/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/200802.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, August 2, 2020, Vol. 24, No. 214 Headlines AFFIRM ASSET 2020-A: DBRS Confirms BB Rating on Class C Notes AJAX MORTGAGE 2020-B: Fitch Rates Class B-2 Notes 'B(EXP)' ALM LTD XVII: Moody's Lowers Rating on Class E-R Notes to Caa1 ANGEL OAK 2020-4: DBRS Finalizes BB Rating on Class B-2 Certs ANGEL OAK 2020-4: Fitch Gives Bsf Rating on Class B-2 Certs AUSTIN FAIRMONT 2019-FAIR: S&P Cuts Rating on E Certs to 'B (sf)' BAMLL COMMERCIAL 2019-AHT: S&P Cuts Rating on E Certs to B(sf) BBCMS TRUST 2019-CLP: DBRS Gives BB(low) Rating on Class E Certs BLACK DIAMOND 2017-1: Moody's Cuts Rating on Class D Notes to B1 BLACKROCK DLF 2020-1: DBRS Gives Prov. B Rating on Class W Notes CARLYLE US 2020-1: S&P Assigns Prelim BB- (sf) Rating to D Notes CIM TRUST 2020-J1: DBRS Gives Prov. B Rating on Class B-5 Certs CITIGROUP COMMERCIAL 2017-B1: Fitch Affirms B- on Class F Certs CITIGROUP COMMERCIAL 2017-P8: Fitch Affirms B- on 2 Tranches COMM MORTGAGE 2016-COR1: Fitch Affirms Class X-F Certs at B-sf COVENANT CREDIT III: Moody's Cuts Rating on Class F Notes to Caa3 CREDIT SUISSE 2015-C1: Fitch Cuts Class X-F Certs to CCCsf CSMC 2020-NET: Moody's Gives (P)B1 Rating on Class HRR Certs DBUBS 2011-LC1: Moody's Affirms B2 Rating on Class G Certs FINANCE OF AMERICA 2020-HB2: DBRS Finalizes BB Rating on M4 Notes FLAGSHIP CREDIT 2020-3: DBRS Gives Prov. BB Rating on Cl. E Notes FREDDIE MAC 2020-HQA3: Moody's Gives 'Ba1' Ratings on 10 Tranches FREED ABS 2020-3FP: DBRS Confirms BB(low) Rating on Class C Notes GS MORTGAGE 2018-SRP5: S&P Cuts Rating on Class C Certs to BB- (sf) GSCG TRUST 2019-600C: DBRS Gives B(low) Rating on Class G Certs HAWAIIAN AIRLINES 2020-1: Fitch Rates Class B Certs 'BB+' JP MORGAN 2013-C17: Fitch Affirms Class F Certs at Bsf JP MORGAN 2016-WIKI: S&P Lowers Rating on Class E Certs to 'B (sf)' JP MORGAN 2018-ASH8: S&P Lowers Rating on Class E Certs to B(sf) JP MORGAN 2020-INV2: DBRS Gives Prov. B Rating on 2 Tranches LB-UBS COMMERCIAL 2006-C1: Fitch Cuts Rating on Class C Certs to C MORGAN STANLEY 2015-XLF2: DBRS Gives BB Rating on Class SNMC Certs MORGAN STANLEY 2020-HR8: DBRS Gives Prov. BB Rating on J-RR Debt MTRO COMMERCIAL 2019-TECH: DBRS Gives BB(low) Rating on F Certs NEUBERGER BERMAN XIX: Moody's Cuts Class E-R2 Notes to Caa1 NORTHWOODS CAPITAL XV: Moody's Cuts Rating on Class E Notes to B1 OAKTOWN RE 2020-1: DBRS Gives Prov. B(low) Rating on Cl. M-2 Notes RAIT CRE I: Fitch Lowers Rating on 4 Tranches to Csf SLM STUDENT 2012-7: Fitch Affirms B Rating on Class B Notes SOUND POINT III-R: Moody's Lowers Class F Notes to Caa2 STARWOOD RETAIL 2014-STAR: DBRS Gives C Rating on 5 Tranches TESLA AUTO 2020-A: Moody's Gives (P)Ba2 Rating on Class E Notes TICP CLO IV: Moody's Lowers Rating on Class F Notes to Caa3 UBS-BARCLAYS COMMERCIAL 2012-C4: Fitch Cuts Class F Certs to CCC VENTURE XXIV: Moody's Lowers Class E Notes Rating to Ba3 VERUS SECURITIZATION 2020-4: DBRS Gives Prov. B Rating on B-2 Certs WELLS FARGO 2020-3: Fitch Gives B+ Rating on Class B-5 Debt WELLS FARGO 2020-3: Moody's Rates Class B-5 Debt 'Ba3' WFRBS COMMERCIAL 2013-C18: Fitch Cuts Class F Certs to CCCsf [*] DBRS Puts 20 U.S. RMBS Securities Under Review [*] Fitch Affirms Ratings on 38 Tranches From 7 Static CLOs [*] S&P Takes Rating Actions on Multiple Classes From 29 U.S. Deals ********* AFFIRM ASSET 2020-A: DBRS Confirms BB Rating on Class C Notes ------------------------------------------------------------- DBRS, Inc. confirmed its provisional ratings on the following notes to be issued by Affirm Asset Securitization Trust 2020-A (the Issuer), originally assigned on July 20, 2020. The confirmations are in conjunction with DBRS Morningstar's "Global Macroeconomic Scenarios: July Update" published on July 22, 2020: -- $329,960,000 Class A Notes at A (sf) -- $16,200,000 Class B Notes at BBB (sf) -- $22,130,000 Class C Notes at BB (sf) The transaction's assumptions consider DBRS Morningstar's set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary "Global Macroeconomic Scenarios: July Update." DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which were last updated on July 22, 2020, and are reflected in DBRS Morningstar's rating analysis. Despite the update to the moderate scenario, no changes were made to DBRS Morningstar's assumptions for the transaction. DBRS Morningstar maintains its expected cumulative net loss assumption as it was based on various factors and considerations consistent with the revised macroeconomic assumptions put forth in the update to the moderate scenario. Notes: All figures are in U.S. dollars unless otherwise noted. AJAX MORTGAGE 2020-B: Fitch Rates Class B-2 Notes 'B(EXP)' ---------------------------------------------------------- Fitch Ratings has assigned expected ratings to Ajax Mortgage Loan Trust 2020-B. AJAXM 2020-B - Class A-1; LT AAA(EXP)sf Expected Rating - Class A-2; LT A(EXP)sf Expected Rating - Class B-1; LT BB(EXP)sf Expected Rating - Class B-2; LT B(EXP)sf Expected Rating - Class B-3; LT NR(EXP)sf Expected Rating - Class M-1; LT BBB(EXP)sf Expected Rating - Class XS; LT NR(EXP)sf Expected Rating TRANSACTION SUMMARY Fitch Ratings expects to rate the residential mortgage-backed notes to be issued by Ajax Mortgage Loan Trust 2020-B. The transaction is expected to close on Aug. 6, 2020. The notes are supported by one collateral group that consists of 764 seasoned re-performing loans with a total balance of approximately $156.5 million, which includes $8.3 million, or 5.3%, of the aggregate pool balance in non-interest-bearing deferred principal amounts, as of the statistical calculation date. The loans were acquired by Great Ajax Operating Partnership LP, a wholly owned subsidiary of Great Ajax Corp., and will be serviced by Gregory Funding, LLC. Distributions of principal and interest are based on a traditional sequential structure that prioritizes the payment of interest above principal. The notes will not be reduced by losses on the loans; however, under certain loss scenarios, there may not be enough interest and principal collections on the mortgage loans or liquidation proceeds to pay the notes all interest and principal amounts to which they are entitled. The servicer will not be advancing delinquent monthly payments of P&I. KEY RATING DRIVERS Revised GDP Due to the Coronavirus: The coronavirus pandemic and the resulting containment efforts have resulted in revisions to Fitch's GDP estimates for 2020. Its baseline global economic outlook for U.S. GDP growth is currently a 5.6% decline for 2020, down from 1.7% growth for 2019. Fitch's downside scenario would see an even larger decline in output in 2020 and a weaker recovery in 2021. To account for declining macroeconomic conditions resulting from the coronavirus, an Economic Risk Factor floor of 2.0 (the ERF is a default variable in the U.S. RMBS loan loss model) was applied to 'BBBsf' and below. Distressed Performance History (Negative): The collateral pool consists primarily of seasoned RPLs. Of the pool, approximately 20% was 30 days delinquent as of the cutoff date, and 50.7% of loans are current but have had recent delinquencies in the past 24 month (dirty current loans); 29.3% of the loans have been paying on time for the past 24 months or longer and 40.9% are contractually current for at least 12 months. Roughly 86% of the loans have been modified and 3.7% have experienced a prior credit event in the past seven years. Although 50.7% of the loans in the pool are dirty current loans, Fitch reviewed the monthly payments the borrowers have made and found that a majority of borrowers who missed a payment were able to make up the missed payment(s) plus the current payment due in the month(s) following the delinquency and become contractually current. In addition, it was observed that some borrowers were chronically late payers but were able to make their payment. Fitch did not take the cash flow velocity into account in its analysis and did not give credit for it in the analysis. Liquidity Stress for Payment Forbearance (Negative): The outbreak of the coronavirus pandemic and widespread containment efforts in the U.S. will result in increased unemployment and cash flow disruptions. To account for the cash flow disruptions, Fitch assumed deferred payments on a minimum of 40% of the pool for the first six months of the transaction at all rating categories with a reversion to its standard delinquency and liquidation timing curve by month 10. This assumption is based on observations of legacy Alt-A delinquencies and past-due payments following Hurricane Maria in Puerto Rico. The lowest ranked classes may be vulnerable to temporary interest shortfalls to the extent there is not enough funds available once the more senior bonds are paid. There is no advancing of delinquent P&I in this transaction and or excess interest available to cover interest shortfalls. As a result, the lowest ranked classes may be vulnerable to temporary interest shortfalls to the extent not enough funds are available once the more senior bonds are paid. No P&I Servicer Advances (Mixed): The servicer will not make advances of delinquent P&I on any of the mortgage loans. As a result, the loss severity is lower; however, principal will need to be used to pay interest to the notes. As a result, more credit enhancement will be needed. Payment Forbearance (Mixed): As of the cutoff date, 2.4% of the pool opted into a coronavirus relief plan. Of the 2.4% that are on a coronavirus relief plan, 1.7% of the borrowers are delinquent, while 0.8% of the borrowers are still making payments and contractually current. In addition, 0.5% of the borrowers are under review for coronavirus-related relief and 11.5% of the borrowers have inquired about or requested coronavirus relief, but the servicer has not granted it yet due to the borrower not completing the standardized hardship questionnaire. Of the roughly 12%, 9.3% of the borrowers are continuing to make their payments, while 2.7% of the loans are delinquent. No borrower in the pool on a coronavirus relief plan or under review for coronavirus relief is more than 30 days delinquent. Fitch considered borrowers who are on a coronavirus relief plan that are cash flowing as current, while the borrowers who are not cash flowing were treated as delinquent. Gregory Funding is offering borrowers a three-month payment forbearance plan. At the end of the forbearance period, the borrower can opt to reinstate (i.e. repay the three missed mortgage payments in a lump sum) or repay the missed amounts with a repayment plan. If reinstatement or a repayment plan is not affordable, Gregory Funding will find the optimal loss mitigation option for the borrower, which may include extending the forbearance period. To the extent special rules apply to a mortgagor because of the jurisdiction or type of the mortgage loan, the servicer will comply with those rules. Such rules may include restrictions on requesting proof of hardship, mandatory payment forbearance periods (and extensions) and mandatory loss mitigation options, among others. If the borrower does not resume making payments, the loan will likely become modified. Fitch ran additional analysis to see the impact a reduction in the net WAC would have on the notes. Fitch increased its loss expectations by 25bps at 'AAA', 'A', 'BBB' and 'BB' rating categories to address the potential increase in loss for loans that are under review for coronavirus relief. RPL Credit Quality (Mixed): The collateral consists of seasoned 30-year fixed-rate, step rate and adjustable-rate loans that are fully amortizing, and interest-only loans or balloon loans. The loans were seasoned approximately 163 (~14 years) months in aggregate as of the cutoff date. The borrowers in this pool have weaker credit profiles (629 FICO as determined by Fitch) and relatively high leverage (77.4% sLTV as calculated by Fitch). In addition, the pool does not contain any particularly large loans. Only three loans are over $1 million and the largest is $1.97 million. While roughly 80% of the pool is current, approximately 71% of the pool had a delinquency in the past 24 months, 3.7% of the pool had a prior credit event and approximately 86% of the pool had been modified. Geographic Concentration (Neutral): Approximately 31% of the pool is concentrated in California with relatively low MSA concentration. The largest MSA concentration is in Los Angeles MSA (14.6%) followed by the New York MSA (11.4%) and the Chicago MSA (5.6%). The top three MSAs account for 31.7% of the pool. As a result, there was no adjustment for geographic concentration. The geographic concentration is based on Fitch's mapping of the MSAs. Sequential Transaction Structure (Positive): The transaction's cash flow is based on a sequential-pay structure, whereby the subordinate classes do not receive principal until the senior classes are repaid in full. In addition, the structure prioritizes interest payments over principal in the principal distribution waterfall. Subordination Floor (Neutral): Not applicable. The CE structure for this transaction reflects a sequential-pay structure that locks out principal to the subordinated notes until the most senior notes outstanding have been paid in full. Therefore, no subordination floor is needed to protect the senior noteholders as the subordinate tranches should be available to absorb losses from adverse selection or other risks that could affect the pool later in the life of the transaction. Low Operational Risk (Neutral): Operational risk is well controlled for this transaction. AJX has a disciplined loan acquisition strategy and is assessed as an 'Average' aggregator by Fitch. AJX leverages its affiliate servicing platform, Gregory Funding, rated 'RSS3' by Fitch, to service its loan portfolio. Loss expectations were not adjusted for at the 'AAAsf' rating category based on these counterparty assessments. As of the closing date, the sponsor or a majority-owned affiliate of the sponsor will hold an eligible horizontal residual interest in an amount equal to at least 5% of the aggregate fair value of the securities, thereby satisfying the U.S. credit risk retention rules. Non-Investment-Grade Rep Provider (Negative): Fitch considers the representation, warranty and enforcement mechanism construct for this transaction to generally be consistent with what it views as a Tier 1 framework. While the framework is considered strong, Fitch increased its loss expectations by 122bps at the 'AAAsf' rating category to reflect the non-investment-grade counterparty risk of the provider, Great Ajax Operating Partnership LP. Due Diligence Review Results (Negative): A third-party due diligence review was performed on 99.5% of the loans in the transaction pool. The review was performed by SitusAMC and Opus Capital Market Consultants, which are assessed by Fitch as 'Acceptable - Tier 1' and 'Acceptable - Tier 2' third-party review firms. The due diligence results indicate 14.9% of loans receiving a final grade of 'C' or 'D'. However, adjustments were only applied to approximately 9% of these loans due to missing or estimated HUD-1 documents that are necessary for properly testing compliance with predatory lending regulations. These regulations are not subject to statute of limitations, which ultimately exposes the trust to added assignee liability risk. Separately, Fitch extended foreclosure timelines by three months to approximately 6% of the pool due to missing modification agreements, which may lead to a delay in the event of liquidation. Fitch adjusted its loss expectations at the 'AAAsf' rating category by 114bps to account for these added risks. Deferred Amounts (Negative): Non-interest-bearing principal forbearance totaling $8.3 million (5.3%) of the unpaid principal balance is outstanding. Fitch included the deferred amounts when calculating the borrower's loan to value ratio and sustainable LTV, despite the lower payment and amounts not being owed during the term of the loan. The inclusion resulted in a higher probability of default and LS than if there were no deferrals. Fitch believes that borrower default behavior for these loans will resemble that of the higher LTVs, as exit strategies (i.e. sale or refinancing) will be limited relative to those borrowers with more equity in the property. RATING SENSITIVITIES Fitch incorporates a sensitivity analysis to demonstrate how the ratings would react to steeper MVDs than assumed at the MSA level. The implied rating sensitivities are only an indication of some of the potential outcomes and do not consider other risk factors that the transaction may become exposed to or that may be considered in the surveillance of the transaction. Sensitivity analyses was conducted at the state and national levels to assess the effect of higher MVDs for the subject pool as well as lower MVDs, illustrated by a gain in home prices. Factors that could, individually or collectively, lead to positive rating action/upgrade: This defined positive rating sensitivity analysis demonstrates how the ratings would react to negative MVDs at the national level, or in other words, positive home price growth with no assumed overvaluation. The analysis assumes positive home price growth of 10.0%. Excluding the senior classes that are already 'AAAsf', the analysis indicates there is potential positive rating migration for all of the rated classes. Factors that could, individually or collectively, lead to negative rating action/downgrade: This defined stress sensitivity analysis demonstrates how the ratings would react to steeper MVDs at the national level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0%, in addition to the model-projected 39.2% at 'AAA'. As shown in the table, the analysis indicates that there is some potential rating migration with higher MVDs, compared with the model projection. This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. The modelling process uses the modification of these variables to reflect asset performance in up and down environments. The results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance. For enhanced disclosure on Fitch's stresses and sensitivities, please refer to the transaction's presale report. Fitch has also added a coronavirus sensitivity analysis that contemplates a more severe and prolonged economic stress caused by a re-emergence of infections in the major economies, before a slow recovery begins in 2Q21. Under this severe scenario, Fitch expects the ratings to be affected by changes in its sustainable home price model due to updates to the model's underlying economic data inputs. Any long-term impact arising from coronavirus disruptions on these economic inputs will likely affect both investment- and speculative-grade ratings. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. CRITERIA VARIATION There are two variations to the "U.S. RMBS Rating Criteria": 1. Title report not provided for 100% of the loans (missing for 27 loans) and title reports likely outdated; and 2. pay history review not received on 100% of the loans (servicer gap report received on most loans). Per the "U.S. RMBS Rating Criteria," updated tax and title are supposed to be provided for all loans and a pay history review is supposed to be received for 100% of the loans. The first variation relates to the tax/title review. The tax/title review was not performed on all the loans or was outdated. Fitch was comfortable with this variation since 1) the number of loans that did not have a tax/title review performed or the review outdated was low; and 2) the servicer is monitoring the tax and title status as part of standard practice and will advance where deemed necessary to keep the first lien positon of each loan. This variation had no rating impact. The second variation relates to the pay history review. For RPL transactions, Fitch expects a pay history review to be completed on 100% of the loans and expects the review to reflect the past 24 months. The pay history review was not completed on 100% of the loans: however, a servicer gap report was provided on most loans. Fitch was comfortable with this variation due to the small number of loans not having a pay history review and the loans are seasoned approximately 14 years. For the loans where a pay history review was conducted, the results verified what was provided on the loan tape. Additionally, the pay strings provided on the loan tape were provided by the current servicer where applicable. This variation had no rating impact. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence 15E was reviewed and used as part of the rating process for this transaction. DATA ADEQUACY Fitch relied on an independent third-party due diligence reviews performed on the pool. Specifically, 99.5% of the pool by loan count had a compliance/data integrity review, 95.9% had a pay history review, 100% had a custodian review, 96.2% had an initial title and lien review, and 97.9% had an updated tax and lien search. The third-party due diligence was generally consistent with Fitch's "U.S. RMBS Rating Criteria." AMC Diligence, LLC, Opus Capital Markets Consultants LLC and Solidifi were engaged to perform the reviews. Loans reviewed under this engagement were given compliance grades. Minimal exceptions and waivers were noted in the due diligence reports. Refer to the Third-Party Due Diligence section for more details. Fitch also utilized data files that were made available by the issuer on its SEC Rule 17g-5 designated website. Fitch received loan-level information based on the American Securitization Forum's data layout format, and the data are considered to be comprehensive. The ASF data tape layout was established with input from various industry participants, including rating agencies, issuers, originators, investors and others, to produce an industry standard for the pool-level data in support of the U.S. RMBS securitization market. The data contained in the ASF layout data tape were reviewed by the due diligence companies, and no material discrepancies were noted. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). ALM LTD XVII: Moody's Lowers Rating on Class E-R Notes to Caa1 -------------------------------------------------------------- Moody's Investors Service has downgraded rating on the following notes issued by ALM XVII, LTD.: US$12,000,000 Class E-R Secured Deferrable Floating Rate Notes due 2028, Downgraded to Caa1 (sf); previously on June 3, 2020 B3 (sf) Placed Under Review for Possible Downgrade Moody's also confirmed the ratings on the following notes: US$41,900,000 Class C-R Senior Secured Deferrable Floating Rate Notes due 2028, Confirmed at Baa3 (sf); previously on June 3, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$29,400,000 Class D-R Secured Deferrable Floating Rate Notes due 2028, Confirmed at Ba3 (sf); previously on June 3, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on June 3, 2020 on the Class C-R, Class D-R and Class E-R notes. The CLO, issued in January 2016 and refinanced in July 2018, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loan. The transaction's reinvestment period ended in July 2020. RATINGS RATIONALE The downgrade on the Class E-R notes reflects the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased substantially, the credit enhancement available to the CLO notes has declined, exposure to Caa-rated assets has increased significantly, and expected losses on certain notes have increased materially. The rating confirmations on the Class C-R and Class D-R notes reflect the benefit of passing the end of the deal's reinvestment period in July 2020. 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. Moody's analysis also considered the positive impact on the rated notes of the imminent reduction of leverage as notes begin to amortize. As a result, despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class C-R and Class D-R notes continue to be consistent with the current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. Consequently, Moody's has confirmed the ratings on the Class C-R and Class D-R notes. Based on Moody's calculation, the weighted average rating factor was 3414 as of July 2020, or 15% worse compared to 2979 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 3088 reported in the July 2020 trustee report [2] by 326 points. Moody's noted that approximately 31% of the CLO's par was from obligors assigned a negative outlook and 3% from obligors whose ratings are on review for possible downgrade. Additionally, based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 22% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $597.4 million, or $2.6 million less than the deal's ramp-up target par balance and Moody's calculated the OC ratios (excluding haircuts) for the Class C-R, Class D-R, and Class E-R notes as of July 2020 at 114.24%, 108.16% and 105.86%, respectively. 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 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 portfolio par of $595.3 million, defaulted par of $3.4 million, a weighted average default probability of 24.88% (implying a WARF of 3414), a weighted average recovery rate upon default of 48.37%, a diversity score of 58 and a weighted average spread of 3.39%. Moody's also analyzed the CLO by incorporating an approximately $10.2 million par haircut in calculating the OC and interest diversion test ratios. Finally, Moody's also considered in its analysis impending restrictions on trading resulting from the end of the reinvestment period and the CLO manager's recent investment decisions and trading strategies. In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: Additional near-term defaults of companies facing liquidity pressure; Additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; And some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. ANGEL OAK 2020-4: DBRS Finalizes BB Rating on Class B-2 Certs ------------------------------------------------------------- DBRS, Inc. finalized its provisional ratings on the following Mortgage-Backed Certificates, Series 2020-4 (the Certificates) issued by Angel Oak Mortgage Trust 2020-4 (the Trust): -- $207.0 million Class A-1 at AAA (sf) -- $21.3 million Class A-2 at AA (sf) -- $20.0 million Class A-3 at A (high) (sf) -- $16.5 million Class M-1 at BBB (high) (sf) -- $6.6 million Class B-1 at BBB (low) (sf) -- $6.6 million Class B-2 at BB (sf) The AAA (sf) rating on the Class A-1 Certificates reflects 31.10% of credit enhancement provided by subordinated Certificates. The AA (sf), A (high) (sf), BBB (high) (sf), BBB (low) (sf), and BB (sf) ratings reflect 24.00%, 17.35%, 11.85%, 9.65%, and 7.45% of credit enhancement, respectively. Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction. This securitization is a portfolio of primarily first-lien fixed- and adjustable-rate nonprime and expanded prime residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 734 loans with a total principal balance of $300,385,023 as of the Cut-Off Date (July 1, 2020). Angel Oak Mortgage Solutions LLC (95.2%), Angel Oak Home Loans LLC (AOHL; 4.6%), and Angel Oak Prime Bridge, LLC (0.2%) (collectively, Angel Oak) originated 100% of the pool. Angel Oak generally originates first-lien mortgages primarily under the following nine programs: Bank Statement, Platinum, Portfolio Select, Investor Cash Flow, Non-Prime General, Non-Prime Recent Housing, Non-Prime Foreign National, Non-Prime Investment Property, and Asset Qualifier. For more information regarding these programs, see the related rating report. In addition, the pool contains one second-lien mortgage loan in the pool ( ANGEL OAK 2020-4: Fitch Gives Bsf Rating on Class B-2 Certs ----------------------------------------------------------- Fitch Ratings has assigned final ratings to the residential mortgage-backed certificates issued by Angel Oak Mortgage Trust, 2020-4. AOMT 2020-4 - Class A-1; LT AAAsf New Rating - Class A-2; LT AAsf New Rating - Class A-3; LT Asf New Rating - Class B-1; LT BBsf New Rating - Class B-2; LT Bsf New Rating - Class B-3; LT NRsf New Rating - Class M-1; LT BBB-sf New Rating - Class XS; LT NRsf New Rating TRANSACTION SUMMARY Fitch Ratings expects to rate the residential mortgage-backed certificates to be issued by AOMT 2020-4, mortgage-backed certificates, series 2020-4. The certificates are supported by 734 loans with a balance of $300.39 million as of the cutoff date. This will be the tenth Fitch-rated transaction consisting of loans originated by several Angel Oak-affiliated entities. The certificates are secured mainly by nonqualified mortgages as defined by the Ability to Repay rule. All of the loans were originated by several Angel Oak entities, which include Angel Oak Mortgage Solutions LLC (95.2%), Angel Oak Home Loans LLC (4.6%) and Angel Oak Prime Bridge LLC (0.2%). Of the pool, 80.4% comprises loans designated as Non-QM, and the remaining 19.6% is not subject to ATR. KEY RATING DRIVERS Revised GDP Due to the Coronavirus Pandemic: The coronavirus pandemic and the resulting containment efforts have led to revisions to Fitch's GDP estimates for 2020. The baseline global economic outlook for U.S. GDP growth is currently declining by 5.6% for 2020, down from 1.7% for 2019. Fitch's downside scenario would see an even larger decline in output in 2020 and a weaker recovery in 2021. To account for declining macroeconomic conditions resulting from the coronavirus pandemic, an Economic Risk Factor floor of 2.0 was applied to bonds rated 'BBBsf' and below. The ERF is a default variable in the U.S. RMBS loan loss model. Liquidity Stress for Payment Forbearance (Negative): The outbreak of the coronavirus and widespread containment efforts in the U.S. will result in increased unemployment and cash flow disruptions. To account for the cash flow disruptions, Fitch assumed deferred payments on a minimum of 40% of the pool for the first six months of the transaction at all rating categories, with a reversion to its standard delinquency and liquidation timing curve by month 10. This assumption is based on observations of legacy Alt-A delinquencies and past due payments following Hurricane Maria in Puerto Rico. The cash flows on the certificates will not be disrupted for the first six months due to principal and interest advancing on delinquent loans by the servicer; however, after month six, the lowest ranked classes may be vulnerable to temporary interest shortfalls to the extent there is not enough funds available once the more senior bonds are paid. Stop Advance Structure (Mixed): The transaction has a stop advance feature, where the servicer will advance delinquent P&I up to 180 days. While the limited advancing of delinquent P&I benefits the pool's projected loss severity, it reduces liquidity. To account for the reduced liquidity of a limited advancing structure, principal collections are available to pay timely interest to the 'AAAsf', 'AAsf' and 'Asf' rated bonds. Fitch expects 'AAAsf' and 'AAsf' rated bonds to receive timely payments of interest and all other bonds to receive ultimate interest. Additionally, as of the closing date, the deal benefits from approximately 278bps of excess spread, which will be available to cover shortfalls prior to any writedowns. The servicer Select Portfolio Servicing, Inc. will provide P&I advancing on delinquent loans - even the loans on a coronavirus forbearance plan. If SPS is not able to advance, the master servicer (Wells Fargo Bank, NA) will advance P&I on the certificates. Payment Forbearance (Mixed): As of the cut-off date, 22.0% of the pool (130 loans) opted into a coronavirus relief plan; however, only 15.3% are currently on a coronavirus relief plan. The remaining 6.65% of borrowers who opted in for relief are no longer on a forbearance plan, as the term of their coronavirus relief plan has expired and the borrowers are contractually current. Of the borrowers who are still on a coronavirus relief plan, 14.9% are on a coronavirus forbearance plan, while 0.4% are solely having their payment deferred. As of the cut-off date, 0.5% (six loans) of the borrowers on a coronavirus forbearance relief plan have been making their payments and are contractually current, while the remaining borrowers (14.3%) have not been making their payments and are delinquent. Fitch considered cash-flowing borrowers who are on coronavirus relief plan as current while, the borrowers who are not cash flowing were treated as delinquent. Angel Oak is offering borrowers a three-month payment forbearance plan. Beginning in month three, the borrower can opt to reinstate (i.e. repay the three missed mortgage payments in a lump sum) or repay the missed amounts with a repayment plan. If reinstatement or a repayment plan is not affordable, the missed payments will be added to the end of the loan term due at payoff or maturity as a deferred principal. If the borrower does not become current under a repayment plan or is not able to make payments after a deferral plan was granted, other loss mitigation options will be pursued, including extending the forbearance term. Of the pool, 69 loans have a forbearance plan extended until Aug. 1, 2020. These loans have an average FICO of 712, average original combined loan-to-value ratio of 76.6% and average liquid cash reserves of $100,854. The servicer will continue to advance during the forbearance period. Recoveries of advances will be repaid either from reinstated or repaid amounts from loans where borrowers are on a repayment plan. For loans with deferrals of missed payments, the servicer can recover advances from the principal portion of collections, which may result in a mismatch between the loan balance and certificate balance. While this may increase realized losses, the 278bps of excess spread as of the closing date should be available to absorb these amounts and reduce the potential for writedowns. If the borrower doesn't resume making payments, the loan will likely become modified and the advancing party will be reimbursed from available funds. Fitch increased its loss expectations by 25bps-50bps at 'AAA', 'A', 'BBB-', 'BB' and 'B' rating categories to address the potential for writedowns due to reimbursements of servicer advances. This increase is based on Fitch's 40% delinquency coronavirus stress assumption in place for the first six months. Expanded Prime Credit Quality (Mixed): The collateral consists of 20-year, 30-year and 40-year mainly fixed-rate loans (1.4% of the loans are adjustable rate); 4.1% of the loans are interest-only loans, and the remaining 95.9% are fully amortizing loans. The pool is seasoned approximately seven months in aggregate (as determined by Fitch). The borrowers in this pool have strong credit profiles, with a 720 weighted-average FICO and moderate leverage (80.9% CLTV). In addition, the pool contains 51 loans over $1 million, and the largest is $2.9 million. Self-employed borrowers make up 69.7% of the pool, 19.7% of the pool are salaried employees and 10.6% of the pool comprises investor cash flow loans. There is one loan that is a second lien and represents 0.3% of the pool balance. Fitch considered 7.7% of borrowers as having a prior credit event in the past seven years, and 0.8% of the pool was underwritten to nonpermanent residents. The pool characteristics resemble recent nonprime collateral, and therefore, the pool was analyzed using Fitch's nonprime model. Bank Statement Loans Included (Negative): Approximately 60% (380 loans) were made to self-employed borrowers underwritten to a bank statement program (26.7% to a 24-month bank statement program, and 33.5% to a 12-month bank statement program) for verifying income in accordance with either AOHL's or AOMS's guidelines, which is not consistent with Appendix Q standards or Fitch's view of a full documentation program. To reflect the additional risk, Fitch increases the probability of default by 1.5x on the bank statement loans. High Investor Property Concentration (Negative): Of the pool, 19.6% comprises investment properties, and 9.0% of loans were underwritten using the borrower's credit profile, while the remaining 10.6% were originated through the originators' investor cash flow program that targets real estate investors qualified on a debt service coverage ratio basis. The borrowers of the non-DSCR investor properties in the pool have strong credit profiles, with a Fitch-calculated WA FICO of 717 and a Fitch-calculated original CLTV of 76.7%. DSCR loans have a Fitch-calculated WA FICO of 739 and an original CLTV of 63.4%. Fitch increased the PD by approximately 2x for the cash flow ratio loans, relative to a traditional income documentation investor loan, to account for the increased risk. Geographic Concentration (Neutral): Approximately 31% of the pool is concentrated in California, with relatively low MSA concentration. The largest MSA concentration is in the Miami - Fort Lauderdale MSA (14.0%) followed by the Los Angeles MSA (11.2%) and the San Diego MSA (4.7%). The top three MSAs account for 29.9% of the pool. As a result, there was no adjustment to the 'AAA' expected loss to account for geographic concentration. Modified Sequential Payment Structure (Neutral): The structure distributes collected principal pro rata among the class A certificates, while shutting out the subordinate bonds from principal until all three classes have been reduced to zero. To the extent that either the cumulative loss trigger event or the delinquency trigger event occurs, the principal will be distributed sequentially to the class A-1, A-2 and A-3 bonds until they are reduced to zero. Low Operational Risk (Positive): Operational risk is well controlled for this transaction. Angel Oak employs sound sourcing and underwriting processes and is assessed by Fitch as an 'Average' originator. Primary and master servicing responsibilities will be performed by SPS and Wells Fargo, rated by Fitch at 'RPS1-' and 'RMS1-', respectively. Fitch adjusted its expected loss at the 'AAAsf' rating stress by 252bps to reflect strong counterparties with established servicing platforms and operating experience in non-agency Private Label Securitization. The sponsor's retention of an eligible horizontal residual interest of at least 5% helps ensure an alignment of interest between the issuer and investors. R&W Framework (Negative): AOHL will be providing loan-level representations and warranties to the loans in the trust. If the entity is no longer an ongoing business concern, it will assign to the trust its rights under the mortgage loan purchase agreements with the originators, which include repurchase remedies for R&W breaches. While the loan-level reps for this transaction are substantially consistent with a Tier I framework, the lack of an automatic review for loans other than those with ATR realized loss and the nature of the prescriptive breach tests, which limit the breach reviewers' ability to identify or respond to issues not fully anticipated at closing, resulted in a Tier 2 framework. Fitch increased its loss expectations (96bps at the 'AAAsf' rating category) to mitigate the limitations of the framework and the non-investment-grade counterparty risk of the providers. Due Diligence Review Results (Positive): Third-party due diligence was performed on 100% of loans in the transaction pool. The reviews were conducted by SitusAMC and Clayton Services, both assessed by Fitch as 'Acceptable - Tier 1' third-party review firms, and Digital Risk, assessed as 'Acceptable - Tier 2'. The results of the review confirm effective origination practices with minimal incidence of material exceptions. Loans that received a final grade of 'B' had immaterial exceptions and either had strong compensating factors or were captured in Fitch's loan loss model. Fitch applied a credit for the high percentage of loan-level due diligence which reduced the 'AAAsf' loss expectation by 39bps. RATING SENSITIVITIES Fitch incorporates a sensitivity analysis to demonstrate how the ratings would react to steeper market value declines (MVDs than assumed at the MSA level. The implied rating sensitivities are only an indication of some of the potential outcomes and do not consider other risk factors that the transaction may become exposed to or that may be considered in the surveillance of the transaction. Sensitivity analyses was conducted at the state and national levels to assess the effect of higher MVDs for the subject pool, as well as lower MVDs, illustrated by a gain in home prices. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: This defined negative stress sensitivity analysis demonstrates how the ratings would react to steeper MVDs at the national level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0%, in addition to the model projected 8.3% at the base case. This analysis indicates that there is some potential rating migration with higher MVDs compared with the model projection. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: This defined positive rating sensitivity analysis demonstrates how the ratings would react to negative MVDs at the national level, or positive home price growth with no assumed overvaluation. The analysis assumes positive home price growth of 10.0%. Excluding the senior classes which are already 'AAAsf', the analysis indicates there is potential positive rating migration for all of the rated classes. This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. The modelling process uses the modification of these variables to reflect asset performance in up and down environments. The results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance. Fitch has also added a coronavirus sensitivity analysis that contemplates a more severe and prolonged economic stress caused by a re-emergence of infections in the major economies, before a slow recovery begins in 2Q21. Under this severe scenario, Fitch expects the ratings to be impacted by changes in its sustainable home price model due to updates to the model's underlying economic data inputs. Any long-term impact arising from coronavirus disruptions on these economic inputs will likely affect both investment and speculative grade ratings BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Third-party loan-level results were reviewed by Fitch for this transaction. Where applicable, the due diligence firms, SitusAMC, Clayton and Digital Risk examined 100% of the loan files in three areas: compliance review, credit review and valuation review. AMC and Clayton are assessed by Fitch as a Tier 1 TPR firm and Digital Risk is assessed by Fitch as a Tier 2 firm. The results of the reviews indicated an overall loan quality that is in line with other prior transactions from the issuer and other Fitch-rated nonprime transactions. Approximately 36% or 264 loans were assigned a final credit grade of 'B'. The credit exceptions graded 'B' were approved by the originator or waived by Angel Oak due to the presence of compensating factors. Roughly 27% of the loans were graded 'B' for compliance exceptions. The majority of these exceptions are either TRID-related issues that were corrected with subsequent documentation; no adjustments were applied for the 'B' graded loans. Fitch adjusted three loans that received a final grade of 'C'. One of the loans received a compliance grade of 'C' due to a material exception to the TILA-RESPA Integrated Disclosure rule, which is a standard $15,500 to the LS to account for the increased risk of statutory damages (this increase to the LS was immaterial and did not affect the expected losses). The remaining two loans received a property valuation grade of 'C' due to the secondary desk review having a negative variance greater than 10% from the original appraised value or the secondary desk review came back as indeterminate. The lower property value was substituted into the LTV as part of the loan loss analysis. Form "ABS Due Diligence 15E" was reviewed and used as a part of the rating for this transaction. DATA ADEQUACY Fitch relied on an independent third-party due diligence review performed on 100% of the pool. The third-party due diligence was generally consistent with Fitch's 'U.S. RMBS Rating Criteria.' AMC, Clayton, and Digital Risk were engaged to perform the review. Loans reviewed under this engagement were given compliance, credit and valuation grades, and assigned initial grades for each subcategory. Minimal exceptions and waivers were noted in the due diligence reports. Refer to the Third-Party Due Diligence section for more detail. Fitch also utilized data files that were made available by the issuer on its SEC Rule 17g-5 designated website. Fitch received loan-level information based on the American Securitization Forum's data layout format, and the data are considered to be comprehensive. The ASF data tape layout was established with input from various industry participants, including rating agencies, issuers, originators, investors and others to produce an industry standard for the pool-level data in support of the U.S. RMBS securitization market. The data contained in the ASF layout data tape were reviewed by the due diligence companies, and no material discrepancies were noted. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). AUSTIN FAIRMONT 2019-FAIR: S&P Cuts Rating on E Certs to 'B (sf)' ----------------------------------------------------------------- S&P Global Ratings lowered its ratings on the class E and F commercial mortgage pass-through certificates from Austin Fairmont Hotel Trust 2019-FAIR, a U.S. CMBS transaction. At the same time, S&P affirmed its ratings on six other classes from the same transaction. The ratings on classes D, E, F, X-CP, and X-EXT were removed from CreditWatch, where they were placed with negative implications on May 6, 2020. S&P Global Ratings previously placed these ratings on CreditWatch negative because of its concerns regarding COVID-19's impact on the performance of the collateral hotel property and the lodging sector overall, along with the related ambiguity concerning the duration of the demand disruption. The downgrades and affirmations on the principal- and interest-paying classes reflect S&P Global Ratings' reevaluation of the Austin Fairmont Hotel, which secures the loan in this single-borrower transaction. "Specifically, the downgrade on class F to 'CCC (sf)' reflects, based on a higher S&P Global Ratings' loan-to-value (LTV) ratio, our view that the class is more susceptible to reduced liquidity support and that the risk of default and losses has increased given the uncertain market conditions," the rating agency said. S&P Global Ratings' expected-case value is 12.8% lower than at issuance, and is driven by the application of a higher S&P Global Ratings' capitalization rate that better captures the increased susceptibility to net cash flow (NCF) and liquidity disruption stemming from the pandemic. Using the S&P Global Ratings' sustainable NCF of $29.3 million (same as at issuance) and applying a capitalization rate of 10.25% (up from 9.00% at issuance), the rating agency arrived at an S&P Global Ratings' value of $269.4 million ($257,052 per guestroom) and an LTV ratio of 111.4%, versus 97.1% at issuance. The Austin Fairmont property closed in March 2020 due to the COVID-19 pandemic, and recently re-opened in June 2020 in a limited capacity with food and beverage outlets and meeting space currently closed. In addition, S&P Global Ratings considered that the loan transferred to special servicing on May 15, 2020, due to imminent monetary default. The borrower has requested COVID-19 forbearance relief. "It is our understanding from the special servicer, Situs Asset Management, that it is still discussing the forbearance plan with the borrower," S&P Global Ratings said. According to the July 2020 trustee remittance report, the borrower is current on its debt service payment; however, interest shortfalls totaling $62,500 due to special servicing fees affected classes F, G, and RRI. Based on the transaction documents, S&P Global Ratings expect the borrower to pay the special servicing fees, and the rating agency will continue to monitor the situation. S&P Global Ratings affirmed its ratings on classes A, B, C, and D, even though the model-indicated ratings were lower than the classes' current rating levels. This is because S&P Global Ratings qualitatively considered the underlying collateral quality, the significant market value decline that would be needed before these classes experience losses, liquidity support provided in the form of servicer advancing, and the positions of the classes in the waterfall. S&P Global Ratings also considered that the borrower is current on its debt service obligations through July 2020 despite the hotel's temporary closure. Moreover, Situs indicated that it has received a 12-month forbearance request for a deferral of interest payments, which is under review. According to Situs, the sponsor (a joint venture between Manchester Financial Group and Colony Capital) plans to fund 2020 operating shortfalls of approximately $15.0 million. S&P Global Ratings affirmed the ratings on the class X-CP and X-EXT interest-only (IO) certificates based on its criteria for rating IO securities, in which the ratings on the IO securities would not be higher than that of the lowest-rated reference class. The notional amounts of the IO classes reference classes B, C, and D. S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions, but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. S&P Global Ratings is using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, S&P Global Ratings will update its assumptions and estimates accordingly. This is a stand-alone (single-borrower) transaction backed by a floating-rate IO mortgage loan secured by the borrower's leasehold interest in the Austin Fairmont Hotel, a 1,048 guestroom full-service convention hotel located in the Austin central business district (CBD). The property offers approximately 140,000 sq. ft. of indoor and outdoor meeting space, including four ballrooms, outdoor meeting space on the seventh floor, and 23 smaller meeting rooms. Given the hotel's recent construction and opening in March 2018, the hotel is in excellent condition. The property was constructed for $416 million, or $396,947 per guestroom. The hotel is subject to a 99-year ground lease, which commenced in 2019. Ground rent is equal to the greater of $100,000 per month, or 5.0% of the property's adjusted gross income. Ground rent represented approximately 1.0% of total revenue in 2019. Prior to the COVID-19 outbreak, the hotel's revenue per available room (RevPAR) and NCF improved from issuance as the hotel continued to stabilize after its recent opening. The property's RevPAR was $193.28 at year-end 2019, up 52.2% from $127.02 in 2018. The 2019 NCF increased to $34.9 million from $14.5 million in 2018 due to the increase in RevPAR and food and beverage revenue as the hotel continued to stabilize. S&P Global Ratings' sustainable NCF of $29.3 million is 16.0% below the 2019 reported NCF. The Austin Fairmont Hotel generates approximately 60% of its occupied room nights from the meeting and group sector, and the remaining 40% from a mix of leisure and corporate transient demand. The hotel accommodates mainly in-house groups, while convention-related groups stemming from Austin Convention Center are a secondary demand source. In an effort to curtail the spread of the virus, most group meetings, both corporate and social, have been cancelled, corporate transient travel has been restricted, and leisure travel has slowed due to fear of travel and the closure of demand generators, such as amusement parks and casinos, and the cancellation of concerts and sporting events. There has also been a dramatic decline in airline passenger miles stemming from governmental restrictions on international travel and a major drop in domestic travel. While leisure travel has slowly increased since April, leisure travelers have thus far favored hotels in smaller markets and more remote locations in an effort to socially distance. It is S&P's expectation that large conventions and meetings, on which the hotel relies heavily for both room revenue and food and beverage revenue, will be significantly curtailed until there is a COVID-19 treatment or vaccine. S&P Global Ratings' review considered not only the impact of COVID-19 on the collateral property, but also the hotel's recent opening and increasing performance, as well as the recent lodging supply increase in the Austin market. Between 2015 and 2018, 10 hotels opened in the CBD. Consequently, RevPAR within Austin declined in both 2017 (2.0%) and 2018 (0.5%), and was flat in 2019, as the additional inventory was absorbed in the market. S&P Global Ratings also reviewed the June 2020 Smith Travel Research (STR) report for the property. Despite its recent opening, the Fairmont Austin outperformed its competitive set with a RevPAR penetration rate--which measures the RevPAR of the hotel relative to its competitors, with 100% indicating parity with competitors--of 105.2% in the trailing 12 months (TTM) ended June 2020, up from 89.2% and 72.4% in the TTM periods ended June 2019 and June 2018, respectively. However, as of June 2020, occupancy at the hotel was 22.6%, significantly down from 78.9% in June 2019. In S&P Global Ratings' current analysis, instead of adjusting its sustainable NCF assumption (being that the property recently re-opened and has very low occupancy), the rating agency increased its capitalization rate by 125 basis points from issuance to account for the adverse impact of COVID-19 and the responses to it. The pandemic's negative effects on lodging properties have been particularly severe for those in urban markets, like the Austin Fairmont, that are highly reliant on corporate and group demand, which will be tempered for the next several quarters. There is significant uncertainty regarding not only the duration of the pandemic, but also the time needed for lodging demand to return to normalized levels after lifting travel restrictions. According to the July 15, 2020, trustee remittance report, the IO mortgage loan has a trust and whole loan balance of $300.0 million, the same as at issuance. The IO loan pays a per annum floating interest rate of LIBOR plus a weighted average spread of 2.11%. The two-year floating-rate loan is scheduled to mature in September 2021, with three one-year extension options remaining. Environmental, social, and governance (ESG) factors relevant to the rating action: -- Health and safety. RATINGS LOWERED AND REMOVED FROM WATCH NEGATIVE Austin Fairmont Hotel Trust 2019-FAIR Commercial mortgage pass-through certificates Rating Class To From E B (sf) BB- (sf)/Watch Neg F CCC (sf) B- (sf)/Watch Neg RATINGS AFFIRMED AND REMOVED FROM WATCH NEGATIVE Austin Fairmont Hotel Trust 2019-FAIR Commercial mortgage pass-through certificates Rating Class To From D BBB- (sf) BBB- (sf)/Watch Neg X-CP BBB- (sf) BBB- (sf)/Watch Neg X-EXT BBB- (sf) BBB- (sf)/Watch Neg RATINGS AFFIRMED (NOT PREVIOUSLY ON WATCH) Austin Fairmont Hotel Trust 2019-FAIR Commercial mortgage pass-through certificates Class Rating A AAA (sf) B AA- (sf) C A- (sf) BAMLL COMMERCIAL 2019-AHT: S&P Cuts Rating on E Certs to B(sf) -------------------------------------------------------------- S&P Global Ratings lowered its ratings on the class E and F commercial mortgage pass-through certificates from BAMLL Commercial Mortgage Securities Trust 2019-AHT, a U.S. CMBS transaction. In addition, S&P affirmed on ratings on six other classes from the same transaction. The ratings on classes D, E, F, X-CP, and X-EXT were removed from CreditWatch, where they were placed with negative implications on May 6, 2020. S&P had placed these ratings on CreditWatch negative due to its view of COVID-19's impact on the performance of the collateral properties and the lodging sector overall, along with the related uncertainty about the duration of the demand interruption. The downgrades and affirmations on the principal- and interest-paying classes reflect S&P Global Ratings' reevaluation of the two lodging properties securing the loan in the single-borrower transaction: the Renaissance Nashville and the Westin Princeton at Forrestal Village. Specifically, the downgrade on class F to 'CCC (sf)' reflects, based on a higher S&P Global Ratings' loan-to-value (LTV) ratio, the rating agency's view that the class is more susceptible to reduced liquidity support and that the risk of default and losses has increased under the uncertain market conditions. Its expected-case value has declined 12.1% since issuance, driven by the application of a higher S&P Global Ratings' capitalization rate that better captures the increased susceptibility to net cash flow (NCF) and liquidity disruption stemming from the pandemic. "Using the S&P Global Ratings' sustainable NCF of $22.9 million (the same as at issuance) and applying a 10.31% weighted average capitalization rate (up from 9.06% at issuance), we arrived at an S&P Global Ratings' value of $222.5 million ($229,669 per guestroom) and a LTV ratio of 107.8%, versus 94.8% at issuance," the rating agency said. As a result of the COVID-19 pandemic, the Renaissance Nashville property closed in April 2020 and reopened in early June 2020. The Westin Princeton at Forrestal Village remained open but had an occupancy rate of just one percent in April and May 2020. In addition, S&P Global Ratings considered that the loan transferred to the special servicer on March 24, 2020, after the borrower requested forbearance on its loan obligations. The borrower is delinquent on the April, May, June, and July 2020 debt service payments. The special servicer, KeyBank Real Estate Capital, advanced in full the four missed monthly payments. KeyBank indicated that a preliminary agreement for a short-term forbearance has been reached with the borrower; however, S&P Global Ratings was not provided the terms of the agreement, and as of the time of this publication the forbearance agreement was not executed. S&P Global Ratings affirmed its ratings on classes A, B, C, and D even though the model-indicated ratings were lower than the classes' current rating levels. This is because S&P Global Ratings qualitatively considered the underlying collateral quality, the significant market decline that would be needed before these classes experience losses, liquidity support provided in the form of servicer advancing, and the positions of the classes in the waterfall. S&P Global Ratings affirmed the ratings on the class X-CP and X-EXT interest-only (IO) certificates and removed them from CreditWatch negative based on its criteria for rating IO securities, in which the ratings on the IO securities would not be higher than that of the lowest-rated reference class. The notional balances on classes X-CP and X-EXT reference the class B, C, and D certificates." S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. S&P Global Ratings is using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, the rating agency will update its assumptions and estimates accordingly. This is a stand-alone (single borrower) transaction backed by a floating-rate IO mortgage loan secured by the borrowers' fee simple, leasehold, and/or condominium interests in two full-service hotels (the 673-guestroom Renaissance Nashville and the 296-guestroom Westin Princeton at Forrestal Village) and a first priority mortgage on the borrower's leasehold and condominium interests in the Renaissance Nashville. The allocated loan amounts are $207.1 million (86.3%) for Renaissance Nashville and $32.9 million (13.7%) for Westin Princeton at Forrestal Village. The Renaissance Nashville is located in downtown Nashville, three blocks from the Music City Center convention center, and offers 86,000 sq. ft. of meeting space. Amenities include a three-meal restaurant, market store, room service, concierge lounge, fitness center, business center, indoor swimming pool, and leased garage parking across the street. The hotel was significantly renovated from 2016-2019, when $17.3 million was spent to renovate the hotel's lobby, restaurant, and meeting space. The Westin Princeton is located within Princeton University's Forrestal Campus, a 52-acre retail and office development in Princeton, N.J. The property is located along US Route 1, a major commercial corridor with corporate campuses and business parks. It includes 24,133 sq. ft. of meeting space, and there are about 5.1 million sq. ft. of office space within one mile of the hotel. Hotel amenities include a three-meal restaurant, a lobby bar/lounge, a Starbucks kiosk, a concierge lounge, a fitness center, a business center, an indoor/outdoor swimming pool, and surface parking. The hotel's guestrooms were renovated in 2018 for about $9.6 million, or $32,577 per guestroom. Both of the hotels' borrowers are directly or indirectly owned and controlled by the sponsor, Ashford Hospitality LP. Prior to the COVID-19 outbreak, the portfolio had strong performance since issuance in March 2019. The portfolio's revenue per available room (RevPAR) was up 4.1% in 2019 to $180.34, from $173.30 in 2018, driven by an increase in occupancy. The portfolio's 2019 NCF increased 19.4% to $29.3 million from $24.5 million in 2018 due to the increase in RevPAR and a 57.8% increase in food and beverage revenue. Both the Renaissance Nashville and the Westin Princeton outperformed their respective competitive sets with 2019 RevPAR penetration rates--which measure the RevPAR of the hotel relative to its competitors, with 100% indicating parity with competitors--of 109.5% and 113.3%, respectively. More recently, based on the May 2020 STR reports, the Renaissance Nashville had a RevPAR penetration rate of 122.5% in the trailing 12-months (TTM), while the Westin Princeton had a penetration of 111.3%. As of March 2020, occupancy at the Renaissance Nashville was 30.9%, significantly down compared to 89.7% in March 2019. At the Westin Princeton, March 2020 occupancy declined to 18.0%, from 59.1% in March 2019. The hotel was only 1.0% occupied in April 2020 and 2.5% occupied in May 2020. In S&P Global Ratings' current analysis, instead of adjusting its sustainable NCF assumption (since the properties are currently operating at very low occupancy levels), the rating agency increased its capitalization rate by 125 basis points from issuance to account for the adverse impact of COVID-19 and the responses to it. The pandemic's negative effects on lodging properties have been particularly severe for hotels like the Renaissance Nashville and the Westin Princeton, which are highly dependent on both corporate and group demand. The Renaissance Nashville generates approximately 40% of its demand from the meeting and group sector, while the Westin Princeton generates about 45% of its demand from the group segment. It is S&P Global Ratings' expectation that large conventions and meetings, on which both hotels rely heavily for room and food and beverage revenue, will be significantly curtailed until there is a COVID-19 treatment or vaccine. The hotels also derive large portions of their occupied room nights from the corporate transient sector, which has also been reduced due to the pandemic. The pandemic has brought about unprecedented social distancing and curtailment measures, which are resulting in a significant decline in demand in corporate, leisure, and group travelers. Since the outbreak, there has been a dramatic decline in airline passenger miles stemming from governmental restrictions on international travel and a major drop in domestic travel. In an effort to curtail the spread of the virus, most group meetings, both corporate and social, have been cancelled, corporate transient travel has been restricted, and leisure travel has slowed due to fear of travel and the closure of demand generators, such as amusement parks and casinos, and the cancellation of concerts and sporting events. There is significant uncertainty regarding not only the duration of the pandemic but also the time needed for lodging demand to return to normalized levels after lifting travel restrictions. According to the July 15, 2020 trustee remittance report, the IO mortgage loan has a trust and whole loan balance of $240.0 million, the same as at issuance. The IO loan pays a per annum floating interest rate of LIBOR plus a weighted average spread of 2.75%. The two-year floating-rate loan is scheduled to mature in March 2021, with five one-year extension options. To date, the trust has not incurred any principal losses. Environmental, social, and governance (ESG) factors relevant to the rating action: -- Health and safety. RATINGS LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE BAMLL Commercial Mortgage Securities Trust 2019-AHT Commercial Mortgage Pass-Through Certificates Rating Class To From E B (sf) BB- (sf)/Watch Neg F CCC (sf) B- (sf)/Watch Neg RATINGS AFFIRMED AND REMOVED FROM CREDITWATCH NEGATIVE BAMLL Commercial Mortgage Securities Trust 2019-AHT Commercial Mortgage Pass-Through Certificates Rating Class To From D BBB- (sf) BBB- (sf)/Watch Neg X-CP BBB- (sf) BBB- (sf)/Watch Neg X-EXT BBB- (sf) BBB- (sf)/Watch Neg RATINGS AFFIRMED BAMLL Commercial Mortgage Securities Trust 2019-AHT Commercial Mortgage Pass-Through Certificates Class Rating A AAA (sf) B AA- (sf) C A- (sf) BBCMS TRUST 2019-CLP: DBRS Gives BB(low) Rating on Class E Certs ---------------------------------------------------------------- DBRS, Inc. assigned ratings to the Commercial Mortgage Pass-Through Certificates, Series 2019-CLP issued by BBCMS Trust 2019-CLP (the Issuer) as follows: -- Class A at AAA (sf) -- Class B at AA (sf) -- Class C at A (high) (sf) -- Class D at BBB (low) (sf) -- Class E at BB (low) (sf) All trends are Stable. These certificates are currently also rated by DBRS Morningstar's affiliated rating agency, Morningstar Credit Ratings, LLC (MCR). In connection with the ongoing consolidation of DBRS Morningstar and MCR, MCR previously announced that it had placed its outstanding ratings of these certificates Under Review–Analytical Integration Review and that MCR intended to withdraw its outstanding ratings; such withdrawal will occur on or about August 5, 2020. In accordance with MCR's engagement letter covering these certificates, upon withdrawal of MCR's outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings. On March 1, 2020, DBRS Morningstar finalized its "North American Single-Asset/Single-Borrower Ratings Methodology" (the NA SASB Methodology), which presents the criteria for which ratings are assigned to and/or monitored for North American single-asset/single-borrower (NA SASB) transactions, large concentrated pools, rake certificates, ground lease transactions, and credit tenant lease transactions. The subject rating actions are the result of the application of the NA SASB Methodology in conjunction with the "North American CMBS Surveillance Methodology," as applicable. Qualitative adjustments were made to the final loan-to-value (LTV) sizing benchmarks used for this rating analysis. The collateral for the transaction is a $290.4 million first-lien mortgage loan on 56 industrial assets consisting of 6.4 million square feet (sf) in Sacramento and Stockton, California. As of September 30, 2018, the properties were 93.8% occupied and leased to 263 unique tenants. Blackstone Real Estate Advisors L.P. is using the proceeds to refinance the portfolio, which it acquired from Westcore Properties Inc. in 2017. Since origination, two properties have been released and the current loan amount is $279.4 million. The portfolio benefits from positive dynamics in the Sacramento industrial market, particularly the Natomas/Northgate submarket centered around the confluence of the major distribution arteries, I-80 and I-5, where about two-thirds of the portfolio is located. Sacramento has seen falling vacancies, rising rental rates, and limited new supply as well as strong employment growth throughout the metropolitan area. The industrial market gains stem from a combination of factors, including growth in e-commerce, strong national and local economies, in migration from the San Francisco Bay Area, as well as an onerous and costly entitlement process contributing to limited availability of quality industrial properties and limited speculative development. DBRS Morningstar expects the portfolio to perform well in the near term, considering the market's healthy fundamentals, and DBRS Morningstar has a favorable view of longer-term performance because of the portfolio's granular and diverse tenancy, diverse building types and sizes, and economies of scale as the sponsor will control about 30% of the Natomas/Northgate submarket. DBRS Morningstar believes that the portfolio can achieve rental rate gains in the short term because tenants that have leases expiring are paying below-market rent on average. Leases covering 50.3% of the portfolio by sf roll in the first three years and 78.2% roll within the fully extended loan term. Tenants on these leases are paying an average of $5.40 per sf (psf) compared with the market rental rate of about $7.22 psf and higher. Additionally, DBRS Morningstar believes that the portfolio's occupancy level is sustainable because of its historical 81.2% retention rate, according to the previous owner, combined with the portfolio's ability to accommodate any number of tenant space requirements. Since acquisition, the current owner has executed 76 new and renewal leases covering 1.2 million sf and reported an average of only three months of downtime between leases. The DBRS Morningstar net cash flow (NCF) derived at issuance was reanalyzed for the subject rating action to confirm its consistency with the "DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria." The resulting NCF figure was $25.9 million and a cap rate of 7.8% was applied, resulting in a DBRS Morningstar Value of $331.3 million, a variance of -46.6% from the appraised value at issuance of $620.4 million. The DBRS Morningstar Value implies an LTV of 129.5% compared with the LTV of 70.9% on the appraised value at issuance. The NCF figure applied as part of the analysis represents a -6.6% variance from the Issuer's NCF, primarily driven by vacancy, management fees, and leasing costs. The cap rate DBRS Morningstar applied is at the lower end of the DBRS Morningstar Cap Rate Ranges for industrial properties, reflecting the portfolio's location and asset quality. In addition, the 7.8% cap rate DBRS Morningstar applied is above the implied cap rate of 4.5% based on the Issuer's underwritten NCF and appraised value. DBRS Morningstar made positive qualitative adjustments to the final LTV sizing benchmarks used for this rating analysis, totaling 2.0% to account for cash flow volatility, property quality, and market fundamentals. Notes: All figures are in U.S. dollars unless otherwise noted. BLACK DIAMOND 2017-1: Moody's Cuts Rating on Class D Notes to B1 ---------------------------------------------------------------- Moody's Investors Service downgraded the ratings on the following notes issued by Black Diamond CLO 2017-1, Ltd.: US$8,000,000 Class B-1 Senior Secured Deferrable Floating Rate Notes due 2029 (the "Class B-1 Notes"), Downgraded to A3 (sf); previously on June 3, 2020 A2 (sf) Placed Under Review for Possible Downgrade US$16,000,000 Class B-2 Senior Secured Deferrable Fixed Rate Notes due 2029 (the "Class B-2 Notes"), Downgraded to A3 (sf); previously on June 3, 2020 A2 (sf) Placed Under Review for Possible Downgrade US$25,000,000 Class C Senior Secured Deferrable Floating Rate Notes due 2029 (the "Class C Notes"), Downgraded to Ba1 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$18,000,000 Class D Secured Deferrable Floating Rate Notes due 2029 (the "Class D Notes"), Downgraded to B1 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated for the Class C and D Notes on April 17, 2020 and Class B-1 and B-2 Notes on June 3, 2020. The CLO, issued in May 2017 is a managed cashflow CLO. The Notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end on July 2021 RATINGS RATIONALE The downgrades on the Class B-1, Class B-2, Class C and Class D Notes reflect the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased substantially, the credit enhancement available to the CLO notes has eroded, exposure to Caa-rated assets has increased significantly and expected losses (ELs) on certain notes have increased materially. Based on Moody's calculation, the weighted average rating factor was 3554 as of July 2020, or 17.7% worse compared to 3019 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2935 reported in the June 2020 trustee report [2] by 619 points. Moody's noted that approximately 35% of the CLO's par was from obligors assigned a negative outlook and 0.9% from obligors whose ratings are on review for possible downgrade. Additionally, based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 25.1% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $392.4 million, or $7.6 million less than the deal's ramp-up target par balance, and Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class B-1, Class B-2, Class C and Class D notes as of July 2020 at 120.7%, 120.7%, 112.1% and 106.6% respectively. Moody's noted that the interest diversion test was recently reported [3] as failing, If this failure occurs on the next payment date it could result in a portion of excess interest collections being diverted towards reinvestment in collateral. 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 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 $389.3 million, defaulted par of $9.7 million, a weighted average default probability of 27.73% (implying a WARF of 3554), a weighted average recovery rate upon default of 47.28%, a diversity score of 73 and a weighted average spread of 3.68%. Moody's also analyzed the CLO by incorporating an approximately $7.2 million par haircut in calculating the OC and interest diversion test ratios. Finally, Moody's also considered in its analysis the CLO manager's recent investment decisions and trading strategies. In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: Additional near-term defaults of companies facing liquidity pressure; Additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; And some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. BLACKROCK DLF 2020-1: DBRS Gives Prov. B Rating on Class W Notes ---------------------------------------------------------------- DBRS, Inc. assigned provisional ratings to the following Notes (together, the Secured Notes) to be issued by BlackRock DLF IX 2020-1 CLO, LLC, pursuant to the Note Purchase and Security Agreement (the NPSA) dated as of July 21, 2020, among BlackRock DLF IX 2020-1 CLO, LLC, as Issuer, U.S. Bank National Association, as Collateral Agent, Custodian, Document Custodian, Collateral Administrator, Information Agent, and Note Agent, and the Purchasers referred to therein. -- Class A-1 Notes at AAA (sf) -- Class A-2 Notes at AAA (sf) -- Class B Notes at A (high) (sf) -- Class C Notes at A (sf) -- Class D Notes at BBB (sf) -- Class E Notes at BB (high) (sf) -- Class W Notes at B (sf) The provisional ratings on the Class A-1 and A-2 Notes address the timely payment of interest (excluding the additional interest payable at the Post-Default Rate, as defined in the NPSA) and the ultimate payment of principal on or before the Stated Maturity of July 21, 2030. The provisional ratings on the Class B, C, D, E, and W Notes address the ultimate payment of interest (excluding the additional interest payable at the Post-Default Rate, as defined in the NPSA) and the ultimate payment of principal on or before the Stated Maturity of July 21, 2030. The Class W Notes will have a fixed-rate coupon that is lower than the spread/coupon of some of the more-senior Secured Notes, including the Class E Notes, and could therefore be considered below-market-rate. As of the Closing Date, DBRS Morningstar's ratings on the Secured Notes will be provisional. The provisional ratings reflect the fact that the finalization of the provisional ratings are subject to certain conditions after the Closing Date, such as compliance with the Eligibility Criteria (as defined in the NPSA). A provisional rating is not a final rating with respect to the above-mentioned Secured Notes and may change or be different than the final rating assigned or may be discontinued. The assignment of final ratings on the Secured Notes is subject to receipt by DBRS Morningstar of all data and/or information and final documentation that DBRS Morningstar deems necessary to finalize the ratings. The notes will be collateralized primarily by a portfolio of U.S. middle-market corporate loans. The Issuer will be managed by BlackRock Capital Investment Advisors, LLC (BCIA), which is a wholly owned subsidiary of BlackRock, Inc. DBRS Morningstar considers BCIA an acceptable collateralized loan obligation (CLO) manager. The provisional ratings reflect the following primary considerations: -- The NPSA, dated as of July 21, 2020. -- The integrity of the transaction structure. -- DBRS Morningstar's assessment of the portfolio quality. -- Adequate credit enhancement to withstand DBRS Morningstar's projected collateral loss rates under various cash flow-stress scenarios. -- DBRS Morningstar's assessment of the origination, servicing, and CLO management capabilities of BCIA. To assess portfolio credit quality, DBRS Morningstar provides a credit estimate or internal assessment for each nonfinancial corporate obligor in the portfolio that is not rated by DBRS Morningstar. Credit estimates are not ratings; rather, they represent a model-driven default probability for each obligor that is used in assigning a rating to a facility. As the Coronavirus Disease (COVID-19) spread around the world, certain countries imposed quarantines and lockdowns, including the United States, which accounts for more than one fourth of confirmed cases worldwide. The coronavirus pandemic has negatively affected not only the economies of the nation's most afflicted, but also the overall global economy with diminished demand for goods and services as well as disrupted supply chains. The effects of the pandemic may result in deteriorated financial conditions for many companies and obligors, some of which will experience the effects of such negative economic trends more than others. At the same time, governments and central banks in multiple regions, including the United States and Europe, have taken significant measures to mitigate the economic fallout from the coronavirus pandemic. In conjunction with DBRS Morningstar's commentary, "Global Macroeconomic Scenarios: Implications for Credit Ratings," published on April 16, 2020, and updated on July 22, 2020, DBRS Morningstar further considers additional adjustments to assumptions for the CLO asset class that consider the moderate economic scenario outlined in the commentary. The adjustments include a higher default assumption for the weighted-average (WA) credit quality of the current collateral obligation portfolio. To derive the higher default assumption, DBRS Morningstar notches ratings for obligors in certain industries and obligors at various rating levels based on their perceived exposure to the adverse disruptions caused by the coronavirus. Considering a higher default assumption would result in losses that exceed the original default expectations for the affected classes of notes. DBRS Morningstar may adjust the default expectations further if there are changes in the duration or severity of the adverse disruptions. For CLOs with minimally ramped assets at closing, DBRS Morningstar considers whether that the NPSA contains a Collateral Quality Matrix with sufficient rows and columns that would allow for higher stressed DBRS Morningstar Risk Scores and therefore a higher default probability on the collateral pool, while still remaining in compliance with the other Collateral Quality Tests, such as the WA Spread and Diversity Score. The results of this analysis indicate that the instruments can withstand an additional higher default probability commensurate with a moderate-scenario impact of the coronavirus. Notes: All figures are in U.S. dollars unless otherwise noted. CARLYLE US 2020-1: S&P Assigns Prelim BB- (sf) Rating to D Notes ---------------------------------------------------------------- S&P Global Ratings assigned its preliminary ratings to Carlyle US CLO 2020-1 Ltd./Carlyle US CLO 2020-1 LLC's floating-rate. The note issuance is a CLO securitization 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 July 24, 2020. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect S&P's view of: -- The diversification of the collateral pool; -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization; -- The experience of the collateral management 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. S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. "We are using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, we will update our assumptions and estimates accordingly," S&P said. PRELIMINARY RATINGS ASSIGNED Carlyle US CLO 2020-1 Ltd./Carlyle US CLO 2020-1 LLC Class Rating Amount (mil. $) A-1 AAA (sf) 300.00 A-2 AA (sf) 80.00 B-1 (deferrable) A+ (sf) 20.00 B-2 (deferrable) A (sf) 10.00 C-1 (deferrable) BBB+ (sf) 15.00 C-2 (deferrable) BBB- (sf) 10.00 D (deferrable) BB- (sf) 17.50 Subordinated notes NR 46.90 NR--Not rated. CIM TRUST 2020-J1: DBRS Gives Prov. B Rating on Class B-5 Certs --------------------------------------------------------------- DBRS, Inc. assigned the following provisional ratings to the Mortgage Pass-Through Certificates, Series 2020-J1 (the Certificates) to be issued by CIM Trust 2020-J1 (CIM 2020-J1): -- $307.5 million Class A-1 at AAA (sf) -- $307.5 million Class A-2 at AAA (sf) -- $230.6 million Class A-3 at AAA (sf) -- $230.6 million Class A-4 at AAA (sf) -- $76.9 million Class A-5 at AAA (sf) -- $76.9 million Class A-6 at AAA (sf) -- $246.0 million Class A-7 at AAA (sf) -- $246.0 million Class A-8 at AAA (sf) -- $61.5 million Class A-9 at AAA (sf) -- $61.5 million Class A-10 at AAA (sf) -- $15.4 million Class A-11 at AAA (sf) -- $15.4 million Class A-12 at AAA (sf) -- $37.3 million Class A-13 at AAA (sf) -- $37.3 million Class A-14 at AAA (sf) -- $344.8 million Class A-15 at AAA (sf) -- $344.8 million Class A-16 at AAA (sf) -- $344.8 million Class A-IO1 at AAA (sf) -- $307.5 million Class A-IO2 at AAA (sf) -- $230.6 million Class A-IO3 at AAA (sf) -- $76.9 million Class A-IO4 at AAA (sf) -- $246.0 million Class A-IO5 at AAA (sf) -- $61.5 million Class A-IO6 at AAA (sf) -- $15.4 million Class A-IO7 at AAA (sf) -- $37.3 million Class A-IO8 at AAA (sf) -- $344.8 million Class A-IO9 at AAA (sf) -- $4.5 million Class B-1A at AA (sf) -- $4.5 million Class B-IO1 at AA (sf) -- $4.5 million Class B-1 at AA (sf) -- $2.4 million Class B-2A at A (sf) -- $2.4 million Class B-IO2 at A (sf) -- $2.4 million Class B-2 at A (sf) -- $5.8 million Class B-3 at BBB (sf) -- $1.8 million Class B-4 at BB (sf) -- $905.0 thousand Class B-5 at B (sf) Classes A-IO1, A-IO2, A-IO3, A-IO4, A-IO5, A-IO6, A-IO7, A-IO8, and A-IO9 are interest-only certificates. The class balance represents notional amounts. Classes A-1, A-2, A-3, A-5, A-6, A-7, A-9, A-11, A-13, A-15, A-16, A-IO2, A-IO4, A-IO5, and A-IO9 are exchangeable certificates. These classes can be exchanged for combinations of initial exchangeable certificates as specified in the offering documents. Classes A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-8, A-9, A-10, A-11, and A-12 are super-senior certificates. These classes benefit from additional protection from senior support certificates (Classes A-13 and A-14) with respect to loss allocation. The AAA (sf) ratings on the Certificates reflect 4.70% of credit enhancement provided by subordinated certificates. The AA (sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 3.45%, 2.80%, 1.20%, 0.70%, and 0.45% of credit enhancement, respectively. Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction. CIM Trust 2020-J1 is a securitization of a portfolio of first-lien, fixed-rate, prime residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 494 loans with a total principal balance of $361,766,034 as of the Cut-Off Date (July 1, 2020). The originators for the aggregate mortgage pool are loanDepot.com, LLC (loanDepot; 25.0%);, Home Point Financial Corporation (Home Point; 15.8%); AmeriHome Mortgage Company, LLC (10.9%); United Shore Financial Services, LLC (9.6%); Guaranteed Rate, Inc. (Guaranteed Rate; 7.1%); NewRez, LLC (6.1%); JMAC Lending, Inc. (5.1%); and various other originators, each comprising no more than 5.0% of the pool by principal balance. On the Closing Date, the Seller, Fifth Avenue Trust, will acquire the mortgage loans from Bank of America, National Association (BANA). Through bulk purchases, BANA generally acquired the mortgage loans underwritten to: -- Its jumbo whole loan acquisition guidelines (50.8%), -- Fannie Mae or Freddie Mac's Automated Underwriting System (AUS; 31.9%), or -- The related originator's guidelines (17.4%). DBRS Morningstar conducted an operational risk assessment on BANA's aggregator platform, as well as certain originators, and deemed them acceptable. NewRez LLC doing business as (dba) Shellpoint Mortgage Servicing (SMS) will service 100% of the mortgage loans, directly or through subservicers. Wells Fargo Bank, N.A. (Wells Fargo; rated AA with a Negative trend by DBRS Morningstar) will act as Master Servicer, Securities Administrator, and Custodian. Wilmington Savings Fund Society, FSB will serve as Trustee. Chimera Funding TRS LLC (Chimera Funding) will serve as the Representations and Warranties (R&W) Provider. The holder of a majority of the most subordinate class of certificates outstanding (the Controlling Holder or CH) has the option to engage an asset manager to review the Servicer's actions regarding the mortgage loans, which includes determining whether the Servicer is making modifications or servicing the loans in accordance with the pooling and servicing agreement. The transaction employs a senior-subordinate, shifting-interest cash flow structure that is enhanced from a pre-crisis structure. As of July 20, 2020, no borrower within the pool has entered into a Coronavirus Disease (COVID-19)-related forbearance plan with the Servicer. After that date, loans that enter into a coronavirus-related forbearance plan will remain in the pool. CORONAVIRUS PANDEMIC IMPACT The coronavirus pandemic and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. DBRS Morningstar anticipates that delinquencies may continue to raise in the coming months for many residential mortgage-backed security (RMBS) asset classes, some meaningfully. The prime mortgage sector is a traditional RMBS asset class that consists of securitizations backed by pools of residential home loans originated to borrowers with prime credit. Generally, these borrowers have decent FICO scores, reasonable equity, and robust income and liquid reserves. As a result of the coronavirus, DBRS Morningstar expects increased delinquencies, loans on forbearance plans, and a potential near-term decline in the values of the mortgaged properties. Such deteriorations may adversely affect borrowers' ability to make monthly payments, refinance their loans, or sell properties in an amount sufficient to repay the outstanding balance of their loans. In connection with the economic stress assumed under its moderate scenario (see "Global Macroeconomic Scenarios: June Update," published on June 1, 2020), for the prime asset class, DBRS Morningstar applies more severe market value decline (MVD) assumptions across all rating categories than what it previously used. Such MVD assumptions are derived through a fundamental home price approach based on the forecast unemployment rates and GDP growth outlined in the aforementioned moderate scenario. In addition, for pools with loans on forbearance plans, DBRS Morningstar may assume higher loss expectations above and beyond the coronavirus assumptions. Such assumptions translate to higher expected losses on the collateral pool and correspondingly higher credit enhancement. In the prime asset class, while the full effect of the coronavirus may not occur until a few performance cycles later, DBRS Morningstar generally believes that this sector should have low intrinsic credit risk. Within the prime asset class, loans originated to (1) self-employed borrowers or (2) higher loan-to-value ratio (LTV) borrowers may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Self-employed borrowers are potentially exposed to more volatile income sources, which could lead to reduced cash flows generated from their businesses. Higher LTV borrowers, with lower equity in their properties, generally have fewer refinance opportunities and therefore slower prepayments. In addition, certain pools with elevated geographic concentrations in densely populated urban metropolitan statistical areas may experience additional stress from extended lockdown periods and the slowdown of the economy. The ratings reflect transactional strengths that include high-quality credit attributes, well-qualified borrowers, and financial strength of the counterparties, satisfactory third-party due-diligence review, structural enhancements, and 100% current loans. This transaction employs an R&W framework that contains certain weaknesses, such as materiality factors, knowledge qualifiers, and sunset provisions that allow for certain R&Ws to expire within three to five years after the Closing Date. To capture the perceived weaknesses in the R&W framework, DBRS Morningstar reduced the originator scores in this pool. A lower originator score results in increased default and loss assumptions and provides additional cushions for the rated securities. Notes: All figures are in U.S. dollars unless otherwise noted. CITIGROUP COMMERCIAL 2017-B1: Fitch Affirms B- on Class F Certs --------------------------------------------------------------- Fitch Ratings has affirmed 15 classes of Citigroup Commercial Mortgage Trust, commercial mortgage pass-through certificates, series 2017-B1. The Rating Outlooks remain Negative on classes E, F and X-E. Citigroup Commercial Mortgage Trust 2017-B1 - Class A-1 17326CAW4; LT AAAsf; Affirmed - Class A-2 17326CAX2; LT AAAsf; Affirmed - Class A-3 17326CAY0; LT AAAsf; Affirmed - Class A-4 17326CAZ7; LT AAAsf; Affirmed - Class A-AB 17326CBA1; LT AAAsf; Affirmed - Class A-S 17326CBB9; LT AAAsf; Affirmed - Class B 17326CBC7; LT AA-sf; Affirmed - Class C 17326CBD5; LT A-sf; Affirmed - Class D 17326CAA2; LT BBB-sf; Affirmed - Class E 17326CAC8; LT BB-sf; Affirmed - Class F 17326CAE4; LT B-sf; Affirmed - Class X-A 17326CBE3; LT AAAsf; Affirmed - Class X-B 17326CBF; LT AA-sf; Affirmed - Class X-D 17326CAJ3; LT BBB-sf; Affirmed - Class X-E 17326CAL8; LT BB-sf; Affirmed KEY RATING DRIVERS Stable Overall Performance; Increased Loss Expectations Due to Coronavirus Pandemic Concerns: While overall pool performance remains stable, loss expectations have increased since Fitch's prior rating action primarily due to additional stresses applied to loans expected to be impacted in the near term from the coronavirus pandemic. Ten loans (28.0% of pool), including one loan (1.0%) in special servicing, were designated Fitch Loans of Concern (FLOCs). Seven (17.9%) were designated FLOCs primarily due to near term effects of the coronavirus pandemic. Regional Mall Fitch Loan of Concern: Lakeside Shopping Center (6.4%) is secured by a 1.2 million sf super regional mall located in Metairie, LA, approximately 7.8 miles northwest of New Orleans. It was designated a FLOC because its collateral anchor, JCPenney, recently announced the closure of its store at this location. While JCPenney leases 16.8% NRA through November 2022, it only accounts for 4.6% of rent and recoveries. The other collateral anchors at the mall are Dillard's, which leases 25.7% NRA through December 2029, and Macy's, which has a ground lease for 19% NRA through February 2029. Occupancy will decline to 82% from 99% as a result of JCPenney vacating. At YE 2019, servicer-reported NOI DSCR was 2.72x. Specially Serviced Loan: 4901 West Irving Park (1.0%), secured by a 60,448-sf retail property in Chicago, IL transferred to special servicing in January 2020 for payment default. Larger tenants include Binny's Beverage Depot, which leases 40.5% NRA through January 2033 and Retro Fitness, which leases 33% NRA through May 2027. Per servicer updates, the lender is simultaneously dual tracking foreclosure/receivership proceedings while continuing negotiations with the borrower on a potential resolution. As of September 2019, occupancy was 82%, and as the YTD September 2019, servicer-reported NOI DSCR was 1.95x. Minimal Change to Credit Enhancement: There has been minimal change to credit enhancement since issuance. As of the July 2020 distribution date, the pool's aggregate balance has been paid down by 1.6% to $926.9 million from $941.6 million at issuance. All original 48 loans remain in the pool. Based on the loans' scheduled maturity balances, the pool is expected to amortize 6.7% during the term. Twenty loans (59.7% of pool) are full-term, interest-only. Sixteen loans (19.7%) had a partial-term, interest-only component at issuance of which seven have begun amortizing. One loan (1.1%) is fully defeased. Pool Concentration: The top 10 loans comprise 53.9% of the pool. Loan maturities are concentrated in 2027 (91.0%). Based on property type, the largest concentrations are mixed-use at 24.8%, retail at 21.6% and hotel at 18.6%. Exposure to Coronavirus Pandemic: Six loans (18.6%) are secured by hotel properties. The weighted average NOI DSCR for all the hotel loans is 2.25x. These hotel loans could sustain a weighted average decline in NOI of 56% before DSCR falls below 1.00x. Twelve loans (21.6%) are secured by retail properties. The weighted average NOI DSCR for all non-defeased retail loans is 2.44%. These retail loans could sustain a weighted average decline in NOI of 60% before DSCR fall below 1.00x. Additional coronavirus specific base case stresses were applied to four hotel loans (12.9%) including Old Town San Diego Hotel Portfolio (5.7%), McNeill Hotel Portfolio (3.6%) and Double Tree Lafayette (2.5%) and two retail loans (3.9%) including Wellington Commercial Condo (3.2%). These additional stresses contributed to the Negative Outlooks on classes E, F and X-E. RATING SENSITIVITIES The Stable Outlooks on classes A-1 through D reflect the overall stable performance of the pool and expected continued amortization. The Negative Outlooks on classes E, F and X-E reflect concerns with the FLOCs, primarily loans expected to be impacted by exposure to the coronavirus pandemic in the near term. Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: Factors that could lead to upgrades would include stable to improved asset performance coupled with paydown and/or defeasance. Upgrades of classes B and C would likely occur with significant improvement in CE and/or defeasance; however increased concentrations, further underperformance of FLOCs and decline in performance of loans expected to be impacted by the coronavirus pandemic could cause this trend to reverse. An upgrade of class D is considered unlikely and would be limited based on sensitivity to concentrations or the potential for future concentration. Classes would not be upgraded above 'Asf' if there is a likelihood for interest shortfalls. Upgrades of classes E and F are not likely due to performance concerns with loans expected to be impacted by the coronavirus pandemic in the near-term but could occur if performance of the FLOCs improves and/or if there is sufficient CE, which would likely occur if the non-rated classes are not eroded and the senior classes pay-off. Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: Factors that could lead to downgrades include an increase in pool level losses from underperforming or specially serviced loans. Downgrades of classes A-1 through C are not likely due to the position in the capital structure. Downgrades of classes D through F could occur if additional loans become FLOCs, with further underperformance of the FLOCs and decline in performance and lack of recovery of loans expected to be impacted by the coronavirus pandemic in the near term. In addition to its baseline scenario, Fitch also envisions a downside scenario where the health crisis is prolonged beyond 2021; should this scenario play out, Fitch expects that a greater percentage of classes may be assigned Negative Outlooks or those with Negative Outlooks would be downgraded one or more categories. Deutsche Bank is the trustee for the transaction and also serves as the backup advancing agent. Fitch's current Issuer Default rating for Deutsche Bank is 'BBB'/'F2'. Fitch relies on the master servicer, Wells Fargo & Company (A+/F1), which is currently the primary advancing agent, as a direct counterparty. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. 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. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). CITIGROUP COMMERCIAL 2017-P8: Fitch Affirms B- on 2 Tranches ------------------------------------------------------------ Fitch Ratings has affirmed 22 classes of Citigroup Commercial Mortgage Trust 2017-P8 commercial mortgage pass-through certificates. CGCMT 2017-P8 - Class A-1 17326DAA0; LT AAAsf; Affirmed - Class A-2 17326DAB8; LT AAAsf; Affirmed - Class A-3 17326DAC6; LT AAAsf; Affirmed - Class A-4 17326DAD4; LT AAAsf; Affirmed - Class A-AB 17326DAE2; LT AAAsf; Affirmed - Class A-S 17326DAF9; LT AAAsf; Affirmed - Class B 17326DAG7; LT AA-sf; Affirmed - Class C 17326DAH5; LT A-sf; Affirmed - Class D 17326DAM4; LT BBB-sf; Affirmed - Class E 17326DAP7; LT BB-sf; Affirmed - Class F 17326DAR3; LT B-sf; Affirmed - Class V-2A 17326DBF8; LT AAAsf; Affirmed - Class V-2B 17326DBH4; LT AA-sf; Affirmed - Class V-2C 17326DBK7; LT A-sf; Affirmed - Class V-2D 17326DBM3; LT BBB-sf; Affirmed - Class V-3AC 17326DBR2; LT A-sf; Affirmed - Class V-3D 17326DBV3; LT BBB-sf; Affirmed - Class X-A 17326DAJ1; LT AAAsf; Affirmed - Class X-B 17326DAK8; LT AA-sf; Affirmed - Class X-D 17326DAV4; LT BBB-sf; Affirmed - Class X-E 17326DAX0; LT BB-sf; Affirmed - Class X-F 17326DAZ5; LT B-sf; Affirmed KEY RATING DRIVERS Increased Loss Expectations: Despite a majority of the pool exhibiting relatively stable performance, loss expectations have increased since issuance primarily due to an increase in Fitch Loans of Concern and coronavirus related performance concerns. Fitch identified nine loans (18.2%) as FLOCs, including two loans (7.5%) secured by regional malls and one loan secured by a hotel portfolio, all of which are in the top 15. The largest FLOC is the Mall of Louisiana (4.4%), which is secured by a 776,789-sf portion of a 1.5 million-sf regional mall located in Baton Rouge, LA. As of the March 2020 rent roll, collateral occupancy was 93% and total mall occupancy was 96%. While property cash flow has remained stable, comparable inline sales for tenants occupying less than 10,000 sf decreased to $414 psf (excluding Apple) as of TTM March 2020 from $461 psf at YE 2018 and $461 psf around the time of issuance as of March 2018. The largest tenant, AMC Theatres (9.6% of NRA), also reported declining sales of $342,933 per screen as of TTM March 2020 from $390,617 per screen at YE 2018 and $560,583 per screen at issuance. While the subject is the dominant mall in its trade area, it is located in a secondary market with few demand drivers. The servicer-reported NOI DSCR was 2.39x as of YE 2019. The loan begins amortizing in September 2020. The second largest FLOC is the Starwood Capital Group Hotel Portfolio (3.9%), which is secured by a portfolio of 65 hotels located in 17 states. The full-term interest-only loan and reported a YE 2019 DSCR of 2.73x. According to the servicer, the borrower has requested COVID-19 related relief and is working toward a resolution. While no loans have yet transferred to special servicing, there are two loans (1.8%) classified as 30 days delinquent. As of the July 2020 distribution period, there are nine (17.1%) loans on the servicer's watchlist for lease rollover, deferred maintenance and relief requests. Minimal Change in Credit Enhancement: Credit Enhancement has had minimal change since issuance due to limited amortization, no loan payoffs and no defeasance. As of the July distribution period, the pool's aggregate balance has been paid down by 1.2% to $1.073 billion from $1.087 billion at issuance. There are 19 loans (43.6% of the pool) that are full-term, interest only and nine loans (21.1%) that are partial interest only that have not yet begun to amortize. Granular Pool: The top 10 and 15 loans account for approximately 43.8% and 58.8% of total pool balances, respectively. This compares favorably with the 2017 vintage averages of 53.1% and 66.9%, respectively. Coronavirus Exposure: Five loans (9.9%) are secured by hotel properties and a weighted average NOI DSCR of 2.47x. Fifteen loans (3.5 %), which have a weighted average NOI DSCR of 2.32x, are secured by retail properties. The base case analysis applied additional stresses to three of the four hotel loans and four of the retail loans due to their vulnerability to the coronavirus pandemic. These additional stresses contributed to the Outlooks remaining Negative on classes E and F. RATING SENSITIVITIES The Negative Outlooks on classes E and F reflect the potential for future downgrades due to performance concerns as a result of the economic slowdown stemming from the coronavirus pandemic. The Stable Outlooks on classes A-1 through D reflect the overall stable pool performance for the majority of the pool and expected continued paydown. Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: Sensitivity factors that lead to upgrades would include stable to improved asset performance coupled with pay down and/or defeasance. Upgrades to the 'Asf' and 'AAsf' categories would likely occur with significant improvement in credit enhancement and/or defeasance; however, adverse selection, increased concentrations and/or further underperformance of the FLOCs or loans expected to be negatively affected by the coronavirus pandemic could cause this trend to reverse. Upgrades to the 'BBBsf' category would also take into account these factors but would be limited based on sensitivity to concentrations or the potential for future concentration. Classes would not be upgraded above 'Asf' if interest shortfalls are likely. Upgrades to the 'Bsf' and 'BBsf' categories are not likely until the later years in a transaction and only if the performance of the remaining pool is stable and/or properties vulnerable to the coronavirus return to pre-pandemic levels, and there is sufficient credit enhancement to the classes. Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: Sensitivity factors that lead to downgrades include an increase in pool level losses from underperforming or specially serviced loans. Downgrades to the 'AAsf' and 'AAAsf' categories are not likely due to the position in the capital structure but may occur at the 'AAsf' and 'AAAsf' categories should interest shortfalls occur. Downgrades to the 'Asf' and 'BBBsf' categories would occur if a high proportion of the pool defaults and expected losses increase significantly. Downgrades to the 'Bsf' and 'BBsf' categories would occur should loss expectations increase due to an increase in specially serviced loans and/or the loans vulnerable to the coronavirus pandemic not stabilize. The Rating Outlooks on classes E and F may be revised back to Stable if the performance of the FLOC's and/or properties vulnerable to the coronavirus stabilize once the pandemic is over. In addition to its baseline scenario related to the coronavirus, Fitch also envisions a downside scenario where the health crisis is prolonged beyond 2021; should this scenario play out, Fitch expects additional negative rating actions, including downgrades of a category or more and Negative Outlook revisions. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. 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. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). COMM MORTGAGE 2016-COR1: Fitch Affirms Class X-F Certs at B-sf -------------------------------------------------------------- Fitch Ratings has affirmed German American Capital Corp.'s COMM Mortgage Securities Trust 2016-COR1 commercial mortgage pass-through certificates and revised the outlooks on four classes. COMM 2016-COR1 - Class A-1 12594MAY4; LT AAAsf; Affirmed - Class A-2 12594MAZ1; LT AAAsf; Affirmed - Class A-3 12594MBB3; LT AAAsf; Affirmed - Class A-4 12594MBC1; LT AAAsf; Affirmed - Class A-M 12594MBG2; LT AAAsf; Affirmed - Class A-SB 12594MBA5; LT AAAsf; Affirmed - Class B 12594MBE7; LT AA-sf; Affirmed - Class C 12594MBF4; LT A-sf; Affirmed - Class D 12594MAL2; LT BBB-sf; Affirmed - Class E 12594MAN8; LT BB-sf; Affirmed - Class F 12594MAQ1; LT B-sf; Affirmed - Class X-A 12594MBD9; LT AAAsf; Affirmed - Class X-B 12594MAA6; LT AA-sf; Affirmed - Class X-C 12594MAC2; LT BBB-sf; Affirmed - Class X-E 12594MAE8; LT BB-sf; Affirmed - Class X-F 12594MAG3; LT B-sf; Affirmed KEY RATING DRIVERS Increasing Loss Expectations: Loss expectations have increased primarily due to increased Fitch Loans of Concern. Twelve loans (25.6% of the pool) are considered FLOCs due to either failing to meet the coronavirus NOI DSCR tolerance threshold, significant upcoming lease rollover and/or declining performance. Two loans (2.3% of the pool) are specially serviced. The largest specially serviced loan, Greenwich Portfolio (1.6% of the pool), is secured by a portfolio of 11 contiguous mixed-use properties located in Greenwich, CT totaling 37,192 sf. The loan transferred in May 2020 after the borrower indicated hardships related to the coronavirus pandemic. As of May 2020, the property was 100% occupied and has exposure to retail tenants including a large restaurant tenant. Per the borrower, only 51% of all rents were collected prior to transferring to the special servicer and the declines in collection were primarily due to the failure of the restaurant tenant to pay its full rent. Per the special servicer, they are assessing next steps while dual tracking foreclosure. The remaining specially serviced loan is less than 1% of the pool and is secured by a 37,000-sf retail property located in Austin, TX, 100%, occupied by LA Fitness whose lease will expire in October 2031. The loan transferred to special servicing in June 2020 and is 90+ days delinquent. Outside of the specially serviced loans, ten loans (23.3% of the pool) were considered FLOCs. The largest FLOC, Hilton San Diego Mission Valley (6.3% of the pool), is secured by a 350-key limited service hotel located in San Diego, CA. As of the trailing twelve months ended March 2020, occupancy slightly declined to 83.9% from 88.3% at YE19 and 88.9% at YE17 and reported a positive penetration rate of 111.8% as of the TTM ended March 2020. However, as of March 2020, NOI DSCR had declined to 0.95x from 1.88x at YE19 and 1.97x at YE18. The declines are primarily related to the declines in occupancy and ADR. Per the master servicer, as of June 2020, the loan received a 90-day payment relief that allows the borrower the ability to utilize reserve funds toward the payment of debt service and/or operating expenses. Additionally, as part of the modification, all loan level covenants have been waived for the next 12 months. The loan also failed to meet the property specific coronavirus NOI DSCR tolerance threshold; therefore, Fitch applied additional stresses to address the expected declines in performance. The second largest FLOC, Hampton Inn & Suites Boston Crosstown (2.9% of the pool), is secured by a 175-key hotel located in Boston, MA. As of TTM ended March 2020, occupancy was 84.4% compared to 87.8% at YE19, 86.3% at YE18 and 88.1% at YE17. Per the most recent STR report, for TTM ended March 2020, the property reported positive RevPAR penetration rates of 103.7%. NOI DSCR also remained relatively stable at 1.46x as of YE19 from 1.62x at YE18, 1.72x at YE17 and 1.67x at YE16. The loan fails to meet the coronavirus NOI DSCR tolerance threshold; therefore, Fitch applied additional stresses to address the expected declines in performance. The third largest FLOC, Brea Portfolio (2.6% of the pool), is secured by a 47,608-sf retail property located in Brea, CA. While the property occupancy has remained strong at 100% as of YE19, NOI DSCR as of March 2020 declined to 0.93x from 1.07x at YE19, 1.77x at YE18 and 1.69x at YE17. Per the most recent OSAR, the declines in performance are related to declining rental rates. Per the master servicer, two tenants were temporarily closed during 2019, resulting in lower annual revenues. Additionally, the borrower is currently deferring rent for several tenants which is expected to result in further declines in performance; the properties remain 100% occupied. The loan also failed to meet the property specific coronavirus NOI DSCR tolerance threshold; therefore, Fitch applied additional stresses to address the expected further declines in performance. The fourth largest FLOC, Mt. Diablo Terrace (2.4% of the pool), is secured by a 81,554-sf office property located in Lafayette, CA. Effective June 2020, the loan had been modified allowing the borrower to utilize the reserve funds for 90 days to pay debt service. The borrower must replenish all reserve funds within 12 months and all loan covenants have been waived for 12 months. Additionally, approximately 30% of the NRA has lease expirations between 2020 and 2021, including the top tenant NFP CA Insurance Services (15.1% of the NRA). Per the master servicer, NFP CA Insurance Services is expected to vacate their space effective August 2020. Fitch applied additional stresses to reflect the expected increased vacancy. The fifth largest FLOC, Acme Hotel (2.2% of the pool), is secured by a 130-key hotel located in Chicago, IL. As of the TTM ended March 2020, per the most recent STR report, the property reported a negative RevPAR penetration rate of 93.3%. Effective May 2020, the loan has been modified to allow the borrower to utilize the reserve funds in order to pay the loan's debt service for 90 days. Per the modification agreement, the borrower must replenish all reserve funds within 12 months and all loan covenants have been waived for 12 months. The sixth largest FLOC, Holiday Inn Resort Daytona Beach Oceanfront (2.1% of the pool), is secured by a 188-key full-service hotel located in Daytona Beach, FL. As of March 2020, occupancy had declined to 57% from 67% at YE19 and 70% at YE18 and NOI DSCR had declined to 1.05x from 1.35x at YE19 and 1.62x at YE18. Effective May 2020, the loan has been modified to allow the borrower to utilize the reserve funds in order to pay the loan's debt service for 90 days. Per the modification agreement, the borrower must replenish all reserve funds within 12 months and all loan covenants have been waived for 12 months. The seventh and eighth largest FLOC, Hagerstown Premium Outlets (1.8% of the pool) and the Birch Run Premium Outlets (1.7% of the pool), are both secured by retail outlet shops located in Hagerstown, MD and Birch Run, MI, respectively. Both loans remain current, yet both failed to meet the coronavirus NOI DSCR tolerance thresholds. Fitch applied additional stresses to reflect the expected declines in performance related to the ongoing coronavirus pandemic. The remaining FLOCs each represent less than 1% of the pool, secured by retail properties and failed to meet the property specific coronavirus NOI DSCR tolerance thresholds. Additional stresses were applied to adjust for the expected declines in performance. Minimal Changes to Credit Enhancement: As of the July 2020 remittance, the pool's aggregate principal balance has been reduced by 3.4% to $860.7 million from $890.7 million at issuance. Two loans (1.9% of the pool) are defeased. Eight loans (17.2% of the pool) have been modified, including two loans in the top 15 (8.7% of the pool). All the modified loans were due to the coronavirus pandemic and, in each case, the borrowers were given access to the reserve accounts in order to pay the loan's debt service for 90 days. Fourteen loans (24.5% of the pool) have partial interest only payments, four of which (13.3% of the pool) are within the top 15. Eleven of the partial interest-only loans (18.7% of the pool) have exited their interest-only periods and are now amortizing. Fifteen loans (53.6% of the pool) have interest-only payments for the full loan term including nine loans (46% of the pool) in the top 15. Coronavirus Exposure: Significant economic impact to certain hotels, retail and multifamily properties is expected from the coronavirus pandemic, due to the recent and sudden reductions in travel and tourism, temporary property closures and lack of clarity on the potential length of the impact. The pandemic has prompted the closure of several hotel properties in gateway cities as well as malls, entertainment venues and individual stores. Four loans (13.4% of the pool) are secured by hotel loans and fifteen loans (28.3% of the pool) are secured by retail properties. The hotel loans have a weighted average DSCR of 1.63x. On average, the hotel loans can sustain an average decline of 37.3% before the NOI DSCR would fall below 1.0x. On average, the retail loans have a WADSCR of 1.83x and would sustain a 41.1% decline in NOI before the DSCR would fall below 1.0x; excluding the specially serviced retail loans achieves similar results. Fitch applied additional stresses to hotel, retail and multifamily loans to account for potential cash flow disruptions due to the coronavirus pandemic. These additional stresses contributed to the Negative Outlooks on classes D, E, F, X-C, X-E and X-F. RATING SENSITIVITIES The Negative Rating Outlooks on classes D, E, F, X-C, X-E, and X-F, reflects performance concerns with the specially serviced loans and FLOCs, which are primarily secured by hotel and retail properties given the decline in travel and commerce as a result of the coronavirus pandemic. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Factors that could lead to upgrades would include stable to improved asset performance, coupled with additional paydown and/or defeasance. Upgrades to the 'A-sf' rated class is not expected but would likely occur with significant improvement in credit enhancement and/or defeasance and/or the stabilization to the properties impacted from the coronavirus pandemic. The Rating Outlooks on classes D, E, F, X-C, X-E and X-F may be revised back to Stable should the performance of the FLOCs improve and/or properties vulnerable to the coronavirus stabilize once the pandemic is over. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Downgrades to the senior classes, rated 'A-sf' through 'AAAsf', are not likely due to the position in the capital structure and the high CE. Downgrades to classes D, E, F, X-C, X-E and X-F would occur should loss expectations increase and/or if the loans susceptible to the coronavirus pandemic not stabilize. In addition to its baseline scenario, Fitch also envisions a downside scenario where the health crisis is prolonged beyond 2021; should this scenario play out, classes with Negative Rating Outlooks will be downgraded one or more categories. For more information on Fitch's original rating sensitivity on the transaction, please refer to the new issuance report. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. 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. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). COVENANT CREDIT III: Moody's Cuts Rating on Class F Notes to Caa3 ----------------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by Covenant Credit Partners CLO III, Ltd: US$23,500,000 Class D Mezzanine Secured Deferrable Floating Rate Notes due 2029 (the "Class D Notes"), Downgraded to Ba1 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$19,000,000 Class E Junior Secured Deferrable Floating Rate Notes due 2029 (the "Class E Notes"), Downgraded to B1 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$8,000,000 Class F Junior Secured Deferrable Floating Rate Notes due 2029 (the "Class F Notes"), Downgraded to Caa3 (sf); previously on April 17, 2020 B3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on April 17, 2020 on the Class D, Class E, and Class F Notes. The CLO, issued in September 2017 is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end in October 2021. RATINGS RATIONALE The downgrades on the Class D, Class E, and Class F Notes reflect the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased substantially, the credit enhancement available to the CLO notes has significantly declined, the exposure to Caa-rated assets has increased, and expected losses on certain notes have increased materially. Based on Moody's calculation, the weighted average rating factor was 3256 as of July 2020, or 12.9% worse compared to 2885 reported in the February 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2814 reported in the July 2020 trustee report [2] by 442 points. Moody's noted that approximately 29.9% of the CLO's par was from obligors assigned a negative outlook and 1.3% from obligors whose ratings are on review for possible downgrade. Additionally, based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 14.9% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including principal proceeds and recoveries from defaulted securities, at $387.3 million, or $12.7 million less than the deal's ramp-up target par balance, and Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class A/B, Class C, Class D, Class E, and Class F notes as of July 2020 at 128.9%, 119.0%, 111.0%, 105.3%, and 103.0%, respectively. 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 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 $384.8 million, defaulted par of $4.7 million, a weighted average default probability of 25.73% (implying a WARF of 3256, a weighted average recovery rate upon default of 47.60%, a diversity score of 65 and a weighted average spread of 3.43%. In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. CREDIT SUISSE 2015-C1: Fitch Cuts Class X-F Certs to CCCsf ---------------------------------------------------------- Fitch Ratings has downgraded six classes of Credit Suisse USA CSAIL 2015-C1 commercial mortgage pass-through certificates and affirmed eight others. CSAIL 2015-C1 - Class A-3 126281AY0; LT AAAsf; Affirmed - Class A-4 126281AZ7; LT AAAsf; Affirmed - Class A-S 126281BD5; LT AAAsf; Affirmed - Class A-SB 126281BA1; LT AAAsf; Affirmed - Class B 126281BE3; LT AA-sf; Affirmed - Class C 126281BF0; LT A-sf; Affirmed - Class D 126281AL8; LT BBsf; Downgrade - Class E 126281AN4; LT Bsf; Downgrade - Class F 126281AQ7; LT CCCsf; Downgrade - Class X-A 126281BB9; LT AAAsf; Affirmed - Class X-B 126281BC7; LT AA-sf; Affirmed - Class X-D 126281AC8; LT BBsf; Downgrade - Class X-E 126281AE4; LT Bsf; Downgrade - Class X-F 126281AG9; LT CCCsf; Downgrade KEY RATING DRIVERS Coronavirus Exposure: The rating actions can be attributed to the social and market disruption caused by the effects of the coronavirus pandemic and related containment measures. Of particular concern is the underlying pool's exposure to retail and hotel property types. Four regional malls and three hotels are secured in the top 15 loans alone. Fitch expects negative economic impact to certain hotels and retail properties due to the recent and sudden reductions in travel and tourism, temporary property closures and lack of clarity on the potential duration of the pandemic. The pandemic has prompted the closure of several hotel properties in gateway cities, as well as malls, entertainment venues and individual stores. Those that have since reopened are likely to experience limited operations and reduced foot traffic. Retail properties secure 25.2% of the pool, including four regional malls in the top 15. The pool's retail component has a weighted-average debt service coverage ratio of 2.02x. Hotel properties secure 24.9% of the pool, including the first- and third-largest loans and three loans in special servicing. These hotel loans generally performed as expected prior to the coronavirus pandemic. The pool's hotel component has a weighted-average DSCR of 2.00x. Additional stresses were applied to 11 hotel loans (14.4%), nine retail loans (19.8%) and one multifamily loan (1.7%) across the pool, in light of the pandemic. These additional stresses contributed to the downgrades of classes D, E and F and the Negative Outlooks on classes A-S through F, X-A, X-B, X-D and X-E. Increased Loss Expectations; High Concentration of Fitch Loans of Concern: The downgrades and Negative Outlook revisions reflect an increase in Fitch's loss expectations since the last rating action, primarily due to a lack of stabilization for Fitch Loans of Concern, as well as ongoing performance concerns for a number of newly identified FLOCs. Fitch has designated 34 loans (57.3% of pool) as FLOCs, including five specially serviced loans (6.5%), all of which are new transfers in the last few months. Ten of the top-15 loans are FLOCs. Soho-Tribeca Grand Hotel Portfolio (10.0% of the pool) is the largest loan and the largest FLOC. It is secured by two boutique hotels in Manhattan's Soho and Tribeca neighborhoods, with a total of 554 rooms. Both hotels are well located and considered to be high quality assets. Historical performance has been stable. However, the borrower requested debt service payment relief following the pandemic's outbreak and a forbearance of the loan is under review. The second largest FLOC is Courtyard Midtown East (7.3% of the pool). The subject is a 317-room limited service hotel located on 52nd Street and 3rd Avenue in Manhattan. Collateral performance has trended downwards since issuance, although occupancy has increased. The YE 2019 NOI DSCR was 1.47x, down from 1.83x at YE 2018. ADR and RevPAR for the T12 ended March 31, 2020 were $260 and $240, respectively, compared to $285 and $260, respectively, at issuance. The loan transferred to the special servicer in April 2020 and was returned to the master servicer in June 2020 as a corrected loan. The most recent servicer report indicates that the borrower requested debt service payment relief and was granted forbearance. The third- and fourth-largest FLOCs in the top 15 are regional malls. Westfield Trumbull (7.0% of the pool) is a 1.1 million sf regional mall in Trumbull, CT. Anchor tenants are Target, JCPenney, Lord and Taylor, Macy's and LA Fitness. Lord and Taylor is expected to close in the near term. Macy's lease has been extended to 2023, and the borrower reports that rent has temporarily been waived. JCPenney's lease expires in 2022. Both Macy's and JCPenney are anchors at a competing mall owned by the same sponsor located 9.5 miles away. Inline sales were $404/sf as of YE 2019, compared to $335 at issuance. It appears that the borrower requested debt service payment relief and was granted forbearance. Westfield Wheaton (3.9% of the pool) is a 1.6 million sf regional mall in Wheaton, MD. Anchor tenants are JCPenney, Target, Macy's and Costco. There are also ground-leased outparcels leased to Giant Food and Sears Outlet. There is also a nine-screen AMC Theater. There are five large retail centers located within a 10-mile radius, with the closest mall being the Westfield Montgomery, located seven miles away. Although overall mall sales appear to be stable, three anchor tenants reported declining sales in 2019. Two additional major loss drivers in the top 15 are Bayshore Mall (2.0% of the pool) and 2000 Bering (1.9% of the pool). Bayshore Mall is a one-story enclosed regional mall in Eureka, CA. Two major tenants vacated in 2019, and there is significant upcoming rollover in the near term. The mall is situated in a tertiary location with sales reported at $282/sf. 2000 Bering is an office property located in Houston, TX. The property was 56% occupied as of March 2020, and the majority of the remaining occupied space (35.6% of the NRA) is scheduled to roll in 2020. The loan began amortizing in January 2020. Specially Serviced Loans: Five loans (6.5%of the pool) are currently in special servicing with forbearance under consideration. All of the loans in special servicing have transferred in the last three months. The largest specially serviced loan is the seventh-largest loan in the pool, 777 10th Avenue (2.6% of the pool). It is secured by a mixed-use light industrial building located in downtown Los Angeles' garment district. The property has a granular tenancy with short-term leases of one to two years. The loan transferred to special servicing in May 2020 and is currently 90+ days delinquent. There are three hotels that have transferred to special servicing: Holiday Inn La Mirada (1.5%) transferred in June 2020, Courtyard by Marriott New Albany (1.1%) transferred in May 2020, and Hampton Inn Lincoln South Heritage (0.9%) transferred in July 2020. The smallest loan to transfer to special servicing is Grand River Plaza (0.9% of the pool), an unanchored retail center in Genoa Township, MI. Several tenants have vacated since issuance, resulting in occupancy declining to 60% as of YE 2019. The property has been on the servicer's watchlist since 2016, and the borrower has indicated that the coronavirus pandemic has driven additional tenants to give notice of their plans to vacate. The loan was transferred to special servicing in June 2020, and forbearance is under consideration. Changes in Credit Enhancement: As of the July 2020 remittance, the pool's aggregate principal balance has been reduced by 8.9% to $1.1 billion from $1.2 billion at issuance. Four loans, including two that were defeased, were repaid from the trust in the last 12 months and contributed approximately $35 million in principal paydown. Five loans (7.8% of the pool), are full-term interest-only. Twelve loans totaling $133.4 million (12.1%) are fully defeased. RATING SENSITIVITIES The Outlooks on classes A-3 through A-SB remain Stable. The Outlook on classes A-S, X-A and X-B have been revised to Negative from Stable. The Outlooks on classes B through E and classes X-D and X-E remain Negative. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: Sensitivity factors that could lead to upgrades include significantly improved performance, coupled with additional paydown and/or defeasance. An upgrade of classes B and C could occur with stabilization of the FLOCs, but would be limited as concentrations increase. Classes would not be upgraded above 'Asf' if there is likelihood for interest shortfalls. Upgrades of classes D and E would only occur with significant improvement in credit enhancement and stabilization of the FLOCs. An upgrade to class F is not likely unless the performance of the FLOCs improve, senior classes pay off and if performance of the remaining pool is stable. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: Sensitivity factors that lead to downgrades include an increase in pool-level losses from underperforming or specially serviced loans/assets. Downgrades to classes A-3 through A-SB are not likely due to defeasance and their position in the capital structure, but may occur if interest shortfalls occur. A downgrade to class A-S may occur if additional loans default or loss expectations increase. Downgrades to classes B and C may occur if loans in special servicing remain unresolved or if performance of the FLOCs continues to decline. Downgrades to classes D and E may occur if FLOC performance does not stabilize. Downgrades to the distressed classes are expected as losses are realized. In addition to its baseline scenario, Fitch envisions a downside scenario where the pandemic is prolonged beyond 2021. Should this scenario play out, classes with Negative Outlooks will be downgraded one or more categories. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. 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. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS CSAIL 2015-C1 has an Environmental, Social and Governance Relevance Score of '4' for Exposure to Social Impacts due to significantly high retail exposure, including four regional malls that are at risk of underperforming as a result of changing consumer preferences in shopping, which has a negative effect on the credit profile and is highly relevant to the rating. This has contributed to the downgrades and Negative Outlooks. Except for the matters discussed, the highest level of ESG credit relevance, if present, is a score of '3' - ESG issues are credit neutral or have only a minimal credit impact on the entity(ies), either due to their nature or the way in which they are being managed by the entity(ies). CSMC 2020-NET: Moody's Gives (P)B1 Rating on Class HRR Certs ------------------------------------------------------------ Moody's Investors Service has assigned provisional ratings on eight classes of CMBS securities, issued by CSMC 2020-NET, Commercial Mortgage Pass-Through Certificates, Series CSMC 2020-NET as follows: Cl. A, Assigned (P)Aaa (sf) Cl. X*, Assigned (P)Aa1 (sf) Cl. B, Assigned (P)Aa3 (sf) Cl. C, Assigned (P)A3 (sf) Cl. D, Assigned (P)Baa3 (sf) Cl. E, Assigned (P)Ba2 (sf) Cl. F, Assigned (P)Ba3 (sf) Cl. HRR, Assigned (P)B1 (sf) * Reflects interest-only classes RATINGS RATIONALE The certificates are collateralized by a single loan secured by fee and leasehold interests in a 7.1 million SF portfolio of 368 single-tenant, net leased properties located in 41 states and the District of Columbia. Its ratings are based on the credit quality of the loans and the strength of the securitization structure. The loan is secured by the fee interests and leasehold interests in 368 properties across three asset types including retail (54.3% of base rent), industrial (29.3% of base rent), and office (16.5% of base rent). NNN leases are in place for 294 tenants representing 80.9% of base rent, requiring tenants to pay all operating expenses, including real estate taxes, insurance, routine maintenance, and repairs. NN leases are in place for 72 tenants representing 18.7% of base rent, requiring tenants to pay real estate taxes, insurance, routine maintenance, and the landlord to pay repairs. Modified gross leases are in place for 2 tenants representing 0.4% of base rent, requiring tenants to pay operating expenses over a base year stop. Modified gross lease tenants include Caliber Collision I -- Fayetteville, NC (retail) and Dialysis II -- Fresenius -- Roanoke, VA (office). The properties are located across 41 states and the District of Columbia with no state accounting for more than 22.8% of SF and 18.5% of base rent. The largest state concentrations include Georgia (38 assets, 18.5% of base rent), South Carolina (10 assets, 7.8% of base rent), Illinois (31 assets, 6.9% of base rent), North Carolina (16 assets, 6.3% of base rent), and (Alabama 8 assets, 5.2% of base rent). The portfolio is leased to 38 tenants across a broad range of industries. No single tenant comprises more than approximately 1.4 million SF (19.8% of total), or 15.2% of base rent. The properties are leased to tenants operating across 15 different industries with no single industry representing more than 15.6% of base rent. The loan benefits from granular lease roll with 16.3% of NRA and 14.3% of base rent expiring during the loan term. No more than 6.1% of NRA and 6.5% of base rent expires in any single year of the loan term. In addition, the weighted average remaining lease term for the portfolio is 7.4 years. Moody's approach to rating this transaction involved the application of both its Large Loan and Single Asset/Single Borrower CMBS methodology and its IO Rating methodology. The rating approach for securities backed by a single loan compares the credit risk inherent in the underlying collateral with the credit protection offered by the structure. The structure's credit enhancement is quantified by the maximum deterioration in property value that the securities are able to withstand under various stress scenarios without causing an increase in the expected loss for various rating levels. In assigning single borrower ratings, Moody's also considers a range of qualitative issues as well as the transaction's structural and legal aspects. The credit risk of commercial real estate loans is determined primarily by two factors: 1) the probability of default, which is largely driven by the DSCR, and 2) the severity of loss in the event of default, which is largely driven by the LTV of the underlying loan. The Moody's first mortgage DSCR is 2.62X based on in-place loan terms and the Moody's first mortgage stressed DSCR is 1.06X based on a 9.25% constant. The Moody's LTV ratio for the first mortgage balance is 97.8%. With respect to loan level diversity, the pool's property level Herfindahl score is 106.3. Notable strengths of the transaction include: Credit tenancy, granular tenant roster, limited lease roll over, and recession resistant industry profile. Notable concerns of the transaction include: Potentially limited alternative property uses, average property age, certain industry specific challenges, interest only loan profile, and credit negative legal considerations. The principal methodology used in rating all classes except interest-only classes was "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in May 2020. Moody's approach for single borrower and large loan multi-borrower transactions evaluates credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from its Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, and property type. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. Moody's analysis considers the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. 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 may indicate that the collateral's credit quality is stronger or weaker than Moody's had previously anticipated. Factors that may cause an upgrade of the ratings include significant loan pay downs or amortization, an increase in the pool's share of defeasance or overall improved pool performance. Factors that may cause a downgrade of the ratings include a decline in the overall performance of the pool, loan concentration, increased expected losses from specially serviced and troubled loans or interest shortfalls. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of commercial real estate from the collapse in U.S. economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. DBUBS 2011-LC1: Moody's Affirms B2 Rating on Class G Certs ---------------------------------------------------------- Moody's Investors Service has affirmed the ratings on nine classes in DBUBS 2011-LC1 Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2011-LC1 as follows: Cl. A-3, Affirmed Aaa (sf); previously on Mar 12, 2019 Affirmed Aaa (sf) Cl. B, Affirmed Aaa (sf); previously on Mar 12, 2019 Affirmed Aaa (sf) Cl. C, Affirmed Aaa (sf); previously on Mar 12, 2019 Upgraded to Aaa (sf) Cl. D, Affirmed Aa2 (sf); previously on Mar 12, 2019 Upgraded to Aa2 (sf) Cl. E, Affirmed Baa2 (sf); previously on Mar 12, 2019 Affirmed Baa2 (sf) Cl. F, Affirmed Ba1 (sf); previously on Mar 12, 2019 Affirmed Ba1 (sf) Cl. G, Affirmed B2 (sf); previously on Mar 12, 2019 Affirmed B2 (sf) Cl. X-A*, Affirmed Aaa (sf); previously on Mar 12, 2019 Affirmed Aaa (sf) Cl. X-B*, Affirmed Ba3 (sf); previously on Mar 12, 2019 Affirmed Ba3 (sf) * Reflects interest-only classes 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 two IO classes were affirmed based on the credit quality of the referenced classes. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of commercial real estate from the collapse in US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties. Moody's rating action reflects a base expected loss of 3.3% of the current pooled balance, compared to 1.1% at Moody's last review. Moody's base expected loss plus realized losses is now 0.9% of the original pooled balance, compared to 0.5% 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 all classes except interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020. DEAL PERFORMANCE As of the July 10, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 72% to $606 million from $2.18 million at securitization. The certificates are collateralized by 18 mortgage loans ranging in size from less than 1% to 32% of the pool. One loan, constituting 32% of the pool, has an investment-grade structured credit assessment. Five loans, constituting 10% 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 five, compared to a Herf of seven at Moody's last review. As of the July 2020 remittance report, loans representing 85% were current or within their grace period on their debt service payments and 15% were 90+ days delinquent and in special servicing. Three loans, constituting 27% 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. The largest specially serviced loan is the Marriott Crystal Gateway Loan ($90.4 million -- 14.9% of the pool), which is secured by a 697-room, full-service hotel located in the Crystal City area of Arlington County, Virginia. Hotel amenities include 11 meeting rooms containing approximately 33,355 square feet, indoor/outdoor heated pools, fitness center, business center, and concierge lounge. The loan transferred to special servicing in June 2020 due to payment default as a result of the coronavirus outbreak. The borrower has requested a forbearance, and the loan is past due for the April 2020 payment. Moody's received full year 2019 operating results for 100% of the pool and partial year 2020 operating results for 95% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 108%, compared to 95% 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 27% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.8%. Moody's actual and stressed conduit DSCRs are 1.11X and 1.04X, respectively, compared to 1.27X and 1.14X 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 Kenwood Towne Centre Loan ($196.2 million -- 32.4% of the pool), which is secured by a super-regional mall located in Cincinnati, Ohio. The mall contains approximately 1.16 million SF, of which 756,412 SF serves as collateral for the loan. Anchor tenants include Macy's (non-collateral), Dillard's and Nordstrom (non-collateral). As of March 2020, the mall was 97% leased, with inline space 91% leased, compared to 98% for the mall and 95% for the in-line space in September 2017. The March 2020 running twelve month comparable in-line sales (tenants with less than 10,000 SF) were $869 PSF, compared to $816 in September 2018. Excluding Apple, the same comparable in-line sales were $627 PSF in March 2020 compared to $592 PSF in September 2018. Moody's structured credit assessment and stressed DSCR are a1 (sca.pd) and 1.59X, respectively. The top three conduit loans represent 29% of the pool balance. The largest loan is the 1200 K Street Loan ($118.1 million -- 19.5% of the pool), which is secured by a 389,561 SF, Class A office building located within the East End submarket of Washington, DC. The property offers twelve stories of rentable space retrofitted for single tenant use. Pension Benefit Guaranty Corporation leases over 97% of the NRA and has occupied the building since its development. The tenant recently renewed its lease for one year until May 31, 2021. Starting in September 2015, excess cash was swept into the Cash Flow Sweep Reserve Account until the reserve reached its aggregate amount of $13.1 million. Due to the single tenant concentration and heightened risk of the near-term lease expiration, Moody's valuation reflects a lit/dark analysis. Moody's LTV and stressed DSCR are 135% and 0.72X, respectively, compared to 121% and 0.81X at the last review. The second largest loan is the Westgate I Corporate Center Loan ($37.2 million -- 6.1% of the pool), which is secured by a 230,518 SF office building located in Basking Ridge, New Jersey. The property is fully leased to Everest Reinsurance as their US headquarters. The loan is cash managed and cash trapped as Everest did not exercise its lease renewal / extension by 2018 and was planning on relocating to a different property at the end of 2020, but the tenant is anticipating the need to extend their current lease due to the pandemic. The borrower is fully marketing the property. Moody's LTV and stressed DSCR are 109% and 0.97X, respectively, compared to 91% and 1.15X at the last review. The third largest loan is the Bell Towne Center Loan ($21.6 million -- 3.6% of the pool), which is secured by an anchored retail property anchored by a non-collateral Target. The property was 97% leased as of December 2019. The property re-opened in May after closing for COVID-19 related reasons. Moody's LTV and stressed DSCR are 96% and 1.09X, respectively, compared to 86% and 1.18X at the last review. FINANCE OF AMERICA 2020-HB2: DBRS Finalizes BB Rating on M4 Notes ----------------------------------------------------------------- DBRS, Inc. finalized its provisional ratings on the following Asset-Backed Notes issued by Finance of America HECM Buyout 2020-HB2: -- $495.9 million Class A at AAA (sf) -- $31.9 million Class M1 at AA (sf) -- $28.0 million Class M2 at A (sf) -- $19.6 million Class M3 at BBB (sf) -- $16.1 million Class M4 at BB (sf) -- $2.7 million Class M5 at BB (low) (sf) The AAA (sf) rating reflects 16.54% of credit enhancement. The AA (sf), A (sf), BBB (sf), BB (sf), and BB (low) (sf) ratings reflect 11.17%, 6.46%, 3.30%, 0.47%, and 0.00% of credit enhancement, respectively. Other than the specified classes above, DBRS Morningstar did not rate any other classes in this transaction. Lenders typically offer reverse mortgage loans to people who are at least 62 years old. Through reverse mortgage loans, borrowers have access to home equity through a lump sum amount or a stream of payments without periodically repaying principal or interest, allowing the loan balance to accumulate over a period of time until a maturity event occurs. Loan repayment is required (1) if the borrower dies, (2) if the borrower sells the related residence, (3) if the borrower no longer occupies the related residence for a period (usually a year), (4) if it is no longer the borrower's primary residence, (5) if a tax or insurance default occurs, or (6) if the borrower fails to properly maintain the related residence. In addition, borrowers must be current on any homeowners association dues if applicable. Reverse mortgages are typically nonrecourse; borrowers don't have to provide additional assets in cases where the outstanding loan amount exceeds the property's value (the crossover point). As a result, liquidation proceeds will fall below the loan amount in cases where the outstanding balance reaches the crossover point, contributing to higher loss severities for these loans. As of the May 31, 2020, cut-off date, the collateral has approximately $594.2 million in unpaid principal balance (UPB) from 2,614 performing and nonperforming home equity conversion mortgage (HECM) reverse mortgage loans secured by first liens typically on single-family residential properties, condominiums, multifamily (two- to four-family) properties, manufactured homes, and planned unit developments. The loans were originated between May 2005 and December 2019. Of the total loans, 1,949 have a fixed interest rate (77.1% of the balance), with a 4.97% weighted-average coupon (WAC). The remaining 665 loans have floating-rate interest (22.9% of the balance) with a 3.95 % WAC, bringing the entire collateral pool to a 4.74% WAC. As of the cut-off date, the loans in this transaction are both performing and nonperforming (i.e., inactive) loans. There are 1,131 performing loans comprising 49.26% of the total UPB. As for the nonperforming loans, there are 574 loans that are referred for foreclosure (20.67% of the balance), 105 are in bankruptcy status (3.83%), 231 are called due following recent maturity (8.91%), 178 are real estate owned (5.59%), one is referred (0.02%), and the remaining 394 (11.72%) are in default. However, all these loans are insured by the United States Department of Housing and Urban Development (HUD), which mitigates losses compared with uninsured loans. Because the insurance supplements the home value, the industry metric for this collateral is not the loan-to-value ratio (LTV) but rather the WA effective LTV adjusted for HUD insurance, which is 53.65% for the loans in this pool. To calculate the WA LTV, DBRS Morningstar divides the UPB by the maximum claim amount and the asset value. The transaction uses a sequential structure. No subordinate note shall receive any principal payments until the senior notes (the Class A Notes) have been reduced to zero. This structure provides credit enhancement in the form of subordinate classes and reduces the effect of realized losses. These features increase the likelihood that holders of the most senior class of notes will receive regular distributions of interest and/or principal. All note classes have available funds caps. Notes: All figures are in U.S. dollars unless otherwise noted. FLAGSHIP CREDIT 2020-3: 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 2020-3 (the Issuer): -- $146,470,000 Class A Notes at AAA (sf) -- $19,010,000 Class B Notes at AA (sf) -- $26,440,000 Class C Notes at A (sf) -- $11,700,000 Class D Notes at BBB (sf) -- $10,120,000 Class E Notes at BB (sf) The provisional ratings are based on DBRS Morningstar's review 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 account, and excess spread. Credit enhancement levels are sufficient to support the DBRS Morningstar-projected cumulative net loss (CNL) assumption under various stress scenarios. (2) DBRS Morningstar's projected losses include the assessment of the impact of the Coronavirus Disease (COVID-19) pandemic. While considerable uncertainty remains with respect to the intensity and duration of the shock, the DBRS Morningstar-projected CNL includes an assessment of the expected impact on consumer behavior. The DBRS Morningstar CNL assumption is 12.75% based on the expected Cut-Off Date pool composition. (3) The Transaction's assumptions consider DBRS Morningstar's set of macroeconomic scenarios for select economies related to the coronavirus, available in its commentary "Global Macroeconomic Scenarios: July Update," published on July 22, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which were last updated on July 22, 2020, and are reflected in DBRS Morningstar's rating analysis. The assumptions also take into consideration observed performance during the 2008–09 financial crisis and the possible impact of the stimulus from the Coronavirus Aid, Relief, and Economic Security Act. The assumptions consider the moderate macroeconomic scenario outlined in the commentary (the moderate scenario serving as the primary anchor for current ratings). The moderate scenario assumes some success in containment of the coronavirus within Q2 2020 and a gradual relaxation of restrictions, enabling most economies to begin a gradual economic recovery in Q3 2020. (4) The consistent operational history of Flagship Credit Acceptance LLC (Flagship or the Company) 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. (5) The capabilities of Flagship with regard to originations, underwriting, and servicing. -- DBRS Morningstar 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. (6) DBRS Morningstar exclusively used the static pool approach because Flagship has enough data to generate a sufficient amount of static pool projected losses. -- DBRS Morningstar was conservative in the loss forecast analysis performed on the static pool data. (7) The Company indicated that it may be subject to various consumer claims and litigation seeking damages and statutory penalties. Some litigation against Flagship could take the form of class-action complaints by consumers; however, the Company indicated that there is no material pending or threatened litigation. (8) The legal structure and presence of legal opinions that will address the true sale of the assets to the Issuer, the nonconsolidation of the special-purpose vehicle with Flagship, that the trust has a valid first-priority security interest in the assets, and the consistency with DBRS Morningstar's "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 36.40% of initial hard credit enhancement provided by subordinated notes in the pool (29.90%), the reserve account (1.50%), and OC (5.00%). The ratings on the Class B, Class C, Class D, and Class E Notes reflect 27.95%, 16.20%, 11.00%, and 6.50% of initial hard credit enhancement, respectively. Additional credit support may be provided from excess spread available in the structure. Notes: All figures are in U.S. dollars unless otherwise noted. FREDDIE MAC 2020-HQA3: Moody's Gives 'Ba1' Ratings on 10 Tranches ----------------------------------------------------------------- Moody's Investors Service has assigned definitive ratings to 23 classes of credit risk transfer notes issued by Freddie Mac STACR REMIC 2020-HQA3. The ratings range from A3 (sf) to Ba1 (sf). Freddie Mac STACR REMIC 2020-HQA3 is the third transaction of 2020 in the HQA series issued by the Federal Home Loan Mortgage Corporation to share the credit risk on a reference pool of mortgages with the capital markets. The transaction is structured as a real estate mortgage investment conduit. The notes in STACR 2020-HQA3 receive principal payments as the loans in the reference pool amortize or prepay. Principal payments to the notes are paid from assets in the trust account established from proceeds of the notes issuance. Interest payments to the notes are paid from a combination of investment income from trust assets, an asset of the trust known as the interest-only Q-REMIC interest, and Freddie Mac. Freddie Mac is responsible to cover (1) any interest owed on the notes not covered by the investment income from the trust assets and the yield on the IO Q-REMIC interest and (2) to reimburse the trust for any investment losses from sales of the trust assets. Investors have no recourse to the underlying reference pool. The credit risk exposure of the notes depends on the actual realized losses and modification losses incurred by the reference pool. Freddie Mac is obligated to pay off the notes in July 2050 if any balances remain outstanding. The complete rating actions are as follows: Issuer: Freddie Mac STACR REMIC 2020-HQA3 Cl. M-1, Assigned A3 (sf) Cl. M-2, Assigned Baa3 (sf) Cl. M-2A, Assigned Baa3 (sf) Cl. M-2AI*, Assigned Baa3 (sf) Cl. M-2AR, Assigned Baa3 (sf) Cl. M-2AS, Assigned Baa3 (sf) Cl. M-2AT, Assigned Baa3 (sf) Cl. M-2AU, Assigned Baa3 (sf) Cl. M-2B, Assigned Ba1 (sf) Cl. M-2BI*, Assigned Ba1 (sf) Cl. M-2BR, Assigned Ba1 (sf) Cl. M-2BS, Assigned Ba1 (sf) Cl. M-2BT, Assigned Ba1 (sf) Cl. M-2BU, Assigned Ba1 (sf) Cl. M-2I*, Assigned Baa3 (sf) Cl. M-2R, Assigned Baa3 (sf) Cl. M-2RB, Assigned Ba1 (sf) Cl. M-2S, Assigned Baa3 (sf) Cl. M-2SB, Assigned Ba1 (sf) Cl. M-2T, Assigned Baa3 (sf) Cl. M-2TB, Assigned Ba1 (sf) Cl. M-2U, Assigned Baa3 (sf) Cl. M-2UB, Assigned Ba1 (sf) *Reflects Interest-Only Classes RATINGS RATIONALE Summary Credit Analysis and Rating Rationale Moody's expected loss for this pool in a baseline scenario-mean is 1.00%, in a baseline scenario-median is 0.76%, and reaches 5.55% at a stress level consistent with its Aaa ratings. Moody's calculated losses on the pool using its US Moody's Individual Loan Analysis GSE model based on the loan-level collateral information as of the cut-off date. Loan-level adjustments to the model results included, but were not limited to, qualitative adjustments for origination quality and third-party review scope. Its analysis has considered the effect of the COVID-19 outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of mortgage loans. Specifically, for US RMBS, loan performance will weaken due to the unprecedented spike in the unemployment rate, which may limit borrowers' income and their ability to service debt. The softening of the housing market will reduce recoveries on defaulted loans, also a credit negative. Furthermore, borrower assistance programs, such as forbearance, may adversely impact scheduled cash flows to bondholders. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of US RMBS from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. The contraction in economic activity in the second quarter was severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's increased its model-derived median expected losses by 15% (12.19% for the mean) and its Aaa losses by 5% to reflect the likely performance deterioration resulting from of a slowdown in US economic activity in 2020 due to the COVID-19 outbreak. Moody's regards the COVID-19 outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Servicing practices, including tracking COVID-19-related loss mitigation activities, may vary among servicers in the transaction. These inconsistencies could impact reported collateral performance and affect the timing of any breach of performance triggers and the amount of modification losses. Moody's may infer and extrapolate from the information provided based on this or other transactions or industry information, or make stressed assumptions. Collateral Description The reference pool consists of over one-hundred eighteen thousand prime, fixed-rate, one- to four-unit, first-lien conforming mortgage loans acquired by Freddie Mac. The loans were originated on or after January 1, 2015 with a weighted average seasoning of eight months. Each of the loans in the reference pool had a loan-to-value ratio at origination that was greater than 80% and less than or equal to 97%. 13.6% of the pool are loans underwritten through Freddie Mac's Home Possible program and 98.7% of loans in the pool are covered by mortgage insurance as of the cut-off date. Aggregation/Origination Quality Moody's considers Freddie Mac's overall seller management and aggregation practices to be adequate and it did not apply a separate loss-level adjustment for aggregation quality. Underwriting Freddie Mac uses a delegated underwriting process to purchase loans. Sellers are required to represent and warrant that loans are made in accordance with negotiated terms or Freddie Mac's guide. Numerous checks in the selling system ensures that loans with the correct characteristics are delivered to Freddie Mac. Sellers are required to cure, make an indemnification payment or repurchase the loans if a material underwriting defect is discovered subject to certain limits. In certain cases, Freddie Mac may elect to waive the enforcements of the repurchase if an alternative such as an indemnification payment is provided. Quality control Freddie Mac monitors each seller's risk exposure both on an aggregated basis as well as by product lines. A surveillance team reviews sellers' financials at least on an annual basis, monitors exposure limits, risk ratings, lenders QC reports and internal audit results and may adjust credit limits, require additional loan/operational reviews or put the seller on a watch list, as needed. Home Possible loans: Approximately 13.6% of the loans by Cut-off Date Balance were originated under the Home Possible program. The program is designed to make responsible homeownership accessible to low- to moderate-income homebuyers, by requiring low down payments, lower risk-adjusted pricing, flexibility in sources of income, and, in certain circumstances, lower than standard mortgage insurance coverage. Home Possible loans in STACR 2020-HQA3's reference pool have a WA FICO of 745 and WA LTV of 93.8%, versus a WA FICO of 753 and a WA LTV of 91.3% for the rest of the loans in the pool. While its MILAN model takes into account characteristics listed on the loan tape, such as lower FICOs and higher LTVs, there may be risks not captured by its model due to less stringent underwriting, including allowing more flexible sources of funds for down payment and lower risk-adjusted pricing. Moody's applied an adjustment to the loss levels to address the additional risks that Home Possible loans may add to the reference pool. Enhanced Relief Refinance The ERR program is designed to provide refinance opportunities to borrowers with existing Freddie Mac's mortgage loans who are current on their mortgage payments but whose LTV ratios exceed the maximum permitted for standard refinance products. The program is intended to offer refinance opportunities to borrowers so they can reduce their monthly payment. STACR 2020-HQA3's reference pool does not include ERR loans at closing, however, transaction documents allow for the replacement of loans in the reference pool with ERR loans in the future. The replacement will not constitute a prepayment on the replaced loan, credit event or a modification event. At closing, Moody's did not make any adjustment to its collateral losses due to the existence of the ERR program. Moody's believes the programs are beneficial for loans in the pool, especially during an economic downturn when limited refinancing opportunities would be available to borrowers with low or negative equity in their properties. However, since such refinanced loans are likely to have later maturities and slower prepayment rates than the rest of the loans, the reference pool is at risk of having a high concentration of high LTV loans at the tail of the transaction's life. Moody's will monitor ERR loans in the reference pool and may make an adjustment in the future if the percentage of them becomes significant after closing. Servicing arrangement As master servicer, Freddie Mac has strong servicer oversight and monitoring processes. Generally, Freddie Mac does not itself conduct servicing activities. When a mortgage loan is sold to Freddie Mac, the seller enters into an agreement to service the mortgage loan for Freddie Mac in accordance with a comprehensive servicing guide for servicers to follow. Freddie Mac monitors primary servicer performance and compliance through its Servicer Success Program, scorecard and servicing quality assurance group. Freddie Mac also reviews individual loan files to identify servicing performance gaps and trends. Moody's considers the servicing arrangement to be adequate and it did not make any adjustments to its loss levels based on Freddie Mac's servicer management. Third-party Review Moody's considers the scope of the TPR based on Freddie Mac's acquisition and QC framework to be adequate. Moody's assessed an adjustment to loss at a Aaa stress level due to lack of compliance review on TILA-RESPA Integrated Disclosure violations. The results and scope of the pre-securitization third-party, loan-level review (due diligence) suggest a heavier reliance on sellers' representations and warranties compared with private label securitizations. The scope of the TPR, for example, is weaker because the sample size is small (only 0.39% of the loans in reference pool are included in the sample). To the extent that the TPR firm classifies certain credit or valuation discrepancies as 'findings', Freddie Mac will review and may provide rebuttals to those findings, which could result in the change of event grades by the review firm. The third-party due diligence scope focuses on the following: Compliance: The diligence firm reviewed 333 loans for compliance with federal, state and local high cost Home Ownership and Equity Protection Act (HOEPA) regulations (297 loans were reviewed for compliance plus 36 loans were reviewed for both credit/valuation and compliance). None were deemed to be noncompliant. Appraisals: The third-party diligence provider also reviewed property valuation on 999 loans in the sample pool (963 loans were reviewed for credit/valuation plus 36 loans were reviewed for both credit/valuation and compliance). Seven loans received final valuation grades of "C". The third-party diligence provider was not able to obtain property appraisal risk reviews on 1 mortgage loan due to properties located in Guam. The remaining 6 loans had Appraisal Desktop with Inspections which did not support the original appraised value within the 10% tolerance. Credit: The third-party diligence provider reviewed credit on 999 loans in the sample pool. Five loans had final grades of "D" and six loans had final grades of "C" due to underwriting defects. These loans were removed from the reference pool. The results were consistent with prior STACR transactions Moody's rated. Data integrity: The third-party review firm analyzed the sample pool for data calculation and comparison to the imaged file documents. The review revealed 74 data discrepancies on 67 loans, with 26 discrepancies related to DTI and 13 discrepancies related to first time home buyers. Unlike private label RMBS transactions, a review of TRID violation was not part of Freddie Mac's due diligence scope. A lack of transparency regarding how many loans in the transaction contain material violations of the TRID rule is a credit negative. However, since Moody's expects overall losses on STACR transactions owing to TRID violations to be fairly minimal, it only made a slight qualitative adjustment to losses under a Aaa scenario. Furthermore, lender R&Ws and the GSEs' ability to remove defective loans from the transactions will likely mitigate some of aforementioned concerns. Reps & Warranties Framework Freddie Mac is not providing loan level (R&Ws for this transaction because the notes are a direct obligation of Freddie Mac. The reference obligations are subject to R&Ws made by the sellers. As such, Freddie Mac commands robust R&Ws from its seller/servicers pertaining to all facets of the loan, including but not limited to compliance with laws, compliance with all underwriting guidelines, enforceability, good property condition and appraisal procedures. Freddie Mac will be responsible for enforcing the R&Ws made by the sellers/lenders in the reference pool. To the extent that Freddie Mac discovers a confirmed underwriting defect or a major servicing defect, the respective loan will be removed from the reference pool. Since Freddie Mac retains a significant portion of the risk in the transaction, it will likely take necessary steps to address any breaches of R&Ws. For example, Freddie Mac undertakes quality control reviews and servicing quality assurance reviews of small samples of the mortgage loans that sellers deliver to Freddie Mac. These processes are intended to determine, among other things, the accuracy of the R&Ws made by the sellers in respect of the mortgage loans that are sold to Freddie Mac. Moody's made no adjustments to the transaction regarding the R&W framework. The Notes Moody's refers to the M-1, M-2A, M-2B, B-1A, B-1B, B-2A and B-2B notes as the original notes, and the M-2, M-2R, M-2S, M-2T, M-2U, M-2I, M-2AR, M-2AS, M-2AT, M-2AU, M-2AI, M-2BR, M-2BS, M-2BT, M-2BU, M-2BI, M-2RB, M-2SB, M-2TB, M-2UB, B-1, B-2, B-1AR, B-1AI, B-2AR and B-2AI notes as the Modifiable and Combinable REMICs notes. The M-2 notes can be exchanged for M-2A and M-2B notes, M-2R and M-2I notes, M-2S and M-2I, M-2T and M-2I, and M-2U and M-2I notes. The M-2A notes can be exchanged for M-2AR and M-2AI notes, M-2AS and M-2AI notes, M-2AT and M-2AI, and M-2AU and M-2AI notes. The M-2B notes can be exchanged for M-2BR and M-2BI notes, M-2BS and M-2BI notes, M-2BT and M-2BI notes, and M-2BU and M-2BI notes. Classes M-2I , M-2AI, M-2BI, B-1AI and B-2AI are interest only tranches referencing to the notional balances of Classes M-2, M-2A, M-2B, B-1A and B-2A, respectively. Classes M-2RB, M-2SB, M-2TB and M-2UB are each an exchangeable for two classes that are initially offered at closing. Its ratings of M-2RB, M-2SB, M-2TB and M-2UB reference the rating of Class M-2B only, disregarding the rating of M-2AI. This is the case because Class M-2AI's cash flow represents an insignificant portion of the overall promise. In the event Class M-2B gets written down through losses and Class M-2AI is still outstanding, Moody's would continue to rate Classes M-2RB, M-2SB, M-2TB and M-2UB consistent with Class M-2B's last outstanding rating so long as Classes M-2RB, M-2SB, M-2TB and M-2UB are still outstanding. Transaction Structure Credit enhancement in this transaction is comprised of subordination provided by mezzanine and junior tranches. Realized losses are allocated in a reverse sequential order starting with the Class B-3H reference tranche. Interest due on the notes is determined by the outstanding principal balance and the interest rate of the notes. The interest payment amount is the interest accrual amount of a class of notes minus any modification loss amount allocated to such class on each payment date, plus any modification gain amount. The modification loss and gain amounts are calculated by taking the respective positive and negative difference between the original accrual rate of the loans, multiplied by the unpaid balance of the loans, and the current accrual rate of the loans, multiplied by the interest-bearing unpaid balance. So long as the senior reference tranche is outstanding, and no performance trigger event occurs, the transaction structure allocates principal payments on a pro-rata basis between the senior and non-senior reference tranches. Principal is then allocated sequentially amongst the non-senior tranches. The STACR 2020-HQA3 transaction allows for principal distribution to subordinate notes by the supplemental subordinate reduction amount even if performance triggers fail. The supplemental subordinate reduction amount equals the excess of the offered reference tranche percentage over 6.15%. The distribution of the supplemental subordinated reduction amount would reduce principal balances of the offered reference tranche and correspondingly limit the credit enhancement of class A note to be always below 6.15% plus the note balance of B-3H. This feature is beneficial to the offered certificates. Credit Events and Modification Events Reference tranche write-downs occur as a result of loan level credit events. A credit event with respect to any loan means any of the following events: (i) a short sale with respect to the related mortgaged property is settled, (ii) a related seriously delinquent mortgage note is sold prior to foreclosure, (iii) the mortgaged property that secured the related mortgage note is sold to a third party at a foreclosure sale, (iv) an REO disposition occurs, or (v) the related mortgage note is charged-off. As a result, the frequency of credit events will be the same as actual loan default frequency, and losses will impact the notes similar to that of a typical RMBS deal. Loans that experience credit events that are subsequently found to have an underwriting defect, a major servicing defect or are deemed ineligible will be subject to a reverse credit event. Reference tranche balances will be written up for all reverse credit events in sequential order, beginning with the most senior tranche that has been subject to a previous write-down. In addition, the amount of the tranche write-up will be treated as an additional principal recovery, and will be paid to noteholders in accordance with the cash flow waterfall. If a loan experiences a forbearance or mortgage rate modification, the difference between the original mortgage rate and the current mortgage rate will be allocated to the reference tranches as a modification loss. The Class B-3H reference tranche, which represents 0.25% of the pool, will absorb modification losses first. The final coupons on the notes will have an impact on the amount of interest available to absorb modification losses from the reference pool. Tail Risk Similar to prior STACR transactions, the initial subordination level of 4% is lower than the deal's minimum credit enhancement trigger level of 4.50%. The transaction begins by failing the minimum credit enhancement test, leaving the subordinate tranches locked out of unscheduled principal payments until the deal builds an additional 0.50% subordination. STACR 2020-HQA3 does not have a subordination floor. This is mitigated by the sequential principal payment structure of the deal, which ensures that the credit enhancement of the subordinate tranches is not eroded early in the life of the transaction. 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 rating all classes except interest-only classes was "Moody's Approach to Rating US RMBS Using the MILAN Framework" published in April 2020. FREED ABS 2020-3FP: DBRS Confirms BB(low) Rating on Class C Notes ----------------------------------------------------------------- DBRS, Inc. confirmed its provisional ratings on the following classes of notes (the Notes) to be issued by FREED ABS Trust 2020-3FP (the Issuer), originally assigned on July 16, 2020. The confirmations are in conjunction with DBRS Morningstar's "Global Macroeconomic Scenarios: July Update" published on July 22, 2020: -- $114,720,000 Class A Notes at A (high) (sf) -- $44,680,000 Class B Notes at A (low) (sf) -- $38,650,000 Class C Notes at BB (low) (sf) The transaction's assumptions consider DBRS Morningstar's set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary "Global Macroeconomic Scenarios: July Update." DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which were last updated on July 22, 2020, and are reflected in DBRS Morningstar's rating analysis. Despite the update to the moderate scenario, no changes were made to DBRS Morningstar's assumptions for the transaction. DBRS Morningstar maintains its expected cumulative net loss assumption as it was based on various factors and considerations consistent with the revised macroeconomic assumptions put forth in the update to the moderate scenario. Notes: All figures are in U.S dollars unless otherwise noted. GS MORTGAGE 2018-SRP5: S&P Cuts Rating on Class C Certs to BB- (sf) ------------------------------------------------------------------- S&P Global Ratings lowered its ratings on five classes of commercial mortgage pass-through certificates from GS Mortgage Securities Corp. Trust 2018-SRP5, a U.S. CMBS transaction. At the same time, S&P withdrew its 'BBB- (sf)' ratings on the class X-CP and X-FP interest only (IO) certificates from the same transaction. All ratings were removed from CreditWatch, where they were placed with negative implications on May 6, 2020. This is a stand-alone (single-borrower) transaction backed by a floating-rate IO mortgage loan secured by the borrowers' fee simple and/or leasehold interests in five enclosed regional malls totaling 5.9 million sq. ft. (of which 3.7 million sq. ft. is collateral) located in California, Ohio, and Washington. RATING ACTIONS S&P Global Ratings had placed its ratings on CreditWatch because of its concern regarding COVID-19's potential impact on the performance of the Starwood Regional Mall Portfolio (comprising five regional malls) securing the loan backing the stand-alone transaction, as well as on the retail sector overall, along with the related uncertainty about the duration of the demand interruption. The downgrades on classes A, B, C, and D reflect S&P Global Ratings' reevaluation of the portfolio. S&P Global Ratings' expected-case valuation, in aggregate, has declined 27.1% since issuance, driven largely by the application of higher S&P Global Ratings capitalization rates on the five malls, which the rating agency believes better captures the challenges now facing the malls and the sector. It also applied a lower S&P Global Ratings sustainable net cash flow (NCF), in aggregate, which was down 12.4% from issuance and 5.4% from the servicer-reported 2019 NCF, to account for the year-over-year declines in servicer-reported net operating income (NOI). S&P Global Ratings expects further declines in overall performance to continue due to the COVID-19 pandemic. "Using the S&P Global Ratings sustainable NCF, in aggregate, of $55.4 million and applying a weighted average capitalization rate of 9.16% (up from 7.62% at issuance), we arrived at an S&P Global Ratings expected case value, in aggregate, of $600.0 million ($161 per sq. ft.) and a loan-to-value (LTV) ratio of 91.5%, versus 66.7% at issuance," the rating agency said. The S&P Global Ratings debt service coverage (DSC) was 1.84x (using the 3.0% one-month LIBOR cap rate and interest rate spread), versus 2.08x at issuance. In addition, S&P Global Ratings considered that the loan, which has a 60-plus-days delinquent payment status, was transferred to special servicing on June 3, 2020, because the borrower requested COVID-19 forbearance relief (details below). The borrower is currently delinquent on its May, June, and July 2020 debt service payments. Further, based on information provided by KeyBank Real Estate Capital, as special servicer, S&P Global Ratings noted a steady decline in the quarterly appraisal values for the collateral properties. S&P Global Ratings tempered its downgrades on classes A, B, C, and D, even though the model-indicated ratings were lower than the classes' current rating levels. This is because S&P Global Ratings' weighted qualitative considerations, such as the classes' relative positions in the waterfall, the significant market value declines that would be needed before these classes experience losses, liquidity support provided in the form of servicer advancing, and the possibility that some or all of the five malls stabilize and perform better than expected by the loan's fully extended maturity date in August 2023. The malls are currently open, and it is S&P Global Ratings' understanding that the borrower and KeyBank are working on finalizing a forbearance agreement, with terms that include bringing the loan current, extending the loan's 2021 maturity to 2023, and reserving six months of debt service. The master servicer, Wells Fargo Bank N.A., reported a 2.38x DSC for the three months ended March 31, 2020, compared with 2.28x as of year-end 2019. "We lowered our rating on the class X-NCP interest-only (IO) certificates based on our criteria for rating IO securities, in which the rating would not be higher than the lowest-rated reference class. The notional amount of class X-NCP references classes A, B, C, and D," S&P Global Ratings said. "We withdrew our 'BBB- (sf)' ratings on the class X-CP and X-FP IO certificates because, according to the transaction documents, their pass-through rates were 0.0% after the December 2019 distribution date and they are not currently accruing interest or entitled to distributions," the rating agency said. PROPERTY-LEVEL ANALYSIS S&P Global Ratings' property-level analysis considered the portfolio's declining occupancy and declining servicer-reported NOI: (1.5)% in 2017, (8.8)% in 2018, and (6.6)% in 2019, which it attributes to lower base rent income from an overall higher vacancy. In addition, S&P Global Ratings considered the increased tenant bankruptcies and store closures, as well as the recent low billed rent collection rates, due to COVID-19. To account for these risks, the rating agency increased its lost rent assumptions and excluded income from those tenants who are no longer listed on the respective mall directory websites, or those that have filed for bankruptcy protection or announced store closures. Details on each of the five regional malls are as follows: Plaza West Covina ($152.3 million allocated loan amount [ALA]) A 1.2 million-sq.-ft. (of which 667,814 sq. ft. is collateral) regional mall in West Covina (Los Angeles), Calif., anchored by J.C. Penney (210,274 sq. ft.; noncollateral), Macy's (180,000 sq. ft.; noncollateral), and an anchor space formerly occupied by Sears (137,820 sq. ft.; noncollateral). KeyBank reported an 84.2% occupancy for the mall as of June 2020, down from 97.9% in 2019. The servicer-reported NOI declined by (2.8)% in 2017, (2.9)% in 2018, and (12.0)% in 2019. According to the December 2019 rent roll, the five largest tenants make up 25.9% of the collateral net rentable area (NRA). In addition, the NRA includes leases that expire in 2020 (9.8%), 2021 (18.6%), 2022 (15.5%), and 2023 (9.1%). It is S&P's understanding from KeyBank that the borrower collected 26.1% of the total billed rent in June 2020. Franklin Park Mall ($126.5 million ALA) A 1.3 million-sq.-ft. (of which 705,503 sq. ft. is collateral) regional mall in Toledo, Ohio, anchored by J.C. Penney (222,990 sq. ft.; noncollateral), Dillard's (192,182 sq. ft.; noncollateral), Macy's (186,621 sq. ft.; noncollateral), Rave Cinemas (83,443 sq. ft.), and Dick's Sporting Goods (75,000 sq. ft.). KeyBank reported a 93.6% occupancy for the mall as of June 2020, down slightly from 95.8% in 2019. The servicer-reported NOI changed by (0.3)% in 2017, (16.1)% in 2018, and 7.3% in 2019. According to the December 2019 rent roll, the five largest tenants make up 33.2% of the collateral NRA. In addition, the NRA includes leases that expire in 2020 (2.0%), 2021 (24.0%), 2022 (6.4%), and 2023 (8.8%). It is S&P's understanding from KeyBank that the borrower collected 31.2% of the total billed rent in June 2020. Parkway Plaza ($116.7 million ALA) A 1.3 million-sq.-ft. (of which 944,728 sq. ft. is collateral) regional mall in El Cajon (San Diego), Calif., anchored by Walmart (160,000 sq. ft.), J.C. Penney (153,047 sq. ft.; ground leased), and Macy's (115,612 sq. ft.; noncollateral). There is also a vacant anchor space formerly occupied by Sears (255,622 sq. ft.; noncollateral). KeyBank reported a 76.4% occupancy for the mall as of June 2020, down slightly from 77.6% in 2019. The servicer-reported NOI declined by (4.9)% in 2017, (4.4)% in 2018, and (9.2)% in 2019. According to the December 2019 rent roll, the five largest tenants make up 52.5% of the collateral NRA. In addition, the NRA includes leases that expire in 2020 (10.1%), 2021 (7.2%), 2022 (20.5%), and 2023 (13.0%). It is S&P's understanding from KeyBank that the borrower collected 35.3% of the total billed rent in June 2020. Capital Mall ($90.8 million ALA) An 804,065-sq.-ft. regional mall in Olympia, Wash., anchored by Macy's (113,190 sq. ft.; ground leased), J.C. Penney (93,481 sq. ft.; ground leased), Dick's Sporting Goods (51,060 sq. ft.), and Century Theatres (45,171 sq. ft.). KeyBank reported a 93.6% occupancy for the mall as of June 2020, up slightly from 91.9% in 2019. The servicer-reported NOI declined by (1.4)% in 2017, (8.3)% in 2018, and (20.8)% in 2019. According to the December 2019 rent roll, the five largest tenants make up 44.0% of the collateral NRA. In addition, the NRA includes leases that expire in 2020 (4.8%), 2021 (9.7%), 2022 (15.4%), and 2023 (20.8%). It is S&P's understanding from KeyBank that the borrower collected 30.4% of the total billed rent in June 2020. Great Northern Mall ($62.7 million ALA) A 1.2 million-sq.-ft. (606,933 sq. ft. is collateral) regional mall in North Olmstead (Cleveland), Ohio, anchored by Macy's (238,261 sq. ft.; noncollateral), Dillard's (214,653 sq. ft.; noncollateral), Sears (179,624 sq. ft.; noncollateral), J.C. Penney (165,428 sq. ft.), and Regal Cinemas (43,955 sq. ft.). KeyBank reported a 96.8% occupancy for the mall as of June 2020, flat from 96.9% in 2019. The servicer-reported NOI changed by 5.1% in 2017, (14.5)% in 2018, and 4.5% in 2019. According to the December 2019 rent roll, the five largest tenants make up 53.6% of the collateral NRA. In addition, the NRA include leases that expire in 2020 (12.5%), 2021 (35.3%), 2022 (5.3%), and 2023 (6.0%). It is S&P's understanding from KeyBank that the borrower collected 20.1% of the total billed rent in June 2020. OTHER CONSIDERATIONS S&P increased its capitalization rate by about 150 basis points (on a weighted average basis) from issuance to account for cash flow volatility due to declining or weakening trends within the retail mall sector, the overall perceived increase in the market risk premium for this property type, vacant and weak anchor and major tenants, market presence, and S&P Global Ratings' calculated in-line sales per sq. ft. and occupancy cost for each property (ranging between $340 per sq. ft. to $440 per sq. ft. and between 12.1% and 14.1%, respectively, using the Dec. 31, 2019 tenant sales reports). According to the July 15, 2020, trustee remittance report, the IO mortgage loan has a trust balance and whole loan balance of $549.0 million, unchanged from issuance. The loan pays a floating rate of per annum weighted average spread of 2.4% over LIBOR and matures on June 9, 2021, subject to two consecutive one-year extension options and a subsequent third extension option of two months and 16 days with a fully extended maturity of Aug. 25, 2023. In addition, there is $252.8 million of unsecured subordinate debt that was funded via a public bond offering in Israel. The debtor for the Israeli debt financing (ILS debt) is a wholly owned entity of the sponsor, Starwood Retail Partners. The trust loan is not cross-defaulted to the ILS debt. It is S&P's understanding from KeyBank that the sponsor has defaulted on the ILS debt, resulting in ongoing litigation. To date, the trust has not incurred any principal losses. S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. "We are using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, we will update our assumptions and estimates accordingly," S&P Global Ratings said. Environmental, social, and governance (ESG) factors relevant to the rating action: -- Health and safety. RATINGS LOWERED GS Mortgage Securities Corporation Trust 2018-SRP5 Commercial mortgage pass-through certificates Rating Class To From A AA- (sf) AAA (sf)/Watch Neg B A- (sf) AA- (sf)/Watch Neg C BB- (sf) A- (sf)/Watch Neg D B- (sf) BBB- (sf)/Watch Neg X-NCP B- (sf) BBB- (sf)/Watch Neg RATINGS WITHDRAWN GS Mortgage Securities Corporation Trust 2018-SRP5 Commercial mortgage pass-through certificates Class To From X-CP NR BBB- (sf)/Watch Neg X-FP NR BBB- (sf)/Watch Neg NR-Not rated. GSCG TRUST 2019-600C: DBRS Gives B(low) Rating on Class G Certs --------------------------------------------------------------- DBRS, Inc. assigned ratings to the Commercial Mortgage Pass-Through Certificates, Series 2019-600C issued by GSCG Trust 2019-600C (the Issuer) as follows: -- Class A at AAA (sf) -- Class B at AAA (sf) -- Class C at AA (sf) -- Class X at A (high) (sf) -- Class D at A (sf) -- Class E at BBB (low) (sf) -- Class F at BB (low) (sf) -- Class G at B (low) (sf) Classes A, B, C, X, and D have Stable trends. Classes E, F, and G have Negative trends because DBRS Morningstar is concerned about the property's exposure to WeWork, which accounts for 51.8% of the asset's net rentable area (NRA). Although there is a long-term lease in place, the company has shuttered many of its facilities since the outbreak of the Coronavirus Disease (COVID-19) pandemic, and an infusion of liquidity from its largest investor, Softbank, failed to materialize. This places the company at increased risk with significantly reduced revenue. The Class X balance is notional. These certificates are currently also rated by DBRS Morningstar's affiliated rating agency, Morningstar Credit Ratings, LLC (MCR). In connection with the ongoing consolidation of DBRS Morningstar and MCR, MCR previously announced that it had placed its outstanding ratings of these certificates Under Review–Analytical Integration Review and that MCR intended to withdraw its outstanding ratings; such withdrawal will occur on or about August 5, 2020. In accordance with MCR's engagement letter covering these certificates, upon withdrawal of MCR's outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings. On March 1, 2020, DBRS Morningstar finalized its "North American Single-Asset/Single-Borrower Ratings Methodology" (the NA SASB Methodology), which presents the criteria for which ratings are assigned to and/or monitored for North American single-asset/single-borrower (NA SASB) transactions, large concentrated pools, rake certificates, ground lease transactions, and credit tenant lease transactions. The subject rating actions are the result of the application of the NA SASB Methodology in conjunction with the "North American CMBS Surveillance Methodology," as applicable. Qualitative adjustments were made to the final loan-to-value (LTV) sizing benchmarks used for this rating analysis. The collateral for the GSCG 2019-600C Mortgage Trust is a $240.0 million first-lien mortgage loan secured by an approximately 359,154-square foot, 20-story, Class A office property with ground-floor retail and a three-level, below-grade parking garage located at 600 California Street in San Francisco. The sponsor, Ark Capital Advisors, LLC (Ark), used the loan proceeds to acquire the property for $322.8 million, or $898 per rentable square foot. Including a transfer tax of approximately 3%, the total purchase price was $332.5 million, or $926 per rentable square foot. The trust loan balance of $240.0 million results in a 74.3% loan-to-purchase price excluding the transfer tax, 72.2% including the transfer tax, and a 64.8% LTV ratio based on the as-stabilized appraised value of the collateral at $370.0 million. Ark is a joint venture among Ivanhoe Cambridge, the Rhone Group, and The We Company, which is the parent of WeWork. The property, which was built in 1991, is in very good condition and was awarded the LEED Gold certification in 2009 and 2016. It has benefited from the prior owner's investment of $8.9 million in capital improvements. The building sports an atrium-style lobby, clad in marble and granite with state-of-the-art systems. Major capital improvements include the full lobby renovation; addition of a new management office, a fitness center, and a bike room; a new roof membrane; and boiler room replacements. In addition, the sponsor's planned capital improvement program includes an additional $11.6 million in elective capital improvements to modernize the building's elevators; add exterior waterproofing to the building; upgrade the building's HVAC system and common area restrooms; and replace the cooling towers. The subject benefits from its desirable location, within the strong and historically stable North Financial District submarket in San Francisco. The Financial District has the highest concentration of Fortune 500 companies occupying space in the San Francisco central business district. The property is situated at the corner of California Street and Kearny Street, bordering the Union Square and Chinatown neighborhoods. The building has good exposure with approximately half-block frontage on California Street, a primary two-way, four-lane major arterial that runs east to west in downtown San Francisco, and a full block of frontage on Kearny Street, which is a primary street that runs north to south through San Francisco. The location affords excellent access to public transportation, with four BART subway lines that stop twice in the Financial District and transport commuters to and from San Francisco and the East Bay. The property exhibits significant tenant concentration, with the three largest tenants—WeWork (51.8% of the NRA); Cardinia Real Estate LLC, a subsidiary of Omnicom Group Inc. (11.6% of the NRA); and Audentes (8.3% of the NRA)—accounting for 71.7% of the NRA. The property has significant exposure to WeWork, whose future remains unclear as it attempts to shed spaces and restructure after its failed initial public offering. Moreover, WeWork will face ongoing challenges resulting from its shutdown during the coronavirus pandemic and the failure of Softbank, its managing member and controlling equity partner to fund additional liquidity as was agreed before the pandemic. Additionally, WeWork, is a subsidiary of The We Company, which is an affiliate of the borrower. However, this concern is mitigated by the organizational arrangement of Ark which is structurally independent of The We Company. Furthermore, none of the leases at the property have termination clauses and the three largest tenants have lease expirations beyond the loan term, with at least one built-in five-year extension option at lease expiration. The DBRS Morningstar net cash flow (NCF) derived at issuance was re-analyzed for the subject rating action to confirm its consistency with the "DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria." The resulting NCF figure was $14.7 million and a cap rate of 6.75% was applied, resulting in a DBRS Morningstar Value of $217.1 million, a variance of -41.3% from the appraised value at issuance of $370.0 million. The DBRS Morningstar Value implies an LTV of 110.6%, as compared with the LTV on the issuance appraised value of 64.8%. The NCF figure applied as part of the analysis represents a -16.1% variance from the Issuer's NCF, primarily driven by leasing costs and vacancy. The cap rate applied is at the lower end of the range of DBRS Morningstar Cap Rate Ranges for Office properties, reflective of the location, market position, and quality. In addition, the 6.75% cap rate applied is above the implied cap rate of 4.72% based on the Issuer's underwritten NCF and appraised value. DBRS Morningstar made positive qualitative adjustments to the final LTV sizing benchmarks used for this rating analysis, totaling 3.0% to account for cash flow volatility, property quality, and market fundamentals. Notes: All figures are in U.S. dollars unless otherwise noted. HAWAIIAN AIRLINES 2020-1: Fitch Rates Class B Certs 'BB+' --------------------------------------------------------- Fitch Ratings has assigned the following ratings to the proposed Hawaiian Airlines 2020-1 Pass Through Trust: -- $216,976,000 class A certificates due September 2027, 'A-'; -- $45,010,000 class B certificates due September 2025, 'BB+'. Hawaiian Airlines intends to raise $261,986,000 in an EETC transaction to finance a pool of eight aircraft. The proceeds of the transaction will be used to shore up Hawaiian's liquidity. The class A certificates will be sized at $217.0 million with a tenor of 7.1 years and a weighted average life of 4.5 years. The class B certificates will be sized at $45.0 million with a tenor of 5.1 years and a WAL of 3.0 years. Collateral Pool: The collateral pool will consist of six Airbus A321-200neo aircraft delivered between May 2018 and August 2019, and two Airbus A330-200 aircraft delivered in April and June of 2013. Fitch considers the A321-200neo to be high-quality tier 1 aircraft. Fitch considers the A330-200 to be a tier 2 aircraft. Liquidity Facility: The class A and B certificates each benefit from an 18-month payment-in-kind feature. The PIK feature offers coverage of three successive semi-annual interest payments. Even though PIK Interest defers delinquent interest payments until the underlying aircraft are remarketed and monetized, Fitch views it as roughly equivalents to the credit protection provided by a typical LF for the senior tranche. However, the PIK feature is less favorable to creditors due to the cash flow implications during the deferred payment period. The inclusion of the PIK feature does negatively weigh on the senior tranche rating outcome. There is also an 'A' rating cap for transactions that feature a PIK. KEY RATING DRIVERS Class A Certificate Ratings: The 'A-' rating for the class A certificates is supported by a solid level of overcollateralization and quality collateral, supporting Fitch's expectations that senior tranche holders should receive full principal recovery prior to default even in a severe stress scenario. The transaction passes Fitch's 'A' level stress test with a maximum stress scenario loan-to-value in the low 90% range, which represents a modest amount of headroom. Ratings for the class A certificates are partly limited by the inclusion of Tier 2 aircraft (A330-200) in the collateral pool and the generally heightened levels of risk involved with aviation due to the coronavirus and its potential impacts on aircraft values. Hawaiian's Issuer Default Rating is also a consideration. Fitch currently rates Hawaiian Holdings, Inc. at 'B+'/Outlook Negative, which is low relative to other airlines. Credit positives for the transaction include a solid level of OC, shorter average life and a relatively small balloon payment. Stress Case: Fitch's stress scenario analysis uses a top-down approach assuming a rejection of the entire pool in a severe global aviation downturn. The analysis incorporates a full draw on the liquidity facility and an assumed repossession/remarketing cost of 5% of the total portfolio value. Fitch then applies haircuts to the collateral value. For the 'A' category stress case Fitch applies a 20% value stress (low end of the stress range) to the A321-200neos and a 35% value stress to the A330-200s. Historically, Fitch has applied a 30% value stress to the A330s but due to recent pressure on widebody aircraft and the likelihood that widebody aircraft are going to be under greater pressure due to the coronavirus, a more conservative estimate was used. The result of Fitch's 'A' level stress test is a maximum LTV in the low 90% range. This represents a comparable level of overcollateralization to other A tranches that Fitch has rated at 'A-'. Class B Certificate Ratings: The rating for the class B certificates is based on the bottom-up approach detailed in Fitch's EETC criteria, which calls for the rating to be notched up from Hawaiian's corporate rating of 'B+'. Subordinated tranches receive notching uplift based on three factors: affirmation factor (0-3 notches for airlines rated in the 'B' category); benefit of a liquidity facility (+1 notch); and recovery prospects in a 'BB' stress scenario (typically 0-1 notches for class B certificates). Fitch assigned a 'BB+' rating to the class B certificates, which represents a three-notch uplift from Hawaiian's IDR of 'B+'. Fitch assigned +2 notch uplift for a moderate-to-high affirmation factor, +1 notch uplift for the benefit of the PIK feature, and no notching for recovery. Affirmation Factor: Fitch considers the affirmation factor for this pool of aircraft to be moderate - high as both the A330-200 and A321-200neo make up a significant portion of Hawaiian's fleet. The eight aircraft in the transaction will make up 16% of Hawaiian's owned fleet making it unlikely that the aircraft in this pool would be rejected in the case of a bankruptcy. The six A321-200neo aircraft represent 38% of Hawaiian's owned A321neo fleet (six of 16). The A321neo is a strong tier 1 aircraft that has been integral to allowing Hawaiian to initiate service to mid-sized routes on the U.S. West Coast that are too small to support service with A330 fleet and broaden service from Maui Hub to key cities on the West Coast. The affirmation factor is also being affected by Hawaiian's plan to bring in 10 Boeing 787-9 "Dreamliner" aircraft with purchase rights for an additional 10 aircraft with scheduled deliveries between 2021 to 2025. These fuel-efficient, long-range aircraft will compete with and is a stronger substitute to existing A330-200 aircraft. Assuming the company was to cut long-haul capacity in the event of a restructuring it would be more likely to reject its leased A330s, since Hawaiian has no equity in those planes and the cost of financing is likely higher. As of Dec. 31, 2019, Hawaiian operated 11 A330s under operating leases. DERIVATION SUMMARY The 'A-' rating on the class A certificates is one notch below the rating on many comparable class A certificates issued by other airlines. The one notch differential is driven by the inclusion of A330 aircraft in the transaction, the uncertainty surrounding aircraft valuations, high coupon, and HA's low corporate credit rating relative to other airlines. The 'BB+' rating on the class B certificates represents a three-notch uplift from Hawaiian's proposed IDR of 'B+' (maximum uplift is five notches). The rating is in line with the B tranche ratings of Hawaiian's 2013-1 EETC, which also received a three-notch uplift and included A330s in the transaction. KEY ASSUMPTIONS Key assumptions within its rating case for the issuer include a harsh downside scenario in which Hawaiian declares bankruptcy, chooses to reject the collateral aircraft, and where the aircraft are remarketed in the midst of a severe slump in aircraft values. Please see the Key Rating Drivers section of this release for more details on specific assumptions. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Rating upgrades are unlikely in the short term. -- Senior tranche ratings are primarily based on levels of overcollateralization. The class A certificates could be upgraded over time as the transaction amortizes, assuming that asset values do not decline faster than projected in Fitch's models. -- Subordinated tranches are linked to the issuer's IDR. Upgrades are unlikely in the near term due to the impacts of the coronavirus. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- The confluence of declining asset values and downgrades to Hawaiian's corporate rating may drive negative rating actions on the class A certificates. - - Class B certificate ratings are tied to the underlying IDR. If Hawaiian's corporate rating were downgraded, the class B certificates would be downgraded in kind. -- Note that Hawaiian's ratings currently have a Negative Outlook, and the airline industry is going through an unprecedented demand shock due to the coronavirus. The uncertain nature of this event heightens the possibility of future downgrades. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Both classes of certificates benefit from PIK features that cover up to 18 months of missed interest payments. ESG CONSIDERATIONS ESG issues are credit neutral or have only a minimal credit impact on the entity(ies), either due to their nature or the way in which they are being managed by the entity(ies). ESG score for this transaction is linked to Hawaiian Air. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. JP MORGAN 2013-C17: Fitch Affirms Class F Certs at Bsf ------------------------------------------------------ Fitch Ratings has affirmed 11 classes of JP Morgan Chase Commercial Mortgage Securities Trust commercial mortgage pass-through certificates series 2013-C17. JPMBB 2013-C17 - Class A-3 46640UAC6; LT AAAsf; Affirmed - Class A-4 46640UAD4; LT AAAsf; Affirmed - Class A-S 46640UAH5; LT AAAsf; Affirmed - Class A-SB 46640UAE2; LT AAAsf; Affirmed - Class B 46640UAJ1; LT AA-sf; Affirmed - Class C 46640UAK8; LT A-sf; Affirmed - Class D 46640UAN2; LT BBB-sf; Affirmed - Class E 46640UAP7; LT BBsf; Affirmed - Class EC 46640UAL6; LT A-sf; Affirmed - Class F 46640UAQ5; LT Bsf; Affirmed - Class X-A 46640UAF9; LT AAAsf; Affirmed KEY RATING DRIVERS Slight Increase in Loss Expectations: While the majority of the pool maintains stable performance, loss expectations on the pool have increased over the last year primarily due to the eight Fitch Loans of Concern (FLOCs; 23.3% of the pool), including two specially serviced loans (2.4%), as well as concerns over the overall impact of the coronavirus pandemic on the pool. Fitch Loans of Concern: The largest FLOC is The Aire loan (10.6%), which is secured by a 310-unit multifamily property located on the Upper West Side of Manhattan, near Lincoln Center. A cash flow sweep was triggered in 2017 due to the DSCR falling below the required threshold. Per the servicer, the YE 2019 NOI debt service coverage ratio was 0.78x, compared with 0.90x at YE 2018, 0.80x at YE 2017, 1.05x at YE 2016 and 1.16x at issuance. The decline in cash flow is due to the significant concessions being offered at the property to offset soft market conditions. As of the March 2020 rent roll, occupancy at the property was 95%. The sponsor has continued to pay the loan as agreed, despite the fact that the property generates cash flow that is inadequate to service its debt. According to servicer updates, the borrower continues to foresee no issues in continuing to fund debt service and operating shortfalls going forward. The second largest FLOC is the Springfield Plaza loan (3.6%), which is secured by a 427,000 sf, anchored retail center located in Springfield, MA. As of the May 2020 rent roll, occupancy was 65% compared with 89% at issuance. The significant decline in occupancy is largely attributable to K-Mart (21% of NRA) vacating in 2017 due to bankruptcy. According to servicer updates, the property has garnered some positive leasing momentum recently, with a tenant signing a 10-year lease for 25,500 sf that is scheduled to commence in October 2020. As of YE 2019, the servicer reported NOI DSCR was 1.12x. The third largest FLOC is the 801 Travis loan (3.4%), which is secured by a 220,000-sf office property located in Houston, TX. The property has been negatively affected by the volatile oil and gas industry. As of the March 2020 rent roll, occupancy was reported at 61%, a significant decline from 83% at issuance. The servicer-reported YE 2019 NOI DSCR was 1.08x, compared with 0.87x at YE 2018 and 1.17x at YE 2017. The largest specially serviced loan is secured by the SpringHill Suites (Albany-Colonie) (1.3%), a 119-room, limited-service hotel located in Colonie, NY. The loan transferred to special servicing in April 2020 due to the coronavirus pandemic. The servicer reported YE 2019 NOI DSCR was 1.27x, compared with 1.0x at YE 2018. The four remaining FLOCs, which combine for approximately 4.3% of the pool balance include two loans secured by office properties that have low occupancy; a specially serviced retail center located in Jackson, MS (1.3%) that has requested coronavirus relief, and a loan secured by a single tenant 24 Hour Fitness located in La Mirada, CA (0.77%). Increased Credit Enhancement: As of the June 2020 distribution date, the pool's aggregate principal balance was reduced by 27.3% to $787 million from $1.1 billion at issuance. Four loans (8.1%) are fully defeased. There has been $4.1 million in realized losses to date and interest shortfalls are currently affecting the non-rated class only. One loan (2.1%) is full-term IO, and all loans with partial IO periods are now amortizing. Exposure to Coronavirus Pandemic: Fitch expects significant economic impacts to certain hotels, retail and multifamily properties from the coronavirus pandemic due to the recent and sudden reductions in travel and tourism, temporary property closures, and lack of clarity at this time on the potential duration of the impacts. Loans collateralized by retail properties and mixed-use properties with a retail component account for 14 loans (31.6% of pool). Loans secured by hotel properties account for five loans (9.3%), while nine loans (17.6%) are secured by multifamily properties. Fitch's base case analysis applied additional stresses to nine retail loans and four hotel loans due to their vulnerability to the coronavirus pandemic. These additional stresses contributed to the Negative Rating Outlooks on classes E and F. RATING SENSITIVITIES The Stable Outlooks on classes A-3 through D reflect the stable performance of the majority of the pool and expected continued amortization. The Negative Outlooks on classes E and F reflect concerns over the FLOCS as well as the unknown impact of the pandemic on the overall pool. Factors that could, individually or collectively, lead to positive rating action/upgrade: Upgrades to the 'A-sf' and 'AA-sf' rated classes would likely occur with significant improvement in credit enhancement and/or defeasance; however, adverse selection and increased concentrations, or the underperformance of the FLOCs, could cause this trend to reverse. Upgrades to the 'BBB-sf' and below-rated classes are considered unlikely and would be limited based on sensitivity to concentrations or the potential for future concentrations. Classes would not be upgraded above 'Asf' if there is a likelihood of interest shortfalls. An upgrade to the 'BBsf' and 'Bsf' rated classes is not likely until later years of the transaction and only if the performance of the remaining pool is stable and/or if there is sufficient credit enhancement, which would likely occur when the non-rated class is not eroded and the senior classes pay off. Factors that could, individually or collectively, lead to negative rating action/downgrade: Downgrades to the senior classes, rated 'A-sf' through 'AAAsf', are not likely due to their position in the capital structure and the high credit enhancement; however, downgrades to these classes may occur should interest shortfalls occur. Downgrades to the classes rated 'BBB-sf' would occur if the performance of the FLOC continues to decline or fails to stabilize. Downgrades to the classes with a Negative Outlook are possible should performance of the FLOCs continue to decline and additional loans transfer to special servicing and/or losses be realized. In addition to its baseline scenario, Fitch also envisions a downside scenario where the health crisis is prolonged beyond 2021; should this scenario play out, Fitch expects that classes assigned a Negative Rating Outlook will be downgraded in one or more categories. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. 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. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). JP MORGAN 2016-WIKI: S&P Lowers Rating on Class E Certs to 'B (sf)' ------------------------------------------------------------------- S&P Global Ratings lowered its ratings on the class E and F commercial mortgage pass-through certificates from J.P. Morgan Chase Commercial Mortgage Securities Trust 2016-WIKI, a U.S. CMBS transaction. In addition, the rating agency affirmed its ratings on six other classes from the same transaction. The ratings on classes D, E, and F were removed from CreditWatch, where they were placed with negative implications on May 6, 2020. S&P had placed these ratings on CreditWatch because of its concerns regarding COVID-19's impact on the performance of the collateral property and the lodging sector overall, along with the related ambiguity concerning the duration of the demand interruption. S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions, but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. "We are using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, we will update our assumptions and estimates accordingly," S&P Global Ratings said. The downgrades and affirmations on the principal- and interest-paying classes reflect S&P Global Ratings' reevaluation of the Hyatt Regency Waikiki Beach Resort & Spa, which secures the loan in this single-asset transaction. "Specifically, the downgrade on class F to 'CCC (sf)' reflects, based on a higher S&P Global Ratings' loan-to-value (LTV) ratio, our view that the class is more susceptible to reduced liquidity support and that the risk of default and losses have increased under the uncertain market conditions," the rating agency said. S&P Global Ratings' expected-case value of $380.7 million ($309,472 per guestroom) has declined 10.9% since issuance and last review, driven by the application of a higher S&P Global Ratings' capitalization rate that better captures the increased susceptibility to net cash flow (NCF) and liquidity disruption stemming from the pandemic. Using the S&P Global Ratings' sustainable NCF of $35.0 million (same as issuance and last review) and applying a 9.19% capitalization rate (up from 8.19% at issuance), the rating agency arrived at an LTV ratio of 105.1%, versus 93.7% at issuance and last review. In addition, S&P Global Ratings considered that the loan was transferred to special servicing on April 2, 2020, when the borrower gave notice of its inability to make debt service payments. The borrower was delinquent on its May 2020 debt service payment; however, it has subsequently made its May, June, and July 2020 debt service payments. According to the servicer, the master servicer and borrower have finalized a forbearance agreement. The terms include, among other items, the waiver of furniture, fixtures, and equipment (FF&E) deposits through December 2020, the ability to utilize current FF&E funds held by Hyatt (over $10.0 million) to cover operating shortfalls at the property, the waiver of all property-related financial and leasing tests, and payment by the borrower of special servicing fees and other fees and expenses. The loan has been brought current, and there are no longer any outstanding advances. S&P Global Ratings affirmed its ratings on classes A, B, C, and D even though the model-indicated ratings were lower than the classes' current rating levels. These affirmations are based on qualitative considerations, including the quality of the underlying collateral, the hotel's prime beachfront location, the significant market value decline that would be needed before these classes experience losses, the liquidity support provided in the form of servicer advancing, and the relative positioning of the classes in the waterfall. In addition, S&P Global Ratings believes the substantial renovation work completed in 2019 by the sponsor, Mirae Asset Management, enhances their long-term commitment to the property. The ratings affirmations on the class X-A and X-B interest-only (IO) certificates is based on S&P Global Ratings' criteria for rating IO securities, in which the rating on the IO securities would not be higher than that of the lowest-rated reference class. The notional amount of class X-A references class A and class X-B references classes B and C. This is a stand-alone (single borrower) transaction backed by a $400.0 million fixed-rate, IO mortgage loan secured by the borrower's leasehold interest in the Hyatt Regency-Waikiki Beach Resort & Spa, a 1,230-guestroom full-service hotel located across the street from Waikiki Beach on the island of Oahu, the most visited Hawaiian island. The hotel features three restaurants, 94,334 sq. ft. of retail space, and a 10,000-sq.-ft. spa. The retail space was 88.9% occupied as of March 2020 and has approximately 60 shops, including Urban Outfitters, UGG, and local retailers. The hotel was significantly renovated between 2016 and 2019, when $22.0 million ($17,886 per guestroom) was spent to renovate the hotel's lobby, restaurant, meeting space, and guestrooms. The property is managed by Hyatt Corp. under a long term agreement through Dec. 2062. The property is subject to four ground leases, each of which expires in December 2087. The base rents on three of the four ground leases covering the property reset in January 2017, and are based on the prevailing rate of return on land of similar type and location, and the fair market value of the land, as determined by the appraisal. The ground rent expense was $14.1 million in 2019, reflecting 9.2% of total revenue. It is S&P's understanding that the remaining ground lease will reset in 2021 and the three ground leases will reset again in 2027. Prior to the COVID-19 outbreak, the hotel exhibited stable performance. The hotel's revenue per available room (RevPAR) was $245.88 in 2017, $248.31 in 2018, and $250.03 in 2019. NCF was $40.6 million in 2017, $36.6 million in 2018, and $40.0 million in 2019. The lower NCF in 2017 was primarily due to increased ground rent expense, as three of the ground leases reset in 2017. S&P Global Ratings' sustainable NCF assumption at issuance, last review, and currently is $35.0 million, which is 6.4% below the adjusted 2019 servicer-reported NCF (after applying a 4% FF&E adjustment to the servicer-reported net operating income). The hotel has maintained a strong RevPAR penetration rate--which measures the RevPAR of the hotel relative to its competitors, with 100% indicating parity with competitors--exceeding 100% for the trailing-12-months (TTM) periods ended February 2019 (100.4%) and February 2020 (104.6%), based on the Smith Travel Research report. The hotel's occupancy was 90.4% as of the TTM ending February 2020 (down slightly from 91.7% in the TTM period ended February 2019) and was 87.1% in February 2020 compared to 91.8% in February 2019, prior to closing as the pandemic took hold. The hotel closed in mid-March and, while it reopened in July, it is unlikely that occupancy levels and hence NCF will return to previous levels in the near term. In addition, RevPAR for Oahu overall declined by 93.8% in April 2020, 90.4% in May 2020, and 88.2% in June 2020. The pandemic has brought about unprecedented social distancing and curtailment measures, which are resulting in a significant decline in corporate, leisure, and group travel. Since the outbreak, there has been a dramatic decline in airline passenger miles stemming from governmental restrictions on international travel and a major drop in domestic travel. In an effort to curtail the spread of the virus, most group meetings (both corporate and social) have been cancelled, corporate transient travel has been restricted, and leisure travel has slowed due to fear of travel and the closure of demand generators, such as amusement parks and casinos, and the cancellation of concerts and sporting events. The pandemic's negative effects on lodging properties have been particularly severe for hotels like the Hyatt Regency-Waikiki Beach Resort & Spa, which is highly dependent on fly-to domestic demand and international travelers, primarily from Asia. The hotel generates over 85% of its demand from the leisure transient sector and the majority of its remaining demand stems from the meeting and group sector. Significant uncertainty remains regarding not only the duration of the pandemic, but also the time needed for lodging demand to return to normalized levels after lifting travel restrictions. Unlike other U.S. hotel properties, the property's location does not enable it to benefit from leisure drive-to demand, a source of travel that has helped increase occupancy during the pandemic. S&P expects leisure travel to this location will be curtailed until there is a COVID-19 treatment or vaccine. In S&P's current analysis, instead of adjusting its sustainable NCF assumption (since the property is currently operating at very low occupancy levels), S&P increased its capitalization rate by 100 basis points to 9.19% from 8.19% at issuance and last review to account for the adverse impact of COVID-19 and the responses to it. According to the July 8, 2020, trustee remittance report, the mortgage loan has a trust and whole loan balance of $400.0 million, the same as at issuance and last review. The loan pays a per annum fixed interest rate of 4.02% and matures on Sept. 22, 2021. In addition, there is a $145.0 million mezzanine loan. To date, the trust has not incurred any principal losses. Environmental, social, and governance (ESG) factors relevant to the rating action: -- Health and safety. RATINGS LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE J.P. Morgan Chase Commercial Mortgage Securities Trust 2016-WIKI Commercial mortgage pass-through certificates Rating Class To From E B (sf) BB- (sf)/Watch Neg F CCC (sf) B- (sf)/Watch Neg RATING AFFIRMED AND REMOVED FROM CREDITWATCH NEGATIVE J.P. Morgan Chase Commercial Mortgage Securities Trust 2016-WIKI Commercial mortgage pass-through certificates Rating Class To From D BBB- (sf) BBB- (sf)/Watch Neg RATINGS AFFIRMED J.P. Morgan Chase Commercial Mortgage Securities Trust 2016-WIKI Commercial mortgage pass-through certificates Class Rating A AAA (sf) X-A AAA (sf) X-B A- (sf) B AA- (sf) C A- (sf) JP MORGAN 2018-ASH8: S&P Lowers Rating on Class E Certs to B(sf) ---------------------------------------------------------------- S&P Global Ratings lowered its ratings on the class E and F commercial mortgage pass-through certificates from J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-ASH8, a U.S. commercial mortgage-backed securities (CMBS) transaction, and removed them from CreditWatch negative, where they were placed with negative implications on May 6, 2020. At the same time, S&P Global Ratings affirmed its ratings on five other classes from the same transaction, and removed two of them from CreditWatch negative, where they were previously placed with negative implications on May 6, 2020. S&P Global Ratings also withdrew its 'BBB- (sf)/Watch Neg' rating on the class X-CP interest-only (IO) certificates from the same transaction. S&P previously placed its ratings on classes D, E, F, X-CP, and X-EXT on CreditWatch negative because of its concerns regarding COVID-19's potential impact on the performance of the collateral hotel properties and the lodging sector overall, along with the related ambiguity concerning the duration of the demand disruption. S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions, but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. "We are using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, we will update our assumptions and estimates accordingly," the rating agency said. The downgrades and affirmations on the principal- and interest-paying classes reflect S&P Global Ratings' reevaluation of a portfolio of eight full-service lodging properties, which secures the loan in this transaction. "Specifically, the downgrade on class F to 'CCC (sf)' reflects, based on a higher S&P Global Ratings' loan-to-value (LTV) ratio, our view that the class is more susceptible to reduced liquidity support and that the risk of default and losses has increased under the uncertain market conditions," the rating agency said. S&P Global Ratings expected-case value is 9.7% lower than at issuance, and is driven by the application of a higher S&P Global Ratings' capitalization rate that better captures the increased susceptibility to net cash flow (NCF) and liquidity disruption stemming from the pandemic. "Using the S&P Global Ratings' sustainable NCF of $32.6 million (same as at issuance) and applying a weighted average capitalization rate of 10.41% (up from 9.41% at issuance), and deducting approximately $2.9 million for California's proposition-13 tax program (same at issuance), we arrived at an S&P Global Ratings' value of $310.3 million ($158,004 per guestroom) and an LTV ratio of 127.3%, versus 115.0% at issuance," the rating agency said. In addition, S&P Global Ratings considered that the loan transferred to special servicing on April 13, 2020, due to imminent monetary default. The loan has a reported 90-plus-days delinquent payment status; the borrower is delinquent on its April, May, June, and July 2020 debt service payments; and the amounts are currently advanced fully by the master servicer. The borrower reached out for COVID-19 forbearance relief, and the request included an 18-month forbearance, waiver of late fees, and default interest. The special servicer, CWCapital Asset Management LLC, indicated that it is reviewing the request. S&P Global Ratings affirmed its ratings on classes A, B, C, and D, even though the model-indicated ratings were lower than the classes' current rating levels. This is based on qualitative considerations such as the underlying collateral quality, the significant market value decline that would be required before these classes experience losses, liquidity support provided in the form of servicer advancing, and relative positions of the classes in the waterfall. S&P Global Ratings also considered that, according to the master servicer, five of the lodging properties remained opened during the COVID-19 pandemic, while Embassy Suites Portland Downtown (Embassy Suites Portland), Key West Crowne Plaza La Concha (Key West Crowne Plaza), and Embassy Suites Crystal City closed for a period. As of July 10, 2020, Key West Crowne Plaza has reopened, Embassy Suites Portland reopened sometime after, while Embassy Suites Crystal City remains closed. "We affirmed the rating on the X-EXT IO certificates based on our criteria for rating IO securities, in which the rating on the IO securities would not be higher than that of the lowest-rated reference class. The notional amount of class X-EXT references the class A, B, C, and D certificates," S&P Global Ratings said. "We withdrew our rating on the class X-CP IO certificates because according to the transaction documents, after the distribution date in August 2019, class X-CP's pass-through rate is 0.0% and the class is currently not accruing interest nor entitled to distributions," the rating agency said. This is a stand-alone (single-borrower) transaction backed by a floating-rate IO mortgage loan secured by the borrowers' fee and leasehold interests in a portfolio of eight full-service lodging properties totaling 1,964 guestrooms. The properties are located across six U.S. states: California (two hotels; 33.7% of the allocated loan amount [ALA], Oregon (one; 22.4%), Florida (two; 22.2%), Virginia (one; 11.7%), Minnesota (one; 5.3%), and Maryland (one; 4.7%). The portfolio is located across various markets: three of the hotels (45.4% of ALA) are located in primary markets (Santa Clara and Orange County, Calif. and Crystal City, Va.); four hotels (38.1%) are located in secondary markets (Portland, Ore.; Orlando, Fla.; Minneapolis, Minn.; and Annapolis, Md.); and the Key West Crowne Plaza (16.5%) is located in a tertiary market (Key West, Fla.). The sponsor spent approximately $60.9 million ($31,024 per guestroom) on capital expenditures between 2013 and 2017. At issuance, there was an upfront reserve for a $2.5 million property improvement plan for guestroom renovations at the Embassy Suites Crystal City, which, according to the special servicer, was completed in 2019. Excluding the Historic Inns of Annapolis, an independent hotel, the remaining seven hotels operate under four different national flags from three brand families: Hilton, Intercontinental, and Marriott. The franchise agreements for four of the seven franchised hotels (56.9% by ALA) expire during the extended loan term: Embassy Suites Portland (September 2021), Embassy Suites Silicon Valley Santa Clara ([Embassy Suites Santa Clara]; February 2023), Embassy Suites Crystal City (February 2023), and Embassy Suites Orlando Airport (February 2023). The four Embassy Suites hotels are brand-managed by Embassy Suites Management LLC (56.9% by ALA), and the remaining four hotels are managed by Remington Lodging & Hospitality LLC (43.1%). All eight management agreements expire during the extended loan term; however, there are renewal options available for each. The three largest hotels in the portfolio are: -- The Embassy Suites Portland (22.4% by ALA), a 276-guestroom full-service hotel in Portland, Ore., located between Portland State University and the Pearl District; -- The Embassy Suites Santa Clara (17.1%), a 257-guestroom full-service hotel in Santa Clara, Calif., located between Sunnyvale, California and northern San Jose, approximately three miles from San Jose International Airport; and -- The Hilton Orange County Costa Mesa ([Hilton Orange County]; 16.6%), a 486-guestroom full-service hotel in Costa Mesa, Calif., located approximately three miles from John Wayne Airport in Orange County, California. The remaining five hotels in the portfolio include the Key West Crowne Plaza (16.5%), Embassy Suites Crystal City (11.7%), Embassy Suites Orlando Airport (5.7%), Sheraton Minneapolis West (5.3%), and the Historic Inn of Annapolis (4.7%). The pandemic has brought about unprecedented social distancing and curtailment measures, which are resulting in a significant decline in demand in corporate, leisure, and group travelers. Since the outbreak, there has been a dramatic decline in airline passenger miles stemming from governmental restrictions on international travel and a significant decline in domestic travel. In an effort to curtail the spread of the virus, most group meetings (both corporate and social) have been cancelled, corporate transient travel has been restricted, and leisure travel has slowed due to fear of travel and the closure of demand generators, such as amusement parks and casinos, and the cancellation of concerts and sporting events. Since the eight hotels in the portfolio are located in various downtown, airport, and resort locations, the portfolio is not reliant on a single demand source. Other than the Key West Crowne Plaza, a resort hotel that relies mainly on the leisure segment, the remaining hotels have a more diverse demand mix of corporate, leisure, and meeting and group demand. Nevertheless, demand from all three of these sources has declined due to consumers' fears of traveling, corporate restrictions on travel, as well as the need for social distancing. While leisure travel has slowly increased since April, leisure travelers have thus far favored hotels in smaller markets and more remote locations in an effort to socially distance. Given the recent spike in COVID-19 cases in 18 "red zone" states, including California and Florida, travel to these states may be curtailed until there is a COVID-19 treatment or vaccine. S&P's property-level analysis considered the relative flat reported revenue per available room (RevPAR) and declining NCF for the portfolio from 2016 through 2019. Specifically, the portfolio's reported RevPAR was $149.38 in 2019, a slight 0.2% decrease from $149.62 in 2016. NCF was $39.2 million in 2016, $39.6 million in the trailing 12 months (TTM) ended November 2017 (+1.0%), $37.2 million in 2018 (-6.1%), and $33.7 million (-9.3%) in 2019. The 2019 portfolio decline was primarily driven by the Sheraton Minneapolis West RevPAR (-7.9%) and NCF (-93.1%). The Sheraton Minneapolis West NCF declined to $83,670 in 2019 from approximately $1.2 million in 2018, specifically driven by a 11.5% decline in departmental revenue (approximately $7.2 million in 2019, down from approximately $8.2 million in 2018), while total operating expenses increased by 3.5% (approximately $6.8 million in 2019, up from approximately $6.6 million in 2018). In addition, the following properties also were contributing factors to the portfolio's performance: -- The Key West Crowne Plaza NCF declined 20.6% to approximately $6.2 million in 2019 from approximately $7.8 million in 2018. -- The Hilton Orange County NCF declined by 16.1% to approximately $4.1 million in 2019 from approximately $4.9 million in 2018. -- The Historic Inns of Annapolis declined 11.8% to approximately $1.5 million in 2019 from approximately $1.7 million in 2018. -- The Embassy Suites Crystal City declined 7.6% to approximately $4.2 million in 2019 from approximately $4.5 million in 2018. -- The Embassy Suites Portland declined 6.2% to approximately $6.6 million in 2019 from approximately $7.1 million in 2018. In addition, the portfolio has experienced an increase in total operating expenses (+4.7%) from 2018 (approximately $90.2 million) to 2019 ($94.5 million), particularly in property insurance (+46%) and payroll and benefits (+25%), while departmental revenue has remained relatively flat (+0.7%). The master servicer reported an overall NCF debt service coverage and occupancy of 1.61x and 77.5%, respectively, on the trust balance for the year-end 2019. At issuance, S&P assumed a RevPAR and NCF of $135.29 and $32.6 million, respectively, representing a -9.4% and -3.2% variance to 2019 levels, respectively. S&P Global Ratings also reviewed the property inspection reports and the March 2020 Smith Travel Research (STR) reports for the eight properties. The March 2020 STR reports indicated that of the eight properties securing the loan, five (61.6% by ALA) had a RevPAR penetration rate--which measures the RevPAR of the hotel relative to its competitors, with 100% indicating parity with competitors--exceeding 100% as of the TTM ended March 2020. Specifically, the portfolio's weighted average (weighted by ALA) RevPAR penetration rate was 111%, 110%, and 111% for the TTM periods ended March 2018, 2019, and 2020, respectively. The portfolio hotels' occupancy rates ranged from 17.2%-52.0% in TTM ended March 2020, declining from 50.4%-96.7% in TTM March 2019, when demand declined as the COVID-19 pandemic took hold. "It is our understanding from the prior special servicer, Trimont Real Estate Advisor LLC, three of the hotels were closed the week ending May 9, 2020; while two have since reopened, it is unlikely that occupancy levels and hence NCF will return to historic levels in the near term," S&P Global Ratings said. "In our current analysis, instead of adjusting our sustainable net cash flow assumption, we increased our capitalization rate by 100 basis points from issuance to account for the portfolio's full-service orientation, reliance on corporate and some group demand, and locations in more populated infill locations," the rating agency said. S&P Global Ratings also considered that the Embassy Suites Portland reopened sometime in July 2020 while the Embassy Suites Crystal City remains closed. While COVID-19-related restrictions eased in the last month or so, increases in COVID-19 cases are causing some U.S. states to put additional measures in place in an effort to contain the outbreak. S&P Global Ratings expects travel will remain tempered for several quarters. There is significant uncertainty regarding not only the duration of the pandemic, but also the time needed for lodging demand to return to normalized levels after lifting travel restrictions. According to the July 15, 2020, trustee remittance report, the IO mortgage loan has a trust and whole loan balance of $395.0 million, which is the same as issuance. The IO loan pays a per annum weighted average floating interest rate of LIBOR plus 2.92% and currently matures on Feb. 9, 2021, after one of the five, one-year extension options was exercised. To date, the trust has not incurred any principal losses. However, $249,618 in accumulated interest shortfalls affected class HRR (not rated by S&P Global Ratings) due to special servicing fees. Environmental, social, and governance (ESG) factors relevant to the rating action: -- Health and safety. RATINGS LOWERED AND REMOVED FROM WATCH NEGATIVE J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-ASH8 Commercial mortgage pass-through certificates Rating Class To From E B (sf) BB- (sf)/Watch Neg F CCC (sf) B- (sf)/Watch Neg RATINGS AFFIRMED AND REMOVED FROM WATCH NEGATIVE J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-ASH Commercial mortgage pass-through certificates Rating Class To From D BBB- (sf) BBB- (sf)/Watch Neg X-EXT BBB- (sf) BBB- (sf)/Watch Neg RATINGS AFFIRMED J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-ASH8 Commercial mortgage pass-through certificates Class Rating A AAA (sf) B AA- (sf) C A- (sf) RATING WITHDRAWN J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-ASH8 Commercial mortgage pass-through certificates Rating Class To From X-CP NR BBB- (sf)/Watch Neg NR-–Not rated. JP MORGAN 2020-INV2: DBRS Gives Prov. B Rating on 2 Tranches ------------------------------------------------------------ DBRS, Inc. assigned the following provisional ratings to the Mortgage Pass-Through Certificates, Series 2020-INV2 (the Certificates) to be issued by J.P. Morgan Mortgage Trust 2020-INV2: -- $300.8 million Class A-1 at AAA (sf) -- $273.5 million Class A-2 at AAA (sf) -- $191.4 million Class A-3 at AAA (sf) -- $191.4 million Class A-3-A at AAA (sf) -- $191.4 million Class A-3-X at AAA (sf) -- $143.6 million Class A-4 at AAA (sf) -- $143.6 million Class A-4-A at AAA (sf) -- $143.6 million Class A-4-X at AAA (sf) -- $47.9 million Class A-5 at AAA (sf) -- $47.9 million Class A-5-A at AAA (sf) -- $47.9 million Class A-5-X at AAA (sf) -- $120.2 million Class A-6 at AAA (sf) -- $120.2 million Class A-6-A at AAA (sf) -- $120.2 million Class A-6-X at AAA (sf) -- $71.2 million Class A-7 at AAA (sf) -- $71.2 million Class A-7-A at AAA (sf) -- $71.2 million Class A-7-X at AAA (sf) -- $23.3 million Class A-8 at AAA (sf) -- $23.3 million Class A-8-A at AAA (sf) -- $23.3 million Class A-8-X at AAA (sf) -- $14.8 million Class A-9 at AAA (sf) -- $14.8 million Class A-9-A at AAA (sf) -- $14.8 million Class A-9-X at AAA (sf) -- $33.0 million Class A-10 at AAA (sf) -- $33.0 million Class A-10-A at AAA (sf) -- $33.0 million Class A-10-X at AAA (sf) -- $82.0 million Class A-11 at AAA (sf) -- $82.0 million Class A-11-X at AAA (sf) -- $82.0 million Class A-11-A at AAA (sf) -- $82.0 million Class A-11-AI at AAA (sf) -- $82.0 million Class A-11-B at AAA (sf) -- $82.0 million Class A-11-BI at AAA (sf) -- $82.0 million Class A-12 at AAA (sf) -- $82.0 million Class A-13 at AAA (sf) -- $27.4 million Class A-14 at AAA (sf) -- $27.4 million Class A-15 at AAA (sf) -- $210.6 million Class A-16 at AAA (sf) -- $90.3 million Class A-17 at AAA (sf) -- $300.8 million Class A-X-1 at AAA (sf) -- $300.8 million Class A-X-2 at AAA (sf) -- $82.0 million Class A-X-3 at AAA (sf) -- $27.4 million Class A-X-4 at AAA (sf) -- $11.5 million Class B-1 at AA (sf) -- $11.5 million Class B-1-A at AA (sf) -- $11.5 million Class B-1-X at AA (sf) -- $9.2 million Class B-2 at A (sf) -- $9.2 million Class B-2-A at A (sf) -- $9.2 million Class B-2-X at A (sf) -- $8.0 million Class B-3 at BBB (sf) -- $8.0 million Class B-3-A at BBB (sf) -- $8.0 million Class B-3-X at BBB (sf) -- $28.7 million Class B-X at BBB (sf) -- $5.6 million Class B-4 at BB (sf) -- $3.6 million Class B-5 at B (sf) -- $3.6 million Class B-5-Y at B (sf) Classes A-3-X, A-4-X, A-5-X, A-6-X, A-7-X, A-8-X, A-9-X, A-10-X, A-11-X, A-11-AI, A-11-BI, A-X-1, A-X-2, A-X-3, A-X-4, B-1-X, B-2-X, B-3-X, and B-X are interest-only certificates. The class balances represent notional amounts. Classes A-1, A-2, A-3, A-3-A, A-3-X, A-4, A-4-A, A-4-X, A-5, A-5-A, A-5-X, A-6, A-7, A-7-A, A-7-X, A-8, A-9, A-10, A-11-A, A-11-AI, A-11-B, A-11-BI, A-12, A-13, A-14, A-16, A-17, A-X-2, A-X-3, B-1, B-2, B-3, B-X, B-5-Y, B-6-Y, and B-6-Z are exchangeable certificates. These classes can be exchanged for combinations of exchange certificates as specified in the offering documents. Classes A-2, A-3, A-3-A, A-4, A-4-A, A-5, A-5-A, A-6, A-6-A, A-7, A-7-A, A-8, A-8-A, A-9, A-9-A, A-10, A-10-A, A-11, A-11-A, A-11-B, A-12, and A-13 are super-senior certificates. These classes benefit from additional protection from the senior support certificates (Classes A-14 and Class A-15) with respect to loss allocation. The AAA (sf) rating on the Certificates reflects 12.00% of credit enhancement provided by subordinated notes in the pool. The AA (sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 8.65%, 5.95%, 3.60%, 1.95%, and 0.90% of credit enhancement, respectively. Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction. This securitization is a portfolio of first-lien, fixed-rate investment-property residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 1,014 loans with a total principal balance of $341,864,600 as of the Cut-Off Date (July 1, 2020). The entire pool, except for a single loan with IO features, consists of fully amortizing fixed-rate mortgages (FRMs) with original terms to maturity of up to 30 years. 100% of the loans were made to investors. Consequently, most of the pool (66.7% by balance) are loans that are not subject to the Qualified Mortgage (QM) and Ability-to-Repay rules (together, the Rules) because the loans were made for business or commercial purposes. In addition, 20 borrowers have multiple mortgages (41 loans in total) included in the securitized portfolio. About 94.5% of the mortgage loans in the portfolio were eligible for purchase by Fannie Mae or Freddie Mac (conforming mortgages). Details on the underwriting of loans can be found in the Key Probability of Default Drivers section. The originators for the aggregate mortgage pool are United Shore Financial Services, LLC d/b/a United Wholesale Mortgage and Shore Mortgage (USFS; 40.1%), Quicken Loans, LLC (Quicken; 25.9%) and various other originators, each comprising less than 15% of the mortgage loans. Prior to the servicing transfer date (September 1, 2020, or a later date) the mortgage loans will be serviced by USFS (sub-serviced by Cenlar FSB (Cenlar), 40.1%), Quicken (25.9%), NewRez LLC d/b/a Shellpoint Mortgage Servicing (SMS, 17.7%), Amerihome Mortgage Company, LLC (Amerihome; sub-serviced by Cenlar, 12.1%) and JPMCB (4.2%). Servicing will be transferred from SMS to JPMCB (rated AA with a Stable trend by DBRS Morningstar) on the servicing transfer date, as determined by the issuing entity and JPMCB. Following the servicing transfer date, the mortgage loans will be serviced by USFS and Amerihome (sub-serviced by Cenlar, 52.2%), Quicken (25.9%), JPMCB (19.8%) and SMS (2.0%). For this transaction, the servicing fee payable for mortgage loans serviced by USFS, JPMCB, and SMS (for those loans that will be subsequently serviced by JPMCB), is composed of three separate components: the aggregate base servicing fee, the aggregate delinquent servicing fee, and the aggregate additional servicing fee. These fees vary based on the delinquency status of the related loan and will be paid from interest collections before distribution to the securities. Nationstar Mortgage LLC will act as the Master Servicer. Citibank N.A. (rated AA (low) with a Stable trend by DBRS Morningstar) will act as Securities Administrator and Delaware Trustee. JPMCB and Wells Fargo Bank, N.A. (rated AA with a Negative trend by DBRS Morningstar) will act as Custodians. Pentalpha Surveillance LLC will serve as the representations and warranties (R&W) Reviewer. The Seller intends to retain (directly or through a majority-owned affiliate) a vertical interest in 5% of the principal amount or notional amount of all the senior and subordinate certificates to satisfy the credit risk retention requirements under Section 15G of the Securities Exchange Act of 1934 and the regulations promulgated thereunder. The transaction employs a senior-subordinate, shifting-interest cash flow structure that is enhanced from a pre-crisis structure. As of the Cut-Off Date, no borrower within the pool has entered into a Coronavirus Disease (COVID-19)-related forbearance plan with a servicer. In the event a borrower requests or enters into a coronavirus-related forbearance plan after the Cut-Off Date but prior to the Closing Date, the Mortgage Loan Seller will remove such loan from the mortgage pool and remit the related Closing Date substitution amount. Loans that enter a coronavirus-related forbearance plan after the Closing Date will remain in the pool. CORONAVIRUS PANDEMIC IMPACT The coronavirus pandemic and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. DBRS Morningstar anticipates that delinquencies may continue to raise in the coming months for many residential mortgage-backed security (RMBS) asset classes, some meaningfully. The prime mortgage sector is a traditional RMBS asset class that consists of securitizations backed by pools of residential home loans originated to borrowers with prime credit. Generally, these borrowers have decent FICO scores, reasonable equity, and robust income and liquid reserves. As a result of the coronavirus, DBRS Morningstar expects increased delinquencies, loans on forbearance plans, and a potential near-term decline in the values of the mortgaged properties. Such deteriorations may adversely affect borrowers' ability to make monthly payments, refinance their loans, or sell properties in an amount sufficient to repay the outstanding balance of their loans. In connection with the economic stress assumed under its moderate scenario (see Global Macroeconomic Scenarios: July Update, published on July 22, 2020), for the prime asset class, DBRS Morningstar applies more severe market value decline (MVD) assumptions across all rating categories than what it previously used. Such MVD assumptions are derived through a fundamental home price approach based on the forecast unemployment rates and GDP growth outlined in the aforementioned moderate scenario. In addition, for pools with loans on forbearance plans, DBRS Morningstar may assume higher loss expectations above and beyond the coronavirus assumptions. Such assumptions translate to higher expected losses on the collateral pool and correspondingly higher credit enhancement. In the prime asset class, while the full effect of the coronavirus may not occur until a few performance cycles later, DBRS Morningstar generally believes that this sector should have low intrinsic credit risk. Within the prime asset class, loans originated to (1) self-employed borrowers or (2) higher loan-to-value (LTV) ratio borrowers may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Self-employed borrowers are potentially exposed to more volatile income sources, which could lead to reduced cash flows generated from their businesses. Higher LTV borrowers, with lower equity in their properties, generally have fewer refinance opportunities and therefore slower prepayments. In addition, certain pools with elevated geographic concentrations in densely populated urban metropolitan statistical areas may experience additional stress from extended lockdown periods and the slowdown of the economy. The ratings reflect transactional strengths that include high-quality credit attributes, well-qualified borrowers, and a satisfactory third-party due diligence review, structural enhancements, and 100%-current loans. The ratings reflect transactional challenges that include 100% Investor properties and multiple loans from the same borrower in the securitized pool, R&W framework that contains certain weaknesses, such as materiality factors, knowledge qualifiers, and some R&W providers that may experience financial stress that could result in the inability to fulfill repurchase obligations. DBRS Morningstar perceives the framework as more limiting than traditional lifetime R&W standards in certain DBRS Morningstar-rated securitizations. To capture the perceived weaknesses in the R&W framework, DBRS Morningstar reduced certain originator scores in this pool. A lower originator score results in increased default and loss assumptions and provides additional cushions for the rated securities. Notes: All figures are in U.S. dollars unless otherwise noted. LB-UBS COMMERCIAL 2006-C1: Fitch Cuts Rating on Class C Certs to C ------------------------------------------------------------------ Fitch Ratings has downgraded two and affirmed 17 classes of LB-UBS Commercial Mortgage Trust commercial mortgage pass-through certificates series 2006-C1. LB-UBS Commercial Mortgage Trust 2006-C1 - Class B 52108MDL4; LT CCsf; Downgrade - Class C 52108MDM2; LT Csf; Downgrade - Class D 52108MDN0; LT Csf; Affirmed - Class E 52108MDP5; LT Dsf; Affirmed - Class F 52108MDQ3; LT Dsf; Affirmed - Class G 52108MDS9; LT Dsf; Affirmed - Class H 52108MDU4; LT Dsf; Affirmed - Class IUU-3 52108MEW9; LT Dsf; Affirmed - Class IUU-4 52108MEY5; LT Dsf; Affirmed - Class IUU-5 52108MFA6; LT Dsf; Affirmed - Class IUU-6 52108MFC2; LT Dsf; Affirmed - Class IUU-7 52108MFE8; LT Dsf; Affirmed - Class IUU-8 52108MFG3; LT Dsf; Affirmed - Class IUU-9 52108MFJ7; LT Dsf; Affirmed - Class J 52108MDW0; LT Dsf; Affirmed - Class K 52108MDY6; LT Dsf; Affirmed - Class L 52108MEA7; LT Dsf; Affirmed - Class M 52108MEC3; LT Dsf; Affirmed - Class N 52108MEE9; LT Dsf; Affirmed KEY RATING DRIVERS High Loss Expectations; Significant REO Concentration: The downgrade to classes B and C is due to Fitch's increased certainty of losses. The pool is highly concentrated with only two of the original 149 loans remaining. Due to the concentrated nature of the pool, Fitch performed a sensitivity analysis that grouped the remaining loans based on loan structural features, collateral quality, and performance and ranked them by their perceived likelihood of repayment. Triangle Town Center is a regional mall in the Raleigh metro which became REO in July 2019. Non-collateral anchors include Sears, Macy's, Dillard's, Belk, and Saks Fifth Avenue. As of 1Q20, the property was 92% occupied and performing at a 1.19x interest-only debt service coverage ratio. Upcoming tenant rollover consists of 26.9% of NRA prior to YE 2021. The most recent sales report was from August 2017 when the property reported in-line sales of $467 psf. The special servicer's appraisal from November 2019 valued the asset at $33.9 million compared to $43.1 million in November 2018. Additionally, the asset's exposure has increased by $5.2 million since Fitch's prior rating action, reducing the expected recovery on the asset. The declining valuation and increased exposure is driving the downgrade to classes B and C. In addition, an ESG relevance score of '5' for Social Impacts was applied as a result of exposure to a sustained structural shift in secular preferences affecting consumer trends, occupancy trends, and more, which, in combination with other factors, impacts the ratings. The loan first transferred to special servicing in September 2015 for imminent maturity default. The lender and borrower agreed to a modification that included extending the loan term, adjusting the interest rate, switching to IO payments, releasing the Triangle Town Place parcel and using the proceeds from this sale ($29 million) to pay down the trust debt, and an assumption where DRA Advisors assumed 90% of the ownership interest, leaving CBL with a 10% stake and the management of the property. The loan transferred back to special servicing in August 2018 when the borrower indicated that they were unable to repay the loan prior to the December 2018 maturity date. The asset became REO in July 2019, and the servicer is working to lease up vacant space, renew leases with existing tenants, and negotiate rent deferrals with tenants that are struggling due to the coronavirus pandemic. Coronavirus Exposure: The entire pool is secured by retail loans. As of 1Q20, Triangle Town Center (97%) is performing at a 1.19x NOI DSCR and Park City Shopping Center (3%) is performing at a 1.62x NOI DSCR. Cash flow disruptions continue as a result of property and consumer restrictions due to the spread of the coronavirus. Fitch's base case analysis applied an additional NOI stress to both retail loans due to their vulnerability to the coronavirus pandemic. These additional stresses contributed to the downgrade of class B. Stable Credit Enhancement: Credit enhancement has remained stable since Fitch's prior rating action despite the liquidation of two loans (2.7% of the prior pool balance) at a loss. The pool has only received $731,806 in principal repayment since Fitch's prior rating action, and due to the majority of the pool (97%) being in special servicing, the pool will continue to receive minimal amortization. As of the July 2020 distribution date, the pool's aggregate principal balance has been reduced by 96.9% to $77.0 million from $2.5 billion at issuance. The pool has $205.6 million in realized losses and interest shortfalls are currently impacting classes C through T. Payoff Timing Uncertain: Resolution timing for Triangle Town Center (97%) remains uncertain and all remaining classes are dependent on its disposition to pay in full. Park City Shopping Center (3%) is the only loan contributing monthly principal resulting in minimal amortization. RATING SENSITIVITIES All remaining classes in the pool are distressed as their repayment depends on the recoveries from Triangle Town Center, an REO regional mall in Raleigh, NC. Factors that lead to upgrades would include improved performance and asset valuation of Triangle Town Center. An upgrade to classes B, C, and D is not likely due to the erosion of the subordinate classes due to realized losses and the dependence on Triangle Town Center, a distressed regional mall with a declining valuation. If the value of Triangle Town Center were to increase, classes could be upgraded, but this is considered to be extremely unlikely. Factors that lead to downgrades include further deterioration of the value of Triangle Town Center and increased certainty of losses. Further downgrades to classes B, C, and D would occur as losses are realized. In addition to its baseline scenario, Fitch also envisions a downside scenario where the health crisis is prolonged beyond 2021; should this scenario play out, Fitch expects that a greater percentage of classes may be assigned a Negative Rating Outlook or those with Negative Rating Outlooks will be downgraded one or more categories. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. 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. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS LB-UBS 2006-C1 has an ESG Relevance Score of 5 for Exposure to Social Impacts due to the pool's significant retail exposure, including a REO regional mall with a declining valuation as a result of changing consumer preferences in shopping, which has a negative impact on the credit profile and is highly relevant to the ratings. This impact contributed to the downgrade of classes B and C. Except for the matters discussed, the highest level of ESG credit relevance, if present, is a score of 3 - ESG issues are credit neutral or have only a minimal credit impact on the entity(ies), either due to their nature or the way in which they are being managed by the entity(ies). MORGAN STANLEY 2015-XLF2: DBRS Gives BB Rating on Class SNMC Certs ------------------------------------------------------------------ DBRS, Inc. assigned ratings to the Commercial Mortgage Pass-Through Certificates, Series 2015-XLF2 issued by Morgan Stanley Capital I Trust 2015-XLF2 (the Issuer) as follows: -- Class SNMA at AA (high) (sf) -- Class SNMB at A (sf) -- Class SNMC at BB (sf) -- Class SNMD at B (low) (sf) All trends are Negative because of the loan's specially serviced status and possible negative credit degradation absent a timely resolution to the assets in addition to the negative impact of the Coronavirus Disease (COVID-19) on the retail sector. These certificates are currently also rated by DBRS Morningstar's affiliated rating agency, Morningstar Credit Ratings, LLC (MCR). In connection with the ongoing consolidation of DBRS Morningstar and MCR, MCR previously announced that it had placed its outstanding ratings of these certificates Under Review–Analytical Integration Review and that MCR intended to withdraw its outstanding ratings; such withdrawal will occur on or about August 7, 2020. In accordance with MCR's engagement letter covering these certificates, upon withdrawal of MCR's outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings. On March 1, 2020, DBRS Morningstar finalized its "North American Single-Asset/Single-Borrower Ratings Methodology" (the NA SASB Methodology), which presents the criteria for which ratings are assigned to and/or monitored for North American single-asset/single-borrower (NA SASB) transactions, large concentrated pools, rake certificates, ground lease transactions, and credit tenant lease transactions. The subject rating actions are the result of the application of the NA SASB Methodology in conjunction with the "North American CMBS Surveillance Methodology," as applicable. Qualitative adjustments were not made to the final loan-to-value (LTV) sizing benchmarks used for this rating analysis. The subject transaction originally comprised two groups of certificates, each of which only represented an interest in the corresponding trust asset (one such trust asset is the remaining loan). The Ashford Full Service II Portfolio certificates were retired in June 2018 upon full repayment of the loan. The remaining Starwood National Mall Portfolio certificates represent an interest in the Starwood National Mall Portfolio loan. The Starwood National Mall Portfolio loan had an original balance of $161.0 million trust balance with an additional $77.0 million of non-trust subordinate debt. The loan was structured with an original term of 36 months with two one-year extension options. The sponsor used the loan proceeds and $104.9 million of additional sponsor equity to purchase the properties, pay closing costs, and fund upfront reserves. The loan is secured by the fee simple interests in three super-regional or regional malls. The Shops at Willow Bend is a two-story enclosed super-regional mall in Plano, Texas, and represented over 48% of the loan by allocated balance at closing. At closing, the property was anchored by Dillard's, Macy's, and Neiman Marcus (none of which were collateral for the loan) as well as a vacant Saks Fifth Avenue store. Fairlane Town Center is a two-story enclosed super-regional mall in Dearborn, Michigan. None of the mall's anchors was collateral for the loan. Stony Point Fashion Center in Richmond, Virginia, is an open-air regional mall that was anchored by Dick's Sporting Goods (collateral) as well as Dillard's and Saks Fifth Avenue (both non-collateral) at closing. The loan was structured with debt yield hurdles attached to each of the two extension options. In both 2017 and 2018, the sponsor was required to make principal paydowns to meet these hurdles and exercise the extension options; as a result, final maturity moved to November 2019. Upon final maturity, the sponsor was granted a forbearance as it sought refinancing and/or a loan modification or extension. The loan ultimately transferred to special servicing in March 2020. The sponsor's inability to refinance the loan was due, in part, to a precipitous drop in net cash flow (NCF) since issuance. As a result of tenant rollover and ongoing renovations at some of the properties (most notably a $95 million renovation at The Shops at Willow Bend), the servicer reported a trailing 12-month period ended November 30, 2019, NCF of $15.1 million, a -36.5% variance from the Issuer's figure of $23.8 million at issuance. In assigning these ratings, DBRS Morningstar relied heavily on updated appraisals provided after the loan transferred to special servicing. DBRS Morningstar assumed an aggregate value of $156.2 million based on the DBRS Morningstar As-Is Values (subject to a 10% haircut) for the Fairlane Town Center and Stony Point Fashion Center loans and the new DBRS Morningstar As-Is Value (without an additional haircut) for The Shops at Willow Bend loan. The lack of haircut to The Shops at Willow Bend value reflects potential upside to value as noted in the appraisal. DBRS Morningstar did not give additional credit for qualitative factors or diversity. This assumed value results in an LTV of 86.9% on the trust debt and 136.2% when considering the subordinate non-trust debt. The assumed value equates to a 9.7% cap rate on the servicer's reported 2019 NCF. Notes: All figures are in U.S. dollars unless otherwise noted. MORGAN STANLEY 2020-HR8: DBRS Gives Prov. BB Rating on J-RR Debt ---------------------------------------------------------------- DBRS, Inc. assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2020-HR8 to be issued by Morgan Stanley Capital I Trust 2020-HR8 (MSC 2020-HR8): -- Class A-1 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-S at AAA (sf) -- Class B at AAA (sf) -- Class X-B at AA (low) (sf) -- Class C at A (high) (sf) -- Class X-D at AA (low) (sf) -- Class D at A (high) (sf) -- Class E-RR at A (low) (sf) -- Class F-RR at A (low) (sf) -- Class G-RR at BBB (sf) -- Class H-RR at BB (high) (sf) -- Class J-RR at BB (sf) -- Class K-RR at B (high) (sf) -- Class L-RR at B (low) (sf) All trends are Stable. The Class X-A, Class X-B, and Class X-D balances are notional. With regard to the Coronavirus Disease (COVID-19) pandemic, the magnitude and extent of performance stress posed to global structured finance transactions remain highly uncertain. This considers the fiscal and monetary policy measures and statutory law changes that have already been implemented or will be implemented to soften the impact of the crisis on global economies. Some regions, jurisdictions, and asset classes are, however, feeling more immediate effects. DBRS Morningstar continues to monitor the ongoing coronavirus pandemic and its impact on both the commercial real estate sector and the global fixed-income markets. Accordingly, DBRS Morningstar may apply additional short-term stresses to its rating analysis, for example by front-loading default expectations and/or assessing the liquidity position of a structured finance transaction with more stressful operational risk and/or cash flow timing considerations. Despite the impact of the coronavirus, all 43 loans in the pool have received debt service payments for the months of May and June. The transaction consists of 43 fixed-rate loans secured by 76 commercial and multifamily properties. The transaction is of a sequential-pay pass-through structure. Two loans, representing 11.4% of the pool, are shadow-rated investment grade by DBRS Morningstar. DBRS Morningstar analyzed the conduit pool to determine the provisional ratings, reflecting the long-term probability of loan default within the term and its liquidity at maturity. When the cut-off loan balances were measured against the DBRS Morningstar net cash flow and their respective actual constants, the initial DBRS Morningstar weighted average (WA) debt service ratio (DSCR) of the pool was 2.58 times (x). Five loans accounting for 29.08% of the pool balance had a DBRS Morningstar DSCR below 1.56x, a threshold indicative of a higher likelihood of midterm default. The pool additionally includes seven loans, comprising a combined 23.4% of the pool balance, with a DBRS Morningstar loan-to-value (LTV) ratio in excess of 67.1%, a threshold generally indicative of above-average default frequency. The WA DBRS Morningstar LTV of the pool at issuance was 60.0%, and the pool is scheduled to amortize down to a DBRS Morningstar WA LTV of 57.3% at maturity. These credit metrics are based on A note balances. Seven loans, representing 33.6% of the pool, are in areas identified as DBRS Morningstar Market Ranks 7 or 8, which are generally characterized as highly dense urbanized areas that benefit from increased liquidity driven by consistently strong investor demand, even during times of economic stress. Markets ranked seven and eight benefit from lower default frequencies than less dense suburban, tertiary, and rural markets. Urban markets represented in the deal include New York, District of Columbia, and San Francisco. Sixteen loans, representing a combined 30.8% of the pool by allocated loan balance, exhibit issuance LTVs of less than 59.3%, a threshold historically indicative of relatively low-leverage financing and generally associated with below-average default frequency. Two of the loans—525 Market Street and Bellagio Hotel & Casino—exhibit credit characteristics consistent with investment-grade shadow ratings. Combined, these loans represent 11.4% of the pool. The credit characteristics of 525 Market Street are consistent with an A (high) rating and those of Bellagio Hotel & Casino are consistent with AAA. Term default risk is low, as indicated by a strong WA DBRS Morningstar DSCR of 2.58x. Even with the exclusion of the shadow-rated loans, which represent 11.4% of the pool, the deal exhibits a very favorable DBRS Morningstar DSCR of 2.09x. The pool is diverse by property type, with multifamily properties representing 38.3% and office properties representing 28.4% of the total pool balance, respectively. Compared with other property types, multifamily properties benefit from staggered lease rollover and generally low expense ratios. While revenue is quick to decline in a downturn because of the short-term nature of the leases, it is also quick to respond when the market improves. While the pool demonstrates favorable loan metrics with WA DBRS Morningstar Issuance and Balloon LTVs of 60.0% and 57.3%, respectively, it also exhibits heavy leverage barbelling. Two loans, accounting for 11.4% of the pool, have investment-grade shadow ratings and a WA LTV of 38.1%. The pool also has 16 loans, comprising 30.8% of the pool balance, with an issuance LTV lower than 59.3%, a threshold historically indicative of relatively low-leverage financing. Seven loans, comprising 23.4% of the pool balance, have an issuance LTV higher than 67.1%, a threshold historically indicative of relatively high-leverage financing and generally associated with above-average default frequency. The WA expected loss of the pool's investment-grade component was approximately 0.4%, while the WA expected loss of the pool's conduit component was substantially higher at over 2.1%, further illustrating the barbelled nature of the transaction. The WA DBRS Morningstar market rank exhibited by the loans that were identified as representing relatively high-leverage financing was 6.8. While these loans exhibit higher leverage, their location within urban markets represent a lower likelihood of midterm default. Thirty-one loans, representing a combined 73.9% of the pool by allocated loan balance, are structured with full-term interest-only (IO) periods. An additional 10 loans, representing 18.3% of the pool, have partial IO periods ranging from 12 months to 60 months. Two of the 31 identified loans area shadow-rated investment grade by DBRS Morningstar: 525 Market Street and Bellagio Hotel & Casino. The pool features a relatively high concentration of loans secured by properties in less favorable suburban market areas, as evidenced by 16 loans, which represent 24.6% of the pool balance, being secured by properties in areas with a DBRS Morningstar Market Rank of either 3 or 4. Furthermore, only six loans, representing 7.1% of the total pool balance, are secured by properties in areas with a DBRS Morningstar Market Rank of either 1 or 2, which are typically considered more rural or tertiary in nature. Ten of the identified loans, representing 15.4% of the pool balance, that are secured by properties in areas with a DBRS Morningstar Market Rank of 1, 2, 3, or 4 will amortize over the loan term, which can reduce risk over time. The WA expected loss of loans with market ranks of 1, 2, 3, or 4 is 2.8%, which is slightly higher than the overall conduit WA expected loss of 2.1% and is reflected in the pool's credit enhancement. Eight loans, representing 23.1% of the total pool balance, were modeled with either Weak or Bad (Litigious) sponsor strength. These loans were associated with sponsors with limited commercial real estate experience and/or low net worth and liquidities multiples. Furthermore, two of the eight loans were associated with sponsors that had a prior voluntary bankruptcy or other negative credit events. DBRS Morningstar applied a more punitive POD penalty towards these loans. 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. Notes: With regard to due diligence services, DBRS Morningstar was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of DBRS Morningstar's methodology, DBRS Morningstar used the data file outlined in the independent accountant's report in its analysis to determine the ratings referenced herein. MTRO COMMERCIAL 2019-TECH: DBRS Gives BB(low) Rating on F Certs --------------------------------------------------------------- DBRS, Inc. assigned ratings to the Commercial Mortgage Pass-Through Certificates, Series 2019-TECH issued by MTRO Commercial Mortgage Trust 2019-TECH as follows: -- Class A at AAA (sf) -- Class B at AAA (sf) -- Class X-NCP at AAA (sf) -- Class C at AA (high) (sf) -- Class D at BBB (sf) -- Class E at BB (sf) -- Class F at BB (low) (sf) All trends are Stable. These certificates are currently also rated by DBRS Morningstar's affiliated rating agency, Morningstar Credit Ratings, LLC (MCR). In connection with the ongoing consolidation of DBRS Morningstar and MCR, MCR previously announced that it had placed its outstanding ratings of these certificates Under Review–Analytical Integration Review and that MCR intended to withdraw its outstanding ratings; such withdrawal will occur on or about August 5, 2020. In accordance with MCR's engagement letter covering these certificates, upon withdrawal of MCR's outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings. On March 1, 2020, DBRS Morningstar finalized its "North American Single-Asset/Single-Borrower Ratings Methodology" (the NA SASB Methodology), which presents the criteria for which ratings are assigned to and/or monitored for North American single-asset/single-borrower (NA SASB) transactions, large concentrated pools, rake certificates, ground lease transactions, and credit tenant lease transactions. The subject rating actions are the result of the application of the NA SASB Methodology in conjunction with the "North American CMBS Surveillance Methodology," as applicable. Qualitative adjustments were made to the final loan-to-value (LTV) sizing benchmarks used for this rating analysis. The mortgage loan is backed by the borrower's leasehold interest in the office properties. The leasehold properties are subject to two ground leases, one that runs through 2087 for One MetroTech Center and the other through 2092 for Eleven MetroTech Center. The borrower pays ground rent and site acquisition costs to New York. The ground rent and site acquisition cost (SAC) payments are fixed through year eight (2026) with respect to One MetroTech, and through year 12 (2030) with respect to Eleven MetroTech. After the 12th year, the payments begin to increase. The collateral is 98.2% occupied by 26 tenants across 50 leased spaces as of December 1, 2018. Prominent tenants are JPMorgan Chase, National Grid, New York University, and several municipal agencies including the Department of Information Technology & Telecommunications (DoITT) and the Emergency 911 (E911) facility. Much of the space is subject to long-term leases with an average remaining term of 8.2 years, which is about 3.2 years beyond the five-year loan term. Lease rollover risk is low, with only 9.2% of the leases rolling during the extended five-year loan term. However, the lease to JPMorgan Chase, with 24.1% of the net rentable area (NRA) expires one year after the loan matures, and National Grid's lease, with 23.1% of the NRA, expires two years after loan maturity. Although neither tenant has any remaining renewal options available, JPMorgan Chase has been at the property since it was built in 1991 and National Grid signed its initial lease in 1988. Both tenants carry an investment-grade credit rating. The multiblock campus contains street-level retail as well as a 3.5-acre, centrally located greenspace and is well located with easy access to public transportation. In addition to its proximity to Manhattan and ample transportation options, the area offers a lower-cost business district that continues to attract a variety of firms seeking comparatively lower rental rates. The loan is secured by the borrowers' leasehold interest in two office properties. Leasehold interests are subject to certain risks not associated with mortgages secured by a lien on a borrower's fee estate in commercial real estate. If the borrower's leasehold interest were to be terminated or impaired, the lender could lose its security in the leasehold interest. The terms of the ground lease for One MetroTech Center provide for ground rent to be reset in 2026. The combined ground rent for both buildings, including SAC payments, will increase to $10.3 million in 2026 from $4.8 million today. The fifth-largest tenant by DBRS Morningstar's rent and seventh-largest by square footage has an early termination date with 180 days’ notice. The Human Resources Administration has leased 27,000 square feet (sf) since 2013 but recently expanded into an additional 17,357 sf of space. The tenant is New York's department in charge of most the city's social service programs. Given the city's vast commitment throughout the MetroTech Campus and the tenant's recent expansion, no adjustment was made for the early termination date. Many of the larger tenants have been in occupancy since the MetroTech Center was completed. Both long-term tenants, DoITT and E911 emergency dispatcher facility, occupy 100% of the space with lease terms through 2030 in Eleven MetroTech Center. Also, JPMorgan Chase and National Grid have been at One MetroTech Center since it was completed. Many have high investment-grade ratings. The DBRS Morningstar net cash flow (NCF) derived at issuance was re-analyzed for the subject rating action to confirm its consistency with the "DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria." The resulting NCF figure of $17.9 million was accepted and a cap rate of 8.23% was applied, resulting in a DBRS Morningstar Value of $217.8 million, a variance of -28.3% from the appraised value at issuance of $304 million. The DBRS Morningstar Value implies an LTV of 105.6%, as compared with the LTV on the issuance appraised value of 75.7%. The NCF figure applied as part of the analysis represents a -18.8-% variance from the Issuer's NCF, primarily driven by vacancy loss, tenant improvements, and leasing commissions. The cap rate applied is at the middle end of the range of DBRS Morningstar Cap Rate Ranges for office properties, reflective of the leasehold interests these loans represent, the strong market, and strong tenancy. In addition, the 8.23% cap rate applied is above the implied cap rate of 7.27% based on the Issuer's underwritten NCF and appraised value. DBRS Morningstar made positive qualitative adjustments to the final LTV sizing benchmarks used for this rating analysis, totaling 4.50% to account for cash flow volatility, property quality, and market fundamentals. Class X-NCP is an interest-only (IO) certificate that references 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. NEUBERGER BERMAN XIX: Moody's Cuts Class E-R2 Notes to Caa1 ----------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by Neuberger Berman CLO XIX, Ltd.: US$6,250,000 Class E-R2 Mezzanine Secured Deferrable Floating Rate Notes Due July 2027, Downgraded to Caa1 (sf); previously on June 3, 2020 B2 (sf) Placed Under Review for Possible Downgrade Moody's also confirmed the ratings on the following notes: US$22,400,000 Class C-R2 Senior Secured Deferrable Floating Rate Notes Due July 2027, Confirmed at Baa2 (sf); previously on June 3, 2020 Baa2 (sf) Placed Under Review for Possible Downgrade US$19,750,000 Class D-R2 Mezzanine Secured Deferrable Floating Rate Notes Due July 2027, Confirmed at Ba3 (sf); previously on June 3, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on June 3, 2020 on the Class C-R2, the Class D-R2 and the Class E-R2 notes. The CLO, issued in July 2015 and last refinanced in April 2018 is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period ended in July 2019. RATINGS RATIONALE The downgrade rating actions on the Class E-R2 notes reflect the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased substantially, the credit enhancement available to the CLO notes has eroded, and exposure to Caa-rated assets has increased. The actions also reflect the negative cash flow generation implications of the CLO portfolio's lower than average weighted average spread. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class C-R2 and Class D-R2 notes continue to be consistent with the current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. Consequently, Moody's has confirmed the rating on the Classes C-R2 and Class D-R2 notes. The rating confirmations on both the Class C-R2 and Class D-R2 notes reflect the level of credit enhancement and protection provided by the Class C and Class D OC tests as well as better than expected performance of the collateral assets. Based on Moody's calculation, the weighted average rating factor (WARF) is 3290 as of July 2020, or 11.9% worse compared to 2939 reported in the February 2020 trustee report. Moody's calculation also showed the WARF was failing the test level of 2946 reported in the July 2020 trustee report by 344 points. Moody's noted that approximately 44.0% of the CLO's par was from obligors assigned a negative outlook and 1.0% from obligors whose ratings are on review for possible downgrade. Additionally, based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 19.5% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $385.6 million, or $14.4 million less than the deal's original ramp-up target par balance, and Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class A, Class B, Class C and Class D notes as of July 2020 is at 132.0%, 122.1%, 114.0% and 107.7% respectively. Nevertheless, Moody's noted that the OC tests for the Class A, Class B, Class C and Class D notes were recently reported in the July 2020 trustee report as passing. 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 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 of $375.9 million, defaulted par of $11.1 million, a weighted average default probability of 23.40% (implying a WARF of 3290), a weighted average recovery rate upon default of 49%, a diversity score of 64 and a weighted average spread of 3.09%. Moody's also analyzed the CLO by incorporating an approximately $2.9 million par haircut in calculating the OC ratios. Finally, Moody's also considered in its analysis restrictions on trading resulting from the end of the reinvestment period and the CLO manager's recent investment decisions. In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. Although the CLO manager's latitude for investment decisions and management of the transaction has become more limited after the end of the reinvestment period, any such activities will nonetheless also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. NORTHWOODS CAPITAL XV: Moody's Cuts Rating on Class E Notes to B1 ----------------------------------------------------------------- Moody's Investors Service has downgraded the rating on the following notes issued by Northwoods Capital XV, Limited: US$22,500,000 Class E Junior Secured Deferrable Floating Rate Notes Due 2029 (the "Class E Notes"), Downgraded to B1 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade Moody's also confirmed the ratings on the following notes: US$27,000,000 Class C Mezzanine Secured Deferrable Floating Rate Notes Due 2029 (the "Class C Notes"), Confirmed at A2 (sf); previously on June 3, 2020 A2 (sf) Placed Under Review for Possible Downgrade US$24,750,000 Class D Mezzanine Secured Deferrable Floating Rate Notes Due 2029 (the "Class D Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on April 17, 2020 on the Class D and the Class E Notes and the review for downgrade initiated on June 3, 2020 on the Class C Notes. The CLO, issued in June 2017 is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end in June 2021. RATINGS RATIONALE The downgrades on the Class E Notes reflect the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased substantially, the credit enhancement available to the CLO notes has eroded, exposure to Caa-rated assets has increased significantly, and expected losses on certain notes have increased. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class C Notes and the Class D Notes continue to be consistent with the current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. Consequently, Moody's has confirmed the rating on the Class C Notes and the Class D Notes. Based on Moody's calculation, the weighted average rating factor was 3465 as of June 2020, or 22.4% worse compared to 2831 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2951 reported in the June 2020 trustee report [2]by 514 points. Moody's noted that approximately 34% of the CLO's par was from obligors assigned a negative outlook and 2.5% from obligors whose ratings are on review for possible downgrade. Additionally, based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 28% as of June 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $436.6 million, or $13.4 million less than the deal's ramp-up target par balance, and Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class C, Class D and Class E notes as of June 2020 at 119.7%, 112.1% and 105.9%, respectively. Moody's noted that the OC test for the Class E Notes, as well as the interest diversion test were recently reported as failing their respective triggers [3], which resulted in partial repayment of senior notes on the last payment date in June 2020. Moody's notes that it also considered the information in the July 2020 trustee report, which became available immediately prior to the release of this announcement. 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 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 $431.8 million, defaulted par of $8.5 million, a weighted average default probability of 25.82% (implying a WARF of 3465), a weighted average recovery rate upon default of 46.4%, a diversity score of 63 and a weighted average spread of 3.86%. Moody's also analyzed the CLO by incorporating an approximately $8.4 million par haircut in calculating the OC and interest diversion test ratios. Finally, Moody's also considered in its analysis impending restrictions on trading resulting from the end of the reinvestment period and the CLO manager's recent investment decisions and trading strategies. Sensitivity Runs related to Coronavirus watchlist resolution: In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. OAKTOWN RE 2020-1: DBRS Gives Prov. B(low) Rating on Cl. M-2 Notes ------------------------------------------------------------------ DBRS, Inc. assigned provisional ratings to the Mortgage Insurance-Linked Notes, Series 2020-1 (the Notes) to be issued by Oaktown Re IV Ltd. (OMIR 2020-1 or the Issuer): -- $81.4 million Class M-1A at BBB (low) (sf) -- $125.4 million Class M-1B at BB (low)(sf) -- $98.3 million Class M-2 at B (low) (sf) The BBB (low) (sf), BB (low) (sf), and B (low) (sf) ratings reflect 6.05%, 4.20%, and 2.75% of credit enhancement, respectively. Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction. OMIR 2020-1 is National Mortgage Insurance Corporation's (NMI; the ceding insurer) third-rated MI-linked note transaction. Payments to the Notes are backed by reinsurance premiums, eligible investments, and related account investment earnings, in each case relating to a pool of MI policies linked to residential loans. The Notes are exposed to the risk arising from losses that the ceding insurer pays to settle claims on the underlying MI policies. As of the cut-off date, the pool of insured mortgage loans consists of 100,621 fully amortizing first-lien fixed- and variable-rate mortgages. They all have been underwritten to a full documentation standard, have original loan-to-value ratios (LTVs) less than or equal to 97%, and have never been reported to the ceding insurer as 60 or more days delinquent. The mortgage loans were originated on or after April 2019. On the closing date, the Issuer will enter into the Reinsurance Agreement with the ceding insurer. Per the agreement, the ceding insurer will receive protection for the funded portion of the MI losses. In exchange for this protection, the ceding insurer will make premium payments related to the underlying insured mortgage loans to the Issuer. The Issuer is expected to use the proceeds from selling the Notes to purchase certain eligible investments that will be held in the reinsurance trust account. The eligible investments are restricted to AAA or equivalently rated U.S. Treasury money market funds and securities. Unlike other residential mortgage-backed security (RMBS) transactions, cash flow from the underlying loans will not be used to make any payments; rather, in MI-linked note (MILN) transactions, a portion of the eligible investments held in the reinsurance trust account will be liquidated to make principal payments to the noteholders and to make loss payments to the ceding insurer when claims are settled with respect to the MI policy. The Issuer will use the investment earnings on the eligible investments, together with the ceding insurer's premium payments, to pay interest to the noteholders. The calculation of principal payments to the Notes will be based on a reduction in the aggregate exposed principal balance on the underlying MI policy. The subordinate Notes will receive their pro rata share of available principal funds if the minimum credit enhancement test and the delinquency test are satisfied. The minimum credit enhancement test will purposely fail at the closing date, thus locking out the rated classes from initially receiving any principal payments until the subordinate percentage grows to 8.00% from 7.25%. The delinquency test will be satisfied if the three-month average of 60+ days delinquency percentage is below 75% of the subordinate percentage. Unlike earlier rated NMI MILN transactions where the delinquency test is satisfied when the delinquency percentage falls below a fixed threshold, this transaction incorporates a dynamic delinquency test. Interest payments are funded via (1) premium payments that the ceding insurer must make under the Reinsurance Agreement and (2) earnings on eligible investments. On the Closing Date, the ceding insurer will establish a cash and securities account, the premium deposit account, and deposit an amount that covers 70 days of interest payments to be made to the noteholders. The calculation of the initial deposit amount also takes into account any potential investment income that may be earned on eligible investments held in the trust account. In case of the ceding insurer's default in paying coverage premium payments to the Issuer, the amount available in this account will be used to make interest payments to the noteholders. The presence of this account mitigates certain counterparty exposure that the trust has to the ceding insurer. On each payment date, if the amount available in the premium deposit account is less than the target premium amount, and the ceding insurer's average financial strength rating is lower than the highest rating assigned to the Notes, then the ceding insurer must fund the premium deposit account up to its target amount. The Notes are scheduled to mature on the payment date in July 2030 but will be subject to early redemption at the option of the ceding insurer (1) for a 10% clean-up call or (2) on or following the payment date in July 2027, among others. The Notes are also subject to mandatory redemption before the scheduled maturity date upon the termination of the Reinsurance Agreement. NMI will act as the ceding insurer. The Bank of New York Mellon (rated AA (high) with a Stable trend by DBRS Morningstar) will act as the Indenture Trustee, Paying Agent, Note Registrar, and Reinsurance Trustee. The Coronavirus Disease (COVID-19) pandemic and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. DBRS Morningstar anticipates that delinquencies may continue to rise in the coming months for many RMBS asset classes, some meaningfully. Various MI companies have set up programs to issue MILNs. These programs aim to transfer a portion of the risk related to MI claims on a reference pool of loans to the investors of the MILNs. In these transactions, investors' risk increases with higher MI payouts. The underlying pool of mortgage loans with MI policies covered by MILN reinsurance agreements are typically conventional/conforming loans that follow government-sponsored enterprises' acquisition guidelines and therefore have LTVs above 80%. However, a portion of each MILN transaction's covered loans may not be agency eligible. As a result of the coronavirus, DBRS Morningstar expects increased delinquencies, loans on forbearance plans, and a potential near-term decline in the values of the mortgaged properties. Such deteriorations may adversely affect borrowers' ability to make monthly payments, refinance their loans, or sell properties in an amount sufficient to repay the outstanding balance of their loans. In connection with the economic stress assumed under the moderate scenario in its commentary, see "Global Macroeconomic Scenarios: July Update," published on July 22, 2020, for the MILN asset class, DBRS Morningstar applies more severe market value decline (MVD) assumptions across all rating categories than what it previously used. DBRS Morningstar derives such MVD assumptions through a fundamental home price approach based on the forecast unemployment rates and GDP growth outlined in the aforementioned moderate scenario. In addition, DBRS Morningstar may assume a portion of the pool (randomly selected) to be on forbearance plans in the immediate future. For these loans, DBRS Morningstar assumes higher loss expectations above and beyond the coronavirus assumptions. Such assumptions translate to higher expected losses on the collateral pool and correspondingly higher credit enhancement. In the MILN asset class, while the full effect of the coronavirus may not occur until a few performance cycles later, DBRS Morningstar generally believes that loans with layered risk (low FICO score with high LTV/high debt-to-income ratio) may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Additionally, higher delinquencies might cause a longer lockout period or a redirection of principal allocation away from outstanding rated classes because performance triggers failed. The ratings reflect transactional strengths that include the following: -- Agency-eligible loans. -- High-quality credit and loan attributes. -- MI termination. -- A well-diversified pool. -- Alignment of interest. The transaction also includes the following challenges: -- Counterparty exposure. -- A weak representation and warranties framework. -- Limited third-party due diligence. -- Eligible investment losses. Notes: All figures are in U.S. dollars unless otherwise noted. RAIT CRE I: Fitch Lowers Rating on 4 Tranches to Csf ---------------------------------------------------- Fitch Ratings has affirmed three and downgraded four distressed classes of RAIT CRE CDO I Ltd. RAIT CRE CDO I Ltd/LLC - Class C 751020AD0; LT CCCsf; Affirmed - Class D 751020AE8; LT Csf; Downgrade - Class E 751020AF5; LT Csf; Downgrade - Class F 751020AG3; LT Csf; Downgrade - Class G 751020AH1; LT Csf; Downgrade - Class H 751020AJ7; LT Csf; Affirmed - Class J 751020AL2; LT Csf; Affirmed KEY RATING DRIVERS High Loss Expectations: The downgrade to classes D through G reflects a greater certainty of loss; default of these classes is considered inevitable. All the remaining CDO ratings are distressed, reflecting the high loss expectations on the pool of 81.3%, which exceed the credit enhancement of the most senior rated class. The CDO is very concentrated and subject to adverse selection. There are only 19 loan interests/assets remaining. All loans/assets are considered Fitch Loans of Concern; approximately 72.7% of the pool is considered defaulted, with 42.9% categorized as real-estate owned. As of the July 2020 trustee report and per Fitch categorization, the CDO is substantially invested as follows: REO (42.9% of pool), whole loans/A-notes (17.8%), mezzanine debt (19.3%) and preferred equity (20%). Many of the remaining loans have been previously modified, including maturity extensions, since origination. Fitch expects significant losses upon default for many of these loan interests, as they are considered overleveraged. The largest CDO asset is an REO neighborhood shopping center located in Raritan, NJ (24.4% of pool), which was previously anchored by Stop & Shop (47% of NRA) through 2017. Stop & Shop, which had been in occupancy since 1987, decided to vacate at its lease expiration due to local competition. Per the most recent rent roll, occupancy at the center is only 6.9%. The property has negative cash flow. Furthermore, the property is subject to ongoing environmental issues and litigation. The asset manager is pursuing a sale of the property. The next largest CDO asset is a whole loan secured by a portfolio of vacant land parcels located in Daytona Beach, FL (10.6%). The collateral includes approximately 500 linear feet of ocean frontage. The property is not cash flowing. The loan is reportedly 90+ days delinquent. The property continues to be marketed for sale. The third largest CDO asset is a mezzanine loan (10.4%) backed by an interest in a class A, 248-unit garden-style apartment complex located in Sugarland, TX. The loan, which has significant accrued deferred interest of more than $26 million, is considered current. Fitch expects limited to no recovery on this loan. Credit Enhancement: Since Fitch's last rating action, three loan interests were paid off in full. Principal pay down over the period was approximately $44 million, resulting in the full payoff of class B and the 37.5% pay down of class C, which is now the senior most class in the transaction. While CE has improved to the senior classes since the last rating action, the transaction has become more concentrated and losses are expected to affect all classes. Classes J and PS have negative CE. Minimal Interest Proceeds Available: Class C, the senior class, now requires timely payment of interest. While interest and principal proceeds from the underlying collateral have been sufficient to cover the class' ongoing interest obligation, several loans do not consistently provide monthly interest proceeds to the CDO; furthermore, only three loans paid interest to the CDO in July 2020. These three preferred equity positions are backed by interests in three Wisconsin medical office buildings leased to Aurora Medical Care; however, two of the buildings have lease maturities at YE20 that have not yet been extended. The loss of a portion of the tenancy would be expected to impact the availability of interest proceeds to pay the senior class, and could result in the default of the class. Coverage Tests: Per the July 2020 trustee reporting, the CDO is failing C/D/E and F/G/H overcollateralization and interest coverage tests. Coronavirus Impact: All the loans/assets are considered FLOCs as they are not preforming at a stabilized level. Fitch expects the ongoing coronavirus pandemic should further stall progress of the asset manager achieving stabilization and may stall any leasing activities and/or pending property sales. Collateral Asset Manager: RAIT CRE CDO I is managed by RAIT Partnership, L.P., a subsidiary of RAIT Financial Trust. In December 2019, Fortress Investment Group completed its purchase of RAIT assets, including its interest in the subject CREL CDO. RAIT and its affiliates filed Chapter 11 on Aug. 30, 2019. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: Upgrades to the distressed classes, which are not expected due to the concentration and adverse selection of the remaining pool, could occur with substantially improved performance of the underlying assets and/or significantly higher recoveries than expected on disposed assets. Factors that could, individually or collectively, lead to negative rating action/downgrade: Downgrade to the 'CCCsf' rated distressed class could occur should asset performance continue to decline and/or further losses be realized. Downgrade of the 'Csf' rated classes would occur at/or prior to legal final maturity, as default is inevitable. The majority of the remaining loans/assets in the pool are defaulted, with limited recovery prospects. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. 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. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). SLM STUDENT 2012-7: Fitch Affirms B Rating on Class B Notes ----------------------------------------------------------- Fitch Ratings has affirmed the ratings of all outstanding classes of SLM Student Loan Trust 2003-10, 2011-3 and 2012-7. The Rating Outlook for all classes, except class B of SLM 2003-10, remains Stable. The Outlook for SLM 2003-10 class B has been revised to Positive from Stable. SLM Student Loan Trust 2003-10 - Class A-3 78442GJG2; LT AAAsf; Affirmed - Class A-4 78442GJH0; LT AAAsf; Affirmed - Class B 78442GJF4; LT Asf; Affirmed SLM Student Loan Trust 2011-3 - Class A 78445UAA0; LT AAAsf; Affirmed - Class B 78445UAD4; LT AAAsf; Affirmed SLM Student Loan Trust 2012-7 - Class A-3 78447KAC6; LT Bsf; Affirmed - Class B 78447KAD4; LT Bsf; Affirmed SLM 2003-10: The class A-3 and A-4 notes pass Fitch's cash flow stresses at the current assigned rating level. The class B notes pass cash flow stresses at higher rating levels than the current rating. In addition, all the notes are supported by a non-declining yield supplement account, which is available for interest or principal shortfalls after the reserve account is fully depleted. SLM 2011-3: The class A and B notes pass Fitch's cash flow stresses at the current assigned rating level. SLM 2012-7: The class A-3 and B notes have been affirmed at 'Bsf', supported by qualitative factors such as Navient's ability to call the notes upon reaching 10% pool factor and the revolving credit agreement established by Navient, which allows the servicer to purchase loans from the trust. Because Navient has the option but not the obligation to lend to the trust, Fitch does not give quantitative credit to this agreement. However, this agreement provides qualitative comfort that Navient is committed to limiting investors' exposure to maturity risk. Navient Corporation is currently rated 'BB-'/Negative. Although the class B notes have a legal final maturity date beyond 2035, in an event of default (EOD), in which the class A-3 notes are not paid in full by maturity, the class B notes will not receive principal or interest payments. KEY RATING DRIVERS U.S. Sovereign Risk: The trust collateral is comprised of 100% Federal Family Education Loan Program loans with guaranties provided by eligible guarantors and reinsurance provided by the U.S. Department of Education for at least 97% of principal and accrued interest. The U.S. sovereign rating is 'AAA'/Stable. Collateral Performance: Based on transaction-specific performance to date, Fitch revised its sustainable constant default rate to 2.5% from 2.3% for SLM 2003-10 and maintained its sCDR at 3.0% for SLM 2011-3 and 4.1% for SLM 2012-7. Fitch also revised its sustainable constant prepayment rate (sCPR; voluntary & involuntary) to 8.0% from 8.8% for SLM 2003-10, to 9.5% from 10.0% for SLM 2011-3, and to 10.0% from 12.0% for SLM 2012-7. The sCDRs and sCPRs for SLM 2003-10 and SLM 2011-3 translate into a cumulative default rate of 16.75% and 19.25% under the base case scenario and a 50.25% and 57.75% and default rate under the 'AAA' credit stress scenario, respectively. Fitch applies the standard default timing curve in its credit stress cash flow analysis. For all the transactions, the claim reject rate is assumed to be 0.25% in the base case and 2.0% in the 'AAA' case. The TTM levels of deferment are 3.55%, 4.70% and 7.49% for SLM 2003-10, 2011-3 and 2012-7, respectively. The TTM levels of forbearance are 11.68%, 12.15% and 18.66% for SLM 2003-10, 2011-3 and 2012-7, respectively. The TTM levels of income-based repayment (IBR; prior to adjustment) are 18.64%, 19.20% and 27.53% for SLM 2003-10, 2011-3 and 2012-7, respectively. These TTM levels are used as the starting point in cash flow modeling. Subsequent declines and increases are modeled as per criteria. The borrower benefits are 0.20%, 0.17% and 0.05% for SLM 2003-10, 2011-3 and 2012-7, respectively, based on information provided by the sponsor. Basis and Interest Rate Risk: Basis risk for these transactions arises from any rate and reset frequency mismatch between interest rate indices for Special Allowance Payments and the securities. As of June 2020, approximately 89.39%, 99.72% and 99.83% of the student loans in SLM 2003-10, 2011-3 and 2012-7, respectively, are indexed to LIBOR, and the balance of the loans is indexed to the 91-day T-bill rate. The outstanding notes in SLM 2003-10 are indexed to three-month LIBOR, or the trust's obligation is indexed to three-month LIBOR through a currency swap, in the case of class A-4. All notes in SLM 2011-3 and SLM 2012-7 are indexed to one-month LIBOR. Fitch applies its standard basis and interest rate stresses to SLM 2003-10 and SLM 2011-3 in cash flow modeling as per criteria. Payment Structure: Credit enhancement is provided by over-collateralization, excess spread and for the class A notes, subordination. As of June 2020, the senior parity ratios (including the reserve account) are 111.04% (9.95% CE), 116.37% (14.06% CE) and 110.34% (9.37% CE) for SLM 2003-10, 2011-3 and 2012-7, respectively. The total parity ratios (including the reserve account) are 102.40% (2.34% CE), 106.25% (5.89% CE) and 101.28% (1.27% CE) for SLM 2003-10, 2011-3 and 2012-7, respectively. Liquidity support is provided by a reserve account sized at 0.25% of the outstanding pool balance. As of June 2020, the reserve accounts are at their floors of $3,012,925, $1,197,172 and $1,248,784 for SLM 2003-10, 2011-3 and 2012-7, respectively. SLM 2003-10 and SLM 2011-3 will continue to release cash as long as 100.0% reported total parity is maintained. SLM 2012-7 will continue to release cash as long as 101.01% reported total parity is maintained. Operational Capabilities: Day-to-day servicing is provided by Navient Solutions, LLC. Fitch believes Navient is an acceptable servicer, due to its extensive track record as the largest servicer of FFELP loans. In addition, Fitch confirmed with the servicer the availability of a business continuity plan to minimize disruptions in the collection process during the coronavirus pandemic. Coronavirus Impact: Under the coronavirus baseline (rating) scenario, Fitch assumes a global recession in 1H20 driven by sharp economic contractions in major economies with a rapid spike in unemployment, followed by a recovery that begins in 3Q20, but personal incomes remain depressed through 2022. Fitch revised the sCDR for SLM 2003-10 and the sCPR for SLM 2003-10 and SLM 2011-3 in cash flow modeling to reflect this scenario by assuming a decline in payment rates and an increase in defaults to previous recessionary levels for two years and then a return to recent performance for the remainder of the life of the transactions. The risk of negative rating actions will increase under Fitch's coronavirus downside (sensitivity) scenario, which contemplates a more severe and prolonged period of stress with a halting recovery beginning in 2Q21. As a downside sensitivity reflecting this scenario, Fitch increases the default rate, IBR and remaining term assumptions by 50%. The results are provided in Rating Sensitivities below. RATING SENSITIVITIES 'AAAsf' rated tranches of most FFELP securitizations will likely move in tandem with the U.S. sovereign rating given the strong linkage to the U.S. sovereign, by nature of the reinsurance provided by the Department of Education. Aside from the U.S. sovereign rating, defaults, basis risk and loan extension risk account for the majority of the risk embedded in FFELP student loan transactions. This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. Fitch conducts credit and maturity stress sensitivity analysis by increasing or decreasing key assumptions by 25% and 50% over the base case. The credit stress sensitivity is viewed by stressing both the base case default rate and the basis spread. The maturity stress sensitivity is viewed by stressing remaining term, IBR usage and prepayments. The results below should only be considered as one potential outcome, as the transactions are exposed to multiple dynamic risk factors and should not be used as an indicator of possible future performance. SLM Student Loan Trust 2003-10 Current Model-Implied Ratings: class A 'AAAsf' (Credit and Maturity Stress); class B 'AAAsf' (Credit and Maturity Stress) Factors that could, individually or collectively, lead to positive rating action/upgrade: No upgrade credit or maturity stress sensitivity is provided for either the class A or class B notes, as they are already at their highest possible model-implied ratings. Factors that could, individually or collectively, lead to negative rating action/downgrade: Credit Stress Rating Sensitivity -- Default increase 25%: class A 'AAAsf'; class B 'AAsf'; -- Default increase 50%: class A 'AAAsf'; class B 'AAsf'; -- Basis spread increase 0.25%: class A 'AAAsf'; class B 'AAsf'; -- Basis spread increase 0.50%: class A 'AAAsf'; class B 'Asf'. Maturity Stress Rating Sensitivity -- CPR decrease 25%: class A 'AAAsf'; class B 'AAAsf'; -- CPR decrease 50%: class A 'AAAsf'; class B 'AAAsf'; -- IBR usage increase 25%: class A 'AAAsf'; class B 'AAAsf'; -- IBR usage increase 50%: class A 'AAAsf'; class B 'AAAsf'; -- Remaining term increase 25%: class A 'AAAsf'; class B 'AAAsf'; -- Remaining term increase 50%: class A 'BBsf'; class B 'AAAsf'. For the downside coronavirus sensitivity scenario, Fitch assumed a 50% increase in defaults, IBR and remaining term for the credit and maturity stresses, respectively. Under this scenario, the model-implied ratings were unchanged at 'AAAsf' for the class A notes and 'AAsf' for the class B notes for the credit stress. There was no impact on model-implied ratings for the maturity stress under increased IBR. The model-implied ratings were 'BBsf' for the class A notes (i.e., the class A-4 notes) and unchanged at 'AAAsf' for the class B notes for the maturity stress under increased remaining term. SLM Student Loan Trust 2011-3 Current Model-Implied Ratings: class A 'AAAsf' (Credit and Maturity Stress); class B 'AAAsf' (Credit and Maturity Stress) Factors that could, individually or collectively, lead to positive rating action/upgrade: No upgrade credit or maturity stress sensitivity is provided for either the class A or class B notes, as they are already at their highest possible model-implied ratings. Factors that could, individually or collectively, lead to negative rating action/downgrade: Credit Stress Rating Sensitivity -- Default increase 25%: class A 'AAAsf'; class B 'AAAsf'; -- Default increase 50%: class A 'AAAsf'; class B 'AAAsf'; -- Basis spread increase 0.25%: class A 'AAAsf'; class B 'AAAsf'; -- Basis spread increase 0.50%: class A 'AAAsf'; class B 'AAAsf'. Maturity Stress Rating Sensitivity -- CPR decrease 25%: class A 'AAAsf'; class B 'AAAsf'; -- CPR decrease 50%: class A 'AAAsf'; class B 'AAAsf'; -- IBR usage increase 25%: class A 'AAAsf'; class B 'AAAsf'; -- IBR usage increase 50%: class A 'AAAsf'; class B 'AAAsf'; -- Remaining term increase 25%: class A 'AAAsf'; class B 'AAAsf'; -- Remaining term increase 50%: class A 'AAAsf'; class B 'AAAsf'. For the downside coronavirus sensitivity scenario, Fitch assumed a 50% increase in defaults, IBR and remaining term for the credit and maturity stresses, respectively. Under this scenario, there was no impact on model-implied ratings for the credit and maturity stresses. SLM Student Loan Trust 2012-7 Cashflow modeling was not conducted for SLM 2012-7, reflecting performance since its last review and current ratings. In general, ratings for FFELP student loan transactions are sensitive to defaults, basis risk and loan extension risk. Factors that could, individually or collectively, lead to positive rating action/upgrade: The current ratings are most sensitive to Fitch's maturity risk scenario. Key factors that may lead to positive rating action are sustained increases in payment rate and a material reduction in weighted average remaining loan term. A material increase of credit enhancement from lower defaults and positive excess spread, given favorable basis spread conditions, is a secondary factor that may lead to positive rating action. Factors that could, individually or collectively, lead to negative rating action/downgrade: The current ratings reflect the risk that the senior notes miss their legal final maturity date under Fitch's base case maturity scenario. If the margin by which these classes miss their legal final maturity date increases, or does not improve as the maturity date nears, the ratings may be downgraded further. Additional defaults, increased basis spreads beyond Fitch's published stresses, lower-than-expected payment speed or loan term extension are factors that could lead to future rating downgrades. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). SOUND POINT III-R: Moody's Lowers Class F Notes to Caa2 ------------------------------------------------------- Moody's Investors Service has downgraded the rating on the following notes issued by Sound Point CLO III-R, Ltd.: US$10,000,000 Class F Junior Secured Deferrable Floating Rate Notes Due April 16, 2029, Downgraded to Caa2 (sf); previously on April 17, 2020 B3 (sf) Placed Under Review for Possible Downgrade Moody's also confirmed the ratings on the following notes: US$25,200,000 Class C Mezzanine Secured Deferrable Floating Rate Notes Due April 16, 2029, Confirmed at A2 (sf); previously on April 17, 2020 A2 (sf) Placed Under Review for Possible Downgrade US$32,800,000 Class D Mezzanine Secured Deferrable Floating Rate Notes Due April 16, 2029, Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$21,000,000 Class E Junior Secured Deferrable Floating Rate Notes Due April 16, 2029, Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on April 17, 2020 on the Class C, Class D, Class E, and Class F notes. The CLO, issued in April 2018 is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end in April 2021. RATINGS RATIONALE The downgrade on the Class F notes reflect the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased substantially, the credit enhancement available to the CLO notes has eroded and exposure to Caa-rated assets has increased significantly. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class C, Class D, and Class E notes continue to be consistent with the current ratings after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. Consequently, Moody's has confirmed the ratings on the Classes C, Class D, and Class E notes. The ratings confirmation on the Class C, Class D and Class E notes also reflects the level of credit enhancement and protection provided by the Class C, Class D and Class E OC tests. Based on Moody's calculation, the weighted average rating factor (WARF) was 3053 as of July 2020, or 16% worse compared to 2635 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2925 reported in the July 2020 trustee report [2] by 128 points. Moody's noted that approximately 31.5% of the CLO's par was from obligors assigned a negative outlook and 1.8% from obligors whose ratings are on review for possible downgrade. Additionally, based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 15.8% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $481 million, or $19 million less than the deal's ramp-up target par balance, and Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class C, Class D and Class E notes as of July 2020 at 118.4%, 109.5% and 104.5%, respectively. 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 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 $478.4 million, defaulted par of $4.8 million, a weighted average default probability of 23.0% (implying a WARF of 3053), a weighted average recovery rate upon default of 47.5%, a diversity score of 78 and a weighted average spread of 3.65%. Finally, Moody's also considered in its analysis the CLO manager's recent investment decisions and trading strategies. In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. STARWOOD RETAIL 2014-STAR: DBRS Gives C Rating on 5 Tranches ------------------------------------------------------------ DBRS, Inc. assigned ratings to the Commercial Mortgage Pass-Through Certificates, Series 2014-STAR issued by Starwood Retail Property Trust 2014-STAR (the Issuer) as follows: -- Class A at B (sf) -- Class B at C (sf) -- Class C at C (sf) -- Class D at C (sf) -- Class E at C (sf) -- Class F at C (sf) The trend on Class A is Negative because of the loan's specially serviced status and possible negative credit degradation absent a timely resolution to the assets in addition to the negative impact of the Coronavirus Disease (COVID-19) on the retail sector. Classes B through F do not carry trends. These certificates are currently also rated by DBRS Morningstar's affiliated rating agency, Morningstar Credit Ratings, LLC (MCR). In connection with the ongoing consolidation of DBRS Morningstar and MCR, MCR previously announced that it had placed its outstanding ratings of these certificates Under Review–Analytical Integration Review and that MCR intended to withdraw its outstanding ratings; such withdrawal will occur on or about August 7, 2020. In accordance with MCR's engagement letter covering these certificates, upon withdrawal of MCR's outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings. On March 1, 2020, DBRS Morningstar finalized its "North American Single-Asset/Single-Borrower Ratings Methodology" (the NA SASB Methodology), which presents the criteria for which ratings are assigned to and/or monitored for North American single-asset/single-borrower (NA SASB) transactions, large concentrated pools, rake certificates, ground lease transactions, and credit tenant lease transactions. The subject rating actions are the result of the application of the NA SASB Methodology in conjunction with the "North American CMBS Surveillance Methodology," as applicable. Qualitative adjustments were not made to the final loan-to-value (LTV) sizing benchmarks used for this rating analysis. The transaction is collateralized by a $681.6 million floating-rate loan secured by three regional malls and one lifestyle center. The Mall at Wellington Green is a 1.3 million-square-foot (sf) indoor regional mall in Palm Beach County, Florida. At closing, it was anchored by City Furniture, Nordstrom on a ground lease, and noncollateral anchors Macy's, Dillard's, and J.C. Penney. MacArthur Center is a 928,000-sf regional mall in downtown Norfolk, Virginia, anchored by Dillard's on a ground lease and Regal Cinema. Northlake Mall is a 1.1 million-sf regional mall in Charlotte, North Carolina. Collateral is 540,000 sf of retail space with Dick's Sporting Goods and AMC Theatres as the collateral anchor tenants while other noncollateral anchors include Dillard's, Macy's, and Belk. The Mall at Partridge Creek is a 626,000-sf lifestyle center in Clinton Township, Michigan, about 30 miles north of downtown Detroit. The property's only remaining anchor is MJR Digital Theatres as Nordstrom vacated in September 2019 and Carsons vacated in 2018 following its bankruptcy filing. The loan was structured with debt yield hurdles attached to each of the two extension options. In 2017, after not meeting the debt yield hurdle, the sponsor was required to pay down principal by $25.0 million and make monthly principal payments of $800,000 to satisfy a loan modification, which ultimately extended the loan to November 2019. Upon final maturity, the loan transferred to special servicing for maturity default. While the sponsor was considering a possible restructuring prior to the global Coronavirus Disease (COVID-19) pandemic, the servicer now reports that discussions have been put on hold. The sponsor's inability to refinance the loan was partly the result of a steady decline in net cash flow (NCF) as occupancy fell over the years, reaching a low of 81% in 2019 from 96% at issuance. The servicer reported the year-end 2019 aggregate NCF at $48.3 million, a -29.4% variance from the Issuer's figure of $68.4 million at issuance. DBRS Morningstar anticipates that this downward trend will continue, given the additional strain that the coronavirus has placed on retailers that were already affected by e-commerce. In assigning these ratings, DBRS Morningstar relied heavily on the updated appraisal value of $366.7 million provided after the loan transferred to the special servicer. This assumed value results in an LTV of 185.8% and equates to a 13.0% cap rate on the servicer's reported 2019 NCF. Furthermore, the value is 66% lower than the Issuer's appraisal value at issuance and barely covers the original AAA-rated front-pay class. Notes: All figures are in U.S. dollars unless otherwise noted. TESLA AUTO 2020-A: Moody's Gives (P)Ba2 Rating on Class E Notes --------------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to the notes to be issued by Tesla Auto Lease Trust 2020-A. This is the first auto lease transaction in 2020 for Tesla Finance LLC (TFL; not rated). The notes will be backed by a pool of closed-end retail automobile leases originated by TFL, who is also the servicer and administrator for this transaction. The complete rating actions are as follows: Issuer: Tesla Auto Lease Trust 2020-A Class A-1 Notes, Assigned (P)P-1 (sf) Class A-2 Notes, Assigned (P)Aaa (sf) Class A-3 Notes, Assigned (P)Aaa (sf) Class A-4 Notes, Assigned (P)Aaa (sf) Class B Notes, Assigned (P)Aa2 (sf) Class C Notes, Assigned (P)A2 (sf) Class D Notes, Assigned (P)Baa2 (sf) Class E Notes, Assigned (P)Ba2 (sf) RATINGS RATIONALE The ratings are based on the quality of the underlying collateral and its expected performance, the strength of the capital structure, and the experience and expertise of TFL as the servicer and administrator. Moody's expected median cumulative net credit loss expectation for TALT 2020-A is 0.50% and the total loss at a Aaa stress on the collateral is 34.50% (including 4.50% credit loss and 30.00% residual value loss at a Aaa stress). The residual value loss at a Aaa stress of 30.00% is higher than the 28.00% assigned to the prior 2019-A transaction mainly due to higher RV setting as percentage of MSRP. In general, the relatively high residual value loss at a Aaa stress for TALT transactions are the result of (1) the sponsor's very limited securitization history and short operating history; (2) thin RV performance data, especially for Model 3, which is included in ABS transactions for the second time; (3) a lack of model diversification; (4) high RV maturity and geographic concentration: (5) unique or significantly greater RV risk for BEVs, especially for Tesla vehicles, which have significant technology risks including those that relate to self-driving and battery technology; (6) the impact of a potential manufacturer bankruptcy on RV, especially in the context of Tesla's vertically integrated production model; and (7) the current expectations for the macroeconomic environment during the life of the transaction. Moody's based its cumulative net credit loss expectation and loss at a Aaa stress of the collateral on an analysis of the quality of the underlying collateral; the historical credit loss and residual value performance of similar collateral, including securitization performance and managed portfolio performance; the ability of TFL and its sub-servicer LeaseDimensions to perform the servicing functions; and current expectations for the macroeconomic environment during the life of the transaction. At closing, the Class A notes, Class B notes, Class C notes, Class D notes, and Class E notes are expected to benefit from 30.75%, 23.75%, 18.25%, 14.50%, and 10.50% of hard credit enhancement, respectively. Hard credit enhancement for the notes consists of a combination of overcollateralization, non-declining reserve account and subordination, except for the Class E notes, which do not benefit from subordination. The notes may also benefit from excess spread. The rapid spread of the COVID-19 outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of auto leases from the collapse in US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. Specifically, for US auto lease deals, the softening of the used car market will impact residual value performance on leases. In addition, performance will weaken due to the unprecedented spike in the unemployment rate, which may limit lessees' income and their ability to make lease payments, also a credit negative. Furthermore, lessee assistance programs such as lease deferrals and extensions may adversely impact scheduled cash flows to bondholders. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the COVID-19 outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was "Moody's Global Approach to Rating Auto Loan- and Lease-Backed ABS" published in July 2020. Factors that would lead to an upgrade or downgrade of the ratings: Up Moody's could upgrade the subordinated notes if, given current expectations of portfolio losses, levels of credit enhancement are consistent with higher ratings. In sequential pay structures, such as the one in this transaction, credit enhancement grows as a percentage of the collateral balance as collections pay down senior notes. Prepayments and interest collections directed toward note principal payments will accelerate this build of enhancement. Moody's expectation of pool losses could decline as a result of a lower number of obligor defaults or appreciation in the value of the vehicles securing an obligor's promise of payment. Portfolio losses also depend greatly on the US job market, the market for used vehicles, and changes in servicing practices. Down Moody's could downgrade the notes if, given current expectations of portfolio losses, levels of credit enhancement are consistent with lower ratings. Credit enhancement could decline if excess spread is not sufficient to cover losses in a given month. Moody's expectation of pool losses could rise as a result of a higher number of obligor defaults or deterioration in the value of the vehicles securing an obligor's promise of payment. Portfolio losses also depend greatly on the US job market, the market for used vehicles, and poor servicing. Other reasons for worse-than-expected performance include error on the part of transaction parties, inadequate transaction governance, and fraud. In its analysis of the Class A-1 money market tranche, Moody's applied incremental stresses to its typical cash flow assumptions in consideration of a likely slowdown in borrower payments brought on by the economic impact of the COVID-19 pandemic. Additionally, Moody's could downgrade the Class A-1 short-term rating following a significant slowdown in principal collections that could result from, among other things, high delinquencies or a servicer disruption that impacts obligor's payments. TICP CLO IV: Moody's Lowers Rating on Class F Notes to Caa3 ----------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by TICP CLO IV, Ltd.: US$23,750,000 Class E Junior Secured Deferrable Floating Rate Notes due 2027 (the "Class E Notes"), Downgraded at B1 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$11,000,000 Class F Junior Secured Deferrable Floating Rate Notes due 2027 (the "Class F Notes"), Downgraded to Caa3 (sf); previously on April 17, 2020 Caa1 (sf) Placed Under Review for Possible Downgrade Moody's has also confirmed the rating on the following notes: US$27,750,000 Class D-R Mezzanine Secured Deferrable Floating Rate Notes due 2027 (the "Class D-R Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Class D-R, Class E, and Class F Notes. The collateralized loan obligation, originally issued in May 2015 and refinanced in March 2018, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period ended in July 2019. RATINGS RATIONALE The downgrades on the Class E and Class F Notes reflect the credit deterioration and par loss observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased substantially and the credit enhancement available to the CLO notes has eroded, exposure to Caa-rated assets has increased significantly, and expected losses on certain notes have increased materially. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class D-R Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. Moody's analysis also considered the positive impact on the notes of deleveraging as the deal amortizes, including as a result of failing the Class E OC test. Consequently, Moody's has confirmed the rating on the Classes D-R Notes. Based on Moody's calculation, the weighted average rating factor was 3557 as of June 2020, or 16% worse compared to a WARF of 3062 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2985 by 572 points. The recent WARF and the extent of the CLO's failure of the WARF test are worse than the averages Moody's has observed for other BSL CLOs. Moody's noted that approximately 29.0% of the CLO's par was from obligors assigned a negative outlook and 1.7% from obligors whose ratings are on review for downgrade. Additionally, based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 23.9% of the CLO par as of June 2020. Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $435.8 million, and Moody's calculated the OC ratios (excluding haircuts) for the Class D-R, Class E, and Class F Notes as of July 2020 at 112.09%, 105.63% and 102.72%, respectively. Moody's noted that the OC tests for the Class E Notes was recently reported in the July 2020 trustee report [2] as failing, and that as a result, interest payments were deferred on the Class F Notes and senior notes were repaid. If this failure occurs on the next payment date, repayment of senior notes or deferral of current interest payments on the junior notes could result. 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 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 $435.8 million, defaulted par of $17.1 million, a weighted average default probability of 24.95% (implying a WARF of 3557), a weighted average recovery rate upon default of 47.53%, a diversity score of 66 and a weighted average spread of 3.26%. Finally, Moody's also considered in its analysis the CLO manager's recent investment decisions and trading strategies. In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. UBS-BARCLAYS COMMERCIAL 2012-C4: Fitch Cuts Class F Certs to CCC ---------------------------------------------------------------- Fitch Ratings has downgraded two classes and affirmed 10 classes of UBS-Barclays Commercial Mortgage Trust 2012-C4 Commercial Mortgage Pass-Through Certificates, Series 2012-C4. UBS-BB 2012-C4 - Class A-3 90270RBC7; LT AAAsf; Affirmed - Class A-4 90270RBD5; LT AAAsf; Affirmed - Class A-5 90270RBE3; LT AAAsf; Affirmed - Class A-AB 90270RBF0; LT AAAsf; Affirmed - Class A-S 90270RAA2; LT AAAsf; Affirmed - Class B 90270RAG9; LT AA-sf; Affirmed - Class C 90270RAJ3; LT A-sf; Affirmed - Class D 90270RAL8; LT BBB-sf; Affirmed - Class E 90270RAN4; LT Bsf; Downgrade - Class F 90270RAQ7; LT CCCsf; Downgrade - Class X-A 90270RAC8; LT AAAsf; Affirmed - Class X-B 90270RAE4; LT A-sf; Affirmed KEY RATING DRIVERS Increased Loss Expectations: The downgrades to classes E and F reflect Fitch's increased loss expectations, after four of the top 15 loans transferred to special servicing since March 2020. There are five loans in special servicing (15% of the current pool balance) and 11 loans (24.8%), including the specially serviced loans, have been designated as Fitch Loans of Concern. As of the July 2020 remittance, four loans are delinquent, including two (3%) that are 30 days delinquent, one loan in foreclosure (0.3%), and one loan (4.8%) that is a nonperforming maturity balloon. Five loans (5.1%) are less than 30 days delinquent. Specially Serviced Loans: The largest specially serviced loan in the pool is Visalia Mall (6.2%), a regional mall in Visalia, CA anchored by Macy's, JC Penney and Old Navy. As of 1Q20, the property was 95% occupied and reported an IO NOI debt service coverage ratio of 3.63x. The loan transferred to special servicing in May 2020 for imminent default after the borrower indicated that they would not be able to refinance the loan prior to its May 2020 maturity date. The servicer has executed a forebearance agreement with the borrower to give them additional time to refinance; the new maturity date is in June 2021. The loan is current as of the July remittance. Newgate Mall (4.8%) is a regional mall in Ogden, UT that is anchored by Dillard's, Burlington Coat Factory and DownEast Home. Sears (30.1% of the collateral net rentable area) went dark in early 2018, and there has been no leasing activity for the vacant box. As of YE 2019, total mall occupancy was 79% and collateral occupancy was 63%. The property has experienced declining cash flow and is not the dominant mall in its trade area. The loan transferred to special servicing in March 2020 when the borrower indicated that they would not be able to refinance the loan prior to their June 2020 maturity date. The servicer is in contact with the borrower and working to determine the best way to proceed. Sun Development Portfolio (2.1%) is a five-property, 512-key hotel portfolio with properties located in Illinois, Mississippi, Ohio and Indiana. As of 3Q19, the portfolio was 71% occupied and performing at a 1.84x NOI DSCR. The loan transferred to special servicing in June 2020 for nonmonetary default and is currently less than 30 days delinquent. The borrower is in negotiations with the special servicer to allow them to sell off one of the properties. Chinatown Shopping Center (1.6%), located in Austin, TX, is anchored by MT Supermarket. As of 1Q20, the property was 95% occupied and performing at a 1.90x NOI DSCR. The loan transferred to special servicing in June 2020 for imminent monetary default and is currently 30 days delinquent. The servicer is in contact with the borrower to determine an appropriate workout. Virginia College (0.3%) is a single-tenant retail property that transferred to special servicing in March 2019 due to imminent default as a result of the single tenant vacating ahead of its lease expiration. A foreclosure sale is scheduled for 3Q20. FLOC: Other FLOCs include Clifton Commons (4.3%), a power center in Clifton, NJ being stress tested due to coronavirus; Courtyard Columbus at Easton Town Center (1.5%), a hotel in Columbus, OH being stress tested due to coronavirus; RR Donnelly HQ (1.4%), an office property in the Chicago metro where the borrower is 30-days delinquent and the single tenant has filed chapter 11 bankruptcy; Gaithersburg Office Portfolio (1.1%), an office portfolio in suburban Maryland with low DSCR due to increased vacancy; Country Inn and Suites at Newark Airport (0.9%), a hotel in Newark, NJ being stress tested due to coronavirus; and Parkstone Office Complex (0.6%), an office property in Indianapolis, IN with low DSCR. Coronavirus Exposure: The pool contains seven loans (10.8%) secured by hotels with a weighted-average NOI DSCR of 2.83x. Retail properties account for 29% of the pool balance, which includes two regional mall loans (11%) in the top four, and have weighted average NOI DSCR of 2.29x. Cash flow disruptions continue as a result of property and consumer restrictions due to the spread of the coronavirus. Fitch's base case analysis applied an additional NOI stress to three hotel and three retail loans due to their vulnerability to the coronavirus pandemic. These additional stresses contributed to the downgrades of classes E and F as well as maintenance of the Negative Outlook on Classes D and E. In addition, an ESG relevance score of '4' for Social Impacts was applied as a result of exposure to a sustained structural shift in secular preferences affecting consumer trends, occupancy trends, and more, which, in combination with other factors, impacts the ratings. Increased Credit Enhancement and Defeaseance: As of the July 2020 distribution date, the pool's aggregate principal balance has been reduced by 17.6% to $1.20 billion from $1.46 billion at issuance. Two loans (1% of the prior pool balance) have been liquidated since Fitch's last rating action, one with a yield maintenance penalty and the other at a small loss. Twenty loans (15.1%) have been defeased compared to 16 loans (7.7%) at the prior rating action. Class G has realized $256,407 in losses and is currently being affected by interest shortfalls. RATING SENSITIVITIES The Negative Outlooks on classes D and E reflect the potential for a near-term rating change should the performance of the specially serviced loans deteriorate. It also reflects concerns with hotel and retail properties due to a decline in travel and commerce as a result of the coronavirus pandemic. The Stable Outlooks on all other classes reflect the overall stable performance of the pool and expected continued amortization. Factors that could, individually or collectively, lead to a positive rating action/upgrade would include stable to improved asset performance coupled with paydown and/or defeasance. Upgrades of the B, C, and X-B classes would only occur with significant improvement in CE or substantial defeasance but would be limited should the deal be susceptible to a concentration whereby the underperformance of particular loans could cause this trend to reverse. An upgrade to class D with a Negative Outlook would also take into account these factors, but would be limited based on sensitivity to concentrations or the potential for future concentration. Classes would not be upgraded above 'Asf' if there is a likelihood for interest shortfalls. An upgrade to classes E and F is not likely and would only occur if the specially serviced loans were resolved without losses, the performance of the remaining pool is stable, and if there is sufficient CE, which would likely occur when the 'CCCsf' or below class(es) are not eroded and the senior classes payoff. Upgrades to any classes are highly unlikely if the specially serviced loans, particularly Newgate Mall, are resolved with substantial losses and while stresses related to the coronavirus continue to impact the pool. Factors that could, individually or collectively, lead to a negative rating action/downgrade would include an increase in pool level losses from underperforming or specially serviced loans or the transfer of additional loans to special servicing. Downgrades to the senior classes, A-3, A-4, A-4, A-AB, A-S and X-A are not likely due to the position in the capital structure and the high CE and defeasance. Downgrades to classes B, C and X-B are possible if additional loans default and transfer to special servicing, if the performance of specially serviced loans deteriorates, or if several large loans realize outsized losses. Downgrades may occur at 'AAAsf' or 'AAsf' should interest shortfalls occur. Downgrades to class D with a Negative Outlook would occur should overall pool losses continue to increase and/or one or more large loans, such as Newgate Mall, have an outsized loss which would erode CE. Further downgrades to classes E and F would occur if loss expectations increase further due to additional transfers to special servicing or as losses are realized. In addition to its baseline scenario, Fitch also envisions a downside scenario where the health crisis is prolonged beyond 2021; should this scenario play out, Fitch expects that a greater percentage of classes may be assigned a Negative Rating Outlook or those with Negative Rating Outlooks will be downgraded one or more categories. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. 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. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS UBS-BB 2012-C4 has an ESG Relevance Score of 4 for Exposure to Social Impacts due to the pool's significant retail exposure, including two specially serviced regional mall loans that are currently underperforming as a result of changing consumer preferences in shopping, which has a negative impact on the credit profile and is highly relevant to the ratings. This impact contributed to the downgrade of classes E and F and the Negative Outlooks on classes D and E. Except for the matters discussed, the highest level of ESG credit relevance, if present, is a score of 3 - ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. VENTURE XXIV: Moody's Lowers Class E Notes Rating to Ba3 -------------------------------------------------------- Moody's Investors Service has downgraded the rating on the following notes issued by Venture XXIV CLO, Limited: US$25,500,000 Class E Junior Secured Deferrable Floating Rate Notes due 2028 (the "Class E Notes"), Downgraded to Ba3 (sf); previously on April 17, 2020 Ba2 (sf) Placed Under Review for Possible Downgrade Moody's also confirmed the ratings on the following notes: US$15,000,000 Class D-1R Mezzanine Secured Deferrable Floating Rate Notes due 2028 (the "Class D-1R Notes"), Confirmed at Baa2 (sf); previously on April 17, 2020 Baa2 (sf) Placed Under Review for Possible Downgrade US$12,000,000 Class D-2 Mezzanine Secured Deferrable Floating Rate Notes due 2028 (the "Class D-2 Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on April 17, 2020 on the Class D-1R Notes, Class D-2 Notes, and Class E Notes. The CLO, originally issued in September 2016 and partially refinanced in September 2019 is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate loans. The transaction's reinvestment period will end in October 2020. RATINGS RATIONALE The downgrade on the Class E Notes reflects the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased substantially, the credit enhancement available to the CLO notes has eroded, and the exposure to Caa-rated assets has increased significantly. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class D-1R and Class D-2 Notes continue to be consistent with the current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual OC levels. Consequently, Moody's has confirmed the ratings on the Class D-1R and Class D-2 Notes. Based on Moody's calculation, the weighted average rating factor was 3013 as of June 2020, or 14% worse compared to 2632 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2655 reported in the June 2020 trustee report [2] by 358 points. Moody's noted that approximately 35.5% of the CLO's par was from obligors assigned a negative outlook and 4.8% from obligors whose ratings are on review for possible downgrade. Additionally, based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 17.34% as of June 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $511.5 million, or $13.5 million less than the deal's ramp-up target par balance. 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 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 $505.3 million, defaulted par of $14.0 million, a weighted average default probability of 23.18% (implying a WARF of 3013), a weighted average recovery rate upon default of 46.71%, a diversity score of 105 and a weighted average spread of 3.61%. Finally, Moody's also considered in its analysis impending restrictions on trading resulting from the end of the reinvestment period and the CLO manager's recent investment decisions and trading strategies. In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. VERUS SECURITIZATION 2020-4: DBRS Gives Prov. B Rating on B-2 Certs ------------------------------------------------------------------- DBRS, Inc. assigned provisional ratings to the following Mortgage Pass-Through Certificates, Series 2020-4 (the Certificates) to be issued by Verus Securitization Trust 2020-4 (Verus 2020-4 or the Trust): -- $281.7 million Class A-1 at AAA (sf) -- $27.9 million Class A-2 at AA (sf) -- $44.2 million Class A-3 at A (sf) -- $28.8 million Class M-1 at BBB (low) (sf) -- $15.5 million Class B-1 at BB (sf) -- $9.9 million Class B-2 at B (sf) Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction. The AAA (sf) rating on the Class A-1 Certificates reflects 34.40% of credit enhancement provided by subordinate certificates. The AA (sf), A (sf), BBB (low) (sf), BB (sf), and B (sf) ratings reflect 27.90%, 17.60%, 10.90%, 7.30%, and 5.00% of credit enhancement, respectively. This securitization is a portfolio of fixed- and adjustable-rate, expanded prime and nonprime, first-lien residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 1,084 mortgage loans with a total principal balance of $429,454,733 as of the Cut-Off Date (July 1, 2020). The originators for the mortgage pool are Athas Capital Group, Inc. (35.9%), Calculated Risk Analytics LLC doing business as Excelerate Capital (16.1%), Sprout Mortgage Corporation (11.0%), and other originators, each comprising less than 10.0% of the mortgage loans. The Servicers of the loans are Shellpoint Mortgage Servicing (98.1%) and Specialized Loan Servicing LLC (1.9%). Although the mortgage loans were originated to satisfy the Consumer Financial Protection Bureau's (CFPB's) Ability-to-Repay (ATR) rules, they were made to borrowers who generally do not qualify for agency, government or private-label nonagency prime jumbo products for various reasons. In accordance with the Qualified Mortgage (QM)/ATR rules, 51.1% of the loans are designated as non-QM, 0.1% are designated as QM safe harbor, and 0.2% are designated as QM rebuttable presumption. Approximately 48.6% of the loans are made to investors for business purposes and, hence, are not subject to the QM/ATR rules. All of the loans not subject to the QM/ATR rules were underwritten using the borrower's debt-to-income (DTI) ratio. The sponsor, directly or indirectly through a majority-owned affiliate, will retain an eligible horizontal residual interest consisting of the Class B-3 and Class XS Certificates, representing at least 5% of the Certificates to satisfy the credit risk-retention requirements under Section 15G of the Securities Exchange Act of 1934 and the regulations promulgated thereunder. On or after the earlier of (1) the Distribution Date occurring in July 2023 or (2) the date when the aggregate stated principal balance of the mortgage loans is reduced to 30% of the Cut-Off Date balance, the Administrator, at the Issuer's option, may redeem all of the outstanding Certificates at a price equal to the greater of (A) the class balances of the related Certificates plus accrued and unpaid interest, including any cap carryover amounts and (B) the class balances of the related Certificates less than 90 days delinquent with accrued unpaid interest plus fair market value of the loans 90 days or more delinquent and real estate owned properties. After such purchase, the Depositor must complete a qualified liquidation, which requires (1) a complete liquidation of assets within the Trust and (2) proceeds to be distributed to the appropriate holders of regular or residual interests. Similar to Verus 2020-2 and Verus 2020-3 (though dissimilar to other previously issued Verus non-QM deals), the principal and interest (P&I) Advancing Party will fund advances of delinquent P&I on any mortgage until such loan becomes 90 days delinquent. The P&I Advancing Party has no obligation to advance P&I on a mortgage approved for a forbearance plan during its related forbearance period. The Servicers, however, are obligated to make advances in respect of taxes, insurance premiums, and reasonable costs incurred in the course of servicing and disposing properties. The three-month advancing mechanism may increase the probability of periodic interest shortfalls in the current economic environment affected by the Coronavirus Disease (COVID-19). As a large number of borrowers may seek forbearance on their mortgages in the coming months, P&I collections may be reduced meaningfully. Unlike Verus 2020-2 and Verus 2020-3 (though similar to other previously issued Verus non-QM deals), this transaction incorporates a sequential-pay cash flow structure with a pro rata feature among the senior tranches. Principal proceeds can be used to cover interest shortfalls on the Class A-1 and A-2 Certificates sequentially (IIPP) after a Trigger Event. For more subordinated Certificates, principal proceeds can be used to cover interest shortfalls as the more senior Certificates are paid in full. Furthermore, excess spread can be used to cover realized losses and prior period bond writedown amounts first before being allocated to unpaid cap carryover amounts to Class A-1 down to Class B-2. Unlike previously issued Verus non-QM deals (though similar to the Verus INV shelf), 24.0% of the loans were originated under the Property Focused Investor Loan Debt Service Coverage Ratio program and 17.9% were originated under the Property Focused Investor Loan program. Both programs allow for property cash flow/rental income to qualify borrowers for income. In contrast to other non-QM transactions, which employ a fixed coupon for senior bonds (Classes A-1, A-2, and A-3), Verus 2020-4's senior bonds are subject to a rate update starting on the distribution date in August 2024. From this distribution date forward, the Class A-1, A-2, and A-3 bonds are subject to a step-up rate (a yearly rate equal to 1.0%). Coronavirus Impact The coronavirus pandemic and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. DBRS Morningstar anticipates that delinquencies may continue to raise in the coming months for many residential mortgage-backed securities (RMBS) asset classes, some meaningfully. The non-QM sector is a traditional RMBS asset class that consists of securitizations backed by pools of residential home loans that may fall outside of the CFPB's ATR rules, which became effective on January 10, 2014. Non-QM loans encompass the entire credit spectrum. They range from high-FICO, high-income borrowers who opt for interest-only or higher DTI ratio mortgages, to near-prime debtors who have had certain derogatory pay histories but were cured more than two years ago, to nonprime borrowers whose credit events were only recently cleared, among others. In addition, some originators offer alternative documentation or bank statement underwriting to self-employed borrowers in lieu of verifying income with W-2s or tax returns. Finally, foreign nationals and real estate investor programs, while not necessarily non-QM in nature, are often included in non-QM pools. As a result of the coronavirus, DBRS Morningstar expects increased delinquencies, loans on forbearance plans, and a potential near-term decline in the values of the mortgaged properties. Such deteriorations may adversely affect borrowers' ability to make monthly payments, refinance their loans, or sell properties in an amount sufficient to repay the outstanding balance of their loans. In connection with the economic stress assumed under its moderate scenario (see "Global Macroeconomic Scenarios: July Update," published on July 22, 2020), for the non-QM asset class, DBRS Morningstar applies more severe market value decline (MVD) assumptions across all rating categories than what it previously used. Such MVD assumptions are derived through a fundamental home price approach based on the forecast unemployment rates and GDP growth outlined in the aforementioned moderate scenario. In addition, for pools with loans on forbearance plans, DBRS Morningstar may assume higher loss expectations above and beyond the coronavirus assumptions. Such assumptions translate to higher expected losses on the collateral pool and correspondingly higher credit enhancement. In the non-QM asset class, while the full effect of the coronavirus may not occur until a few performance cycles later, DBRS Morningstar generally believes loans originated to (1) borrowers with recent credit events, (2) self-employed borrowers, or (3) higher loan-to-value ratio (LTV) borrowers may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Borrowers with prior credit events have exhibited difficulties in fulfilling payment obligations in the past and may revert to spotty payment patterns in the near term. Self-employed borrowers are potentially exposed to more volatile income sources, which could lead to reduced cash flows generated from their businesses. Higher LTV borrowers, with lower equity in their properties, generally have fewer refinance opportunities and therefore slower prepayments. In addition, certain pools with elevated geographic concentrations in densely populated urban metropolitan statistical areas may experience additional stress from extended lockdown periods and the slowdown of the economy. In addition, for this transaction, as permitted by the Coronavirus Aid, Relief, and Economic Security Act, signed into law on March 27, 10.0% (as of July 6, 2020) of the borrowers had been granted forbearance or deferral plans because of financial hardship related to the coronavirus. These forbearance plans allow temporary payment holidays, followed by repayment once the forbearance period ends. The Servicers, in collaboration with the Servicing Administrator, are generally offering borrowers a three-month payment forbearance plan. Beginning in month four, the borrower can repay all of the missed mortgage payments at once or opt for other loss mitigation options. Prior to the end of the applicable forbearance period, the Servicers will contact each related borrower to identify the options available to address related forborne payment amounts. As a result, the Servicers, in conjunction with or at the direction of the Servicing Administrator, may offer a repayment plan or other forms of payment relief, such as deferral of the unpaid principal and interest amounts or a loan modification, in addition to pursuing other loss mitigation options. For these loans, DBRS Morningstar applied additional assumptions to evaluate the impact of potential cash flow disruptions on the rated tranches, stemming from (1) lower P&I collections and (2) limited servicing advances on delinquent P&I. These assumptions include the following: -- Increasing delinquencies on the AAA (sf) and AA (sf) rating levels for the first twelve months. -- Increasing delinquencies on the A (sf) and below rating levels for the first nine months. -- No voluntary prepayments for the first 12 months for the AAA (sf) and AA (sf) rating levels. -- No liquidation recovery for the first 12 months for the AAA (sf) and AA (sf) rating levels. Notes: All figures are in U.S. dollars unless otherwise noted. WELLS FARGO 2020-3: Fitch Gives B+ Rating on Class B-5 Debt ----------------------------------------------------------- Fitch Ratings assigns the following ratings to Wells Fargo Mortgage-Backed Securities 2020-3 Trust: WFMBS 2020-3 - Class A-1; LT AAAsf New Rating - Class A-2; LT AAAsf New Rating - Class A-3; LT AAAsf New Rating - Class A-4; LT AAAsf New Rating - Class A-5; LT AAAsf New Rating - Class A-6; LT AAAsf New Rating - Class A-7; LT AAAsf New Rating - Class A-8; LT AAAsf New Rating - Class A-9; LT AAAsf New Rating - Class A-10; LT AAAsf New Rating - Class A-11; LT AAAsf New Rating - Class A-12; LT AAAsf New Rating - Class A-13; LT AAAsf New Rating - Class A-14; LT AAAsf New Rating - Class A-15; LT AAAsf New Rating - Class A-16; LT AAAsf New Rating - Class A-17; LT AAAsf New Rating - Class A-18; LT AAAsf New Rating - Class A-19; LT AAAsf New Rating - Class A-20; LT AAAsf New Rating - Class A-IO1; LT AAAsf New Rating - Class A-IO2; LT AAAsf New Rating - Class A-IO3; LT AAAsf New Rating - Class A-IO4; LT AAAsf New Rating - Class A-IO5; LT AAAsf New Rating - Class A-IO6; LT AAAsf New Rating - Class A-IO7; LT AAAsf New Rating - Class A-IO8; LT AAAsf New Rating - Class A-IO9; LT AAAsf New Rating - Class A-IO10; LT AAAsf New Rating - Class A-IO11; LT AAAsf New Rating - Class B-1; LT AA+sf New Rating - Class B-2; LT Asf New Rating - Class B-3; LT BBB+sf New Rating - Class B-4; LT BB+sf New Rating - Class B-5; LT B+sf New Rating - Class B-6; LT NRsf New Rating TRANSACTION SUMMARY The certificates are supported by 671 prime fixed-rate mortgage loans with a total balance of approximately $522.9 million as of the cutoff date. All of the loans were originated by Wells Fargo Bank, N.A. (Wells Fargo) or were acquired from its correspondents. This is the eighth post-crisis issuance from Wells Fargo. KEY RATING DRIVERS Revised GDP Due to Coronavirus (Negative): The coronavirus pandemic and the resulting containment efforts have resulted in revisions to Fitch's GDP estimates for 2020. Fitch's baseline global economic outlook for U.S. GDP growth is currently a 5.6% decline for 2020, down from 1.7% for 2019. Fitch's downside scenario would see an even larger decline in output in 2020 and a weaker recovery in 2021. To account for declining macroeconomic conditions resulting from the coronavirus pandemic, an Economic Risk Factor (ERF) floor of 2.0 (the ERF is a default variable in the U.S. RMBS loan loss model) was applied to 'BBBsf' and below. Expected Payment Deferrals Related to Coronavirus (Negative): The outbreak of the coronavirus and widespread containment efforts in the U.S. will result in increased unemployment and cash flow disruptions. To account for the cash flow disruptions, Fitch assumed deferred payments on a minimum of 25% of the pool for the first six months of the transaction at all rating categories with a reversion to its standard delinquency and liquidation timing curve by month 10. This assumption is based on observations of legacy delinquencies and past-due payments following Hurricane Maria in Puerto Rico. Payment Forbearance (Mixed): As of the cutoff date, none of the borrowers in the pool are on a coronavirus forbearance plan. Additionally, any loan that enters a coronavirus forbearance plan between the cutoff date and prior to or on the closing date will be removed from the pool (at par) within 30 days of closing. For borrowers who enter a coronavirus forbearance plan post-closing, the P&I advancing party will advance delinquent P&I during the forbearance period. If at the end of the forbearance period the borrower begins making payments, the advancing party will be reimbursed from any catch-up payment amount. If the borrower doesn't resume making payments, the loan will likely become modified and the advancing party will be reimbursed from available funds. Fitch increased its loss expectations by 10 bps for the 'BB+sf' ratings categories and below to address the potential for write-downs due to reimbursements of servicer advances. This increase is based on a servicer reimbursement scenario analysis which incorporated collateral similar to WFMBS 2020-3. Fitch did not adjust its loss expectations above 'BB+sf' because the agency's model output levels were sufficiently lower than its loss floors for 30-year collateral. Full Servicer Advancing (Neutral): The pool benefits from advances of delinquent P&I until the servicer, Wells Fargo, the primary servicer of the pool, deems them non-recoverable. Fitch's loss severities reflect reimbursement of amounts advanced by the servicer from liquidation proceeds based on its liquidation timelines assumed at each rating stress. In addition, the credit enhancement for the rated classes has some cushion for recovery of servicer advances for loans that are modified following a payment forbearance. Very High-Quality Mortgage Pool (Positive): The collateral attributes are among the strongest of post-crisis RMBS rated by Fitch. The pool consists primarily of 30-year fixed-rate fully amortizing loans to borrowers with strong credit profiles, low leverage and large liquid reserves. All loans are Safe Harbor Qualified Mortgages. The loans are seasoned an average of 7.1 months. The pool has a weighted average original FICO score of 774, which is indicative of very high credit-quality borrowers. Approximately 82% has original FICO scores at or above 750. In addition, the original WA CLTV ratio of 70.6% represents substantial borrower equity in the property. The pool's attributes, together with Wells Fargo's sound origination practices, support Fitch's very low default risk expectations. High Geographic Concentration (Negative): Approximately 49% of the pool is concentrated in California with a relatively low MSA concentration. The largest MSA concentration is in New York MSA (19.3%) followed by the San Francisco MSA (18.9%) and the Los Angeles MSA (10.5%). The top three MSAs account for 48.9% of the pool. As a result, an additional penalty of approximately 7% was applied to the pool's lifetime default expectations. Low Operational Risk (Positive): Operational risk is very well controlled for in this transaction. Wells Fargo has an extensive operating history in residential mortgage originations and is assessed as an 'Above Average' originator by Fitch. The entity has a diversified sourcing strategy and utilizes an effective proprietary underwriting system for its retail originations. Wells Fargo will perform primary and master servicing for this transaction; these functions are rated 'RPS1-' and 'RMS1-', respectively, which are among Fitch's highest servicer ratings. The Rating Outlooks for these servicers were revised to Negative from Stable due to the changing economic landscape. The expected losses at the 'AAAsf' rating stress were reduced by approximately 58 bps to reflect these strong operational assessments. Tier 2 R&W (Representations and Warranties) Framework (Neutral): While the loan-level R&Ws for this transaction are substantially in conformity with Fitch criteria, the framework has been assessed as a Tier 2 due to the narrow testing construct which limits the breach reviewers ability to identify or respond to issues not fully anticipated at closing. The Tier 2 assessment and the strong financial condition of Wells Fargo as the R&W provider resulted in a neutral impact to the CE. In response to the coronavirus, and in an effort to focus breach reviews on loans that are more likely to contain origination defects that let to or contributed to the delinquency of the loan, Wells Fargo added additional carve-out language relating to the delinquency review trigger for certain Disaster Mortgage Loans that are modified or delinquent due to disaster related loss mitigation (including the coronavirus pandemic). Due Diligence Review Results (Positive): Third-party due diligence was performed on 100% of loans in the transaction pool. The review was performed by Clayton, which is assessed by Fitch as an 'Acceptable - Tier 1' TPR firm. 99.7% of the loans received a final grade of 'A' or 'B', which reflects strong origination practices. Loans with a final 'B' grade were supported with sufficient compensating factors, or were already accounted for in Fitch's loan loss model. The two remaining loans received a final due diligence grade of 'C', which reflected a material property valuation exception where the secondary review value yielded a negative variance larger than 10% of the original appraisal value. Fitch applied the lower of the values to calculate the LTV. The adjustment did not have a material impact on the expected loss levels. Loans with due diligence receive a credit in the loss model; the aggregate adjustment reduced the 'AAAsf' expected losses by 14 bps. Straightforward Deal Structure (Positive): The mortgage cash flow and loss allocation are based on a senior-subordinate, shifting-interest structure whereby the subordinate classes receive only scheduled principal and are locked out from receiving unscheduled principal or prepayments for five years. The lockout feature helps maintain subordination for a longer period should losses occur later in the life of the deal. The applicable credit support percentage feature redirects subordinate principal to classes of higher seniority if specified CE levels are not maintained. To mitigate tail risk, which arises as the pool seasons and fewer loans are outstanding, a subordination floor of 0.90% of the original balance will be maintained for the senior certificates. Extraordinary Expense Treatment (Neutral): The trust provides for expenses, including indemnification amounts, reviewer fees and costs of arbitration, to be paid by the net WA coupon of the loans, which does not affect the contractual interest due on the certificates. In addition, the expenses to be paid from the trust are capped at $350,000 per annum, with the exception of independent reviewer breach review fee, which can be carried over each year, subject to the cap until paid in full. RATING SENSITIVITIES Fitch incorporates a sensitivity analysis to demonstrate how the ratings would react to steeper MVDs than assumed at the MSA level. The implied rating sensitivities are only an indication of some of the potential outcomes and do not consider other risk factors that the transaction may become exposed to or that may be considered in the surveillance of the transaction. Sensitivity analyses was conducted at the state and national levels to assess the effect of higher MVDs for the subject pool as well as lower MVDs, illustrated by a gain in home prices. Factors that could, individually or collectively, lead to a negative rating action/downgrade: This defined negative rating sensitivity analysis demonstrates how the ratings would react to steeper MVDs at the national level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the model-projected 38.5% at 'AAA'. The analysis indicates that there is some potential rating migration with higher MVDs for all rated classes, compared with the model projection. Specifically, a 10% additional decline in home prices would lower all rated classes by one full category. Factors that could, individually or collectively, lead to a positive rating action/upgrade: This defined positive rating sensitivity analysis demonstrates how the ratings would react to negative MVDs at the national level, or in other words positive home price growth with no assumed overvaluation. The analysis assumes positive home price growth of 10%. Excluding the senior class which is already 'AAAsf', the analysis indicates there is potential positive rating migration for all of the rated classes. Specifically, a 10% gain in home prices would result in a full category upgrade for the rated class excluding those being assigned ratings of 'AAAsf'. This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. The modeling process uses the modification of these variables to reflect asset performance in up- and down environments. The results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance. Fitch has added a Coronavirus Sensitivity Analysis that includes a prolonged health crisis, resulting in depressed consumer demand and a protracted period of below-trend economic activity that delays any meaningful recovery to beyond 2021. Under this severe scenario, Fitch expects the ratings to be impacted by changes in its sustainable home price model due to updates to the model's underlying economic data inputs. Any long-term impact arising from coronavirus disruptions on these economic inputs will likely affect both investment and speculative grade ratings. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Fitch was provided with Form ABS Due Diligence-15E as prepared by Clayton Services LLC. The third-party due diligence described in Form 15E focused on a compliance review, credit review and valuation review. The due diligence company performed a review on 100% of the loans. Fitch believes the overall results of the review generally reflected strong underwriting control. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS WFMBS 2020-3 has an ESG Relevance Score of '4' for Transaction Parties & Operational Risk. Operational risk is well controlled for in WFMBS 2020-3, including strong R&W and transaction due diligence and a strong originator and servicer, which resulted in a reduction in expected losses. Except for the matters discussed, the highest level of ESG credit relevance, if present, is a score of 3 - ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. WELLS FARGO 2020-3: Moody's Rates Class B-5 Debt 'Ba3' ------------------------------------------------------ Moody's Investors Service has assigned definitive ratings to 25 classes of residential mortgage-backed securities issued by Wells Fargo Mortgage Backed Securities 2020-3 Trust. The ratings range from Aaa (sf) to Ba3 (sf). WFMBS 2020-3 is the third prime issuance by Wells Fargo Bank, N.A. (Wells Fargo Bank, the sponsor and mortgage loan seller) in 2020, consisting of 671 primarily 30-year, fixed rate, prime residential mortgage loans with an unpaid principal balance of $522,906,953. The pool has strong credit quality and consists of borrowers with high FICO scores, significant equity in their properties and liquid cash reserves. The pool has clean pay history and weighted average seasoning of approximately 5.06 months. The mortgage loans for this transaction are originated by Wells Fargo Bank, through its retail and correspondent channels, in accordance with its underwriting guidelines. In this transaction, all 671 loans are designated as qualified mortgages under the QM safe harbor rules. Wells Fargo Bank will service all the loans and will also be the master servicer for this transaction. The securitization has a shifting interest structure with a five-year lockout period that benefits from a senior floor and a subordinate floor. Moody's coded the cash flow to each of the certificate classes using Moody's proprietary cash flow tool. The complete rating actions are as follows: Issuer: Wells Fargo Mortgage Backed Securities 2020-3 Trust Cl. A-1, Definitive Rating Assigned Aaa (sf) Cl. A-2, Definitive Rating Assigned Aaa (sf) Cl. A-3, Definitive Rating Assigned Aaa (sf) Cl. A-4, Definitive Rating Assigned Aaa (sf) Cl. A-5, Definitive Rating Assigned Aaa (sf) Cl. A-6, Definitive Rating Assigned Aaa (sf) Cl. A-7, Definitive Rating Assigned Aaa (sf) Cl. A-8, Definitive Rating Assigned Aaa (sf) Cl. A-9, Definitive Rating Assigned Aaa (sf) Cl. A-10, Definitive Rating Assigned Aaa (sf) Cl. A-11, Definitive Rating Assigned Aaa (sf) Cl. A-12, Definitive Rating Assigned Aaa (sf) Cl. A-13, Definitive Rating Assigned Aaa (sf) Cl. A-14, Definitive Rating Assigned Aaa (sf) Cl. A-15, Definitive Rating Assigned Aaa (sf) Cl. A-16, Definitive Rating Assigned Aaa (sf) Cl. A-17, Definitive Rating Assigned Aa1 (sf) Cl. A-18, Definitive Rating Assigned Aa1 (sf) Cl. A-19, Definitive Rating Assigned Aaa (sf) Cl. A-20, Definitive Rating Assigned Aaa (sf) Cl. B-1, Definitive Rating Assigned Aa3 (sf) Cl. B-2, Definitive Rating Assigned A2 (sf) Cl. B-3, Definitive Rating Assigned Baa2 (sf) Cl. B-4, Definitive Rating Assigned Ba1 (sf) Cl. B-5, Definitive Rating Assigned Ba3 (sf) RATINGS RATIONALE Summary Credit Analysis and Rating Rationale Moody's expected loss for this pool in a baseline scenario-mean is 0.22% and reaches 3.22% at a stress level consistent with its Aaa ratings. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of US RMBS from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. The contraction in economic activity in the second quarter was severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's increased its model-derived median expected losses by 15% (9.02% for the mean) and its Aaa losses by 5% to reflect the likely performance deterioration resulting from of a slowdown in US economic activity in 2020 due to the COVID-19 outbreak. Moody's regards the COVID-19 outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Moody's bases its ratings on the certificates on the credit quality of the mortgage loans, the structural features of the transaction, its assessments of the origination quality and servicing arrangement, the strength of the third-party due diligence and the R&W framework of the transaction. Collateral Description The WFMBS 2020-3 transaction is a securitization of 671 first lien residential mortgage loans with an unpaid principal balance of $522,906,953. The loans in this transaction have strong borrower characteristics with a weighted average original FICO score of 782 and a weighted-average original loan-to-value ratio of 70.4%. In addition, 3.6% of the borrowers are self-employed, rate-and-term refinance and cash-out loans comprise approximately 53.0% of the aggregate pool (inclusive of construction to permanent loans). Of note, 7.4% (by loan balance) of the pool comprised of construction to permanent loans. The construction to permanent is a two-part loan where the first part is for the construction and then it becomes a permanent mortgage once the property is complete. For such loans in the pool, the construction was complete and because the borrower cannot receive cash from the permanent loan proceeds or anything above the construction cost, Moody's treated these loans as a rate term refinance rather than a cash out refinance loan. The pool has a high geographic concentration with 49.2% of the aggregate pool located in California and 19.4% located in the New York-Newark-Jersey City MSA. The characteristics of the loans underlying the pool are slightly stronger than recent prime RMBS transactions backed by 30-year mortgage loans that Moody's has rated. Origination Quality Wells Fargo Bank (long term debt Aa2) is an indirect, wholly-owned subsidiary of Wells Fargo & Company (long term debt A2). Wells Fargo & Company is a U.S. bank holding company with approximately $1.98 trillion in assets and approximately 263,000 employees as of March 31, 2020, which provides banking, insurance, trust, mortgage and consumer finance services throughout the United States and internationally. Wells Fargo Bank has sponsored or has been engaged in the securitization of residential mortgage loans since 1988. Wells Fargo Home Lending is a key part of Wells Fargo & Company's diversified business model. The mortgage loans for this transaction are originated by WFHL, through its retail and correspondent channels, generally in accordance with its underwriting guidelines. The company uses a solid loan origination system which include embedded features such as a proprietary risk scoring model, role-based business rules and data edits that ensure the quality of loan production. After considering the company's origination practices, Moody's made no additional adjustments to its base case and Aaa loss expectations for origination. Third Party Review One independent third-party review firm, Clayton Services LLC, was engaged to conduct due diligence for the credit, regulatory compliance, property valuation, and data accuracy for all 671 loans in the initial population of this transaction (100% of the mortgage pool). For an initial population of 693 loans, Clayton Services LLC identified 545 loans level A, 146 loans level B and two (2) loans of level C grade with its review. Most of the level B loans were underwritten using underwriter discretion. Areas of discretion included insufficient cash reserves, length of mortgage/rental history, cash out amount exceeds guidelines, missing verbal verification of employment and explanation for other multiple credit exceptions. The due diligence firm noted that these exceptions are minor and/or provided an explanation of compensating factors. For these two (2) level C loans there are findings related to property valuation review, because Clayton determined that the appraisal value used in the origination of such mortgage loans was not supported by field review within a negative 10% variance. These two findings are disclosed in the transaction's PPM. Moody's ran an additional sensitivity to take these valuation variances into account which it ultimately concluded to be of a non-material impact. In addition, with respect to these two-level C loans, the property value per field review resulted in a LTV ratio which was still within the parameters of Wells Fargo's underwriting guidelines. Representation & Warranties (R&W) Wells Fargo Bank, as the originator, makes the loan-level representation and warranties (R&Ws) for the mortgage loans. The loan-level R&Ws are strong and, in general, either meet or exceed the baseline set of credit-neutral R&Ws Moody's has identified for US RMBS. Further, R&W breaches are evaluated by an independent third party using a set of objective criteria to determine whether any R&Ws were breached when loans become 120 days delinquent, the property is liquidated at a loss above a certain threshold, or the loan is modified by the servicer. Similar to J.P. Morgan Mortgage Trust transactions, the transaction contains a "prescriptive" R&W framework. These reviews are prescriptive in that the transaction documents set forth detailed tests for each R&W that the independent reviewer will perform. It should be noted that exceptions exist for certain excluded disaster mortgage loans that trip the delinquency trigger. These excluded disaster loans include COVID-19 forbearance loans or any other loan with respect to which (a) the related mortgaged property is located in an area that is subject to a major disaster declaration by either the federal or state government and (b) has either been modified or is being reported delinquent by the servicer as a result of a forbearance, deferral or other loss mitigation activity relating to the subject disaster. As excluded disaster mortgage loans may be subject to a review in future periods if certain conditions are satisfied. Overall, Moody's believes that Wells Fargo Bank's robust processes for verifying and reviewing the reasonableness of the information used in loan origination along with effectively no knowledge qualifiers mitigates any risks involved. Wells Fargo Bank has an anti-fraud software tools that are integrated with the loan origination system and utilized pre-closing for each loan. In addition, Wells Fargo Bank has a dedicated credit risk, compliance and legal teams oversee fraud risk in addition to compliance and operational risks. Moody's did not make any additional adjustment to its base case and Aaa loss expectations for R&Ws. Tail Risk and Subordination Floor The transaction cash flows follow a shifting interest structure that allows subordinated bonds to receive principal payments under certain defined scenarios. Because a shifting interest structure allows subordinated bonds to pay down over time as the loan pool shrinks, senior bonds are exposed to increased performance volatility, known as tail risk. The transaction provides for a senior subordination floor of 0.90% of the closing pool balance, which mitigates tail risk by protecting the senior bonds from eroding credit enhancement over time. Additionally, there is a subordination lock-out amount which is 0.90% of the closing pool balance. Moody's calculates the credit neutral floors for a given target rating as shown in its principal methodology. The senior subordination floor of 0.90% and subordinate floor of 0.90% are consistent with the credit neutral floors for the assigned ratings. Transaction Structure The securitization has a shifting interest structure that benefits from a senior floor and a subordinate floor. Funds collected, including principal, are first used to make interest payments and then principal payments to the senior bonds, and then interest and principal payments to each subordinate bond. As in all transactions with shifting interest structures, the senior bonds benefit from a cash flow waterfall that allocates all unscheduled principal collections to the senior bond for a specified period of time and increasing amounts of unscheduled principal collections to the subordinate bonds thereafter, but only if loan performance satisfies delinquency and loss tests. All certificates in this transaction are subject to a net WAC cap. Realized losses are allocated reverse sequentially among the subordinate and senior support certificates and on a pro-rata basis among the super senior certificates. Servicing Arrangement In WFMBS 2020-3, unlike other prime jumbo transactions, Wells Fargo Bank as servicer, master servicer, securities administrator and custodian of all of the mortgage loans for the deal. The servicer will be primarily responsible for funding certain servicing advances and delinquent scheduled interest and principal payments for the mortgage loans, unless the servicer determines that such amounts would not be recoverable. The master servicer and servicer will be entitled to be reimbursed for any such monthly advances from future payments and collections (including insurance and liquidation proceeds) with respect to those mortgage loans (see also COVID-19 impacted borrowers' section for additional information). In the case of the termination of the servicer, the master servicer must consent to the trustee's selection of a successor servicer, and the successor servicer must have a net worth of at least $15 million and be Fannie or Freddie approved. The master servicer shall fund any advances that would otherwise be required to be made by the terminated servicer (to the extent the terminated servicer has failed to fund such advances) until such time as a successor servicer is appointed. Additionally, in the case of the termination of the master servicer, the trustee will be required to select a successor master servicer in consultation with the depositor. The termination of the master servicer will not become effective until either the trustee or successor master servicer has assumed the responsibilities and obligations of the master servicer which also includes the advancing obligation. After considering Wells Fargo Bank's servicing practices, Moody's did not make any additional adjustment to its losses. COVID-19 Impacted Borrowers As of the cut-off date, no borrower under any mortgage loan has entered into a COVID-19 related forbearance plan with the servicer. The mortgage loan seller will covenant in the mortgage loan purchase agreement to repurchase at the repurchase price within 30 days of the closing date any mortgage loan with respect to which the related borrower requests or enters into a COVID-19 related forbearance plan after the cut-off date but on or prior to the closing date. In the event that after the closing date a borrower enters into or requests a COVID-19 related forbearance plan, such mortgage loan (and the risks associated with it) will remain in the mortgage pool. In the event the servicer enters into a forbearance plan with a COVID-19 impacted borrower of a mortgage loan, the servicer will report such mortgage loan as delinquent (to the extent payments are not actually received from the borrower) and the servicer will be required to make advances in respect of delinquent interest and principal (as well as servicing advances) on such loan during the forbearance period (unless the servicer determines any such advances would be a nonrecoverable advance). At the end of the forbearance period, if the borrower is able to make the current payment on such mortgage loan but is unable to make the previously forborne payments as a lump sum payment or as part of a repayment plan, the servicer anticipates it will modify such mortgage loan and any forborne amounts will be deferred as a non-interest bearing balloon payment that is due upon the maturity of such mortgage loan. At the end of the forbearance period, if the borrower repays the forborne payments via a lump sum or repayment plan, advances will be recovered via the borrower payment(s). In an event of modification, Wells Fargo Bank will recover advances made during the period of Covid-19 related forbearance from pool level collections. Any principal forbearance amount created in connection with any modification (whether as a result of a COVID-19 forbearance or otherwise) will result in the allocation of a realized loss and to the extent any such amount is later recovered, will result in the allocation of a subsequent recovery. 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 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 RMBS Using the MILAN Framework" published in April 2020. WFRBS COMMERCIAL 2013-C18: Fitch Cuts Class F Certs to CCCsf ------------------------------------------------------------ Fitch has downgraded two classes and affirmed 11 other commercial mortgage pass-through certificates from WFRBS Commercial Mortgage Trust 2013-C18. WFRBS 2013-C18 - Class A-2 96221QAB9; LT AAAsf; Affirmed - Class A-3 96221QAC7; LT AAAsf; Affirmed - Class A-4 96221QAD5; LT AAAsf; Affirmed - Class A-5 96221QAE3; LT AAAsf; Affirmed - Class A-S 96221QAG8; LT AAAsf; Affirmed - Class A-SB 96221QAF0; LT AAAsf; Affirmed - Class B 96221QAJ2; LT AA-sf; Affirmed - Class C 96221QAK9; LT A-sf; Affirmed - Class D 96221QAM5; LT BBB-sf; Affirmed - Class E 96221QAP8; LT B-sf; Downgrade - Class F 96221QAR4; LT CCCsf; Downgrade - Class PEX 96221QAL7; LT A-sf; Affirmed - Class X-A 96221QAH6; LT AAAsf; Affirmed KEY RATING DRIVERS Coronavirus Exposure: The downgrade to classes E and F can be attributed to the social and market disruption caused by the effects of the coronavirus pandemic and related containment measures. Of particular concern are several underperforming hotels in the top 15 and the pool's exposure to retail properties, which represent 45.5% of the pool balance. The weighted-average NOI debt service coverage ratio for the 14 non-defeased retail loans is 4.13x. It would take a weighted-average 75% decline in NOI before debt service is reduced to 1.00x. The pool's retail component includes the two-largest loans, which are backed by high-performing regional malls in primary markets. There are nine loans representing 19.4% of the pool backed by hotels, including three Fitch loans of concern in the top 15. Additional stresses were applied to seven hotels, three retail centers, one office and one wholesale event center related to ongoing performance concerns in light of the pandemic. Increased Loss Expectations: Fitch's loss projections for the pool have increased since the last rating action. This is driven by three hotel loans in the top 15, all of which are FLOCs. JFK Hilton (7.2% of the pool) is secured by a 356-key, full-service hotel located less than one-quarter mile from John F. Kennedy International Airport in Queens, New York. The property was originally built in 1987 as a Holiday Inn and went through a major renovation before re-opening in March 2012 as a full-service Hilton hotel. The loan has been on the servicer's watchlist since October 2019 for performance decline. According to a November 2019 servicer site inspection, two new hotels were under development on parcels adjacent to the subject. The borrower has missed the May 2020 and subsequent debt service payments, but is not in forbearance as of the June 2020 remittance. Occupancy, ADR and RevPAR have declined in the last year. The YE 2019 NOI DSCR was 1.18x, down from 1.48x at YE 2018 and 1.56x at YE 2017. Hotel Felix (5.2% of the pool) is secured by a 225-key, full-service boutique hotel in Chicago's River North neighborhood. The building was originally constructed in 1926 as an apartment building and was converted to hotel use in 2009 following a $36 million redevelopment. The loan previously transferred to special servicing in April 2018 and was modified in December 2018, terms of which included a three-year extension of the interest-only period. The prior default stemmed from declined cash flow attributed to a significant increase in real estate expenses and new supply to the submarket. The loan again transferred to special servicing in April 2020 for imminent default and missed the May 2020 and subsequent debt service payments. According to the STR report for the T12 period ending June 2019, the property is outperforming its competitive set in occupancy, with 104.1% market penetration index, but underperforming in ADR (76.5%) and RevPAR (79.7%). Additionally, performance declined in occupancy and RevPAR for the property over the last three years. Real estate taxes increased over 200% since issuance and new supply to the market continues to negatively affect performance. The September 2019 DSCR was 1.04x. HIE Magnificent Mile (2.5% of the pool) is secured by a 174-key, limited-service hotel in Chicago, two blocks west of Michigan Avenue. The property was originally developed in 1927 as the Hotel Cass and was most recently renovated in 2007 following the current sponsor's acquisition. This loan shares common sponsorship with the Hotel Felix loan. It transferred to special servicing in April 2020 for imminent default and missed the May 2020 and subsequent debt service payments. According to the STR report for the T12 period ending June 2019, the subject outperforms its competitive set in occupancy (104.2% MPI) but lags in ADR (80.9%) and RevPAR (84.2%). ADR and RevPAR have been relatively stable despite increased market competition. The YE 2019 NOI DSCR was 0.99x. Minimal Changes to Credit Enhancement: No loans have repaid since the last rating action, so there has not been any significant change to credit enhancement. The second-largest loan in the pool, The Outlet Collection | Jersey Gardens (16.1% of the pool) is scheduled to mature in November 2020. The asset is a 1.3 million sf outlet mall located in Elizabeth, NJ. Inline sales were $969/sf for the T12 period ending March 2020. If this loan repays, it would contribute $140 million in principal paydown. No other loans are scheduled to mature prior to November 2023. RATING SENSITIVITIES The Outlooks on classes A-2 through PEX remain Stable. The Outlooks on classes D and E remain Negative. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: Factors that lead to upgrades would include significantly improved performance coupled with paydown and/or defeasance. An upgrade to class B would occur with stabilization of the FLOCs, but would be limited as concentrations increase. Upgrades of classes C and PEX would only occur with significant improvement in credit enhancement and stabilization of the FLOCs. Classes would not be upgraded above 'Asf' if there is likelihood for interest shortfalls. An upgrade to classes D through F is not likely, unless performance of the FLOCs improves and if performance of the remaining pool is stable. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: Factors that lead to downgrades include an increase in pool-level losses from underperforming or specially serviced loans. Downgrades to the classes rated 'AAAsf' are not considered likely due to position in the capital structure, but may occur at 'AAAsf' or 'AAsf' should interest shortfalls occur. Downgrades to classes C and PEX are possible should the specially serviced hotel loans fail to resolve or additional loans default. Downgrades to classes D and E are possible should performance of the FLOCs fail to stabilize. Downgrades to the distressed classes are expected as losses are realized. In addition to its baseline scenario, Fitch envisions a downside scenario where the health crisis is prolonged beyond 2021; should this scenario play out, Fitch expects a greater percentage of classes may be assigned a Negative Outlook, or those with Negative Outlooks will be downgraded one or more categories. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. 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. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). [*] DBRS Puts 20 U.S. RMBS Securities Under Review -------------------------------------------------- DBRS, Inc. placed various classes of securities issued in the Non-Qualified Mortgage (Non-QM), Government-Sponsored Enterprise Credit Risk Transfer (GSE CRT), and Mortgage Insurance-Linked Notes (MILNs) asset classes Under Review with Negative Implications as a result of the negative impact of the Coronavirus Disease (COVID-19). The Affected Ratings is Available at https://bit.ly/3gcyzz6 On April 13, 2020, and May 13, 2020, DBRS Morningstar published commentaries on the U.S. residential mortgage-backed security (RMBS) sector titled "Coronavirus Disease Fallout and the Credit Risk Exposure Mapping of U.S. RMBS Sectors" and "Coronavirus Disease Implications for GSE CRT Deals," respectively. In a commentary titled "Global Macroeconomic Scenarios: July Update" published on July 22, 2020, DBRS Morningstar provided an update on how its scenarios and views on the coronavirus have evolved since its original commentary dated April 16, 2020. DBRS Morningstar's moderate scenario now reflects recent economic data and assumes that a full recovery takes somewhat longer. This implies lower GDP growth for 2020, higher GDP growth for 2021 (as a larger proportion of lost output is made up in 2021 instead of Q3 and Q4 2020), and higher unemployment in 2020 carrying through to 2021. DBRS Morningstar's rating actions are based on the following analytical considerations: -- Key performance measures as reflected in month-over-month changes in delinquency (including forbearance) percentages, credit enhancement (CE) increases since deal inception, and the CE levels relative to the 30+-day delinquencies. -- Offset of mortgage relief initiatives via direct-to-consumer economic aid, mortgage payment assistance, and foreclosure suspension directives. -- Higher unemployment rates and more conservative home price assumptions. NON-QM In the Non-QM asset class, DBRS Morningstar generally believes that loans originated to (1) borrowers with recent credit events, (2) self-employed borrowers, or (3) higher loan-to-value (LTV) borrowers may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Borrowers with prior credit events have exhibited difficulties in fulfilling payment obligations in the past and may revert to spotty payment patterns in the near term. Self-employed borrowers are potentially exposed to more volatile income sources, which could lead to reduced cash flows generated from their businesses. Higher LTV borrowers with lower equity in their properties generally have fewer refinance opportunities and therefore slower prepayments. In addition, certain pools with elevated geographic concentrations in densely populated urban metropolitan statistical areas may experience additional stress from extended lockdown periods and the slowdown of the economy. GSE CRT AND MILNs In the GSE CRT and MILNs asset classes, DBRS Morningstar generally believes that loans with layered risk (low FICO score with high LTV/high debt-to-income ratio) may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Additionally, higher delinquencies might cause a longer lockout period or a redirection of principal allocation away from outstanding rated classes because of the failure of performance triggers. The rating actions are a result of DBRS Morningstar's application of the "U.S. RMBS Surveillance Methodology" published on February 21, 2020. When DBRS Morningstar places a rating Under Review with Negative Implications, DBRS Morningstar seeks to complete its assessment and remove the rating from this status as soon as appropriate. Upon the resolution of the Under Review status, DBRS Morningstar may confirm or downgrade the ratings on the affected classes. Notes: The principal methodologies are the U.S. RMBS Surveillance Methodology (February 21, 2020) and RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (April 1, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria. [*] Fitch Affirms Ratings on 38 Tranches From 7 Static CLOs ----------------------------------------------------------- Fitch Ratings has affirmed 38 tranches from Seven static U.S. collateralized loan obligations serviced by Palmer Square Capital Management LLC. Fitch has removed a total of 11 tranches from Rating Watch Negativ. These tranches now have Negative Rating Outlooks. The notes were previously placed on RWN in April. Palmer Square Loan Funding 2019-2 - Class A-1 69689PAA5; LT AAAsf; Affirmed - Class A-2 69689PAC1; LT AA+sf; Affirmed - Class B 69689PAE7; LT Asf; Affirmed - Class C 69689PAG2; LT BBB-sf; Affirmed - Class D 69689MAA2; LT BBsf; Affirmed - Class E 69689MAE4; LT B+sf; Affirmed Palmer Square Loan Funding 2019-3, Ltd. - Class A-1 69689LAA4; LT AAAsf; Affirmed - Class A-2 69689LAC0; LT AAsf; Affirmed - Class B 69689LAE6; LT Asf; Affirmed - Class C 69689LAG1; LT BBB-sf; Affirmed - Class D 69689NAA0; LT BBsf; Affirmed - Class E 69689NAC6; LT B+sf; Affirmed Palmer Square Loan Funding 2019-4, Ltd. - Class A-1 69689HAA3; LT AAAsf; Affirmed - Class A-2 69689HAC9 LT AAsf; Affirmed - Class B 69689HAE5; LT Asf; Affirmed - Class C 69689HAG0; LT BBB-sf; Affirmed - Class D 69689JAA9; LT BBsf; Affirmed Palmer Square Loan Funding 2018-4, Ltd - Class A-1 69700KAA1; LT AAAsf; Affirmed - Class A-2 69700KAC7; LT AA+sf; Affirmed - Class B 69700KAE3; LT Asf; Affirmed - Class C 69700KAG8; LT BBBsf; Affirmed - Class D 69700NAA5; LT BBsf; Affirmed - Class E 69700NAC1; LT B+sf; Affirmed Palmer Square Loan Funding 2018-5, Ltd. - Class A-1 69700PAA0; LT AAAsf; Affirmed - Class A-2 69700PAC6; LT AA+sf; Affirmed - Class B 69700PAE2; LT Asf; Affirmed - Class C 69700PAG7; LT BBBsf; Affirmed - Class D 69700QAA8; LT BBsf; Affirmed Palmer Square Loan Funding 2019-1 - Class A-1 69700VAA7; LT AAAsf; Affirmed - Class A-2 69700VAC3; LT AA+sf; Affirmed - Class B 69700VAE9; LT Asf; Affirmed - Class C 69700VAG4; LT BBB-sf; Affirmed - Class D 69700RAA6; LT BBsf; Affirmed Palmer Square Loan Funding 2020-1, Ltd. - Class A-1 69701EAA4; LT AAAsf; Affirmed - Class A-2 69701EAC0; LT AAsf; Affirmed - Class B 69701EAE6; LT Asf; Affirmed - Class C 69701EAG1 LT BBB-sf; Affirmed - Class D 69701DAA6; LT BBsf; Affirmed TRANSACTION SUMMARY Palmer Square Loan Funding 2018-4, Ltd., PSLF 2018-5, Ltd., PSLF 2019-1, Ltd., PSLF 2019-2, Ltd., PSLF 2019-3, Ltd., PSLF 2019-4, Ltd. and PSLF 2020-1, Ltd. are arbitrage CLOs that are serviced by Palmer Square Capital Management LLC. The CLOs were issued from October 2018 to February 2020 and are securitized by static pools of primarily first lien, senior secured leveraged loans. KEY RATING DRIVERS The affirmations are supported by the overall results of Fitch's Cash Flow Model analysis that was based on the actual portfolios after the substantial negative rating migration since early April. While CFM analysis indicated failures in some scenarios, they were limited to scenarios to which committee assigned less weight and considered to be minor in magnitude. In addition, Fitch expects all transactions to continue to build notes credit enhancement levels due to the CLOs' amortization, which should improve the notes' performance in the absence of significant deterioration in the portfolios' credit quality. Coronavirus Baseline Scenario Impact The coronavirus baseline sensitivity analysis applied for this review included notching down the ratings for all assets with corporate issuers on Outlook Negative regardless of sector, with a floor of 'CCC-'. The notes with an ON reflect the performance in Fitch's CFM analysis based on the coronavirus baseline sensitivity when considering flat interest rate scenarios. The ON of the eleven notes reflects committee's view that at least some of the underlying assets with ON may experience future downgrades, as the impact of coronavirus continues to unfold and the recovery path remains uncertain. Assets with a Fitch-derived rating on ON currently make up an average of 33% of the portfolios' balance in the seven reviewed CLOs. In addition to these eleven tranches, Fitch maintained ON for twelve tranches due to their subordinate positions in the capital structures. Fitch believes that these classes have increased sensitivities to tail-end risks in the life of their transactions. The notes with current ratings on Stable Outlook demonstrate the resilience of the notes with positive breakeven cushions under the coronavirus baseline scenario. Asset Credit Quality was the key driver for this review. Since April, the two Palmer Square Loan Funding CLOs of 2018 vintage and four PSLF CLOs of 2019 vintage in this review experienced downgrades on 12%-15% of portfolio notional amounts (excluding principal cash) compared with 10% held by PSLF 2020-1. As a result, the average Fitch WARF increased to 33.3 from 31.5, within the 'B' rating. Fitch-derived 'CCC+' and lower rating exposure (excluding non-rated assets) increased to an average 5% across the seven CLOs from 3% since early April. Cash Flow Analysis Fitch used a proprietary cash flow model to replicate the principal and interest waterfalls and the various structural features of each transaction. Each transaction was modelled under the stable, down and rising interest-rate scenarios and the front-, mid- and back-loaded default timing scenarios as outlined in Fitch's criteria. The class C notes in PSLF 2018-4, Ltd., class B notes in PSLF 2019-4, Ltd., and class B notes in PSLF 2020-1, Ltd. experienced shortfalls in some scenarios and the model-implied ratings of these notes were one notch below their current rating levels. However, Fitch considered the magnitude of these failures as minor and isolated to the back-loaded default timing and rising interest rate scenario that was given less weight in the analysis. In addition, MIRs of the following classes were at least one notch higher than their current ratings based on current portfolio analyses, but were not upgraded in light of the ongoing economic disruption: -- Class A-2, D and E notes in PSLF 2018-4, Ltd.; -- Class A-2, B and D notes in PSLF 2018-5, Ltd.; -- Class B, C, and D notes in PSLF 2019-1; -- Class B, C, D and E notes in PSLF 2019-2; -- Class A-2, C, D and E notes in PSLF 2019-3; -- Class A-2 and D in PSLF 2019-4; -- Class A-2 and D in PSLF 2020-1. When conducting its cash flow analysis, Fitch's model first projects the portfolio scheduled amortization proceeds and any prepayments for each reporting period of the transaction life assuming no defaults (and no voluntary terminations, when applicable). In each rating stress scenario, such scheduled amortization proceeds and prepayments are then reduced by a scale factor equivalent to the overall percentage of loans that are not assumed to default (or to be voluntary terminated, when applicable). This adjustment avoids running out of performing collateral due to amortization and ensures all of the defaults projected to occur in each rating stress are realized in a manner consistent with Fitch's published default timing curve. Asset Security, Portfolio Management and Portfolio Composition: The current portfolios consist of 99% of first lien senior secured loans on average. The Fitch weighted average recovery rate of the current portfolios ranged from 79% to 81%. Portfolios remained diversified, with obligor count ranging from 205 to 282 and weight to top ten obligors ranging from 8% to 10%. Given the static nature of the pools, portfolio management was confined to a limited number of credit risk sales since April contributing to a small par loss. Each transaction had received at least one payment since Fitch's review in April which increased the notes' credit enhancements. All overcollateralization and interest coverage tests are passing for each CLO. None of the CLOs are applying excess 'CCC' haircuts in the most recent trustee reports available. RATING SENSITIVITIES This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. The modelling process uses the modification of these variables to reflect asset performance in up and down environments. The results below should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance. Factors that could, individually or collectively, lead to positive rating action/upgrade: A 25% reduction of the mean default rate across all ratings, and a 25% increase of the recovery rate at all rating levels, would lead to an upgrade of up to four notches for the rated notes, based on model-implied ratings, except for the class A-1 notes as their ratings are at the highest level on Fitch's scale and cannot be upgraded. At closing, Fitch uses a stress portfolio (Fitch's Stressed Portfolio) that is customized to the specific portfolio limits for the transaction as specified in the transaction documents. Upgrades may occur in the event of a better-than-expected portfolio credit quality and deal performance, leading to higher notes' credit enhancement and excess spread available to cover for losses on the remaining portfolio. Factors that could, individually or collectively, lead to negative rating action/downgrade: A 25% increase of the mean default rate across all ratings, and a 25% decrease of the recovery rate at all rating levels, would lead to a downgrade of up to six notches for the rated notes, based on model-implied ratings. Downgrades may occur if realized and projected losses of the portfolio are higher than what was assumed at closing in the Fitch Stressed Portfolio and the notes' CE does not compensate for the worse loss expectation than initially expected. As the disruptions to supply and demand due to the coronavirus disruption become apparent for other vulnerable sectors, loan ratings in those sectors would also come under pressure. Fitch will update the sensitivity scenarios in line with the views of its Leveraged Finance team. Coronavirus Downside Scenario Impact: In addition to the baseline scenario described earlier in this commentary, Fitch conducted a sensitivity analysis that contemplates a more severe and prolonged economic stress caused by a re-emergence of infections in the major economies, before a halting recovery begins in 2Q21. The downside sensitivity incorporates the following stresses: Applying a one-notch downgrade to all Fitch-derived ratings in the 'B' rating category; Applying a 70% recovery rate multiplier to all assets from issuers in the eight industries identified as being most exposed to negative performance resulting from business disruptions from the coronavirus (Group 1 countries only); And applying a 85% recovery rate multiplier to all other assets. The results under this sensitivity scenario can be found in the accompanying rating action report. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. [*] S&P Takes Rating Actions on Multiple Classes From 29 U.S. Deals ------------------------------------------------------------------- S&P Global Ratings took various rating actions on 181 classes of notes from 29 U.S. cash flow CLO transactions. These CLO transactions had one or more tranches placed on CreditWatch with negative implications following the outbreak of the pandemic in the U.S. S&P's actions resolve these CreditWatch placements. The rating actions follow the application of S&P's global corporate CLO criteria and its credit and cash flow analyses of each transaction. S&P's analysis of the transactions entailed a review of their performance, and the ratings list table below highlights key performance metrics behind specific rating changes. The majority of the transactions in the current batch are broadly syndicated loan (BSL) CLOs still in their reinvestment period and are largely recent vintages. S&P expects that many of the rating actions on these types of transactions will result in a one-notch movement, while earlier vintage and amortizing CLOs could potentially experience larger rating changes. In line with its criteria, S&P's cash flow scenarios applied forward-looking assumptions on the expected timing and pattern of defaults, and recoveries upon default, under various interest rate and default scenarios. In addition, S&P's analysis considered the transactions ability to pay timely interest and/or ultimate principal to each of its rated tranches. The results of the cash flow analysis and other qualitative factors, as applicable, demonstrated in S&P's view that all of the rated outstanding classes have adequate credit enhancement available at the rating levels associated with these rating actions following the rating actions. While each tranche's indicative cash flow results were one primary factor, S&P also incorporated various considerations into its decisions to raise, lower, affirm, or limit the ratings when reviewing the indicative ratings suggested by its projected cash flows. Some of these considerations may include: -- Forward-looking scenarios for 'CCC' and 'CCC-' rated collateral; -- Existing subordination or overcollateralization and recent trends; -- Cushion available for coverage ratios and comparative analysis with other CLO tranches with similar ratings; -- Exposure to assets in stressed industries and/or stressed market values; -- Exposure to assets whose ratings are currently on CreditWatch negative; -- Risk of imminent default; and -- Additional sensitivity runs to account for any of the above. The downgrades primarily reflect the cash flow results but also incorporate some of the forward-looking and qualitative considerations mentioned above. Ratings lowered to the 'CCC' category reflect S&P's view based on forward-looking analysis on existing 'CCC' exposure that the previous credit enhancement has deteriorated--or is likely to deteriorate--such that the class is vulnerable and dependent on favorable market conditions. "The affirmations indicate our opinion that the current enhancement available to those classes is commensurate with their current ratings. We have limited the upgrade of some tranches if the CLO's reinvestment period has not ended, as the collateral manager for these transactions would typically have time to reinvest and change the credit risk profile of the transaction," S&P said. S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. S&P is using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, the rating agency will update its assumptions and estimates accordingly. S&P will continue to review whether the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. A list of Affected Ratings can be viewed at: https://bit.ly/2WZZwhT ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. 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