
-- Issue class X notes that are expected to pay down on the first
or second payment date.
-- Issue the replacement class C-R and D-R notes at a lower spread
than the original notes.
-- Extend the non-call period to October 2020.
-- Extend the reinvestment period to October 2023.
-- Extend the maturity date to October 2030.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction as reflected in
the trustee report, to estimate future performance (see table). In
line with our criteria, our cash flow scenarios applied
forward-looking assumptions on the expected timing and pattern of
defaults, and recoveries upon default, under various interest rate
and macroeconomic scenarios. In addition, our analysis considered
the transaction's ability to pay timely interest or ultimate
principal, or both, to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and we will take further rating actions
as we deem necessary."
PRELIMINARY RATINGS ASSIGNED
Octagon Investment Partners 28 Ltd.
Replacement class Rating Amount (mil. $)
X AAA (sf) 2.20
A-1-R AAA (sf) 434.00
A-2-R NR 24.50
B-R AA (sf) 73.50
C1-R (deferrable) A (sf) 25.03
C2-R (deferrable) A (sf) 20.48
D-R (deferrable) BBB- (sf) 38.50
E-R (deferrable) BB- (sf) 28.00
Subordinated notes NR 61.50
OHA CREDIT X-R: S&P Assigns Prelim. B- Rating on Cl. F Notes
------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to OHA Credit
Partners X-R Ltd./OHA Credit Partners X-R LLC's floating- and
fixed-rate notes. This is a proposed reissue of OHA Credit Partners
X Ltd., which was not rated by S&P Global Ratings.
The note issuance is a collateralized loan obligation (CLO) backed
by primarily broadly syndicated speculative-grade (rated 'BB+' and
lower) senior secured term loans that are governed by collateral
quality tests.
The preliminary ratings are based on information as of Nov. 14,
2018. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversified collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
PRELIMINARY RATINGS ASSIGNED
OHA Credit Partners X-R Ltd./OHA Credit Partners X-R LLC
Class Rating Amount (mil. $)
X AAA (sf) 4.15
A-1 AAA (sf) 348.00
A-2 NR 23.50
A-2F NR 12.50
B AA (sf) 72.00
C (deferrable) A (sf) 36.00
D (deferrable) BBB- (sf) 36.00
E (deferrable) BB- (sf) 21.00
F (deferrable) B- (sf) 11.75
Subordinated notes NR 73.00
NR--Not rated.
RAIT TRUST 2017-FL8: DBRS Confirms B Rating on Cl. F Notes
----------------------------------------------------------
DBRS Limited removed from Under Review with Negative Implications
all classes of Floating Rate Notes issued by RAIT 2017-FL8 Trust
(the Trust), where they were placed on March 12, 2018. DBRS also
confirmed the ratings of all classes of the Trust as follows:
-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of
the transaction. At issuance, the transaction consisted of 23
interest-only, floating-rate loans secured by 26 transitional
commercial properties. As of the October 2018 remittance, 19 of the
loans remain in the pool with an outstanding trust balance of
approximately $223.0 million, representing a collateral reduction
of 14.1% since issuance due to unscheduled loan repayment, as four
loans have fully repaid from the Trust, while one loan has
partially repaid. Two loans, representing 15.1% of the current
trust balance, have unfunded future funding commitments totalling
approximately $3.1 million, which are held outside the Trust as
pari passu non-controlling participation interests.
The classes were previously placed Under Review with Negative
Implications due to concerns over the servicing of all RAIT
Financial Trust (RAIT or the Company; a non-rated entity)
transactions, as RAIT, parent of the issuer, mortgage loan seller,
servicer/special servicer, advancing agent and trust administrator,
was experiencing financial troubles this past year. The uncertainty
surrounding the direction of the Company and the concerns regarding
RAIT's capabilities as servicer to ensure the underlying loans were
performing in line with their respective business plans were cited
by DBRS. DBRS met with the servicing team and senior management on
several occasions, and based on the meetings, the servicing and
asset management teams in place appeared to be sufficient to
service and specially service its commercial real estate
collateralized loan obligation transactions. While there are
outstanding future funding commitments for two loans, given the low
dollar balance relative to the outstanding trust balance, DBRS does
not foresee any material risk in RAIT's ability to meet these
obligations.
As of the October 2018 remittance, there are no loans in special
servicing or on the servicer's watch list. The loans are all
secured by traditional property types (multifamily, retail and
office), most of which (94.1% of the current trust balance) are
located in urban and suburban markets that benefit from greater
liquidity and/or are affordable offerings in stable communities. Of
the 19 loans, 18 loans (94.1% of the current trust balance)
represent acquisition financing, with the borrowers contributing
equity to the transaction. Most of the properties are currently
cash-flowing assets in a period of transition with viable plans and
loan structures in place to facilitate stabilization and value
growth. Based on updated reporting provided by RAIT in its capacity
as servicer, DBRS confirmed that the majority of the remaining loan
sponsors are in the process of successfully executing their
respective business plans. In addition, all borrowers have
purchased LIBOR rate caps to protect against a rise in interest
rates over the term of their respective loans. The Class E, F, G
and H notes (19.8% of the current trust balance) are retained by
RAIT.
TCI-SYMPHONY CLO 2016-1: Moody's Rates $20MM Class E-R Notes Ba3
----------------------------------------------------------------
Moody's Investors Service has assigned ratings to four classes of
CLO refinancing notes issued by TCI-Symphony CLO 2016-1 Ltd.:
Moody's rating action is as follows:
US$60,000,000 Class B-R Senior Secured Floating Rate Notes due 2029
(the "Class B-R Notes"), Assigned Aa2 (sf)
US$31,250,000 Class C-R Senior Secured Deferrable Floating Rate
Notes due 2029 (the "Class C-R Notes"), Assigned A2 (sf)
US$28,750,000 Class D-R Senior Secured Deferrable Floating Rate
Notes due 2029 (the "Class D-R Notes"), Assigned Baa3 (sf)
US$20,000,000 Class E-R Mezzanine Secured Deferrable Floating Rate
Notes due 2029 (the "Class E-R Notes"), Assigned Ba3 (sf)
Additionally, Moody's has taken rating action on the following
outstanding notes issued by the Issuer on the original issuance
date:
US$320,000,000 Class A Senior Secured Floating Rate Notes due 2029
(the "Class A Notes"), Affirmed Aaa (sf); previously on September
29, 2016 Assigned Aaa (sf)
The Issuer is a managed cash flow collateralized loan obligation.
The issued notes are collateralized primarily by a portfolio of
broadly syndicated senior secured corporate loans.
TCI Capital Management II LLC manages the CLO. It directs the
selection, acquisition, and disposition of collateral on behalf of
the Issuer.
RATINGS RATIONALE
The ratings reflect the risks due to defaults on the underlying
portfolio of assets, the transaction's legal structure, and the
characteristics of the underlying assets.
The Issuer has issued the Refinancing Notes on November 13, 2018 in
connection with the refinancing of certain classes of the secured
notes previously issued on September 29, 2016. On the Refinancing
Date, the Issuer used proceeds from the issuance of the Refinancing
Notes to redeem in full the Refinanced Original Notes.
In addition to the issuance of the Refinancing Notes, other changes
to transaction features will occur in connection with the
refinancing. These include: extension of the non-call period.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in August 2017.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: $500,000,000
Defaulted par: $0
Diversity Score: 66
Weighted Average Rating Factor (WARF): 2731
Weighted Average Spread (WAS): 3.22%
Weighted Average Coupon (WAC): N/A
Weighted Average Recovery Rate (WARR): 48.51%
Weighted Average Life (WAL): 6.31 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
August 2017.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the notes is subject to uncertainty. The
performance of the notes is sensitive to the performance of the
underlying portfolio, which in turn depends on economic and credit
conditions that may change. The Manager's investment decisions and
management of the transaction will also affect the performance of
the notes.
VENTURE 35: Moody's Assigns Ba3 Rating on $30MM Class E Notes
-------------------------------------------------------------
Moody's Investors Service has assigned ratings to eight classes of
notes issued by Venture 35 CLO, Limited.
Moody's rating action is as follows:
US$50,000,000 Class A-L Senior Secured Floating Rate Notes due 2031
(the "Class A-L Notes"), Definitive Rating Assigned Aaa (sf)
US$255,000,000 Class A-S Senior Secured Step-Up Floating Rate Notes
due 2031 (the "Class A-S Notes"), Definitive Rating Assigned Aaa
(sf)
US$80,000,000 Class A-F Senior Secured Fixed Rate Notes due 2031
(the "Class A-F Notes"), Definitive Rating Assigned Aaa (sf)
US$36,475,000 Class B-L Senior Secured Floating Rate Notes due 2031
(the "Class B-L Notes"), Definitive Rating Assigned Aa2 (sf)
US$30,525,000 Class B-F Senior Secured Fixed Rate Notes due 2031
(the "Class B-F Notes"), Definitive Rating Assigned Aa2 (sf)
US$40,500,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2031 (the "Class C Notes"), Definitive Rating Assigned A2
(sf)
US$32,500,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2031 (the "Class D Notes"), Definitive Rating Assigned
Baa3 (sf)
US$30,000,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2031 (the "Class E Notes"), Definitive Rating Assigned Ba3 (sf)
The Class A-L Notes, the Class A-S Notes, the Class A-F Notes, the
Class B-L Notes, the Class B-F Notes, the Class C Notes, the Class
D Notes and the Class E Notes are referred to herein, collectively,
as the "Rated Notes."
RATINGS RATIONALE
The ratings reflect the risks due to defaults on the underlying
portfolio of assets, the transaction's legal structure, and the
characteristics of the underlying assets.
Venture 35 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90.0% of the portfolio must consist of
first lien senior secured loans, cash, and eligible investments,
and up to 10.0% of the portfolio may consist of second lien loans
and unsecured loans. The portfolio is approximately 100% ramped as
of the closing date.
MJX Asset Management LLC (the "Manager") will direct the selection,
acquisition and disposition of the assets on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's five year reinvestment period.
Thereafter, the Manager may reinvest unscheduled principal payments
and proceeds from sales of credit risk assets, subject to certain
restrictions.
In addition to the Rated Notes, the Issuer issued subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in August 2017.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $603,500,000
Diversity Score: 85
Weighted Average Rating Factor (WARF): 2809
Weighted Average Spread (WAS): 3.60%
Weighted Average Coupon (WAC): 6.00%
Weighted Average Recovery Rate (WARR): 46.00%
Weighted Average Life (WAL): 9 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
August 2017.
The Credit Rating for Venture 35 CLO, Limited was assigned in
accordance with Moody's existing Methodology entitled "Moody's
Global Approach to Rating Collateralized Loan Obligations," dated
August 31, 2017. Please note that on November 14, 2018, Moody's
released a Request for Comment, in which it has requested market
feedback on potential revisions to its Methodology for
Collateralized Loan Obligations. If the revised Methodology is
implemented as proposed, Moody's does not expect the changes to
affect the Credit Rating on Venture 35 CLO, Limited. Please refer
to Moody's Request for Comment, titled "Proposed Update to Moody's
Global Approach to Rating Collateralized Loan Obligations," for
further details regarding the implications of the proposed
Methodology revisions on certain Credit Ratings.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
VOYA CLO 2015-3: S&P Assigns Prelim BB- Rating on Class D-R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Voya CLO
2015-3 Ltd.'s floating-rate notes. This is a proposed reset of the
transaction that initially closed in September 2015 and was not
rated by S&P Global Ratings.
The note issuance is a collateralized loan obligation (CLO)
transaction backed by primarily of broadly syndicated
speculative-grade senior secured term loans that are governed by
collateral quality tests.
The preliminary ratings are based on information as of Nov. 14,
2018. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversified collateral pool, which consists primarily of
broadly syndicated speculative-grade senior secured term loans that
are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
PRELIMINARY RATINGS ASSIGNED
Voya CLO 2015-3 Ltd.
Class Rating Amount (mil. $)
X-R AAA (sf) 3.32
A-1-R AAA (sf) 478.90
A-2A-R NR 23.00
A-2B-R NR 12.90
A-3-R AA (sf) 91.80
B-R (deferrable) A (sf) 51.80
C-R (deferrable) BBB- (sf) 44.00
D-R (deferrable) BB- (sf) 31.90
E-R (deferrable) NR 18.40
Subordinated notes NR 56.70
NR--Not rated.
WELLS FARGO 2016-NXS5: Fitch Affirms BB-sf Rating on Class F Certs
------------------------------------------------------------------
Fitch Ratings affirms Wells Fargo Commercial Mortgage Trust
Pass-Through Certificates, series 2016-NXS5.
KEY RATING DRIVERS
Overall Stable Performance and Loss Expectations Since Issuance:
The affirmations reflect the overall stable performance and loss
expectations since issuance. One loan, 1006 Madison Avenue (2.0%),
transferred to special servicing in October 2018 due to imminent
default. The 3,915 square foot retail property located in Manhattan
on 78th and Madison Avenue was originally 100% leased to Roland
Mouret through 2025. However, the tenant exercised it termination
option and vacated Oct. 31, 2018, prior to its lease expiration.
Seven loans (4.5%) were on the servicer watchlist due to declining
performance and upcoming large tenant rollover; four loans (2.8%)
were flagged as Fitch Loans of Concern (FLOCs). While not on the
watchlist, 4400 Jenifer Street (3.1%) was flagged after the
property's third largest tenant, Sundance Getaways (previously 8.8%
of NRA), vacated their space and the property's second largest
tenant, Long & Foster (21.9% of NRA), renewed their original 2018
lease expiration for only one year.
Minimal Change in Credit Enhancement: There has been minimal change
to credit enhancement since issuance. As of the October 2018
remittance report, the transaction's outstanding balance has been
reduced by 1.9% to $853.3 million from $875.1 million at issuance
with no realized losses to date. The pool is only expected to pay
down 11.2% of the initial pool balance prior to maturity. Seven
loans are interest only (28.9% of the pool) and 17 loans are
partial interest only (32.5% of pool balance), 10 of which have
exited their interest only periods. The majority of the remaining
seven interest only loans are expected to exit their interest only
period in 2020 and 2021, including top 15 loans 901 7th Street NW
(3.0% of pool), 4400 Jenifer Street (3.1% of pool), Preferred
Freezer - Westfield (2.4% of pool), and Chase Corporate Center
(2.4% of pool). The remaining loans are amortizing (38.5%).
ADDITIONAL CONSIDERATIONS
Single Tenant Occupancy: The pool includes six loans (18.3% of
pool) secured by properties that are exclusively occupied by a
single-tenant. Loans in the top 10 secured by properties with
single tenant concentration include One Court Square (8.7% of
pool), Walgreens-CVS Portfolio (5.1%) and Keurig Green Mountain
(3.2%).
One Court Square: One Court Square is a 51-story, 1.4 million sf
office tower located in Long Island City, NY that is 100% leased to
Citibank, N.A through 2020. Citibank announced in early 2018 they
intend on vacating 1.0 million sf (71% NRA) by 2020. Multiple media
news outlets on Nov. 13, 2018, indicated Amazon (rated A+/F1 by
Fitch) signed a letter of intent to lease one million square feet
of space at the property. Amazon is predicted to utilize One Court
Square as one of the locations for its East Coast operations, along
with Crystal City, VA. Fitch is awaiting confirmation from the
master servicer regarding the recent news and will continue to
monitor the loan for performance updates.
RATING SENSITIVITIES
The Rating Outlooks on all classes remain Stable due to overall
stable pool performance. Future rating upgrades may occur with
improved pool performance and additional defeasance or paydown.
Rating downgrades to the classes are possible should overall pool
performance decline.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third party due diligence was provided or reviewed by Fitch in
relation to this rating.
Fitch has affirmed the following ratings:
-- $16.3 million class A-1 at 'AAAsf'; Outlook Stable;
-- $121.9 million class A-2 at 'AAAsf'; Outlook Stable;
-- $35.8 million class A-3 at 'AAAsf'; Outlook Stable;
-- $65 million class A-4 at 'AAAsf'; Outlook Stable;
-- $85 million class A-5 at 'AAAsf'; Outlook Stable;
-- $164.8 million class A-6 at 'AAAsf'; Outlook Stable;
-- $50 million class A-6FL at 'AAAsf'; Outlook Stable;
-- $50 class A-6FX at 'AAAsf'; Outlook Stable;
-- $57 million class A-SB at 'AAAsf'; Outlook Stable;
-- $50.3 million class A-S at 'AAAsf'; Outlook Stable;
-- $52.5 million class B at 'AA-sf'; Outlook Stable;
-- $39.4 million class C at 'A-sf'; Outlook Stable;
-- $26.3 million class D at 'BBBsf'; Outlook Stable;
-- $20.8 million class E at 'BBB-sf'; Outlook Stable;
-- $22.2 million class F at 'BB-sf'; Outlook Stable;
-- $9.5 million class G at 'B-sf'; Outlook Stable;
-- Interest-only class X-A at 'AAAsf'; Outlook Stable;
-- Interest-only class X-B at 'AA-sf'; Outlook Stable;
-- Interest-only class X-F at 'BB-sf'; Outlook Stable;
-- Interest-only class X-G at 'B-sf'; Outlook Stable.
Fitch does not rate the class H or class X-H certificates.
WFRBS COMMERCIAL 2012-C10: Moody's Cuts Class E Certs Rating to B1
------------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on ten classes
and downgraded the ratings on two classes in WFRBS Commercial
Mortgage Trust 2012-C10, Commercial Mortgage Pass-Through
Certificates Series 2012-C10 as follows:
Cl. A-FL, Affirmed Aaa (sf); previously on Oct 13, 2017 Affirmed
Aaa (sf)
Cl. A-FX, Affirmed Aaa (sf); previously on Oct 13, 2017 Affirmed
Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Oct 13, 2017 Affirmed Aaa
(sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Oct 13, 2017 Affirmed
Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on Oct 13, 2017 Affirmed Aaa
(sf)
Cl. B, Affirmed Aa3 (sf); previously on Oct 13, 2017 Affirmed Aa3
(sf)
Cl. C, Affirmed A3 (sf); previously on Oct 13, 2017 Affirmed A3
(sf)
Cl. D, Affirmed Baa3 (sf); previously on Oct 13, 2017 Affirmed Baa3
(sf)
Cl. E, Downgraded to B1 (sf); previously on Oct 13, 2017 Downgraded
to Ba3 (sf)
Cl. F, Downgraded to Caa1 (sf); previously on Oct 13, 2017
Downgraded to B3 (sf)
Cl. X-A, Affirmed Aaa (sf); previously on Oct 13, 2017 Affirmed Aaa
(sf)
Cl. X-B, Affirmed A2 (sf); previously on Oct 13, 2017 Affirmed A2
(sf)
RATINGS RATIONALE
The ratings on eight P&I Classes were affirmed because the
transaction's key metrics, including Moody's loan-to-value ratio,
Moody's stressed debt service coverage ratio and the transaction's
Herfindahl Index, are within acceptable ranges.
The ratings on two P&I Classes, Cl. E and Cl. F, were downgraded
due to an increase in anticipated losses primarily due to a decline
in the performance of three loans backed by regional malls
(representing a total of 16% of the pool balance).
The ratings on IO Classes, Cl. X-A and Cl. X-B, were affirmed based
on the credit quality of the referenced classes.
Moody's rating action reflects a base expected loss of 4.0% of the
current balance, compared to 3.5% at Moody's last review. Moody's
base expected loss plus realized losses is now 3.3% of the original
pooled balance, compared to 3.0% at Moody's last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating WFRBS Commercial Mortgage
Trust 2012-C10, Cl. A-FL, Cl. A-FX, Cl. A-3, Cl. A-SB, Cl. A-S, Cl.
B, Cl. C, Cl. D, Cl. E, and Cl. F was "Approach to Rating US and
Canadian Conduit/Fusion CMBS" published in July 2017. The
methodologies used in rating WFRBS Commercial Mortgage Trust
2012-C10, Cl. X-A and Cl. X-B were "Approach to Rating US and
Canadian Conduit/Fusion CMBS" published in July 2017 and "Moody's
Approach to Rating Structured Finance Interest-Only (IO)
Securities" published in June 2017.
DEAL PERFORMANCE
As of the October 17, 2018 distribution date, the transaction's
aggregate certificate balance has decreased by 16.1% to $1.1
billion from $1.31 billion at securitization. The certificates are
collateralized by 22 mortgage loans ranging in size from less than
1% to 10.9% of the pool, with the top ten loans (excluding
defeasance) constituting 54.6% of the pool. One loan, constituting
10.0% of the pool, has an investment-grade structured credit
assessment. Eleven loans, constituting 5.1% of the pool, have
defeased and are secured by US government securities.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 22, compared to 24 at Moody's last review.
Ten loans, constituting 13.5% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
No loans have been liquidated from the pool and there no loans are
currently in special servicing.
Moody's received full year 2017 operating results for 99% of the
pool, and full or partial year 2018 operating results for 92% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 95.8%, compared to 93.6% at Moody's
last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 16.1% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 10.2%.
Moody's actual and stressed conduit DSCRs are 1.68X and 1.25X,
respectively, compared to 1.70X and 1.24X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The loan with a structured credit assessment is the Concord Mills
Loan ($110.0 million -- 10.0% of the pool), which is secured by a
participation interest in the senior component of a $235 million
mortgage loan. The loan is secured by a 1.28 million square foot
(SF) super-regional mall located in Concord, North Carolina. Major
tenants include Bass Pro Shops Outdoor, Burlington Coat Factory and
AMC Corporation. The mall was 97% leased and in-line space was
about 92% as of June 2018. While occupancy has remained stable
compared to last review and securitization, financial performance
has steadily improved due to an increase in rental revenue. Moody's
structured credit assessment and stressed DSCR are a2 (sca.pd) and
1.34X, respectively, the same as at last review.
The top three conduit loans represent 23.1% of the pool balance.
The largest loan is the Republic Plaza Loan ($119.0 million --
10.9% of the pool), which represents a participation interest in a
$266.6 million loan. The loan is secured by a 56-story Class-A
trophy office tower and a separate 12-story parking garage located
in Denver, Colorado. Major tenants include Encana Oil & Gas, DCP
Midstream, LP and Wheeler Trigg O'Donnell LLP. The tower was 91.5%
leased as of June 2018, compared to 87% in December 2017 and 94.5%
at securitization. Moody's LTV and stressed DSCR are 114.4% and
0.85X, respectively, compared to 116.7% and 0.83X at the last
review.
The second largest loan is the Dayton Mall Loan ($80.6 million --
7.4% of the pool), which is secured by a 778,500 SF, two-story
regional mall located in Dayton, Ohio. The mall's current anchor
tenants include Macy's (non-collateral), Sears (non-collateral), JC
Penney (collateral) and Dick's Sporting Goods (collateral). Sears
has announced that they will close this location in late 2018. The
mall has had other major tenants shutdown due to bankruptcy
including a 203,000 SF Elder Beerman (non-collateral) in early 2018
and a 30,000 SF hhgregg in 2017. The borrower has recently
announced that Ross Dress for Less will replace the former hhgregg
location. The collateral was 95% leased as of June 2018, compared
to 93% in December 2017 and 92% at securitization. Financial
performance has declined since securitization and the year end 2017
NOI was approximately 11% below underwritten levels. Moody's LTV
and stressed DSCR are 130.0% and 0.98X, respectively, compared to
124.2% and 1.02X at the last review.
The third largest loan is the STAG REIT Portfolio ($53.6 million --
4.9% of the pool), which is secured by 24 (originally 28)
industrial buildings totaling 3.38 million SF and located
throughout eight states. The portfolio was 94% leased as of June
2018, compared to 90% in December 2017 and 98% at securitization
Four properties from this portfolio have defeased. Excluding the
defeased properties, Moody's LTV and stressed DSCR are 71.8% and
1.54X, respectively, compared to 70.9% and 1.49X at the last
review.
WFRBS COMMERCIAL 2012-C7: Moody's Affirms B1 Rating on 2 Tranches
-----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on thirteen
classes in WFRBS Commercial Mortgage Trust 2012-C7 as follows:
Cl. A-1, Affirmed Aaa (sf); previously on Nov 10, 2017 Affirmed Aaa
(sf)
Cl. A-2, Affirmed Aaa (sf); previously on Nov 10, 2017 Affirmed Aaa
(sf)
Cl. A-FL, Affirmed Aaa (sf); previously on Nov 10, 2017 Affirmed
Aaa (sf)
Cl. A-FX, Affirmed Aaa (sf); previously on Nov 10, 2017 Affirmed
Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on Nov 10, 2017 Affirmed Aaa
(sf)
Cl. B, Affirmed Aa2 (sf); previously on Nov 10, 2017 Affirmed Aa2
(sf)
Cl. C, Affirmed A2 (sf); previously on Nov 10, 2017 Affirmed A2
(sf)
Cl. D, Affirmed Baa1 (sf); previously on Nov 10, 2017 Affirmed Baa1
(sf)
Cl. E, Affirmed Ba1 (sf); previously on Nov 10, 2017 Downgraded to
Ba1 (sf)
Cl. F, Affirmed B1 (sf); previously on Nov 10, 2017 Downgraded to
B1 (sf)
Cl. G, Affirmed Caa1 (sf); previously on Nov 10, 2017 Downgraded to
Caa1 (sf)
Cl. X-A, Affirmed Aaa (sf); previously on Nov 10, 2017 Affirmed Aaa
(sf)
Cl. X-B, Affirmed B1 (sf); previously on Nov 10, 2017 Downgraded to
B1 (sf)
RATINGS RATIONALE
The ratings of eleven P&I classes were affirmed because the
transaction's key metrics, including Moody's loan-to-value ratio,
Moody's stressed debt service coverage ratio, and the transaction's
Herfindahl Index are within acceptable ranges.
The ratings on the IO classes, Cl X-A and Cl. X-B, were affirmed
based on the credit quality of the referenced classes.
Moody's rating action reflects a base expected loss of 3.1% of the
current pooled balance, compared to 3.3% at Moody's last review.
Moody's base expected loss plus realized losses is now 3.1% of the
original pooled balance, compared to 3.4% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in rating WFRBS Commercial Mortgage Trust
2012-C7, Cl. A-1, Cl. A-2, Cl. A-FL, Cl. A-FX, Cl. A-S, Cl. B, Cl.
C, Cl. D, Cl. E, Cl. F, and Cl. G were "Approach to Rating US and
Canadian Conduit/Fusion CMBS" published in July 2017 and "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in July 2017. The methodologies used in rating
WFRBS Commercial Mortgage Trust 2012-C7, Cl. X-A and Cl. X-B were
"Approach to Rating US and Canadian Conduit/Fusion CMBS" published
in July 2017, "Moody's Approach to Rating Large Loan and Single
Asset/Single Borrower CMBS" published in July 2017, and "Moody's
Approach to Rating Structured Finance Interest-Only (IO)
Securities" published in June 2017.
DEAL PERFORMANCE
As of the October 17, 2018 distribution date, the transaction's
aggregate certificate balance has decreased by 12.8% to $963
million from $1.10 billion at securitization. The certificates are
collateralized by 56 mortgage loans ranging in size from less than
1% to 14.6% of the pool, with the top ten loans (excluding
defeasance) constituting 65.1% of the pool. Four loans,
constituting 5.3% of the pool, have defeased and are secured by US
government securities.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 14, compared to 15 at Moody's last review.
Nine loans, constituting 9.8% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Two loans have been liquidated from the pool, resulting in an
aggregate realized loss of $5.0 million (for an average loss
severity of 35.6%).
There are no loans currently in special servicing, however, Moody's
has assumed a high default probability for two poorly performing
loans, constituting 4.0% of the pool, and has estimated an
aggregate loss of $12.6 million (a 33% expected loss on average)
from these troubled loans.
Moody's received full year 2017 operating results for 99% of the
pool, and full or partial year 2018 operating results for 99% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 90%, compared to 91% at Moody's
last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow
reflects a weighted average haircut of 18.1% to the most recently
available net operating income. Moody's value reflects a weighted
average capitalization rate of 9.9%.
Moody's actual and stressed conduit DSCRs are 1.65X and 1.23X,
respectively, compared to 1.66X and 1.21X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 36.5% of the pool balance.
The largest loan is the Northridge Fashion Center Loan ($140.4
million -- 14.6% of the pool), which is secured by a participation
interest in a $220.3 million first-mortgage loan encumbering a
644,000 SF component of a 1.5 million SF, two-story, super-regional
mall located in Northridge, California. The property, which is
owned by General Growth Properties (GGP), is anchored by a Macy's,
Macy's Home, JCPenney, and Sears. All of the anchor tenants own
their own boxes. In addition, the property has an outparcel housing
a 10-screen Pacific Theatres. Property performance has remained
stable since securitization. The total property was 98% leased as
of December 2017. The mall's inline occupancy was 96% as of
December 2017, up from 89% at the prior review. Moody's LTV and
stressed DSCR are 88% and 1.10X, respectively, compared to 90% and
1.08X at the prior review.
The second largest loan is the Town Center at Cobb Loan ($120.8
million -- 12.5% of the pool), which is secured by a participation
interest in a $185.9 million first-mortgage loan encumbering a
560,000 SF component of a 1.3 million SF super-regional mall
located in Kennesaw, Georgia. The property, which is owned by Simon
Properties, opened in 1985, was expanded in 1996, and renovated in
2009-2011. The property is anchored by a Macy's, Macy's Furniture,
JCPenney, Sears, and Belk. All of the anchors own their own boxes,
with the exception of Belk and a portion of the JCPenney space.
Property performance has declined modestly over the past two years,
however, the year-end 2017 performance was inline with underwritten
levels. The occupancy of the collateral component of the property
stands at 86% as of December 2017, compared to 85% as of December
2016. Moody's LTV and stressed DSCR are 107% and 0.96X,
respectively, compared to 109% and 0.94X at the prior review.
The third largest loan is the Florence Mall Loan ($90.0 million --
9.3% of the pool), which is secured by 384,000 SF component of a
957,000 SF regional mall located in Florence, Kentucky,
approximately 12 miles from the Cincinnati CBD. The property, which
is owned by GGP, is anchored by Macy's, Macy's Home Store,
JCPenney, Sears, and Rave Theatres. With the exception of 14-screen
Rave Theatres, all of the anchor boxes are not part of the loan
collateral. Sears announced it will be closing this location in the
fourth quarter of 2018. Financial performance and inline sales at
the property have been declined in recent years. As of December
2017, the total mall was 95.5% leased, with in-line occupancy
standing at 78%. Moody's LTV and stressed DSCR are 105% and 1.10X,
respectively.
WORLD OMNI 2018-1: Fitch Assigns BBsf Rating on Class E Notes
-------------------------------------------------------------
Fitch Ratings has assigned the following ratings to the notes
issued by World Omni Select Auto Trust 2018-1:
-- $103,000,000 class A-1 notes 'F1+sf';
-- $215,000,000 class A-2 notes 'AAAsf'; Outlook Stable;
-- $110,450,000 class A-3 notes 'AAAsf'; Outlook Stable;
-- $34,630,000 class B notes 'AAsf'; Outlook Stable;
-- $50,370,000 class C notes 'Asf'; Outlook Stable;
-- $37,780,000 class D notes 'BBBsf'; Outlook Stable;
-- $21,730,000 class E notes 'BBsf'; Outlook Stable.
KEY RATING DRIVERS
Subprime Collateral - Weak Credit Quality: 2018-1 is backed by a
pool of subprime auto loans with a weighted average FICO score of
619 and nearly 50% have non-zero FICO scores less than 620, and 94%
less than 700. Over 43% of the loans have interest rates greater
than 10%. The credit quality of this pool is comparable with other
Fitch-rated subprime auto loan transactions.
Subprime Collateral Risk - High Extended Term Contracts: 94.6% of
the pool consists of extended-term (61 months or greater) loans.
While this concentration is high, it is similar to other subprime
auto loan transactions that have high extended-term loan
concentrations. Fitch received data segmented by original term band
and accounted for this risk when deriving the base case loss proxy.
Macroeconomic and Auto Industry Risks - Weakening Portfolio
Performance: Performance of 2015-2017 vintages is weaker than
2010-2014 but remains within historical averages and is reflective
of broader consumer credit cycle trends. There were no adjustments
to Fitch's credit analysis given generally stable economic
conditions.
Forward-Looking Approach to Derive the Base Case Loss Proxy: Fitch
examined fully amortized historical vintage loss curves,
extrapolating incomplete vintage curves, matching future
expectations with any relevant previous vintage data, and weighting
by relevant pool credit characteristics. Additionally, a margin of
safety is built into the base case by weighting previous
recessionary vintages and adding adjustments for future
unemployment expectations and/or wholesale vehicle market
conditions, where applicable.
Subprime Loss Multiples Applied: Loss coverage for each class of
notes is sufficient to cover respective subprime multiples applied
(3.75x for AAAsf, 3.00x for AAsf, 2.50x for Asf, 1.75x for BBBsf
and 1.50x for BBsf) under Fitch's base case cumulative net loss
(CNL) proxy of 8.50%.
Payment Structure - Sufficient Credit Enhancement (CE): Initial
hard CE totals 32.45%, 26.95%, 18.95%, 12.95% and 9.50% for classes
A, B, C, D and E, respectively. Hard CE levels are comparable with
recently Fitch-rated subprime auto loan transactions. Excess spread
is 4.28% per annum.
Consistent Origination/Underwriting/Servicing: Fitch believes World
Omni to be a capable originator, underwriter and servicer for this
series, as evidenced by the historical performance of its managed
portfolio and servicing of its prime auto loan and lease
securitizations.
Legal Structure Integrity: The legal structure of the transaction
should provide that a bankruptcy of World Omni would not impair the
timeliness of payments on the securities.
RATING SENSITIVITIES
Unanticipated increases in the frequency of defaults and loss
severity on defaulted receivables could produce loss levels higher
than the base case. This in turn could result in Fitch taking
negative rating actions on the notes.
Fitch evaluated the sensitivity of the ratings assigned to WOSAT
2018-1 to increased credit losses over the life of the transaction.
Fitch's analysis found that the transaction displays some
sensitivity to increased defaults and credit losses. Under the
moderate (1.5x base case CNL) stress scenario, CNL multiples for
all classes compress to levels that may suggest a single-category
downgrade should such stresses occur six months following close.
The severe (2.5x CNL) stress is more taxing on the notes as the
multiples compress in month six to levels that may suggest
downgrades of up to three categories. Based off of the class A loss
coverage under Fitch's primary modeling scenario, the transaction's
CNL would need to reach over 11.50% for a potential single category
downgrade, over 23.00% to be downgraded to below investment grade,
and over 34.00% to be downgraded to 'CCCsf' or below.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Fitch was provided with third-party due diligence information from
Ernst & Young LLP (EY). The third-party due diligence focused on an
extract of 135 retail installment sale contracts for the referenced
pool that were selected by EY and verified for details such as
customer name and state, interest rate, monthly payment amount,
original term and FICO score. In that sample set, all compared
information presented no material issues. Fitch considered this
information and concluded that the findings do not affect the
analysis.
WORLD OMNI 2018-1: S&P Assigns BB Rating on Class E Notes
---------------------------------------------------------
S&P Global Ratings assigned its ratings to World Omni Select Auto
Trust 2018-1's (WOSAT 2018-1's) asset-backed notes series 2018-1.
The note issuance is an asset-backed securities transaction backed
by subprime auto loan receivables.
The ratings reflect:
-- The availability of approximately 34.4%, 28.7%, 22.8%, 17.7%,
and 14.9% credit support for the class A, B, C, D, and E notes,
respectively, based on stressed break-even cash flow scenarios
(including excess spread). These credit support levels provide
coverage of approximately 3.75x, 3.15x, 2.45x, 1.85x, and 1.55x our
8.75%-9.25% expected cumulative net loss (CNL) range for the class
A, B, C, D, and E notes, respectively, and are commensurate with
the assigned ratings.
-- S&P's expectation that, under a moderate ('BBB') stress
scenario of 1.85x its expected net loss level, all else equal, the
ratings on the class A through C notes would remain within one
rating category while they are outstanding, and the rating on the
class D notes would not decline by more than two rating categories
within its life. The rating on the class E notes would remain
within two rating categories during the first year, but the class
would eventually default under the 'BBB' stress scenario after
receiving 41% of its principal. These rating migrations are
consistent with S&P's credit stability criteria.
-- The transaction's credit enhancement in the form of
subordination, a nonamortizing reserve account,
overcollateralization that builds to a target level as a percentage
of the initial aggregate collateral balance and is nonamortizing,
and excess spread.
-- The timely interest and full principal payments made to the
rated notes under S&P's stressed cash flow modeling scenarios,
which S&P believes are appropriate for the assigned ratings.
-- S&P's review of World Omni Financial Corp.'s (World Omni;
BBB+/Stable/A-2) origination static pool data, managed portfolio
data, 27-year auto loan securitization track record, and deal-level
collateral characteristics, as well as its forward-looking view of
the economy.
-- The collateral characteristics of the securitized pool.
-- S&P's view of the transaction's payment, credit enhancement,
and legal structures.
RATINGS ASSIGNED
World Omni Select Auto Trust 2018-1
Class Rating Amount (mil. $)
A-1 A-1+ (sf) 103.00
A-2 AAA (sf) 215.00
A-3 AAA (sf) 110.45
B AA (sf) 34.63
C A (sf) 50.37
D BBB (sf) 37.78
E BB (sf) 21.73
[*] DBRS Reviews 55 Ratings From 13 US Structured ABS Transactions
------------------------------------------------------------------
DBRS, Inc. reviewed 55 ratings from 13 U.S. structured finance
asset-backed securities transactions. Of the 55 outstanding
publicly rated classes reviewed, 41 were confirmed, 13 were
upgraded and one was discontinued due to repayment. For the ratings
that were confirmed, performance trends are such that credit
enhancement levels are sufficient to cover DBRS's expected losses
at their current respective rating levels. For the ratings that
were upgraded, performance trends are such that credit enhancement
levels are sufficient to cover DBRS's expected losses at their new
respective rating levels.
The ratings are based on DBRS's review of the following analytical
considerations:
-- Transaction capital structure, proposed ratings and form and
sufficiency of available credit enhancement.
-- The transaction parties' capabilities with regard to
origination, underwriting and servicing.
-- The credit quality of the collateral pool and historical
performance.
The Affected Ratings is available at https://bit.ly/2RSn1o6
[*] Moody's Takes Action on $2.7BB GSE CRT RMBS Issued in 2016
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 31 tranches
from four Agency Risk Transfer transactions issued in 2016. These
four transactions are actual-loss credit risk transfer transactions
issued by Fannie Mae or Freddie Mac in 2016.
Complete rating actions are as follows:
Issuer: Connecticut Avenue Securities, Series 2016-C01
Cl. 1M-2A, Upgraded to A1 (sf); previously on Feb 6, 2018 Upgraded
to A3 (sf)
Cl. 1M-2F, Upgraded to A1 (sf); previously on Feb 6, 2018 Upgraded
to A3 (sf)
Cl. 1M-1, Upgraded to Aaa (sf); previously on Feb 6, 2018 Upgraded
to Aa3 (sf)
Cl. 1M-2, Upgraded to Baa1 (sf); previously on Feb 6, 2018 Upgraded
to Baa2 (sf)
Cl. 1M-2B, Upgraded to Baa2 (sf); previously on Feb 6, 2018
Upgraded to Baa3 (sf)
Cl. 1M-2I, Upgraded to A1 (sf); previously on Feb 6, 2018 Upgraded
to A3 (sf)
Cl. 2M-2A, Upgraded to A1 (sf); previously on Feb 6, 2018 Upgraded
to Baa1 (sf)
Cl. 2M-2B, Upgraded to Baa2 (sf); previously on Feb 6, 2018
Upgraded to Ba1 (sf)
Cl. 2M-2F, Upgraded to A1 (sf); previously on Feb 6, 2018 Upgraded
to Baa1 (sf)
Cl. 2M-2I, Upgraded to A1 (sf); previously on Feb 6, 2018 Upgraded
to Baa1 (sf)
Cl. 2M-2, Upgraded to Baa2 (sf); previously on Feb 6, 2018 Upgraded
to Baa3 (sf)
Issuer: Connecticut Avenue Securities, Series 2016-C02
Cl. 1M-1, Upgraded to Aaa (sf); previously on Feb 6, 2018 Upgraded
to A1 (sf)
Cl. 1M-2, Upgraded to Baa2 (sf); previously on Feb 6, 2018 Upgraded
to Baa3 (sf)
Cl. 1M-2A, Upgraded to A2 (sf); previously on Feb 6, 2018 Upgraded
to Baa1 (sf)
Cl. 1M-2B, Upgraded to Baa3 (sf); previously on Feb 6, 2018
Upgraded to Ba1 (sf)
Cl. 1M-2F, Upgraded to A2 (sf); previously on Feb 6, 2018 Upgraded
to Baa1 (sf)
Cl. 1M-2I, Upgraded to A2 (sf); previously on Feb 6, 2018 Upgraded
to Baa1 (sf)
Issuer: Connecticut Avenue Securities, Series 2016-C04
Cl. 1M-1, Upgraded to A1 (sf); previously on Feb 6, 2018 Upgraded
to A3 (sf)
Cl. 1M-2, Upgraded to Baa3 (sf); previously on Feb 6, 2018 Upgraded
to Ba1 (sf)
Cl. 1M-2A, Upgraded to Baa1 (sf); previously on Feb 6, 2018
Upgraded to Baa2 (sf)
Cl. 1M-2B, Upgraded to Ba1 (sf); previously on Feb 6, 2018 Upgraded
to Ba2 (sf)
Cl. 1M-2I, Upgraded to Baa1 (sf); previously on Feb 6, 2018
Upgraded to Baa2 (sf)
Cl. 1M-2F, Upgraded to Baa1 (sf); previously on Feb 6, 2018
Upgraded to Baa2 (sf)
Issuer: STACR 2016-HQA2
Cl. M-2I, Upgraded to A2 (sf); previously on Feb 6, 2018 Upgraded
to A3 (sf)
Cl. M-2, Upgraded to A2 (sf); previously on Feb 6, 2018 Upgraded to
A3 (sf)
Cl. M-2F, Upgraded to A2 (sf); previously on Feb 6, 2018 Upgraded
to A3 (sf)
Cl. M-3B, Upgraded to Ba1 (sf); previously on Feb 6, 2018 Upgraded
to Ba2 (sf)
Cl. M-3, Upgraded to Baa3 (sf); previously on Feb 6, 2018 Upgraded
to Ba1 (sf)
Cl. M-3A, Upgraded to Baa1 (sf); previously on Feb 6, 2018 Upgraded
to Baa2 (sf)
Cl. M-3AF, Upgraded to Baa1 (sf); previously on Feb 6, 2018
Upgraded to Baa2 (sf)
Cl. M-3AI, Upgraded to Baa1 (sf); previously on Feb 6, 2018
Upgraded to Baa2 (sf)
RATINGS RATIONALE
The rating upgrades are due to the increase in credit enhancement
available to the bonds and a reduction in the expected losses on
the underlying pools owing to strong collateral performance. The
outstanding rated bonds in these transactions have continued to
benefit both from a steady increase in the credit enhancement as a
result of sequential principal distributions among the subordinate
bonds and higher than expected voluntary prepayment rates since
issuance.
The risk transfer transactions provide credit protection against
the performance of a "reference pool" of mortgages guaranteed by
Freddie Mac or Fannie Mae. The notes are direct, unsecured
obligations of Freddie Mac or Fannie Mae and are not guaranteed by
nor are they obligations of the United States Government. Unlike a
typical RMBS transaction, note holders are not entitled to receive
any cash from the mortgage loans in the reference pools. Instead,
the timing and amount of principal and interest that Freddie Mac or
Fannie Mae is obligated to pay on the Notes is linked to the
performance of the mortgage loans in the reference pool. Principal
payments to the notes relate only to actual principal received from
the reference pool with pro-rata payments between senior and
subordinate bonds, provided some performance triggers are met, and
sequential among subordinate bonds.
The bonds have benefited from sustained prepayment rates, low
default rates and continued increases in credit enhancement. The
September 2018 remittance data shows a three month average
conditional prepayment rate (CPR) of 12.40% for CAS 2016-C01,
10.94% for CAS 2016-C02, 11.98% for CAS 2016-C04 and 12.20% for
STACR 2016-HQA2. The percentage of loans that are 60 plus days
delinquent is trending down this year due to recovery from 2017
Hurricanes. Additionally, there are no net losses for CAS 2016-C01,
CAS 2016-C02 and CAS 2016-C04. The net losses are approximately
0.0043% of the original pool balance for STACR 2016-HQA2 as of the
September 2018 remittance report..
Its updated loss expectations on the pools incorporate, amongst
other factors, its assessment of the representations and warranties
frameworks of the transactions, the due diligence findings of the
third party review received at the time of issuance, and the
strength of the transaction's originators and servicers.
The principal methodology used in rating Connecticut Avenue
Securities, Series 2016-C01 Cl. 1M-1 , Cl. 1M-2A , Cl. 1M-2B , Cl.
1M-2 , Cl. 1M-2F , Cl. 2M-2A , Cl. 2M-2B , Cl. 2M-2 and Cl. 2M-2F ,
Connecticut Avenue Securities, Series 2016-C02 Cl. 1M-1 , Cl. 1M-2A
, Cl. 1M-2B , Cl. 1M-2 and Cl. 1M-2F , STACR 2016-HQA2 Cl. M-2 ,
Cl. M-3A , Cl. M-3B, Cl. M-2F , Cl. M-3 and Cl. M-3AF, and
Connecticut Avenue Securities, Series 2016-C04 Cl. 1M-1 , Cl.
1M-2A, Cl. 1M-2B , Cl. 1M-2 and Cl. 1M-2F was "Moody's Approach to
Rating US Prime RMBS" published in February 2015. The methodologies
used in rating Connecticut Avenue Securities, Series 2016-C01 Cl.
1M-2I and Cl. 2M-2I , Connecticut Avenue Securities, Series
2016-C02 Cl. 1M-2I , STACR 2016-HQA2 Cl. M-2I and Cl. M-3AI , and
Connecticut Avenue Securities, Series 2016-C04 Cl. 1M-2I were
"Moody's Approach to Rating US Prime RMBS" published in February
2015 and "Moody's Approach to Rating Structured Finance
Interest-Only (IO) Securities" published in June 2017.
Factors that would lead to an upgrade or downgrade of the ratings:
UP
Moody's would consider upgrading the transaction or some of its
tranches if, for example, properties underlying the portfolio were
to appreciate substantially and the property conditions were to
remain well maintained.
DOWN
Moody's would consider downgrading the transaction if the
transaction was to breach their debt yield triggers or DSCR
triggers. Additionally, breaches of certain loan covenants could
lead to an event of default in the transaction and, if unremedied,
a downgrade. Moody's will also monitor the transaction's portfolio
mix for any unexpected changes. Unexpected negative changes could
result from unusual patterns in the properties that are released by
a sponsor as contemplated by the transaction documents. Also, where
available, changes in rent renewal and lease turnover rates and
time to re-rent could indicate performance issues.
[*] Moody's Withdraws $341.8MM RMBS Issued 2005 to 2009
-------------------------------------------------------
Moody's Investors Service has withdrawn the ratings of 15 bonds
from ten re-securitization transactions issued between 2005 and
2009.
Complete rating actions are as follows:
Issuer: Banc of America Funding 2006-R1 Trust
Cl. A-1, Currently Rated A3 (sf); previously on July 5, 2016
Upgraded to A3 (sf)
Underlying Rating: Withdrawn (sf); previously on May 11, 2011
Downgraded to C (sf)
Financial Guarantor: Assured Guaranty Corp (Affirmed at A3, Outlook
Stable on May 07, 2018)
Cl. A-2, Currently Rated A3 (sf); previously on July 5, 2016
Upgraded to A3 (sf)
Underlying Rating: Withdrawn (sf); previously on May 11, 2011
Downgraded to C (sf)
Financial Guarantor: Assured Guaranty Corp (Affirmed at A3, Outlook
Stable on May 07, 2018)
Issuer: Bear Stearns Structured Products Inc. Trust 2007-R6
Cl. II-A-1, Withdrawn (sf); previously on May 12, 2011 Downgraded
to Caa3 (sf)
Issuer: Bear Stearns Structured Products Inc. Trust Notes, Series
2008-R2
Cl. I-A-1, Withdrawn (sf); previously on May 24, 2011 Downgraded to
Ca (sf)
Issuer: Financial Asset Securities Corp. AAA Trust 2005-1
Cl. I-A3A, Withdrawn (sf); previously on Aug 21, 2018 Upgraded to
A1 (sf)
Cl. I-A3B, Withdrawn (sf); previously on Aug 21, 2018 Upgraded to
A1 (sf)
Cl. I-X, Withdrawn (sf); previously on Aug 21, 2018 Upgraded to A1
(sf)
Issuer: GSMSC Pass-Through Trust 2009-1R
Cl. 3A1, Withdrawn (sf); previously on Jun 18, 2010 Downgraded to
Aa3 (sf)
Cl. 23A2, Withdrawn (sf); previously on Oct 20, 2016 Upgraded to
Baa3 (sf)
Issuer: MASTR Resecuritization 2005-3CI and MARS 2005-3CI CORP.
Cl. N-2, Withdrawn (sf); previously on Jul 13, 2009 Downgraded to C
(sf)
Issuer: MASTR Resecuritization Trust 2007-1
Cl. A1, Withdrawn (sf); previously on Oct 19, 2016 Confirmed at
Caa3 (sf)
Cl. A2, Withdrawn (sf); previously on Jun 2, 2011 Downgraded to C
(sf)
Issuer: Residential Mortgage Securities Funding 2008-3, Ltd.
Notes, Withdrawn (sf); previously on Jul 16, 2013 Downgraded to
Caa2 (sf)
Issuer: Residential Mortgage Securities Funding 2008-6, Ltd.
The Notes, Withdrawn (sf); previously on Oct 19, 2016 Downgraded to
Caa2 (sf)
Issuer: Residential Mortgage Securities Funding 2008-7, Ltd.
Secured Floating Rate Notes, Withdrawn (sf); previously on Mar 28,
2011 Downgraded to Caa3 (sf)
RATINGS RATIONALE
These 15 Resec bonds are backed by one or more underlying
securities which have been withdrawn for small pool factor. Because
the rating on Resec bonds generally link to the ratings on the
underlying securities and their performance, Moody's cannot
maintain the ratings on these 15 Resec bonds due to the withdrawal
of the rating of the underlying security(ies).
Moody's has decided to withdraw the ratings because it believes it
has insufficient or otherwise inadequate information to support the
maintenance of the ratings.
[*] S&P Takes Various Actions on 96 Classes From 21 US RMBS Deals
-----------------------------------------------------------------
S&P Global Ratings completed its review of 96 classes from 21 U.S.
residential mortgage-backed securities (RMBS) transactions issued
between 1997 and 2006. All of these transactions are backed by
subprime, alternative-A, and prime jumbo collateral. The review
yielded 10 upgrades, 39 affirmations, and 47 withdrawals.
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by its projected cash flows. These considerations
are based on transaction-specific performance or structural
characteristics (or both) and their potential effects on certain
classes. Some of these considerations include:
-- Collateral performance/delinquency trends;
-- Erosion of or increases in credit support;
-- Historical missed interest payments;
-- Priority of principal payments;
-- Principal-only criteria;
-- Interest-only criteria; and
-- Available subordination and/or overcollateralization.
Rating Actions
The affirmations of ratings reflect S&P's opinion that its
projected credit support and collateral performance on these
classes has remained relatively consistent with its prior
projections.
A list of Affected Ratings can be viewed at:
https://bit.ly/2z7QpQ9
*********
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