/raid1/www/Hosts/bankrupt/TCR_Public/211128.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Sunday, November 28, 2021, Vol. 25, No. 331
Headlines
ANCHORAGE CAPITAL 8: Moody's Gives Ba3 Rating to $21MM E-R2 Notes
ANTARES CLO 2020-1: S&P Retains BB- (sf) Rating on Class E Notes
APRES STATIC 1: Fitch Raises Rating on Cl. E-R Debt to 'BB+'
BANK 2021-BNK37: Fitch Assigns Final B- Rating on 2 Tranches
BARCLAYS MORTGAGE 2021-NQM1: S&P Assigns B(sf) Rating on B-2 Notes
BARINGS EURO 2020-1: S&P Assigns B- (sf) Rating on Class F-R Notes
BARINGS MIDDLE 2017-I: S&P Assigns Prelim BB- Rating on D-R Notes
BENEFIT STREET XVIII: S&P Assigns BB- (sf) Rating on Cl. E-R Notes
BLACK DIAMOND 2021-1: Moody's Assigns Ba3 Rating to $18MM D Notes
CAPITAL ONE: Fitch Affirms BB Rating on 2002-1D Notes
CARLYLE US 2020-2: S&P Assigns Prelim B- (sf) Rating on E-R Notes
CARLYLE US 2021-10: S&P Assigns BB- (sf) Rating on Class E Notes
CASTLELAKE AIRCRAFT 2019-1: Fitch Affirms CCC Rating on Cl. C Notes
CD 2017-CD3: Fitch Lowers Rating on Class F Certs to 'C'
CEDAR FUNDING XII: Moody's Gives Ba3 Rating to $18.45MM E-R Notes
CFIP CLO 2021-1: S&P Assigns Prelim BB-(sf) Rating on Class E Notes
COLT MORTGAGE 2021-5: Fitch Rates Class B2 Certs 'B'
CONNS RECEIVABLES 2021-A: Fitch Rates Class C Notes 'B'
CQS US 2021-1: Fitch Assigns BB-(EXP) Rating on Class E Debt
CSAIL 2018-CX11: Fitch Affirms CCC Rating on Class G-RR Certs
CSMC 2021-INV2: S&P Assigns B (sf) Rating on Class B-5 Notes
DEEPHAVEN 2021-4: S&P Assigns Prelim B-(sf) Rating on B-2 Notes
DIAMOND ISSUER: Fitch Rates Series 2021-1 Class C Notes 'BB-'
DRYDEN 76: S&P Assigns BB- (sf) Rating on Class E-R Notes
ELMWOOD CLO XII: S&P Assigns Prelim B- (sf) Rating on Class F Notes
FLAGSHIP CREDIT 2021-4: S&P Assigns BB-(sf) Rating on Class E Notes
FLAGSTAR MORTGAGE 2021-12: Fitch Gives Final 'B' on Class B-5 Certs
GCAT 2021-NQM6: S&P Assigns Prelim B (sf) Rating on Class B-2 Certs
GENERATE CLO 8: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
GS MORTGAGE 2021-INV2: Moody's Assigns B3 Rating to Cl. B-5 Certs
HILDENE COMMUNITY: Moody's Assigns Ba1 Rating to $18MM C-RR Notes
HOTWIRE FUNDING 2021-1: Fitch Gives Final 'BB' on Class C Notes
HUNDRED ACRE 2021-INV3: Moody's Assigns B2 Rating to Cl. B5 Certs
JP MORGAN 2021-14: Moody's Assigns (P)B3 Rating to Cl. B-5 Certs
LCM 36 LTD: Moody's Assigns (P)Ba3 Rating to $16MM Class E Notes
MADISON PARK XLIX: S&P Assigns BB- (sf) Rating in Class E Notes
MED TRUST 2021-MDLN: Moody's Hikes Rating on Cl. F Certs to B2
MELLO MORTGAGE 2021-INV4: Moody's Gives (P)B3 Rating to B-5 Certs
MONROE CAPITAL VIII: Moody's Assigns Ba3 Rating to $32MM E-R Notes
MORGAN STANLEY 2014-C14: Fitch Raises Class G Certs to 'B'
MORGAN STANLEY 2015-C23: Fitch Affirms B- Rating on Class F Certs
NEUBERGER BERMAN 45: S&P Assigns BB- (sf) Rating on Class E Notes
NLT 2021-INV3: S&P Assigns B (sf) Rating on Class B-2 Notes
NORTHWOODS CAPITAL 27: Moody's Assigns Ba3 Rating to $21MM E Notes
OBX TRUST 2021-INV3: Moody's Assigns B3 Rating to Cl. B-5 Certs
OBX TRUST 2021-NQM4: Fitch Assigns B Rating on Class B-2 Debt
OCTAGON 57: S&P Assigns BB- (sf) Rating on $20MM Class E Notes
OCTAGON INVESTMENT 48: S&P Assigns BB-(sf) Rating on Cl. E-R Notes
OCTAGON INVESTMENT 50: S&P Assigns BB- (sf) Rating Class E-R Notes
OHA LOAN 2015-1: S&P Assigns Prelim BB- (sf) Rating on E-R3 Notes
PARTS PRIVATE 2007-CT1: Fitch Affirms C Rating on Class C Bonds
PIKES PEAK 2: Moody's Assigns Ba3 Rating to $16MM Class E-R Notes
PRIME STRUCTURED 2021-1: Moody's Gives (P)B1 Rating to Cl. F Certs
RATE MORTGAGE 2021-J4: Fitch Assigns B+ Rating on B-5 Certs
REESE PARK CLO: Moody's Assigns Ba3 Rating to Class E-R Notes
SOUTHWICK PARK: S&P Assigns BB- (sf) Rating on Class E-R Notes
SPRITE 2021-1: S&P Assigns B+ (sf) Rating on $60MM Class C Notes
START II LTD: Fitch Affirms B Rating on Class C Notes
TCI-SYMPHONY 2016-1: Moody's Gives Ba3 Rating to Class E-R-2 Notes
TRESTLES CLO V: S&P Assigns BB- (sf) Rating on Class E Notes
TRINITAS CLO VII: S&P Assigns Prelim B- (sf) Rating on F-R Notes
UWM MORTGAGE 2021-INV4: Moody's Assigns B3 Rating to Cl. B-5 Certs
VERUS SECURITIZATION 2021-7: S&P Assigns 'B-' Rating on B-2 Notes
WELLS FARGO 2021-INV2: Moody's Assigns B3 Rating to Cl. B-5 Certs
WESTLAKE AUTOMOBILE 2021-3: S&P Assigns B (sf) Rating on F Notes
WFRBS COMMERCIAL 2014-LC14: Fitch Affirms CCC Rating on Cl. F Certs
WHITEBOX CLO II: Moody's Assigns Ba3 Rating to $21.75MM E-R Notes
[*] Moody's Puts 9 Securities From 4 US CLOs on Review for Upgrade
[*] S&P Takes Various Actions on 43 Classes from 16 US RMBS Deals
[*] S&P Takes Various Actions on 49 Classes from 22 US RMBS Deals
[*] S&P Takes Various Actions on 79 Classes from 10 US RMBS Deals
*********
ANCHORAGE CAPITAL 8: Moody's Gives Ba3 Rating to $21MM E-R2 Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to two classes of
CLO refinancing notes issued by Anchorage Capital CLO 8, Ltd. (the
"Issuer").
Moody's rating action is as follows:
US$240,000,000 Class A-R2-A Senior Secured Floating Rate Notes Due
2034, Assigned Aaa (sf)
US$21,000,000 Class E-R2 Junior Secured Deferrable Floating Rate
Notes Due 2034, Assigned Ba3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least
92.5% of the portfolio must consist of senior secured loans and
eligible investments, and up to 7.5% of the portfolio may consist
of second lien loans, unsecured loans, bonds and senior secured
notes.
Anchorage Capital Group, L.L.C. (the "Manager") will continue to
direct the selection, acquisition and disposition of the assets on
behalf of the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's extended five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes, the other
classes of secured notes and additional subordinated notes, a
variety of other changes to transaction features will occur in
connection with the refinancing. These include: reinstatement and
extension of the reinvestment period; extensions of the stated
maturity and non-call period; changes to certain collateral quality
tests; and changes to the overcollateralization test levels; the
inclusion of Libor replacement provisions; additions to the CLO's
ability to hold workout and restructured assets; changes to the
definition of "Adjusted Weighted Average Rating Factor" and changes
to the base matrix and modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: $400,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 3398
Weighted Average Spread (WAS): 3.75%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 9.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
ANTARES CLO 2020-1: S&P Retains BB- (sf) Rating on Class E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1-R, A-2-R, B-R, C-R, and D-R replacement notes from Antares CLO
2020-1 Ltd. The delayed draw class E note, which S&P rated on the
original closing date, has never been drawn but will remain
outstanding following the refinancing closing date and is expected
to close with a zero balance. Antares CLO 2020-1 Ltd. is a CLO
previously issued in Oct. 2020 and is managed by Antares Capital
Advisers LLC.
The preliminary ratings are based on information as of Nov. 24,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Nov. 30, 2021, refinancing date, the proceeds from the
replacement notes will be used to redeem the original notes. S&P
said, "At that time, we expect to withdraw our ratings on the
original notes and assign ratings to the replacement notes.
However, if the refinancing doesn't occur, we may affirm our
ratings on the original notes and withdraw our preliminary ratings
on the replacement notes."
The replacement notes will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement notes.
According to the proposed supplemental indenture:
-- The replacement class A-1-R, A-2-R, B-R, C-R, and D-R notes are
expected to be issued at a lower spread over three-month LIBOR,
replacing the current class A-1, A-2, B, C, and D notes.
-- The stated maturity, reinvestment period, and non-call period
will be extended by about two years.
-- The class E delayed draw tranche will be included in the new
capital structure, which is consistent with the original deal
terms.
New, Replacement, And Original Note Issuances
Existing notes
Class E (deferrable), $42.00 million: Three-month LIBOR + 8.85%
Replacement notes
Class A-1-R, $413.00 million: Three-month LIBOR + 1.46%
Class A-2-R, $14.00 million: Three-month LIBOR + 1.65%
Class B-R, $59.50 million: Three-month LIBOR + 1.90%
Class C-R (deferrable), $52.50 million: Three-month LIBOR +
2.45%
Class D-R (deferrable), $35.00 million: Three-month LIBOR +
3.60%
Original notes
Class A-1, $345.00 million: Three-month LIBOR + 1.90%
Class A-2, $15.00 million: Three-month LIBOR + 2.30%
Class B, $54.00 million: Three-month LIBOR + 2.60%
Class C (deferrable), $45.00 million: Three-month LIBOR + 3.80%
Class D (deferrable), $33.00 million: Three-month LIBOR + 5.40%
Class E (deferrable), $36.00 million: Three-month LIBOR + up to
8.85%
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Antares CLO 2020-1 Ltd./Antares CLO 2020-1 LLC
Class A-1-R, $413.00 million: AAA (sf)
Class A-2-R, $14.00 million: AAA (sf)
Class B-R, $59.50 million: AA (sf)
Class C-R (deferrable), $52.50 million: A (sf)
Class D-R (deferrable), $35.00 million: BBB- (sf)
Other Outstanding Ratings
Antares CLO 2020-1 Ltd./Antares CLO 2020-1 LLC
Class E (deferrable)(i), $42.00 million: BB- (sf)
Subordinated notes(ii), $80.99 million: Not rated
(i)Class E is a delayed draw tranche. It will be unfunded at
closing but can be drawn up to a maximum notional amount $42.00
million.
(ii)The notional amount of the subordinated notes will be $122.99
million at closing. The $80.99 million notional amount reflects the
balance if the class E note were to be fully drawn and the proceeds
used to pay down an equal portion of the subordinated notes.
APRES STATIC 1: Fitch Raises Rating on Cl. E-R Debt to 'BB+'
------------------------------------------------------------
Fitch Ratings has upgraded four and affirmed two tranches in Apres
Static CLO 1, Ltd. (Apres Static CLO 1) and removed four tranches
from Under Criteria Observation (UCO). Fitch also revised the
Rating Outlooks on notes rated below 'AAAsf' to Positive from
Stable, while both 'AAAsf'-rated tranches remain on Outlook
Stable.
DEBT RATING PRIOR
---- ------ -----
Apres Static CLO 1, Ltd.
A-1-R 03835JBA0 LT AAAsf Affirmed AAAsf
A-2-R 03835JBC6 LT AAAsf Affirmed AAAsf
B-R 03835JBE2 LT AAsf Upgrade A+sf
C-R 03835JBG7 LT A+sf Upgrade BBB+sf
D-R 03835KAL4 LT BBB-sf Upgrade BB+sf
E-R 03835KAN0 LT BB+sf Upgrade B+sf
TRANSACTION SUMMARY
Apres Static CLO 1 is a broadly syndicated collateralized loan
obligation (CLO) serviced by ArrowMark Colorado Holdings, LLC. The
transaction originally closed in April 2019 and reset in October
2020. The notes are securitized by a static pool of primarily first
lien senior secured leveraged loans.
KEY RATING DRIVERS
CLO Criteria Update and Transaction Deleveraging
The analysis was based on the current portfolio and evaluated the
combined impact of the updated Fitch CLOs and Corporate CDOs Rating
Criteria (including, among others, a change in the underlying
default assumptions) and transaction deleveraging since the last
review in May 2021. Since the last review, the class X notes have
paid in full, and an additional 18.5% of the original class A-1-R
note balance has amortized, resulting in increased credit
enhancement (CE) levels and total amortization of 37% for the
senior notes.
The rating actions are in line with the model-implied ratings in
the updated cash flow analyses, based on a scenario that assumes a
one-notch downgrade on the Fitch Issuer Default Rating Equivalency
Rating for assets with a Negative Outlook on the driving rating of
the obligor.
The Positive Outlooks on the notes also reflect the static nature
of the portfolio, as the transaction does not have a reinvestment
period and Fitch expects CE levels to continue to increase as note
amortization continues.
Credit Quality, Asset Security, Portfolio Composition and Portfolio
Management
As of the November 2021 trustee report, the Fitch weighted average
rating factor is 25.1, equivalent to the 'B'/'B-' rating category.
The portfolio has 99% first lien senior secured loans, and the
weighted average recovery rate (WARR) of the portfolio is 77.3%.
The portfolio has 158 obligors and the top 10 obligors comprise
approximately 15.1% of the portfolio. There are no defaulted assets
and exposure to assets considered 'CCC' or lower by Fitch
(excluding non-rated assets) is 6.9%.
Given the static nature of the pools, portfolio management was
confined to a limited number of credit risk sales since the prior
review, contributing to minimal par losses and not considered a key
rating driver. All overcollateralization and interest coverage
tests are passing for each CLO.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A 25% increase of the mean default rate across all ratings,
along with a 25% decrease of the recovery rate at all rating
levels, would lead to downgrades (based on the model-implied
ratings) of one rating category for the class B-R and C-R
notes, two rating categories for the class D-R and more than
two rating categories for the E-R notes.
-- Downgrades may occur if the buildup of the notes' CE following
amortization does not compensate for a higher loss expectation
than initially assumed due to unexpected high level of default
and portfolio deterioration.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- A 25% reduction of the mean default rate across all ratings,
along with a 25% increase of the recovery rate at all rating
levels, would lead to upgrades (based on model-implied
ratings) of one rating category for the class B-R, D-R and E-R
notes, and no rating impact to class C-R, A-1-R and A-2-R
notes, the latter two having their ratings at the highest
level on Fitch's scale and cannot be upgraded.
-- Except for the tranches already at the highest 'AAAsf' rating,
upgrades may occur in the event of better-than-expected
portfolio credit quality and deal performance, leading to
higher notes' CE and excess spread available to cover for
losses on the remaining portfolios.
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.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third-party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
securities and markets authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
BANK 2021-BNK37: Fitch Assigns Final B- Rating on 2 Tranches
------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks on
BANK 2021-BNK37, commercial mortgage pass-through certificates
series 2021-BNK37.
-- $19,414,000 class A-1 'AAAsf'; Outlook Stable;
-- $147,337,000 class A-2 'AAAsf'; Outlook Stable;
-- $74,150,000 class A-3 'AAAsf'; Outlook Stable;
-- $24,589,000 class A-SB 'AAAsf'; Outlook Stable;
-- $234,500,000a class A-4 'AAAsf'; Outlook Stable;
-- $0a class A-4-1 'AAAsf'; Outlook Stable;
-- $0a class A-4-2 'AAAsf'; Outlook Stable;
-- $0ab class A-4-X1 'AAAsf'; Outlook Stable;
-- $0ab class A-4-X2 'AAAsf'; Outlook Stable;
-- $380,018,000a class A-5 'AAAsf'; Outlook Stable;
-- $0a class A-5-1 'AAAsf'; Outlook Stable;
-- $0a class A-5-2 'AAAsf'; Outlook Stable;
-- $0ab class A-5-X1 'AAAsf'; Outlook Stable;
-- $0ab class A-5-X2 'AAAsf'; Outlook Stable;
-- $880,008,000b class X-A 'AAAsf'; Outlook Stable;
-- $190,144,000b class X-B 'AA-sf'; Outlook Stable;
-- $143,001,000a class A-S 'AAAsf'; Outlook Stable;
-- $0a class A-S-1 'AAAsf'; Outlook Stable;
-- $0a class A-S-2 'AAAsf'; Outlook Stable;
-- $0ab class A-S-X1 'AAAsf'; Outlook Stable;
-- $0ab class A-S-X2 'AAAsf'; Outlook Stable;
-- $47,143,000a class B 'AA-sf'; Outlook Stable;
-- $0a class B-1 'AA-sf'; Outlook Stable;
-- $0a class B-2 'AA-sf'; Outlook Stable;
-- $0ab class B-X1 'AA-sf'; Outlook Stable;
-- $0ab class B-X2 'AA-sf'; Outlook Stable;
-- $53,430,000a class C 'A-sf'; Outlook Stable;
-- $0a class C-1 'A-sf'; Outlook Stable;
-- $0a class C-2 'A-sf'; Outlook Stable;
-- $0ab class C-X1 'A-sf'; Outlook Stable;
-- $0ab class C-X2 'A-sf'; Outlook Stable;
-- $55,000,000bc class X-D 'BBB-sf'; Outlook Stable;
-- $26,715,000bc class X-F 'BB-sf'; Outlook Stable;
-- $12,571,000bc class X-G 'B-sf'; Outlook Stable;
-- $31,428,000c class D 'BBBsf'; Outlook Stable;
-- $23,572,000c class E 'BBB-sf'; Outlook Stable;
-- $26,715,000c class F 'BB-sf'; Outlook Stable;
-- $12,571,000c class G 'B-sf'; Outlook Stable.
The following classes are not rated by Fitch:
-- $39,286,752bc class X-H;
-- $39,286,752c class H;
-- $66,166,040cd RR Interest.
(a) Exchangeable Certificates. The class A-4, class A-5, class A-S,
class B and class C are exchangeable certificates. Each class of
exchangeable certificates may be exchanged for the corresponding
classes of exchangeable certificates, and vice versa. The dollar
denomination of each of the received classes of certificates must
be equal to the dollar denomination of each of the surrendered
classes of certificates.
The class A-4 may be surrendered (or received) for the received (or
surrendered) classes A-4-1, A-4-2, A-4-X1 and A-4-X2. The class A-5
may be surrendered (or received) for the received (or surrendered)
class A-5-1, A-5-2, A-5-X1 and A-5-X2. The class A-S may be
surrendered (or received) for the received (or surrendered) class
A-S-1, A-S-2, A-S-X1 and A-S-X2. The class B may be surrendered (or
received) for the received (or surrendered) class B-1, B-2, B-X1
and B-X2. The class C may be surrendered (or received) for the
received (or surrendered) class C-1, C-2, C-X1 and C-X2. The
ratings of the exchangeable classes would reference the ratings on
the associated referenced or original classes;
(b) Notional amount and interest only;
(c) Privately placed and pursuant to Rule 144A;
(d) Represents the "eligible vertical interest" comprising 5.0% of
the pool.
Since Fitch published its expected ratings on Nov. 4, 2021, the
balances for classes A-4 and A-5 were finalized. At the time the
expected ratings were published, the initial certificate balances
of classes A-4 and A-5 were expected to be $614,518,000 in the
aggregate, subject to a 5% variance. The final class balances for
classes A-4 and A-5 are $234,500,000 and $380,018,000,
respectively.
Additionally, at the time the expected ratings were published, the
notional amount of the class X-B certificates was equal to the
aggregate certificate balances of the class A-S, class B and class
C certificates, and Fitch's expected rating was 'A-sf', based on
that of class C. The final notional amount of the class X-B
certificates is equal to the aggregate certificate balances of the
class A-S and class B certificates, and Fitch's rating is now
'AA-sf', based on that of class B.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 80 loans secured by 137
commercial properties having an aggregate principal balance of
$1,323,320,792 as of the cut-off date. The loans were contributed
to the trust by Wells Fargo Bank, National Association, Bank of
America, National Association, Morgan Stanley Mortgage Capital
Holdings LLC, and National Cooperative Bank, N.A. The master
servicers are expected to be Wells Fargo Bank, National Association
and National Cooperative Bank, N.A. and the special servicers are
expected to be CWCapital Asset Management LLC and National
Cooperative Bank, N.A.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 41.4% of the loans by
balance, cash flow analyses of 81.0% of the pool and asset summary
reviews on 100% of the pool.
Coronavirus Impact: The ongoing containment effort related to the
coronavirus pandemic may have an adverse impact on near-term
revenue (i.e. bad debt expense, rent relief) and operating expenses
(i.e. sanitation costs) for some properties in the pool. Per the
offering documents, all of the loans are current and are not
subject to any ongoing forbearance requests.
KEY RATING DRIVERS
Lower Fitch Leverage Than Recent Transactions: This transaction's
leverage is lower than that of other multiborrower transactions
recently rated by Fitch. The pool's Fitch debt service coverage
ratio (DSCR) of 1.57x is higher than the 2021 YTD and 2020 averages
of 1.39x and 1.32x, respectively. Additionally, the pool's Fitch
loan-to-value (LTV) ratio of 95.0% is below the 2021 YTD and 2020
average of 102.5% and 99.6%, respectively. Excluding the
co-operative (co-op) and the credit opinion loans, the pool's DSCR
and LTV are 1.40x and 98.2%, respectively. The YTD 2021 and 2020
averages excluding credit opinions and co-op loans are 1.30x/110.2%
and 1.24x/111.3%, respectively.
Investment-Grade Credit Opinions and Co-op Loans: The pool includes
four loans, representing 23.2% of the pool, that received
investment-grade credit opinions. This is higher than the YTD 2021
average of 13.3% and slightly lower than the 2020 average of credit
opinion concentrations of 24.5%. On a standalone basis, London
Terrace Towers Owners, Inc. (6.2% of the pool) received a credit
opinion of 'AAAsf*'. The three remaining credit opinion loans
received a credit opinion of 'BBB-sf*', which include 1 Union
Square South Retail (5.7%), One SoHo Square (5.7%), and Park Avenue
Plaza (5.7%).
Additionally, the pool contains 22 loans, representing 4.6% of the
pool, that are secured by residential cooperatives (excluding
London Terrace Towers) and exhibit leverage characteristics
significantly lower than typical conduit loans. The weighted
average Fitch DSCR and LTV for the co-op loans are 10.11x and 8.4%,
respectively
Above-Average Retail Concentration: Loans secured by retail
properties represent 32.4% of the pool by balance including three
loans in the top 10 and eight loans in the top 20. The total retail
concentration is greater than the 2021 YTD average of 20.4%, the
2020 average of 16.3% and the 2019 average of 23.6%. Retail
properties have experienced the severe near-term revenue declines
as a result of the coronavirus containment efforts. To account for
elevated risk to retail assets in the pool, Fitch considered higher
volatility scores and vacancy assumptions in its analysis, as well
as increasing the probability of loss on the Arizona Mills
property.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Declining cash flow decreases property value and capacity to meet
its debt service obligations. The table below indicates the model
implied rating sensitivity to changes to the same one variable,
Fitch NCF:
-- Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' / 'BBB-
sf' / 'BB-sf'/ 'B-sf';
-- 10% NCF Decline: 'AA-sf' / 'A-sf' / 'BBB-sf' / 'BB+sf' / 'BB-
sf' / 'CCCsf'/ 'CCCsf';
-- 20% NCF Decline: 'A-sf' / 'BBBsf' / 'BB+sf' / 'B+sf' / 'CCCsf'
/ 'CCCsf'/ 'CCCsf';
-- 30% NCF Decline: 'BBBsf' / 'BBB-sf' / 'CCCsf' / 'CCCsf' /
'CCCsf' / 'CCCsf'/ 'CCCsf'.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model implied rating sensitivity to changes in one variable, Fitch
NCF:
-- Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' / 'BBB-
sf' / 'BB-sf'/ 'B-sf';
-- 20% NCF Increase: 'AAAsf' / 'AAAsf' / 'AA+sf' / 'A+sf' / 'A-
sf' / 'BBBsf'/ 'BBB-sf'.
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 (Form 15E) as
prepared by Ernst & Young LLP. The third-party due diligence
described in Form 15E focused on a comparison and re-computation of
certain characteristics with respect to each of the mortgage loans.
Fitch considered this information in its analysis and it did not
have an effect on Fitch's analysis or conclusions.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means 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.
BARCLAYS MORTGAGE 2021-NQM1: S&P Assigns B(sf) Rating on B-2 Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Barclays Mortgage Loan
Trust 2021-NQM1's mortgage-backed notes.
The note issuance is an RMBS securitization backed by first-lien,
fixed- and adjustable-rate, fully amortizing residential mortgage
loans to prime and non-prime borrowers, generally secured by
single-family residential properties, planned-unit developments,
condominiums, and two- to four-family residential properties. The
pool has 731 loans backed by 757 properties, which are primarily
non-qualified mortgage and ability-to-repay-exempt loans.
Since S&P assigned its preliminary ratings and published its
presale report on Nov. 10, 2021, S&P received final bond coupons
and an updated structure on the pool. Bond sizes and credit support
remained the same on all classes; however, the sponsor (Sutton
Funding LLC), updated the class B-2 coupon from a net weighted
average coupon interest rate to a fixed interest rate. The
assignment of final ratings are unchanged from the preliminary
ratings.
The ratings reflect S&P's view of:
-- The pool's collateral composition;
-- The credit enhancement provided for this transaction;
-- The transaction's associated structural mechanics;
-- The representation and warranty framework for this
transaction;
-- The mortgage originators and aggregators, primarily Carrington
Mortgage Services LLC;
-- The geographic concentration; and
-- The impact that the economic stress brought on by the COVID-19
pandemic will likely have on the performance of the mortgage
borrowers in the pool and liquidity available in the transaction.
Ratings Assigned
Barclays Mortgage Loan Trust 2021-NQM1
Class A-1, $169,353,000: AAA (sf)
Class A-1X(i): AAA (sf)
Class A-2, $16,605,000: AA (sf)
Class A-3, $26,618,000: A (sf)
Class M-1, $12,332,000: BBB (sf)
Class B-1, $9,524,000: BB (sf)
Class B-2, $5,739,000: B (sf)
Class B-3, $4,029,596: Not rated
Class XS(ii): Not rated
Class R, amount not applicable: Not rated
(i)Class A-1X will have a notional amount equal to the lesser of
the balance of class A-1 immediately prior to such distribution
date and the notional amount set forth on a schedule for the
related accrual period. After the 34th distribution date, the
notional amount of the class A-1X notes will be zero.
(ii)The notional amount equals the loans' stated principal
balance.
BARINGS EURO 2020-1: S&P Assigns B- (sf) Rating on Class F-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned credit ratings to Barings Euro CLO
2020-1 DAC's class A-R to F-R European cash flow CLO notes. At
closing, the issuer also issued unrated subordinated notes.
The transaction is a reset of the existing Barings Euro CLO 2020-1
DAC transaction, which closed in November 2020.
The issuance proceeds of the refinancing notes will be used to
redeem the notes (class A, B-1, B-2, C-1, C-2, D, E, and F of the
original Barings Euro CLO 2020-1 DAC), and pay fees and expenses
incurred in connection with the reset.
The reinvestment period, originally scheduled to last until October
2023, will be extended to April 2026. The covenanted maximum
weighted-average life will be 8.5 years from closing.
The ratings reflect our assessment of:
-- The diversified collateral pool, which consists primarily of
broadly syndicated speculative-grade senior-secured term loans and
bonds that are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which is bankruptcy remote.
-- The transaction's counterparty risks, which are in line with
S&P's counterparty rating framework.
Portfolio Benchmarks
CURRENT
S&P weighted-average rating factor 2,782.34
Default rate dispersion 664.35
Weighted-average life (years) 5.14
Obligor diversity measure 123.30
Industry diversity measure 19.99
Regional diversity measure 1.39
Transaction Key Metrics
CURRENT
Portfolio weighted-average rating
derived from our CDO evaluator B
'CCC' category rated assets (%) 4.52
Covenanted 'AAA' weighted-average recovery (%) 36.50
Covenanted weighted-average spread (%) 3.65
Covenanted weighted-average coupon (%) 4.75
The transaction allows the purchase of loss mitigation loans. Loss
mitigation loans allow the issuer to participate in potential new
financing initiatives by the borrower in default. This feature aims
to mitigate the risk of other market participants taking advantage
of CLO restrictions, which typically do not allow the CLO to
participate in a defaulted entity's new financing request, and
hence increase the chance of increased recovery for the CLO. While
the objective is positive, it can also lead to par erosion, as
additional funds will be placed with an entity that is under
distress or in default. This may cause greater volatility in our
ratings if the positive effect of such loans does not materialize.
In S&P's view, the presence of a bucket for loss mitigation loans,
the restrictions on the use of principal proceeds to purchase such
assets, and the limitations in reclassifying proceeds received from
such assets from principal to interest help to mitigate the risk.
Loss mitigation loan mechanics
Under the transaction documents, the issuer can purchase loss
mitigation loans, which are assets of an existing collateral
obligation held by the issuer offered in connection with
bankruptcy, workout, or restructuring of such obligation, to
improve the recovery value of such related collateral obligation.
The purchase of loss mitigation loans is not subject to the
reinvestment criteria or the eligibility criteria. Other than
qualifying loss mitigation loans--which receive a defaulted
treatment-it receives no credit in either the principal balance or
par coverage test numerator definition, and is limited to 5% of the
target par amount. The cumulative exposure to loss mitigation loans
is limited to 10% of the target par amount.
The issuer may purchase loss mitigation loans using either interest
proceeds, principal proceeds, or amounts standing to the credit of
the supplemental reserve account. The use of interest proceeds to
purchase loss mitigation loans are subject to (1) all the interest
and par coverage tests passing following the purchase, and (2) the
manager determining there are sufficient interest proceeds to pay
interest on all the rated notes on the upcoming payment date. The
usage of principal proceeds is subject to (1) passing par coverage
tests, (2) the manager having built sufficient excess par in the
transaction so that the principal collateral amount is equal to or
exceeds the portfolio's reinvestment target par balance after the
reinvestment, and (3) the class F par value coverage ratio is equal
to or greater than 103.91%.
To protect the transaction from par erosion, any distributions
received from loss mitigation loans that are purchased with the use
of principal proceeds will form part of the issuer's principal
account proceeds and cannot be recharacterized as interest unless
(1) the principal collateral amount is equal to or exceeds the
portfolio's reinvestment target par balance, and (2) until the
amounts received from the loss mitigation loan, plus the recoveries
of the related defaulted obligation (or credit risk obligation),
equals the sum of the outstanding principal balance of the
defaulted obligation (or credit risk obligation) and the principal
proceeds used to purchase the loss mitigation loan.
Under the transaction documents, the rated notes will pay quarterly
interest unless a frequency switch event occurs. Following this,
the notes will switch to semiannual payments. The portfolio's
reinvestment period will end approximately four years after
closing.
The portfolio is well-diversified, primarily comprising broadly
syndicated speculative-grade senior-secured term loans and
senior-secured bonds. Therefore, S&P has conducted our credit and
cash flow analysis by applying its criteria for corporate cash flow
CDOs.
S&P said, "In our cash flow analysis, we used the EUR500 million
target par amount, the covenanted weighted-average spread (3.65%),
the reference weighted-average coupon (4.75%), and the covenanted
'AAA' weighted-average recovery rate (36.50%) as indicated by the
collateral manager. We applied various cash flow stress scenarios,
using four different default patterns, in conjunction with
different interest rate stress scenarios for each liability rating
category.
"Under our structured finance sovereign risk criteria, we consider
that the transaction's exposure to country risk is sufficiently
mitigated at the assigned ratings."
Until the end of the reinvestment period on April 21, 2026, the
collateral manager may substitute assets in the portfolio for so
long as our CDO Monitor test is maintained or improved in relation
to the initial ratings on the notes. This test looks at the total
amount of losses that the transaction can sustain as established by
the initial cash flows for each rating, and it compares that with
the current portfolio's default potential plus par losses to date.
As a result, until the end of the reinvestment period, the
collateral manager may through trading deteriorate the
transaction's current risk profile, as long as the initial ratings
are maintained.
The transaction's documented counterparty replacement and remedy
mechanisms adequately mitigate its exposure to counterparty risk
under our current counterparty criteria.
The transaction's legal structure and framework is bankruptcy
remote, in line with its legal criteria.
S&P said, "Following our analysis of the credit, cash flow,
counterparty, operational, and legal risks, we believe our ratings
are commensurate with the available credit enhancement for the
class A-R to E-R notes. Our credit and cash flow analysis indicates
that the available credit enhancement could withstand stresses
commensurate with the same or higher rating levels than those we
have assigned. However, as the CLO will be in its reinvestment
phase starting from closing, during which the transaction's credit
risk profile could deteriorate, we have capped our ratings assigned
to the notes.
"Taking the above factors into account and following our analysis
of the credit, cash flow, counterparty, operational, and legal
risks, we believe that our ratings are commensurate with the
available credit enhancement for all of the rated classes of
notes.
"In addition to our standard analysis, to provide an indication of
how rising pressures among speculative-grade corporates could
affect our ratings on European CLO transactions, we have also
included the sensitivity of the ratings on the class A-R to E-R
notes to five of the 10 hypothetical scenarios we looked at in our
publication.
"As our ratings analysis makes additional considerations before
assigning ratings in the 'CCC' category, and we would assign a 'B-'
rating if the criteria for assigning a 'CCC' category rating are
not met, we have not included the above scenario analysis results
for the class F-R notes."
Environmental, social, and governance (ESG) credit factors
S&P said, "We regard the exposure to ESG credit factors in the
transaction as being broadly in line with our benchmark for the
sector. Primarily due to the diversity of the assets within CLOs,
the exposure to environmental credit factors is viewed as below
average, social credit factors are below average, and governance
credit factors are average. For this transaction, the documents
prohibit assets from being related to the following industries:
production or marketing of controversial weapons, tobacco or
tobacco-related products, nuclear weapons, thermal coal production,
speculative extraction of oil and gas, pornography or prostitution,
or opioid manufacturing and distribution. Accordingly, since the
exclusion of assets from these industries does not result in
material differences between the transaction and our ESG benchmark
for the sector, no specific adjustments have been made in our
rating analysis to account for any ESG-related risks or
opportunities."
Assigned Ratings
Ratings List
CLASS RATING AMOUNT INTEREST RATE (%) CREDIT
(MIL. EUR) ENHANCEMENT (%)
A-R AAA (sf) 310.00 3mE + 0.98 38.00
B-R AA (sf) 50.00 3mE + 1.75 28.00
C-R A (sf) 31.25 3mE + 2.30 21.75
D-R BBB- (sf) 35.00 3mE + 3.40 14.75
E-R BB- (sf) 23.75 3mE + 6.17 10.00
F-R B- (sf) 15.50 3mE + 8.78 6.90
Sub NR 38.80 N/A N/A
NR--Not rated.
N/A--Not applicable.
3mE--Three-month Euro Interbank Offered Rate.
BARINGS MIDDLE 2017-I: S&P Assigns Prelim BB- Rating on D-R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
X-R, A-1-R, A-2-R, B-R, C-R, and D-R replacement notes from Barings
Middle Market CLO 2017-I LLC, a CLO originally issued in November
2017 that is managed by Barings LLC and was not rated by S&P Global
Ratings.
The preliminary ratings are based on information as of Nov. 23,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Nov. 30, 2021, refinancing date, the proceeds from the
replacement notes will be used to redeem the original notes. At
that time, S&P expects to assign ratings to the replacement notes.
However, if the refinancing doesn't occur, it may withdraw its
preliminary ratings on the replacement notes.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Barings Middle Market CLO 2017-I LLC
Class X-R(i), $4.00 million: AAA (sf)
Class A-1-R, $280.00 million: AAA (sf)
Class A-2-R, $57.50 million: AA (sf)
Class B-R (deferrable), $45.00 million: A- (sf)
Class C-R (deferrable), $22.50 million: BBB- (sf)
Class D-R (deferrable), $33.50 million: BB- (sf)
Subordinated notes, $64.60 million: Not rated
(i)The class X-R notes are expected to be paid down using interest
proceeds in equal installments of $285,700, beginning April 2022
and ending July 2025.
BENEFIT STREET XVIII: S&P Assigns BB- (sf) Rating on Cl. E-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned ratings to the class A-1-R, B-R, C-R,
D-R, and E-R replacement notes and the new class A-2-R notes from
Benefit Street Partners CLO XVIII Ltd./Benefit Street Partners CLO
XVIII LLC, a CLO originally issued in November 2019 that is managed
by Benefit Street Partners LLC, a wholly-owned subsidiary of
Franklin Templeton Investments.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The replacement class A-1-R, B-R, C-R, D-R, and E-R notes were
issued at lower spreads over three-month LIBOR than the original
notes.
-- New class A-2-R notes were issued at a floating spread, junior
in priority of payment but with the same requested rating as the
replacement class A-1-R notes.
-- The initial target par amount increased 10% to $550 million.
-- The stated maturity, reinvestment period, non-call period, and
weighted average life test date were each extended two years.
-- The documents had several updates, including adding the ability
to purchase bonds and workout-related assets, and the capacity to
account for the replacement of LIBOR.
Replacement And Original Note Issuances
Replacement notes
Class A-1-R, $346.50 million: Three-month LIBOR + 1.17%
Class A-2-R, $11.00 million: Three-month LIBOR + 1.45%
Class B-R, $60.50 million: Three-month LIBOR + 1.70%
Class C-R (deferrable), $33.00 million: Three-month LIBOR +
2.15%
Class D-R (deferrable), $33.00 million: Three-month LIBOR +
3.40%
Class E-R (deferrable), $21.45 million: Three-month LIBOR +
6.75%
Subordinated notes, $53.35 million: Residual
Original notes
Class A, $315.00 million: Three-month LIBOR + 1.34%
Class B, $62.50 million: Three-month LIBOR + 1.95%
Class C (deferrable), $30.00 million: Three-month LIBOR + 2.70%
Class D (deferrable), $30.00 million: Three-month LIBOR + 3.90%
Class E (deferrable), $19.50 million: Three-month LIBOR + 6.90%
Subordinated notes, $50.85 million: Residual
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Benefit Street Partners CLO XVIII Ltd./
Benefit Street Partners CLO XVIII LLC
Class A-1-R, $346.50 million: AAA (sf)
Class A-2-R, $11.00 million: AAA (sf)
Class B-R, $60.50 million: AA (sf)
Class C-R (deferrable), $33.00 million: A (sf)
Class D-R (deferrable), $33.00 million: BBB- (sf)
Class E-R (deferrable), $21.45 million: BB- (sf)
Subordinated notes, $53.35 million: Not rated
Ratings Withdrawn
Benefit Street Partners CLO XVIII Ltd./
Benefit Street Partners CLO XVIII LLC
Class A: to NR from AAA (sf)
Class B: to NR from AA (sf)
Class C (deferrable): to NR from A (sf)
Class D (deferrable): to NR from BBB- (sf)
Class E (deferrable): to NR from BB- (sf)
NR--Not rated.
BLACK DIAMOND 2021-1: Moody's Assigns Ba3 Rating to $18MM D Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by Black Diamond CLO 2021-1, Ltd. (the "Issuer" or
"Black Diamond").
Moody's rating action is as follows:
US$179,000,000 Class A-1a Senior Secured Floating Rate Notes due
2034, Definitive Rating Assigned Aaa (sf)
US$77,000,000 Class A-1b Senior Secured Fixed Rate Notes due 2034,
Definitive Rating Assigned Aaa (sf)
US$48,000,000 Class A-2 Senior Secured Floating Rate Notes due
2034, Definitive Rating Assigned Aa2 (sf)
US$20,000,000 Class B Senior Secured Deferrable Floating Rate Notes
due 2034, Definitive Rating Assigned A2 (sf)
US$24,000,000 Class C Senior Secured Deferrable Floating Rate Notes
due 2034, Definitive Rating Assigned Baa3 (sf)
US$18,000,000 Class D Secured Deferrable Floating Rate Notes due
2034, Definitive Rating Assigned Ba3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Black Diamond is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90% of the portfolio must consist of
senior secured loans and eligible investments, and up to 10% of the
portfolio may consist of first-lien last-out loans, second lien
loans, unsecured loans, and permitted non-loan assets. The
portfolio is approximately 70% ramped as of the closing date.
Black Diamond CLO 2021-1 Adviser, L.L.C. (the "Manager") will
direct the selection, acquisition and disposition of the assets on
behalf of the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five-year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer issued subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 60
Weighted Average Rating Factor (WARF): 2817
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 5.50%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 9 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
CAPITAL ONE: Fitch Affirms BB Rating on 2002-1D Notes
-----------------------------------------------------
Fitch Ratings has affirmed the Long-Term ratings on Capital One
Multi-Asset Execution Note Trust. The Rating Outlook remains
Stable.
The Stable Outlook reflects Fitch's expectation that performance
and loss multiples will remain supportive of the rating. The
affirmation of the outstanding notes reflects available credit
enhancement (CE) and performance to date.
DEBT RATING PRIOR
---- ------ -----
Capital One Multi-Asset Execution Trust Card Series
2002-1D LT BBsf Affirmed BBsf
2005-3B 14041NCG4 LT Asf Affirmed Asf
2009-A C LT BBBsf Affirmed BBBsf
2009-C B LT Asf Affirmed Asf
2015-4A 14041NEX5 LT AAAsf Affirmed AAAsf
2017-2A 14041NFL0 LT AAAsf Affirmed AAAsf
2017-3A 14041NFM8 LT AAAsf Affirmed AAAsf
2017-5A 14041NFP1 LT AAAsf Affirmed AAAsf
2017-6A 14041NFQ9 LT AAAsf Affirmed AAAsf
2018-2A 14041NFS5 LT AAAsf Affirmed AAAsf
2019-1A 14041NFT3 LT AAAsf Affirmed AAAsf
2019-2A 14041NFU0 LT AAAsf Affirmed AAAsf
2019-3A 14041NFV8 LT AAAsf Affirmed AAAsf
2021-1A 14041NFW6 LT AAAsf Affirmed AAAsf
2021-2A 14041NFX4 LT AAAsf Affirmed AAAsf
KEY RATING DRIVERS
Receivables' Performance and Collateral Characteristics: The notes
issued by Capital One Multi-Asset Execution Trust are secured by a
pool of credit card receivables from VISA and MasterCard serviced
by Capital One N.A.
Chargeoff performance has improved over the past year. The current
12-month average gross chargeoff rate as of the November 2021
distribution date is 2.39% compared to 3.43% in November 2020.
Fitch has revised its charge-off steady state assumption to 6.00%
from 7.00% due to improved performance observed to date.
Monthly payment rate (MPR), which includes principal and finance
charge collections and is a measure of how quickly consumers are
paying off their credit card debts, has improved over the past
year. Current 12-month average MPR as of the November 2021
distribution date is 46.15% compared to 36.63% one year ago. Fitch
maintains a conservative MPR steady state at 26.00% with strong
performance observed through the pandemic.
The current 12-month average gross yield as of the November 2021
distribution date is 24.89%, which is comprised of finance charges,
fees and interchange. This compares with the 12-month average of
23.44% as of November 2020 distribution date. Fitch maintained its
steady state at 19.00% given the stabilized performance trend over
the last 12 months, which incorporates Fitch's interchange haircut
in case interchange is affected in the future by regulatory or
competitive factors.
The underlying collateral performance and characteristics play a
vital role in a credit card ABS transaction. Fitch closely examines
the trust's performance history and such collateral characteristics
as credit quality, seasoning, geographic concentration,
delinquencies and utilization rates on the cards.
CE continues to be sufficient with loss multiples and are in line
with the current ratings given each rating category. The Stable
Outlook on the notes reflects Fitch's expectation that performance
and loss multiples will remain supportive of these ratings, given
the steady states and stresses detailed below.
Originator and Servicer Quality: Fitch believes Capital One Bank
(USA) National Association to be an effective and capable
originator and servicer given its extensive track record. Capital
One Bank (USA), National Association currently has a Fitch Issuer
Default Rating (IDR) of 'A-'/'F1'.
Counterparty Risk: Fitch's ratings of the notes are dependent on
the financial strength of certain counterparties. Fitch believes
this risk is currently mitigated as evidenced by the ratings of the
applicable counterparties to the transactions.
Interest Rate Risk: Interest rate risk is currently mitigated by
the available CE. For the class A notes, total CE of 21.00% is
provided by 9.00% subordination of class B notes, 9.00%
subordination of class C notes and 3.00% subordination of class D
notes. The class B benefits from 12.00% CE achieved through 9.00%
subordination of class C and 3.00% subordination of class D. The
class C benefits from 4.00% CE achieved through 3.00% subordination
of class D and a reserve account. The class D benefits from a
reserve account.
Fitch analyzed characteristics of the underlying collateral to
better assess overall asset performance. This supplements Fitch's
analysis of the originator's historical data when determining the
following steady state performance assumptions and stresses:
Steady State:
-- Annualized Chargeoffs - Revised to 6.00% from 7.00%;
-- Monthly Payment Rate (MPR) - 26.00%;
-- Annualized Gross Yield - 19.00%;
-- Purchase Rate - 100.00%.
Rating Level Stresses (for 'AAAsf', 'Asf', 'BBBsf' and 'BBsf'):
-- Chargeoffs (increase) - 4.50x/3.00x/2.25x/1.75x;
-- Payment Rate (% decrease) - 55.00/46.20/39.60/30.80;
-- Gross Yield (% decrease) - 35.00/25.00/20.00/15.00;
-- Purchase Rate (% decrease) - 50.00/40.00/35.00/30.00.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Rating sensitivity to increased chargeoff rate:
-- Current ratings for class A, class B, class C and class D,
(steady state: 6%): 'AAAsf'; 'Asf'; 'BBBsf'; 'BBsf';
-- Increase base case by 25%: 'AAAsf'; 'Asf'; 'BBBsf'; 'BBsf';
-- Increase base case by 50%: 'AAAsf'; 'Asf'; 'BBBsf'; 'BBsf';
-- Increase base case by 75%: 'AAAsf'; 'Asf'; 'BBBsf'; 'BBsf'.
-- Current ratings for class A, class B, class C and class D,
(100% base assumption): 'AAAsf'; 'Asf'; 'BBBsf'; 'BBsf';
-- Reduce purchase rate by 50%: 'AAAsf'; 'Asf'; 'BBBsf'; 'BBsf';
-- Reduce purchase rate by 75%: 'AAAsf'; 'Asf'; 'BBBsf'; 'BBsf';
-- Reduce purchase rate by 100%: 'AAAsf'; 'Asf'; 'BBBsf'; 'BBsf'.
Rating sensitivity to increased chargeoff rate and reduced MPR:
-- Current ratings for class A, class B, class C and class D
(charge-off steady state: 6%; MPR steady state: 26%): 'AAAsf';
'Asf'; 'BBBsf'; 'BBsf';
-- Increase charge-off rate by 25% and reduce MPR by 15%:
'AAAsf'; 'Asf'; 'BBBsf'; 'BBsf';
-- Increase charge-off rate by 50% and reduce MPR by 25%:
'AAAsf'; 'Asf'; 'BBBsf'; 'BBsf';
-- Increase charge-off rate by 75% and reduce MPR by 35%:
'AAAsf'; 'Asf'; 'BBB-sf'; 'BB-sf'.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- The positive rating action/upgrade scenario is not considered
in this review since Fitch rates the class A notes 'AAAsf'.
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.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means 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.
CARLYLE US 2020-2: S&P Assigns Prelim B- (sf) Rating on E-R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1-R, A-2-R, B-R, C-R, and D-R replacement notes and proposed new
class X and E-R notes from Carlyle US CLO 2020-2 Ltd./Carlyle US
CLO 2020-2 LLC, a CLO originally issued in November 2020 that is
managed by Carlyle US CLO 2020-2 LLC.
The preliminary ratings are based on information as of Nov. 18,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Nov. 23, 2021,, refinancing date, the proceeds from the
replacement notes will be used to redeem the original notes. S&P
said, "At that time, we expect to withdraw our ratings on the
original notes and assign ratings to the replacement notes.
However, if the refinancing doesn't occur, we may affirm our
ratings on the original notes and withdraw our preliminary ratings
on the replacement notes."
The replacement notes will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement notes.
According to the proposed supplemental indenture:
-- The replacement class A-1-R, A-2-R, B-R, C-R, and D-R notes are
expected to be issued at a lower spread over three-month LIBOR than
the original notes.
-- The original class A-1a and A-1b notes are expected to be
combined into the class A-1-R (floating-rate) notes and issued at a
lower spread.
-- New class X and E-R notes will be issued in connection with
this refinancing. The class X notes are expected to be paid down
using interest proceeds over 11 payment periods, starting in April
2022.
-- The stated maturity date and the reinvestment period will be
both extended four years, while the non-call period will be
extended two years.
-- Of the identified underlying collateral obligations, 99.58%
have credit ratings (which may include confidential ratings,
private ratings, and credit estimates)assigned by S&P Global
Ratings.
-- Of the identified underlying collateral obligations, 92.32%
have recovery ratings (which may include confidential ratings,
private ratings, and credit estimates)assigned by S&P Global
Ratings.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Carlyle US CLO 2020-2 Ltd./Carlyle US CLO 2020-2 LLC
Class X, $5.00 million: AAA (sf)
Class A-1-R, $310.00 million: AAA (sf)
Class A-2-R, $70.00 million: AA (sf)
Class B-R (deferrable), $30.00 million: A (sf)
Class C-R (deferrable), $30.00 million: BBB- (sf)
Class D-R (deferrable), $17.50 million: BB- (sf)
Class E-R (deferrable), $7.80 million: B- (sf)
Subordinated notes, $40.45 million: Not rated
CARLYLE US 2021-10: S&P Assigns BB- (sf) Rating on Class E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Carlyle US CLO 2021-10
Ltd./Carlyle US CLO 2021-10 LLC's floating-rate debt.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Carlyle CLO Management LLC, a
subsidiary of the Carlyle Group.
The ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Carlyle US CLO 2021-10 Ltd./Carlyle US CLO 2021-10 LLC
Class A, $76.88 million: AAA (sf)
Class A-L(i), $230.63 million: AAA (sf)
Class A-N, $0.00 million: AAA (sf)
Class B, $72.50 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $20.00 million: BB- (sf)
Subordinated notes, $47.70 million: Not rated
(i)The class A-L is a loan class that is convertible into class A-N
notes per the indenture and credit agreement.
CASTLELAKE AIRCRAFT 2019-1: Fitch Affirms CCC Rating on Cl. C Notes
-------------------------------------------------------------------
Fitch Ratings has affirmed the ratings on the outstanding series A,
B and C notes issued by Castlelake Aircraft Structured Trust 2018-1
(CLAS 2018-1) and Castlelake Aircraft Structured Trust 2019-1 (CLAS
2019-1) asset-backed securities (ABS) transactions. The Rating
Outlook remains Negative on all series of notes, except CLAS 2019-1
series C notes.
DEBT RATING PRIOR
---- ------ -----
Castlelake Aircraft Structured Trust 2019-1
A 14855MAA6 LT BBBsf Affirmed BBBsf
B 14855MAB4 LT BBsf Affirmed BBsf
C 14855MAC2 LT CCCsf Affirmed CCCsf
Castlelake Aircraft Structured Trust 2018-1
A 14856CAA7 LT Asf Affirmed Asf
B 14856CAB5 LT BBBsf Affirmed BBBsf
C 14856CAC3 LT Bsf Affirmed Bsf
TRANSACTION SUMMARY
The rating actions reflect ongoing stress and pressure on airline
lessee credits backing the leases in each transaction pool,
downward pressure on aircraft values, Fitch's updated assumptions
and stresses and ongoing performance of the transactions since the
prior review that occurred in November 2020.
The Outlook remains Negative on all series of notes except series C
notes for CLAS 2019-1, reflecting Fitch's base case expectation for
the structure to withstand immediate and near-term stresses at the
updated assumptions, and stressed scenarios commensurate with their
respective ratings. Continued global travel restrictions driven by
the pandemic and the subsequent airlines recovery, including
ongoing regional flareups and potential for and occurrence of new
virus variants, resulted in continued delays in recovery of the
airline industry.
This remains a credit negative for these aircraft ABS transactions
and airlines globally remain under pressure despite the recent
opening up of borders regionally and a pick-up in air travel across
many regions. This could lead to additional near-term lease
deferrals, airline defaults and bankruptcies, along with lower
aircraft demand and value impairments, which can be more impactful
on these pools since they contain a large percent of older
aircraft. These negative factors could manifest in the
transactions, resulting in lower cash flows and pressure on ratings
in the near term.
Cash flow modeling was not conducted for both transactions as
performance has been within expectations, and the transactions were
modeled within the past 18 months, consistent with criteria.
Castlelake, L.P. and certain third-parties are the sellers of the
initial assets, and it acts as servicer for both transactions.
Fitch deems the servicer to be adequate to service these
transactions based on its experience as a lessor and overall
servicing capabilities.
KEY RATING DRIVERS
Stable-to-Improving Airline Lessee Credit
The credit profiles of the airline lessees in the pools remain
stable-to-improved since the prior review, but remain under stress
due to the ongoing coronavirus-related impact on all global
airlines in 2021. The proportion of the airline lessees assumed at
a 'CCC' Issuer Default Rating (IDR) and below in the CLAS 2018-1
pool remain relatively stable at 56% from 53%, while those of CLAS
2019-1 decreased to 59% from 81%, both versus the prior review. The
assumptions reflect the airlines' ongoing credit profiles and
fleets in the current operating environment, due to the continued
pandemic-related impact on the sector. Any publicly rated airlines
in the pool whose ratings have shifted have been updated.
Asset Quality and Appraised Pool Value
Each pool features mostly liquid narrowbody (NB) aircraft, which is
viewed positively. Widebody (WB) aircraft total 22% and 29% in CLAS
2018-1 and 2019-1, respectively, which is consistent since the
prior review. Six and five assets are reported as off-lease in CLAS
2018-1 and 2019-1, respectively, totaling approximately 18% each of
the respective pools. This is up from 11% and 0% for CLAS 2018-1
and 2019-1 as of the prior review. Uncertainty remains over ongoing
pressure on aircraft market values (MV) and how the current
environment will impact near-term lease maturities.
The appraisers for both transactions are Aircraft Information
Services, Inc. (AISI), Collateral Verifications LLC (CV) and morten
beyer & agnew Inc. (mba). The transaction document value is
currently $666.4 million for CLAS 2018-1 (as of October 2021) and
$775.9 million for CLAS 2019-1 (as of August 2021). When
controlling for asset sales that occurred since the prior review,
the pool values declined by approximately 8% and 10%, respectively,
compared with the values a year ago, which is within Fitch's
expectations. In the prior review, these values were $826.9 million
for CLAS 2018-1 and $862.8 million for CLAS 2019-1 prior to
experiencing approximately $105 million and $10 million of aircraft
sales, respectively.
Transaction Performance
Lease collections have fluctuated in 2021, but have remained
rangebound since the prior review. Based on the November 2021
servicer report covering the October collection period, CLAS 2018-1
and 2019-1 received $3.9 million and $4.8 million in basic rent
collections, respectively, which were respectively lower and higher
than the average monthly receipts of $4.8 million and $4.5 million
over the last 12 months.
Loan-to-values (LTVs) on CLAS 2018-1 series A notes remain
relatively stable from the prior review, as they benefitted from
recent aircraft sales while the series B and C LTVs increased due
to no-to-limited note amortization. LTVs on CLAS 2019-1 series A
and B notes has also remained relatively stable since the last
review primarily due to a large amount of excess proceeds received
in recent months. The series C notes in 2019-1 have not received
any payments since the last review.
All series A and B notes in each transaction continue to receive
interest payments through the October collection period. Available
cashflow has been sufficient to pay a portion of note A principal
amount since the last review in every period for CLAS 2018-1 and
all but one period for CLAS 2019-1. Series B notes for both
transactions received principal payments in one or two periods
since the prior review due to end-of-lease payments or excess
proceeds.
The debt-service coverage ratio (DSCR) for CLAS 2018-1 is currently
at 0.58x and remains below their trigger levels. CLAS 2019-1 has a
DSCR of 1.21x above both the cash trap (1.20x) and rapid
amortization event (1.15x) triggers, as the ratio was boosted from
a $55.3 million excess proceeds payment in the July 2021 collection
period.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Base Assumptions with Weaker WB Values
The Negative Outlooks on all series of notes reflect the potential
for further negative rating actions due to concerns over the
ultimate impact of the coronavirus pandemic, the resulting concerns
associated with airline performance and aircraft values and other
assumptions across the aviation industry due to the severe decline
in travel and grounding of airlines. Due to the correlation between
global economic conditions and the airline industry, the ratings
can be affected by the strength of the macro-environment over the
remaining terms of these transactions.
The pools contain concentrations of WB aircraft between 20% to 30%
for both transactions. Due to continuing MV pressure on WB and
worsening supply and demand dynamics, Fitch explored the potential
cash flow decline if WB values were haircut by 10% of Fitch's
modeled values at the prior review. For CLAS 2018-1, the notes
experienced weaker cash flows, but remain at their current ratings.
For CLAS 2019-1, the notes experienced weaker cash flows, and could
result in downgrades of one category for the class B and C notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Base Assumptions with Stronger Values
The aircraft ABS sector has a rating cap of 'Asf'. All subordinate
tranches carry one category of ratings lower than the senior
tranche and below the ratings at close. However, if the assets in
this pool display stronger asset values than Fitch modeled and
therefore stronger lease collections than Fitch's stressed
scenarios, the transaction could perform better than expected.
In Fitch's prior review, Fitch utilized AEH MABV for narrowbodies
and AEH MAMV for widebodies. Under this scenario, both transactions
experienced an improvement to cash flows. Both transactions would
remain at their current 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
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means 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.
CD 2017-CD3: Fitch Lowers Rating on Class F Certs to 'C'
--------------------------------------------------------
Fitch Ratings has downgraded five and affirmed 12 classes of CD
2017-CD3 Mortgage Trust Commercial Mortgage Pass-Through
Certificates, Series 2017-CD3.
DEBT RATING PRIOR
---- ------ -----
CD 2017-CD3 Mortgage Trust Series 2017-CD3
A-2 12515GAB3 LT AAAsf Affirmed AAAsf
A-3 12515GAC1 LT AAAsf Affirmed AAAsf
A-4 12515GAD9 LT AAAsf Affirmed AAAsf
A-AB 12515GAE7 LT AAAsf Affirmed AAAsf
A-S 12515GAF4 LT AAAsf Affirmed AAAsf
B 12515GAG2 LT AA-sf Affirmed AA-sf
C 12515GAH0 LT A-sf Affirmed A-sf
D 12515GAM9 LT B-sf Downgrade BBsf
E 12515GAP2 LT CCsf Downgrade CCCsf
F 12515GAR8 LT Csf Downgrade CCsf
V-A 12515GAX5 LT AAAsf Affirmed AAAsf
V-B 12515GAZ0 LT AA-sf Affirmed AA-sf
V-C 12515GBB2 LT A-sf Affirmed A-sf
V-D 12515GBD8 LT B-sf Downgrade BBsf
X-A 12515GAJ6 LT AAAsf Affirmed AAAsf
X-B 12515GAK3 LT AA-sf Affirmed AA-sf
X-D 12515GAV9 LT B-sf Downgrade BBsf
KEY RATING DRIVERS
Increased Loss Expectations: The downgrades and Negative Outlooks
reflect increased loss expectations since Fitch's last rating
action, primarily on the largest loan, 229 West 43rd Street Retail
Condo, as well as continued pandemic-related underperformance for
the Fitch Loans of Concern (FLOCs). Fitch has designated 21 loans
(52% of the pool) as FLOCs, including two specially-serviced loans
(10.1%); although the majority of the loan level losses are from
the largest loan.
Fitch's current ratings reflect a base case loss of 9.6%. A
sensitivity analysis was applied where losses could reach 10% after
factoring in additional pandemic-related sensitivities to eight
hotel loans and a potential outsized loss to 681 Fifth Avenue.
Largest Contributor to Losses: The 229 West 43rd Street Retail
Condo (7.94% of the pool) loan transferred to special servicing in
December 2019 due to imminent monetary default. The loan is secured
by a 245,132 sf retail condominium located in Manhattan's Times
Square district. The property whose tenants catered to
entertainment and tourism had already seen declines prior to the
pandemic. A receiver was appointed in March 2021 and the loan is in
foreclosure.
The most recent servicer provided appraised value dated August 2020
indicates it is significantly below the outstanding debt amount.
Multiple lease sweep periods have occurred related to the majority
of the tenants, triggering a cash flow sweep since December 2017.
The OHM food hall concept contemplated at issuance failed to open
at the property. National Geographic and Gulliver's Gate (combined
43% of NRA) and Guitar Center (11.3% of NRA) have also vacated the
property. As a result, occupancy has declined to 42%. The property
had been benefiting from an Industrial Commercial Incentive Program
tax abatement, which began to burn off in the 2017-2018 tax year by
20% per year. The loans exposure continues to increase due to
servicer advances, increasing Fitch modeled losses to approximately
76%.
The next largest contributor to losses is 1384 Broadway, the second
largest loan in the pool (7.0%). The loan is secured by a
220,045-sf office building located in the Garment District of
Manhattan, NY. The property suffered performance declines caused by
the pandemic. Despite a granular rent roll with no tenant occupying
more the 5% of the NRA, occupancy fell to 80% as of August 2021
compared to 89% at YE 2020 and 93.3% at YE 2019. As a result, the
YE 2020 NOI declined 26% below YE 2019 and is 21% below issuers
NOI. Debt service coverage ratio (DSCR) declined to 1.25x as of YE
2020 compared to 1.68x at YE 2019 and 1.59x at issuance. The
declines are primarily due to lower revenues with a 15% decline in
base rents. Per media reports, the Sponsor (Chetrit Group) has
taken legal action against tenants for un-paid rents in 2020.
The property faces near term rollover risks, with three tenants
rolling in 2021 (7.1% of NRA) and 11 tenants rolling in 2022 (12.7%
of NRA). This includes the second largest tenant, the Chetrit
Organization (sponsor affiliated), which leases 9,557-sf (4.5% NRA)
through Dec. 31, 2021. The property is performing below the
submarket average. Per REIS as of September 2021, average vacancy
in the Midtown office submarket was 9.6%, with average asking rents
of $63.27psf. Per the August 2021 rent roll, the property was 20%
vacant with average in-place base rents of approximately $40 psf.
Fitch's analysis includes a 10% haircut to the YE 2019 NOI to
account for the 2020 occupancy declines and near-term rollover
risk. Fitch's base case loss of approximately 5.0% gives credit for
the property location in Manhattan and strong prospects for
recovery.
Minimal Change in Credit Enhancement: As of the November 2021
distribution date, the pool's aggregate balance was reduced by
5.13% to $1.26 billion from $1.33 billion. No loans have been
defeased, and three loans (2.9% of the pool) have been disposed of
since issuance. Fifteen loans (52.5%) are full-term, interest-only;
14 loans (26.4%) remain in their partial interest-only period, and
20 loans (21.1%) are fully amortizing. The pool is scheduled to
amortize by 6.9% of the initial pool balance by maturity. Interest
shortfalls totaling $4.04 million are affecting class F, G, and
risk retention V-E class.
Alternative Loss Considerations: Fitch performed an additional
sensitivity scenario that assumed a potential outsized loss of
10.1% to 681 Fifth Avenue (2.3% of the pool), which currently has
dark retail space (27% of NRA, expiry 2023); and additional
coronavirus-related stresses on eight hotel loans (15.4%) that have
been identified as FLOCs. This sensitivity analysis contributed to
the Negative Outlooks. Additionally, Fitch assumed a payoff
scenario for loans that pass Fitch's term and maturity test, which
resulted in affirming classes A-S and B, but maintaining Negative
Rating Outlooks.
Credit Opinion Loans: Two loans (10.2%) were given investment-grade
credit opinions at issuance. 85 Tenth Avenue (5.7% of the pool)
received an investment-grade credit opinion of 'BBBsf' and Hilton
Hawaiian Village Waikiki Beach Resort (4.5% of the pool) received
an investment-grade credit opinion of 'BBB-sf', on a stand-alone
basis.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- The downgrades and Negative Outlooks reflect concerns with the
FLOCs, particularly 229 West 43rd Street Retail Condo. The
Stable Outlooks on the senior AAAsf classes reflect the high
credit enhancement (CE).
-- Downgrades would occur with an increase in pool-level losses
from underperforming or specially serviced loans. Downgrades
to classes A-1 through A-AB are not likely due to the high CE,
but may occur should interest shortfalls affect these classes.
Downgrades to classes A-S, B, and C may occur if expected
losses increase and/or if loans expected to payoff at maturity
exhibit worsening performance.
-- Further downgrades to classes D, E, and F would occur should
loss expectations increase due to an increase in specially
serviced loans, increased certainty of high losses on
specially serviced loans, or a decline in the FLOC's
performance. The Negative Outlooks may be revised to Stable if
performance of the FLOCs improves and/or properties vulnerable
to the pandemic stabilize as the economy improves.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades would occur with stable to improved asset
performance, particularly on the FLOCs and specially serviced
loans, coupled with paydown and/or defeasance. Upgrades of the
subordinated classes category would likely occur with
significant improvement in credit enhancement and/or
defeasance; however, adverse selection and increased
concentrations or the underperformance of particular loans(s)
could cause this trend to reverse.
-- Upgrades on the 'B-sf' are 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 were likelihood for interest
shortfalls. The 'Csf' and 'CCsf' rated classes are unlikely to
be upgraded absent significant performance improvement and
substantially higher recoveries than expected on the FLOCs.
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.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means 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.
CEDAR FUNDING XII: Moody's Gives Ba3 Rating to $18.45MM E-R Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to three classes of
CLO refinancing notes issued by Cedar Funding XII CLO, Ltd. (the
"Issuer").
Moody's rating action is as follows:
US$279,000,000 Class A-1-R Senior Secured Floating Rate Notes due
2034, Assigned Aaa (sf)
US$9,000,000 Class A-2-R Senior Secured Floating Rate Notes due
2034, Assigned Aaa (sf)
US$18,450,000 Class E-R Secured Deferrable Floating Rate Notes due
2034, Assigned Ba3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least 90%
of the portfolio must consist of senior secured loans, cash and
other eligible investments, and up to 10% of the portfolio may
consist of non-senior secured loans.
Aegon USA Investment Management, LLC (the "Manager") will continue
to direct the selection, acquisition and disposition of the assets
on behalf of the Issuer and may engage in trading activity,
including discretionary trading, during the transaction's extended
approximately five year reinvestment period. Thereafter, subject to
certain restrictions, the Manager may reinvest unscheduled
principal payments and proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: extension of the reinvestment
period; extensions of the stated maturity and non-call period;
changes to certain collateral quality tests; and changes to the
overcollateralization test levels; amendments of Libor replacement
provisions; additions to the CLO's ability to hold workout and
restructured assets; changes to the definition of "Moody's Adjusted
Weighted Average Rating Factor" and changes to the base matrix and
modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Portfolio par: $450,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 2997
Weighted Average Spread (WAS): 3.20%
Weighted Average Coupon (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 48.0%
Weighted Average Life (WAL): 9 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
CFIP CLO 2021-1: S&P Assigns Prelim BB-(sf) Rating on Class E Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to CFIP CLO
2021-1 Ltd./CFIP CLO 2021-1 LLC's fixed- and floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by CFI Partners LLC.
The preliminary ratings are based on information as of Nov. 24,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversification of the collateral pool.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
CFIP CLO 2021-1 Ltd./CFIP CLO 2021-1 LLC
Class X, $1.60 million: AAA (sf)
Class A, $281.60 million: AAA (sf)
Class B-1, $44.80 million: AA (sf)
Class B-2, $8.00 million: AA (sf)
Class C-1 (deferrable), $18.00 million: A (sf)
Class C-2 (deferrable), $8.40 million: A (sf)
Class D (deferrable), $26.40 million: BBB- (sf)
Class E (deferrable), $15.40 million: BB- (sf)
Subordinated notes, $40.00 million: Not rated
COLT MORTGAGE 2021-5: Fitch Rates Class B2 Certs 'B'
----------------------------------------------------
Fitch Ratings assigns final ratings to the residential
mortgage-backed certificates to be issued by COLT 2021-5 Mortgage
Loan Trust (COLT 2021-5).
DEBT RATING PRIOR
---- ------ -----
COLT 2021-5
A1 LT AAAsf New Rating AAA(EXP)sf
A2 LT AAsf New Rating AA(EXP)sf
A3 LT Asf New Rating A(EXP)sf
M1 LT BBBsf New Rating BBB(EXP)sf
B1 LT BBsf New Rating BB(EXP)sf
B2 LT Bsf New Rating B(EXP)sf
B3A LT NRsf New Rating NR(EXP)sf
B3B LT NRsf New Rating NR(EXP)sf
X LT NRsf New Rating NR(EXP)sf
AIOS LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
The certificates are supported by 568 loans with a total balance of
approximately $337 million as of the cutoff date. Loans in the pool
were originated by multiple originators and aggregated by Hudson
Americas L.P. All loans are currently or will be serviced by Select
Portfolio Servicing, Inc.
KEY RATING DRIVERS
Non-QM Credit Quality (Mixed): The collateral consists of 568 loans
totaling $337 million and seasoned at approximately two months in
aggregate. The borrowers have a strong credit profile -- a 739
model FICO, a 43.3% debt-to-income ratio, which includes mapping
for debt service coverage ratio (DSCR) loans, and moderate leverage
-- and an 80.0% sustainable loan-to-value ratio.
The pool consists of 59% of loans treated as owner-occupied, while
41% were treated as an investor property (38%) or second home (2%).
Additionally, 13.4% of the loans were originated through a retail
channel. 61.7% are non-QM and for the remainder the Ability to
Repay Rule (ATR) does not apply. Lastly, there are currently 2.1%
of loans that are 30 days' delinquent as of the data cutoff date.
Loan Documentation (Negative): Approximately 85.7% of the pool was
underwritten to less than full documentation, and 45.4% was
underwritten to a 12-month or 24-month bank statement program for
verifying income, which is not consistent with Appendix Q standards
and Fitch's view of a full documentation program.
A key distinction between this pool and legacy Alt-A loans is that
these loans adhere to underwriting and documentation standards
required under the Consumer Financial Protections Bureau's ATR,
which reduces the risk of borrower default arising from lack of
affordability, misrepresentation or other operational quality risks
due to rigors of the ATR mandates regarding the underwriting and
documentation of the borrower's ability to repay.
Additionally, 34.8% comprises a DSCR or no ratio product, 3.3% is
an asset depletion product and the remaining is a mixture of other
alternative documentation products. Separately, close to 2.8% of
the loans were originated to foreign nationals, nonpermanent
resident aliens or are unknown.
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 11.0% above a long-term sustainable level (versus
10.5% on a national level). Underlying fundamentals are not keeping
pace with the growth in prices, which is a result of a
supply/demand imbalance driven by low inventory, low mortgage rates
and new buyers entering the market. These trends have led to
significant home price increases over the past year, with home
prices rising 18.6% yoy nationally as of June 2021.
Sequential Payment 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. Losses are allocated in reverse-sequential order.
Furthermore, the provision to re-allocate principal to pay interest
on the 'AAAsf' and 'AAsf' rated notes prior to other principal
distributions is highly supportive of timely interest payments to
that class with limited advancing.
Limited Advancing (Positive): Advances of delinquent P&I will be
made on the mortgage loans for the first 180 days of delinquency to
the extent such advances are deemed recoverable. If the P&I
advancing party fails to make a required advance, the master
servicer (Wells Fargo) will be obligated to make such advance.
The limited advancing reduces loss severities, as there is a lower
amount repaid to the servicer when a loan liquidates and
liquidation proceeds are prioritized to cover principal repayment
over accrued but unpaid interest. The downside to this is the
additional stress on the structure side, as there is limited
liquidity in the event of large and extended delinquencies.
Excess Cash Flow (Positive): The transaction benefits from a
material amount of excess cash flow that provides benefit to the
rated certificates before being paid out to class X certificates.
The excess is available to pay timely interest and protect against
realized losses. To the extent the collateral weighted average
coupon (WAC) and corresponding excess are reduced through a rate
modification, Fitch would view the impact as credit neutral, as the
modification would reduce the borrower's probability of default,
resulting in a lower loss expectation.
As a sensitivity to Fitch's rating stresses, Fitch took into
account a WAC deterioration that varied by rating stress. The WAC
cut was derived by assuming a 2.5% cut (based on the most common
historical modification rate) on 40% (historical Alt-A modification
percentage) of the performing loans. Although the WAC reduction
stress is based on historical modification rates, Fitch did not
include the WAC reduction stress in its testing of the delinquency
trigger.
Fitch viewed the WAC deterioration as more of a pre-emptive cut
given the ongoing macroeconomic and regulatory environment. A
portion of borrowers will likely be impaired, but will not
ultimately default. Furthermore, this approach had the largest
impact on the back-loaded benchmark scenario, which is also the
most probable outcome, as defaults and liquidations are not likely
to be extensive over the next 12 months-18 months given the ongoing
borrower relief and eviction moratoriums.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Fitch's incorporates a sensitivity analysis to demonstrate how
the ratings would react to steeper market value declines
(MVDs) than assumed at the MSA level. Sensitivity analysis was
conducted at the state and national level to assess the effect
of higher MVDs for the subject pool as well as lower MVDs,
illustrated by a gain in home prices.
-- The 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 44.0% 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 positive
rating action/upgrade:
-- Fitch's incorporates a sensitivity analysis to demonstrate how
the ratings would react to MVDs than assumed at the MSA level.
Sensitivity analysis was conducted at the state and national
level to assess the effect of higher MVDs for the subject pool
as well as lower MVDs, illustrated by a gain in home prices.
-- The defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. Excluding the senior class,
which is already rated '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'.
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.
SUMMARY OF FINANCIAL ADJUSTMENTS
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 (Form 15E) as
prepared by the TPRs. Fitch relied on an independent third-party
due diligence review performed on 100% of the loans. The
third-party due diligence was consistent with Fitch's "U.S. RMBS
Rating Criteria." Lone Star Residential Mortgage Fund Acquisitions
II, LLC engaged AMC, Clayton, Edgemac, Evolve, Infinity, Opus,
Recovco, Selene and Stonehill Diligence to perform the review.
Loans reviewed under this engagement were given compliance, credit
and valuation grades and assigned initial grades for each
subcategory.
DATA ADEQUACY
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. The loan-level
information Fitch received was provided in the American
Securitization Forum's data layout format.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means 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.
CONNS RECEIVABLES 2021-A: Fitch Rates Class C Notes 'B'
-------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to the notes
issued by Conn's Receivables Funding 2021-A, LLC, which consists of
notes backed by retail loans originated by Conn Appliances, Inc. or
Conn Credit Corporation, Inc. and serviced by Conn Appliances,
Inc.
DEBT RATING PRIOR
---- ------ -----
Conns Receivables Funding 2021-A, LLC
A LT BBBsf New Rating BBB(EXP)sf
B LT BBsf New Rating BB(EXP)sf
C LT Bsf New Rating B(EXP)sf
KEY RATING DRIVERS
Subprime Collateral Quality: The Conn's 2021-A receivables pool has
a weighted average FICO score of 613, and 8.1% of the loans have
scores below 550 or no score. Fitch applied 2.2x, 1.5x and 1.2x
stresses to the 25% default assumption at the 'BBBsf', 'BBsf' and
'Bsf' rating stress levels, respectively. The default multiple
reflects the high absolute value of the historical defaults and
default assumption, the variability of default performance in
recent years and the high geographical concentration of the
portfolio.
Rating Cap at 'BBBsf': The rating cap reflects the subprime
credit-risk profile of the customer base, higher loan defaults in
recent years, the high concentration of receivables from Texas,
recent disruption in servicing contributing to increased defaults
in recent securitized vintages and servicing collection risk
(albeit reduced in recent years) due to a portion of customers
making in-store payments.
Payment Structure -- Sufficient Credit Enhancement: Initial hard
credit enhancement (CE) totals 44.25%, 29.25% and 14.75% for class
A, B and C notes, respectively. Initial CE is sufficient to cover
Fitch's stressed cash flow assumptions for all classes. The notes
will receive principal sequentially beginning with the class A
notes until the total overcollateralization amount of 24.50% is
reached, after which the notes will receive principal pro-rata
among all three classes as long as the total overcollateralization
is at or above 24.50% and no triggers have been breached.
Adequate Servicing Capabilities: Conn Appliances, Inc. has a long
track record as an originator, underwriter and servicer. Servicing
disruption risk is reduced by backup servicing provided by Systems
& Services Technologies, Inc. (SST), which has committed to a
servicing transition period of 30 days.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Unanticipated increases in the frequency of defaults or
chargeoffs could produce loss levels higher than the base
case, and would likely result in declines of CE and remaining
net loss coverage levels available to the notes. Decreased CE
may make certain ratings on the notes susceptible to potential
negative rating actions, depending on the extent of the
decline in coverage.
-- Fitch conducts sensitivity analysis by stressing a
transaction's initial base case default assumption by an
additional 10%, 25% and 50% and examining the rating
implications. These increases of the base case default rate
are intended to provide an indication of the rating
sensitivity of the notes to unexpected deterioration of a
trusts performance. As additional sensitivity run of lowering
recoveries to 0% is also conducted.
-- During the sensitivity analysis, Fitch examines the magnitude
of the multiplier compression by projecting the expected cash
flows and loss coverage levels over the life of investments
under higher than the initial base case default assumptions.
Fitch models cash flows with the revised default estimates
while holding constant all other modeling assumptions.
Conn's 2021-A:
-- Default increase 10%: class A 'BBB-sf'; class B 'BBsf'; class
C 'B-sf';
-- Default increase 25%: class A 'BB+sf'; class B 'B+sf'; class C
'CCCsf';
-- Default increase 50%: class A 'BBsf'; class B 'Bsf'; class C
less than 'CCCsf';
-- Recoveries decrease to 0%: class A 'BBB-sf'; class B 'BBsf';
class C 'B-sf'.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance driven by stable
delinquencies and defaults would lead to increasing CE levels
and consideration for potential upgrades. If the defaults are
20% less than the projected base case default rate, the
ratings for the subordinate notes could be upgraded by up to
one rating category.
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 third-party due diligence information from
Ernst & Young LLP. The third-party due diligence focused on
comparing certain information with respect to a sample of loans
from the statistical data file. Fitch considered this information
in its analysis, and the findings did not have an impact on Fitch's
analysis. A copy of the ABS Due Diligence Form-15E received by
Fitch in connection with this transaction may be obtained through
the link contained on the bottom of the related rating action
commentary.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means 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.
CQS US 2021-1: Fitch Assigns BB-(EXP) Rating on Class E Debt
------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
CQS US CLO 2021-1, Ltd.
DEBT RATING
---- ------
CQS US CLO 2021-1, Ltd.
A LT AAA(EXP)sf Expected Rating
B LT NR(EXP)sf Expected Rating
C LT NR(EXP)sf Expected Rating
D-1 LT NR(EXP)sf Expected Rating
D-J LT NR(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
Subordinated Notes LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
CQS US CLO 2021-1, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by CQS
(US), LLC. Net proceeds from the issuance of the secured and
subordinated notes will provide financing on a portfolio of
approximately $400 million of primarily first lien senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 25.1 versus a maximum covenant, in
accordance with the initial expected matrix point, of 27.0. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the class A and E notes benefit from credit
enhancement of 37.0% and 8.0%, respectively, and standard U.S. CLO
structural features.
Asset Security (Positive): The indicative portfolio consists of
99.3% first lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 75.8% versus a
minimum covenant, in accordance with the initial expected matrix
point of 70.0%.
Portfolio Composition (Positive): The largest three industries may
constitute up to 39.0% of the portfolio balance in aggregate, while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
U.S. CLOs.
Portfolio Management (Neutral): The transaction has a 5.1-year
reinvestment period and reinvestment criteria similar to other U.S.
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the class A and E notes
can withstand default rates of up to 59.4% and 33.9%, respectively,
assuming a portfolio recovery rate of 36.7% and 68.7% in Fitch's
'AAAsf' and 'BB-sf' scenarios, respectively.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- Variability in key model assumptions, such as decreases in
recovery rates and increases in default rates, could result in
a downgrade. Fitch evaluated the notes' sensitivity to
potential changes in such a metric. The results under these
sensitivity scenarios are between 'BBB+sf' and 'AAAsf' for
class A notes, and between less than 'B-sf' and 'BB+sf' for
class E notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrade scenarios are not applicable to the class A notes, as
these notes are in the highest rating category of 'AAAsf'.
-- Variability in key model assumptions, such as increases in
recovery rates and decreases in default rates, could result in
an upgrade. Fitch evaluated the notes' sensitivity to
potential changes in such metrics; results under these
sensitivity scenarios are between 'BBB-sf' and 'BBB+sf' for
class E notes.
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.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
CSAIL 2018-CX11: Fitch Affirms CCC Rating on Class G-RR Certs
-------------------------------------------------------------
Fitch Ratings has affirmed 15 classes of Credit Suisse CSAIL
2018-CX11 Commercial Mortgage Trust Commercial Mortgage
Pass-Through Certificates Series 2018-CX11. In addition, Fitch has
revised the Rating Outlook on classes D and X-D to Stable from
Negative.
DEBT RATING PRIOR
---- ------ -----
CSAIL 2018-CX11
A-2 12652UAR0 LT AAAsf Affirmed AAAsf
A-3 12652UAS8 LT AAAsf Affirmed AAAsf
A-4 12652UAT6 LT AAAsf Affirmed AAAsf
A-5 12652UAU3 LT AAAsf Affirmed AAAsf
A-S 12652UAY5 LT AAAsf Affirmed AAAsf
A-SB 12652UAV1 LT AAAsf Affirmed AAAsf
B 12652UAZ2 LT AA-sf Affirmed AA-sf
C 12652UBA6 LT A-sf Affirmed A-sf
D 12652UAC3 LT BBB-sf Affirmed BBB-sf
E-RR 12652UAE9 LT BBB-sf Affirmed BBB-sf
F-RR 12652UAG4 LT BB-sf Affirmed BB-sf
G-RR 12652UAJ8 LT CCCsf Affirmed CCCsf
X-A 12652UAW9 LT AAAsf Affirmed AAAsf
X-B 12652UAX7 LT AA-sf Affirmed AA-sf
X-D 12652UAA7 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Stable Loss Expectations: Overall base case loss expectations are
stable since the last review and performance of loans impacted by
the pandemic have begun to stabilize. Fourteen loans (31.2%),
including one loan in special servicing (2.8%), were flagged as
Fitch Loans of Concern (FLOCs). Fitch's current ratings for the
transaction reflect a base case loss of 5.5%. Losses that could
reach 6.7% after factoring potential outsized losses to the Lehigh
Valley Mall, Soho House Chicago, Northrop Grumman Portfolio and
Hilton Clearwater Beach Resort & Spa. The Negative Outlooks reflect
the pool's high hotel and retail concentrations of 20.7% and 18.1%,
respectively. Should these loans continue to exhibit stable
performance, additional classes' Outlooks will be revised to
Stable.
The largest contributor to base case modeled losses, Hyatt House
Broomfield Hotel (1.4%), is secured by a 123 key extended stay
hotel located in Broomfield, CO. Due to the property's declining
performance, it was flagged as a FLOC. As of YE 2019, servicer
reported occupancy and debt service coverage ratio (DSCR) were 71%
and 1.03x, respectively, compared to 78% and 1.73x at YE 2018.
Fitch's base case analysis assumed a 26% stress to YE 2019 NOI to
account for declining performance to the coronavirus pandemic.
The second largest contributor to modeled losses and sole specially
serviced loan, 6-8 West 28th Street (2.8%), is secured by a 26,600
sf mixed use property consisting of 14,000 sf of retail and 12,600
sf of office space, located in New York, NY. The property is
currently 100% vacant and in foreclosure. Fitch's loss expectations
of approximately 20% were based on a discount to an appraisal value
reflecting recovery of $875 psf.
The third largest contributor to modeled losses, Throggs Neck
Shopping Center (4.9%), is secured by 119,161 sf retail strip
center, located in Bronx, NY. The largest tenant at the property is
TJ Maxx (23.8% NRA; exp. August 2024). The second and third largest
tenants are Party City (9.0% NRA; exp. January 2028) and Petco
Animal Supplies (8.7% NRA; exp. January 2025), respectively. The
subject has a diverse tenant mix of retail tenants, food
service/restaurant tenants and medical/salon/service tenants. Loss
expectations remain in line with issuance.
Increased Credit Enhancement: As of the October 2021 distribution
date, the pool's aggregate principal balance has paid down by 3.9%
to $915.8 million from $952.9 million at issuance. One loan prepaid
in full during its open period; recoveries were higher than
expected. Nineteen loans (44.6% of pool) are full-term,
interest-only and 16 loans (25.5%) are partial interest-only (of
which 13 loans representing 16.1% have begun amortizing). The pool
is scheduled to amortize 8.5% prior to maturity.
Alternative Loss Considerations: Fitch performed an additional
sensitivity scenario that assumed potential outsized losses of 2.6%
on Hilton Clearwater Beach Resort & Spa and 22% on the maturity
balance of Lehigh Valley Mall, which is based on a 15% cap rate and
a 20% haircut to the YE 2020 NOI, to reflect sponsorship concerns
and the potential for sustained underperformance. Fitch also
assumed a 20% loss severity on the Soho House Chicago to address
concerns with the specialized nature of the tenant and potential
volatility of performance, and a 10% loss severity on Northrop
Grumman Portfolio due to expected loss of a large tenant. The
Negative Outlooks on classes E-FF and F-RR reflect these additional
stresses.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An increase in pool-level losses from underperforming or
specially serviced loans;
-- Downgrades to the 'AA-sf' through 'AAAsf' rated-classes are
not likely due to their high credit enhancement (CE) but may
occur should interest shortfalls affect these classes;
-- Downgrades to the 'BBB-sf' through 'A-sf' rated classes may
occur should expected losses for the pool increase
substantially and all of the loans susceptible to the
coronavirus pandemic suffer losses, which would erode CE;
-- Downgrades to the 'CCCsf' and 'BB-sf' rated classes would
occur with greater certainty of loss or as losses are
realized.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance coupled with pay down
and/or defeasance;
-- Upgrades to the 'A-sf' and 'AA-sf' rated classes would likely
occur with significant improvement in CE and/or defeasance and
improved performance from loans affected by the coronavirus
pandemic; however, adverse selection and increased
concentrations, or 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.
-- Additionally, an upgrade to the 'BB-sf' and 'CCCsf' rated
classes is not likely until later years of the transaction and
only if the performance of the remaining pool is stable and/or
there is sufficient CE, which would likely occur when the
nonrated class is not eroded and the senior classes pay off.
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.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means 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.
CSMC 2021-INV2: S&P Assigns B (sf) Rating on Class B-5 Notes
------------------------------------------------------------
S&P Global Ratings assigned its ratings to CSMC 2021-INV2 Trust's
mortgage-backed notes.
The issuance is an RMBS transaction backed by first-lien,
fixed-rate, fully amortizing residential mortgage loans secured by
one- to four-family residential properties, planned-unit
developments, condominiums, and one manufactured housing to prime
borrowers. The pool consists of 1,267 investor mortgage loans and
105 secondary-occupancy mortgage loans.
The ratings reflect S&P's view of:
-- The high-quality collateral in the pool;
-- The transaction's credit enhancement;
-- The transaction's associated structural mechanics;
-- The transaction's representation and warranty (R&W) framework;
-- The mortgage aggregator, DLJ Mortgage Capital Inc., and the
originators, which include Cardinal Financial Co. L.P., and Home
Point Financial Corp.;
-- The geographic concentration;
-- The due diligence results consistent with the represented loan
characteristics; and
-- The further impact the COVID-19 pandemic will likely have on
the performance of the mortgage borrowers in the pool and liquidity
available in the transaction.
Ratings Assigned(i)
CSMC 2021-INV2 Trust
Class A-1, $376,773,000: AAA (sf)
Class A-2, $352,512,000: AAA (sf)
Class A-3, $326,073,600: AAA (sf)
Class A-3A, $326,073,600: AAA (sf)
Class A-3X, $326,073,600(ii): AAA (sf)
Class A-4, $244,555,000: AAA (sf)
Class A-4A, $244,555,000: AAA (sf)
Class A-4X, $244,555,000(ii): AAA (sf)
Class A-5, $81,518,600: AAA (sf)
Class A-5A, $81,518,600: AAA (sf)
Class A-5X, $81,518,600(ii): AAA (sf)
Class A-6, $195,644,000: AAA (sf)
Class A-6A, $195,644,000: AAA (sf)
Class A-6X, $195,644,000(ii): AAA (sf)
Class A-7, $130,429,600: AAA (sf)
Class A-7A, $130,429,600: AAA (sf)
Class A-7X, $130,429,600(ii): AAA (sf)
Class A-8, $48,911,000: AAA (sf)
Class A-8A, $48,911,000: AAA (sf)
Class A-8X, $48,911,000(ii): AAA (sf)
Class A-11, $26,438,400: AAA (sf)
Class A-11X, $26,438,400(ii): AAA (sf)
Class A-12, $26,438,400: AAA (sf)
Class A-13, $26,438,400: AAA (sf)
Class A-14, $24,261,000: AAA (sf)
Class A-15, $24,261,000: AAA (sf)
Class A-15A, $24,261,000: AAA (sf)
Class A-15X, $24,261,000(ii): AAA (sf)
Class A-X1, $376,773,000(ii): AAA (sf)
Class A-X2, $376,773,000(ii): AAA (sf)
Class A-X3, $26,438,400(ii): AAA (sf)
Class A-X4, $24,261,000(ii): AAA (sf)
Class A-X5, $350,334,600(ii): AAA (sf)
Class B-1, $10,368,000: AA (sf)
Class B-2, $8,709,000: A (sf)
Class B-3, $8,502,000: BBB (sf)
Class B-4, $4,769,000: BB (sf)
Class B-5, $3,110,000: B (sf)
Class B-6, $2,489,098: Not rated
Class A-IO-S, $414,720,098 (ii): Not rated
Class PT, $414,720,098 (ii): Not rated
Class R, not applicable: Not rated
(i)The collateral and structural information in this report reflect
the private placement memorandum dated Nov. 16, 2021.
(ii)Notional balance.
IO--Interest only.
DEEPHAVEN 2021-4: S&P Assigns Prelim B-(sf) Rating on B-2 Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Deephaven
Residential Mortgage Trust 2021-4's mortgage-backed pass-through
notes series 2021-4.
The note issuance is an RMBS transaction backed first-lien, fixed-
and adjustable-rate mortgage loans secured by single-family
residences, planned-unit developments, condominiums, two- to
four-family homes, and five– to 10-unit properties. The pool
consists of 751 loans backed by 868 properties that are primarily
non-qualified mortgage loans and ability-to-repay exempt loans; of
the 751 loans, 24 are cross-collateralized, which were broken down
to their constituents at the property level (making up 141
properties).
The preliminary ratings are based on information as of Nov. 19,
2021. 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 pool's collateral composition;
-- The credit enhancement provided for this transaction;
-- The transaction's associated structural mechanics;
-- The mortgage aggregator, Deephaven Mortgage LLC;
-- The transaction's representation and warranty framework;
-- The geographic concentration;
-- The 100% due diligence results consistent with represented loan
characteristics; and
-- The impact the COVID-19 pandemic will likely have on the
performance of the mortgage borrowers in the pool and liquidity
available in the transaction.
Preliminary Ratings Assigned
Deephaven Residential Mortgage Trust 2021-4
Class A-1, $252,319,000: AAA (sf)
Class A-2, $24,332,000: AA (sf)
Class A-3, $41,191,000: A (sf)
Class M-1, $23,756,000: BBB (sf)
Class B-1, $16,860,000: BB (sf)
Class B-2, $16,093,000: B- (sf)
Class B-3, $8,622,229: NR
Class XS, Notional(i): NR
Class A-IO-S, Notional(i): NR
Class R: NR
(i)Notional amount equals the loans' aggregate stated principal
balance.
NR--Not rated.
DIAMOND ISSUER: Fitch Rates Series 2021-1 Class C Notes 'BB-'
-------------------------------------------------------------
Fitch Ratings has assigned Diamond Issuer LLC Fixed Rate Cellular
Site Revenue Notes, Series 2021-1 final ratings as follows:
-- $306,000,000 series 2021-1 class A 'Asf'; Outlook Stable;
-- $60,000,000 series 2021-1 class B 'BBB-sf'; Outlook Stable;
-- $69,000,000 series 2021-1 class C 'BB-sf'; Outlook Stable.
The following class is not expected to be rated by Fitch:
-- $22,900,000(a) series 2021-1 class R.
(a) Horizontal credit risk retention interest representing 5% of
the 2021-1 certificates.
TRANSACTION SUMMARY
The transaction is an issuance of notes backed by mortgages
representing no less than 90% of the annualized run rate net cash
flow (ARRNCF) on the tower sites, and guaranteed by the direct
parent of the borrower issuer. This guarantee is secured by a
pledge and first-priority-perfected security interest in 100% of
the real property interest (equity interest) of the borrowers,
which own or lease 1,064 wireless communication sites (towers and
the tenant leases) and mortgages on applicable sites (no less than
90% of ARRNCF); a pledge of the equity interest of the issuers and
any asset entities; and The Capacity Use and Service Agreements and
any and all associated rights, remedies and proceeds, including the
exclusive and perpetual relationship with FirstEnergy Corp.'s (FE)
ten utility subsidiaries to sublease FE transmission and
communication towers.
The new securities will be issued pursuant to the newly formed
trust's servicing agreement dated as of the expected closing of the
series 2021-1 transaction. At closing, proceeds from the issuance
of securities will be used to repay the Issuer's existing Series
2017-1, Series 2018-1 and Series 2020-1 notes in full (including
any applicable prepayment consideration); pay related transaction
fees and expenses; fund the Site Acquisition Account (SAA); fund
reserve accounts, and for general corporate purposes.
The ratings reflect a structured finance analysis of the cash flows
from the ownership interest in cellular sites, not an assessment of
the corporate default risk of the ultimate parent, Diamond
Communications LLC not rated (NR) by Fitch, which is also the
2021-1 Manager. This transaction is the fifth ABS transaction
managed by Diamond.
KEY RATING DRIVERS
Trust Leverage: Fitch net cash flow (NCF) on the pool is $36.7
million, implying a Fitch stressed debt service coverage ratio
(DSCR) of 1.00x. The debt multiple relative to Fitch's NCF is
12.5x, which equates to a debt yield of 8.0%. Excluding the
non-offered risk retention class R notes, the offered notes have a
Fitch stressed DSCR, debt multiple and debt yield of 1.05x, 11.87x
and 8.4%, respectively.
Technology-Dependent Credit: Due to the specialized nature of the
collateral and potential for changes in technology to affect
long-term demand for tower space, similar to most wireless tower
transactions, the senior classes of this transaction do not achieve
ratings above 'Asf'. The securities have a rated final payment date
over 30 years after closing, and the long-term tenor of the
securities increases the risk that an alternative technology —
rendering obsolete the current transmission of wireless signals
through cellular sites — will be developed. Wireless service
providers (WSPs) currently depend on towers to transmit their
signals and continue to invest in this technology.
Diversified Pool: There are 1,064 wireless sites and 1,440 tenant
leases spanning 44 states. The largest state (New Jersey)
represents 22.7% and top three states total 49.4%, both of ARRNCF.
Prefunding: On the closing date, $20 million (4.6% of total offered
proceeds) will be deposited into a site acquisition account to be
used during a 12-month period to acquire additional cellular sites
or convert leasehold sites to owned or easement, or in connection
with lease-up activity on existing sites. Prefunding introduces
uncertainty as to final collateral characteristics. Fitch accounted
for prefunding by stressing the NCF of the prefunding component to
reflect the most conservative prefunding pool composition tests.
Leases to Strong Tower Tenants: There are 1,440 tenant leases.
Telephony tenants represent approximately 98.2% of the annualized
run rate revenue (ARRR), and 96% of the ARRR is from
investment-grade tenants. The tenant leases have weighted average
annual escalators of approximately 2.6% and a weighted average
final remaining term, including renewals, of 36.8 years. The
largest tenant is AT&T (BBB+/Stable; 52.4% of ARRR).
Additional Securities: The transaction allows for the issuance of
additional securities. Such additional securities may rank pari
passu with or subordinate to the 2021 securities. Any additional
securities will be pari passu with any class of securities bearing
the same alphabetical class designation. Additional securities may
be issued without the benefit of additional collateral, provided
the post-issuance DSCR is not less than 2.0x. The possibility of
upgrades may be limited due to this provision.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Declining cash flow as a result of higher site expenses or
lease churn, and the development of an alternative technology
for the transmission of wireless signal could lead to
downgrades.
-- Fitch's NCF was 2.0% above the issuer's underwritten cash
flow. A 10% decrease in Fitch's NCF indicates the following
model-implied rating sensitivities for series 2021-1: 2021-1
class A to 'BBB-sf' from 'Asf', 2021-1 class B to 'BBsf' from
'BBB-sf', 2021-1 class C to 'Bsf' from 'BB-sf'.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Increasing cash flow without an increase in corresponding
debt, from contractual lease escalators, new tenant leases, or
lease amendments could lead to upgrades. However, the
transaction is capped in the 'Asf' category, given the risk of
technological obsolescence.
-- A 10% increase in Fitch's NCF indicates the following model
implied rating sensitivities for series 2021-1: 2021-1 class A
to 'Asf' from 'Asf', 2021-1 class B to 'BBBsf' from 'BBB-sf',
2021-1 class C to 'BBsf' from 'BB-sf'.
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 third-party due diligence information from
Deloitte & Touche LLP. The third-party due diligence information
was provided on Form ABS Due Diligence Form-15E and focused on a
comparison of certain characteristics with respect to the portfolio
of wireless communication sites and related tenant leases in the
data file. Fitch considered this information in its analysis, and
the findings did not have an impact on Fitch's analysis.
ESG CONSIDERATIONS
Diamond Issuer LLC 2021-1 Secured Site Revenue Notes has an ESG
Relevance Score of '4' for Transaction & Collateral Structure due
to due to several factors, including the issuer's ability to issue
additional notes, which has a negative impact on the credit
profile, and is relevant to the rating[s] in conjunction with other
factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means 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.
DRYDEN 76: S&P Assigns BB- (sf) Rating on Class E-R Notes
---------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1R, B-R,
C-R, D-R, and E-R replacement notes, and new class X notes, from
Dryden 76 CLO Ltd./Dryden 76 CLO LLC, a CLO originally issued in
October 2019 that is managed by PGIM Inc.
On the Nov. 18, 2021 refinancing date, the proceeds from the
replacement notes were used to redeem the original notes. At that
time, S&P withdrew its ratings on the original notes and assigned
ratings to the replacement notes.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The stated maturity, reinvestment period, and non-call period
were each extended by approximately two years.
-- The weighted average life test was extended to nine years from
the refinancing date.
-- New class X notes were issued in connection with this
refinancing. These notes will be paid down using interest proceeds
in equal installments over 11 payment dates beginning in April
2022.
-- The required minimum overcollateralization and interest
coverage ratios for certain classes were amended.
-- The transaction modified its investment criteria, including
certain concentration limitations, and added the ability to
purchase certain non-loan and workout-related assets. In addition,
the transaction modified the benchmark replacement language and
made updates to conform to current rating agency methodology.
-- No additional subordinated notes were issued on the refinancing
date.
-- No additional assets were purchased on the Nov. 18, 2021,
refinancing date, and the target initial par amount remained at
$400 million. There is no additional effective date or ramp-up
period, and the first payment date following the refinancing date
will be Jan. 20, 2022.
New, Replacement, And Original Note Issuances
New notes
Class X, $4.0 million: Three-month LIBOR + 0.70%
Replacement notes
Class A-1R, $248.0 million: Three-month LIBOR + 1.15%
Class B-R, $48.0 million: Three-month LIBOR + 1.60%
Class C-R (deferrable), $24.0 million: Three-month LIBOR + 2.00%
Class D-R (deferrable), $24.0 million: Three-month LIBOR + 3.30%
Class E-R (deferrable), $15.0 million: Three-month LIBOR + 6.50%
Original notes
Class A-1, $235.0 million: Three-month LIBOR + 1.33%
Class A-2, $25.0 million: 2.843%
Class B, $44.0 million: Three-month LIBOR + 1.80%
Class C (deferrable), $26.0 million: Three-month LIBOR + 2.50%
Class D-1 (deferrable), $17.8 million: Three-month LIBOR + 3.85%
Class D-2 (deferrable), $3.0 million: 5.428%
Class D-3 (deferrable), $5.2 million: Three-month LIBOR + 4.77%
Class E (deferrable), $12.0 million: Three-month LIBOR + 7.06%
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions. "We will continue to review
whether the ratings assigned to the notes remain consistent with
the credit enhancement available to support them, and will take
rating actions as we deem necessary."
Ratings Assigned
Dryden 76 CLO Ltd./Dryden 76 CLO LLC
Class X, $4.0 million: AAA (sf)
Class A-1R, $248.0 million: AAA (sf)
Class B-R, $48.0 million: AA (sf)
Class C-R (deferrable), $24.0 million: A (sf)
Class D-R (deferrable), $24.0 million: BBB- (sf)
Class E-R (deferrable), $15.0 million: BB- (sf)
Other Outstanding Ratings
Dryden 76 CLO Ltd./Dryden 76 CLO LLC
Class A-2R: $8.0 million, Not rated
Subordinated notes, $33.3 million: Not rated
Ratings Withdrawn
Dryden 76 CLO Ltd./Dryden 76 CLO LLC
Class A-1: to NR, from AAA (sf)
Class A-2: to NR, from AAA (sf)
Class B: to NR, from AA (sf)
Class C (deferrable): to NR, from A (sf)
Class D-1 (deferrable): to NR, from BBB- (sf)
Class D-2 (deferrable): to NR, from BBB- (sf)
Class D-3 (deferrable): to NR, from BBB- (sf)
Class E (deferrable): to NR, from BB- (sf)
NR--Not rated.
ELMWOOD CLO XII: S&P Assigns Prelim B- (sf) Rating on Class F Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Elmwood CLO
XII Ltd./Elmwood CLO XII LLC's floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Elmwood Asset Management LLC.
The preliminary ratings are based on information as of Nov. 22,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversification of the collateral pool, which consists
primarily of broadly syndicated speculative-grade (rated 'BB+' and
lower) senior secured term loans.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Elmwood CLO XII Ltd./Elmwood CLO XII LLC
Class A-L loans, $279.00 million: AAA (sf)
Class A, $93.00 million: AAA (sf)
Class B, $84.00 million: AA (sf)
Class C (deferrable), $36.00 million: A (sf)
Class D (deferrable), $36.00 million: BBB- (sf)
Class E (deferrable), $24.00 million: BB- (sf)
Class F (deferrable), $9.00 million: B- (sf)
Subordinated notes, $47.00 million: Not rated
FLAGSHIP CREDIT 2021-4: S&P Assigns BB-(sf) Rating on Class E Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Flagship Credit Auto
Trust 2021-4's automobile receivables-backed notes.
The note issuance is an ABS transaction backed by subprime auto
loan receivables.
The ratings reflect S&P's view of:
-- The availability of approximately 41.44%, 35.89%, 27.99%,
21.79%, and 17.95% credit support (including excess spread) for the
class A, B, C, D, and E notes, respectively, based on stressed cash
flow scenarios. These credit support levels provide coverage of
approximately 3.50x, 3.00x, 2.30x, 1.75x, and 1.40x of S&P's
11.25%-11.75% expected cumulative net loss (CNL) range for the
class A, B, C, D, and E notes, respectively. These break-even
scenarios cover total cumulative gross defaults (using a recovery
assumption of 40.00%) of approximately 69.07%, 59.82%, 46.65%,
36.31%, and 29.91%, respectively.
-- The hard credit enhancement in the form of subordination,
overcollateralization, and a reserve account in addition to excess
spread.
-- The expectation that under a moderate ('BBB') stress scenario
(1.75x S&P's expected loss level), all else being equal, its 'AAA
(sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)', and 'BB- (sf)' ratings on
the class A, B, C, D, and E notes, respectively, will be within the
credit stability limits specified by section A.4 of the Appendix
contained in "S&P Global Ratings Definitions," published Nov. 10,
2021.
-- The timely interest and principal payments made under stressed
cash flow modeling scenarios that are appropriate for the assigned
ratings.
-- The characteristics of the collateral pool being securitized.
-- The transaction's payment and legal structures.
Ratings Assigned
Flagship Credit Auto Trust 2021-4
Class A, $217.43 million: AAA (sf)
Class B, $24.69 million: AA (sf)
Class C, $32.77 million: A (sf)
Class D, $21.74 million: BBB (sf)
Class E, $12.43 million: BB- (sf)
FLAGSTAR MORTGAGE 2021-12: Fitch Gives Final 'B' on Class B-5 Certs
-------------------------------------------------------------------
Fitch Ratings has assigned final rating to the residential
mortgage-backed certificates (RMBS) Issued by Flagstar Mortgage
Trust 2021-12 (FSMT 2021-12).
DEBT RATING PRIOR
---- ------ -----
FSMT 2021-12
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-9 LT AAAsf New Rating AAA(EXP)sf
A-10 LT AAAsf New Rating AAA(EXP)sf
A-11 LT AAAsf New Rating AAA(EXP)sf
A11-X LT AAAsf New Rating AAA(EXP)sf
A-12 LT AAAsf New Rating AAA(EXP)sf
A-13 LT AAAsf New Rating AAA(EXP)sf
A-14 LT AAAsf New Rating AAA(EXP)sf
A-15 LT AAAsf New Rating AAA(EXP)sf
A-16 LT AAAsf New Rating AAA(EXP)sf
A-17 LT AAAsf New Rating AAA(EXP)sf
A-18 LT AAAsf New Rating AAA(EXP)sf
A-19 LT AAAsf New Rating AAA(EXP)sf
A-20 LT AAAsf New Rating AAA(EXP)sf
A-21 LT AAAsf New Rating AAA(EXP)sf
A-X-1 LT AAAsf New Rating AAA(EXP)sf
A-X-4 LT AAAsf New Rating AAA(EXP)sf
A-X-6 LT AAAsf New Rating AAA(EXP)sf
A-X-8 LT AAAsf New Rating AAA(EXP)sf
A-X-10 LT AAAsf New Rating AAA(EXP)sf
A-X-13 LT AAAsf New Rating AAA(EXP)sf
A-X-15 LT AAAsf New Rating AAA(EXP)sf
A-X-16 LT AAAsf New Rating AAA(EXP)sf
A-X-17 LT AAAsf New Rating AAA(EXP)sf
A-X-18 LT AAAsf New Rating AAA(EXP)sf
A-X-20 LT AAAsf New Rating AAA(EXP)sf
A-X-21 LT AAAsf New Rating AAA(EXP)sf
B-1 LT AAsf New Rating AA(EXP)sf
B-2 LT Asf New Rating A(EXP)sf
B-3 LT BBBsf New Rating BBB(EXP)sf
B-4 LT BBsf New Rating BB(EXP)sf
B-5 LT Bsf New Rating B(EXP)sf
B-6-C LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch has rated the residential mortgage-backed certificates issued
by Flagstar Mortgage Trust 2021-12 (FSMT 2021-12) as indicated
above. The certificates are supported by 855 newly originated,
fixed-rate, prime-quality first liens on one- to four-family
residential homes and condominiums. The pool consists of both
non-agency jumbo and agency eligible mortgage loans. The total
balance of these loans is approximately $755 million, as of the
cut-off date. This is the fifth 2021 issuance from Flagstar Bank,
FSB (Flagstar) rated by Fitch.
The pool comprises loans that Flagstar originated through its
retail, broker and correspondent channels. The transaction is
similar to previous Fitch-rated prime transactions, with a standard
senior-subordinate, shifting-interest deal structure. 100% of the
loans in the pool were underwritten to the Ability to Repay (ATR)
rule and qualify as safe-harbor or temporary qualified mortgages
(SHQMs and TQMs, respectively) or rebuttable presumption QM.
Flagstar (RPS2/Stable) will be the servicer, and Wells Fargo Bank,
N.A. (RMS1-/ Negative) will be the master servicer.
The collateral and the structure are very similar to those of prior
FSMT transactions that Fitch has rated.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative)
Due to Fitch's updated view on sustainable home prices, Fitch views
the home price values of this pool as 13.4% above a long-term
sustainable level (versus 11.7% on a national level). Underlying
fundamentals are not keeping pace with the growth in prices, which
is a result of a supply/demand imbalance driven by low inventory,
low mortgage rates and new buyers entering the market. These trends
have led to significant home price increases over the past year,
with home prices rising 18.6% yoy nationally as of June 2021.
High-Quality Prime Mortgage Pool (Positive)
The pool consists of very high-quality, 30-year fixed-rate, fully
amortizing loans to prime quality borrowers. The loans were made to
borrowers with strong credit profiles, relatively low leverage and
large liquid reserves. The loans are seasoned at an average of five
months, according to Fitch (three months per the transaction
documents). The pool has a weighted average (WA) original FICO
score of 771 and 31.5% DTI (as determined by Fitch), which is
indicative of a very high credit-quality borrower. Approximately
79.4% of the loans have a borrower with an original FICO score at
or above 750. In addition, Fitch determined the original WA
combined loan to value ratio (CLTV) to be 65.7%, translating to a
sustainable loan to value ratio (sLTV) of 75.5%, represents
substantial borrower equity in the property and reduced default
risk.
The pool consists of 96.7% of loans where the borrower maintains a
primary residence, while 3.3% is a second home. Single-family homes
comprise 96.4% of the pool, and condominiums make up 3.1%. Cash out
refinances comprise 14.0% of the pool, purchases, 48.8%, and
rate-term refinances, 37.2%. All the loans were originated through
a retail channel. A total of 178 loans in the pool are over $1
million, and the largest loan is $2.7 million.
No loans in the pool were made to foreign nationals/non-permanent
residents. Fitch viewed this as a positive attribute for the
transaction. In addition, there are no loans in the pool that have
their QM status determined by APOR QM standard.
Approximately 31.8% of the pool is concentrated in California. The
largest MSA is Los Angeles MSA (10.2%) followed by San Francisco
MSA (7.0%) and Houston MSA (5.7%). The top three MSAs account for
23% of the pool. As a result, there was no adjustment for
geographic concentration.
Shifting-Interest Structure and Full Servicer Advancing (Mixed)
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
credit enhancement (CE) levels are not maintained.
The servicer, Flagstar (RPS2/Stable), will provide full advancing
for the life of the transaction. Although full P&I advancing will
provide liquidity to the certificates, it will also increase the
loan-level loss severity (LS) since the servicer looks to recoup
P&I advances from liquidation proceeds, which results in less
recoveries. Wells Fargo Bank (servicer rating RMS1-/Negative; IDR
AA-/Negative) is the master servicer in this transaction and will
advance delinquent P&I on the loans if Flagstar is not able to.
Subordination Floor (Positive)
Fitch expects CE or a senior subordination floor of 0.65% to
mitigate potential tail-end risk and loss exposure for senior
tranches as the pool size declines and performance volatility
increases due to adverse loan selection and small loan count
concentration. Additionally, a junior subordination floor of
0.50%should mitigate potential tail-end risk and loss exposure for
subordinate tranches as the pool size declines and performance
volatility increases due to adverse loan selection and small loan
count concentration.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Fitch incorporates a sensitivity analysis to demonstrate how
the ratings would react to steeper market value declines
(MVDs) than assumed at the MSA level. 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.
-- 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 43.7% at 'AAA'. The analysis
indicates 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.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. Excluding the senior class,
which is already rated 'AAAsf', the analysis indicates there
is potential positive rating migration for all 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 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.
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 (Form 15E) as
prepared by Canopy Financial Technology Partners, LLC. The
third-party due diligence described in Form 15E focused on credit,
compliance, property valuation and data integrity. Fitch considered
this information in its analysis. Fitch applied an adjustment to
losses based on the unreviewed population of the pool as described
below. A credit was given to loans that received a due diligence
review, which decreased Fitch's loss expectations by 6bps at the
'AAAsf' rating stress.
The sample was determined by a statistically significant selection
methodology based on a 95% confidence level with a 5% error rate.
Flagstar adopted this methodology in 2019 when it had previously
selected loans for review at a fixed rate. For loans that were
reviewed, the diligence scope consisted of a review of credit,
regulatory compliance, property valuation and data integrity. Both
the sample size and review scope are consistent with Fitch criteria
for diligence sampling.
100% of the loans in the review sample received a final diligence
grade of 'A' or 'B' and the results did not indicate material
defects. The sample exhibited strong adherence to underwriting
guidelines as approximately 98% of loans received a final credit
grade of 'A'.
The sample had a low concentration of compliance 'B' exceptions
(2.0%) compared to the average prime jumbo non-agency transactions
(46%). Approximately three of the loans in the sample had initial
TRID exceptions graded 'C' that were ultimately cured to a 'B' by
Flagstar through the re-issuance of post-closing documentation.
While Fitch does not typically adjust its loss expectations for
compliance 'B' exceptions, due diligence was only performed on 32%
of the initial pool, which led Fitch to extrapolate the findings to
the remainder of the pool.
Since more than half of the pool did not receive due diligence,
Fitch assumed that 1.1% of the non-reviewed loans have potential
TRID exceptions that would be identified as material and not cured
with post-closing documentation. Fitch applies a standard loss
adjustment of $15,500 to the loss amount for material TRID
exceptions as these loans can carry an increased risk of statutory
damages. However, the aggregate loss severity adjustment was
negligible at the 'AAAsf' level, and Fitch did not make any further
adjustments to the model output.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on approximately 32% of the pool. The third-party due
diligence was generally consistent with Fitch's "U.S. RMBS Rating
Criteria," and Canopy Financial Technology Partners, LLC was
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.
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
(ASF) 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.
ESG CONSIDERATIONS
FSMT 2021-12 has an ESG Relevance Score of '4'[+] for Transaction
Parties & Operational Risk. Operational risk is well controlled for
in FSMT 2021-12, including strong transaction due diligence as well
as 'Average' originator and strong R&WE Framework, which resulted
in a reduction in expected losses and is relevant to the rating in
conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means 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.
GCAT 2021-NQM6: S&P Assigns Prelim B (sf) Rating on Class B-2 Certs
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to GCAT
2021-NQM6 Trust's mortgage pass-through certificates.
The certificate issuance is an RMBS transaction backed first-lien,
fixed- and adjustable-rate, fully amortizing, and interest-only
residential mortgage loans primarily secured by single-family
residential properties, planned-unit developments, condominiums,
two- to four-family residential properties, townhouses, and
cooperatives to both prime and nonprime borrowers. The pool has 823
loans, which are either nonqualified or ATR-exempt mortgage loans.
The preliminary ratings are based on information as of Nov. 22,
2021. 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 asset pool's collateral composition;
-- The transaction's credit enhancement, associated structural
mechanics, geographic concentration, and representation and
warranty framework;
-- The mortgage aggregator, Blue River Mortgage III LLC; and
-- The impact the COVID-19 pandemic will likely have on the
performance of the mortgage borrowers in the pool and the liquidity
available in the transaction.
Preliminary Ratings Assigned(i)
GCAT 2021-NQM6 Trust
Class A-1, $306,690,000: AAA (sf)
Class A-1IO, $306,690,000(ii): AAA (sf)
Class A-1B, $306,690,000: AAA (sf)
Class A-1X, $306,690,000(iii): AAA (sf)
Class A-2, $15,334,000: AA (sf)
Class A-3, $17,552,000: A (sf)
Class M-1, $12,194,000: BBB (sf)
Class B-1, $8,313,000; BB (sf)
Class B-2, $5,358,000: B (sf)
Class B-3, $4,065,379: Not rated
Class A-IO-S, Notional(iv): Not rated
Class X, Notional(iv): Not rated
Class R, N/A: Not rated
(i)The preliminary ratings address the ultimate payment of interest
and principal.
(ii)Class A-1IO will have a notional balance amount equal to the
balance of class A-1.
(iii)Class A-1X will have a notional amount equal to the lesser of
(a) the balance of class A-1 immediately prior to such distribution
date and (b) the notional amount set forth on a schedule for the
related accrual period. After the 40th distribution date, the
notional amount of the A-1X certificates will be zero.
(iv)The notional amount equals the aggregate principal balance of
the loans.
GENERATE CLO 8: S&P Assigns Prelim BB- (sf) Rating on E-R Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
X-R, A-R, B-R, C-R, D-R, and E-R replacement notes from Generate
CLO 8 Ltd./Generate CLO 8 LLC, a CLO originally issued as York CLO
8 Ltd. in November 2020 that is managed by Generate Advisors LLC
and was not rated by S&P Global Ratings.
The preliminary ratings are based on information as of Nov. 18,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Dec. 3, 2021, refinancing date, the proceeds from the
replacement notes will be used to redeem the original notes. S&P
said, "At that time, we expect to withdraw our ratings on the
original notes and assign ratings to the replacement notes.
However, if the refinancing doesn't occur, we may affirm our
ratings on the original notes and withdraw our preliminary ratings
on the replacement notes."
The replacement notes will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement notes.
According to the proposed supplemental indenture:
-- The replacement class X-R, A-R, B-R, C-R, D-R, and E-R notes
are expected to be issued at a lower spread than the original
notes.
-- The replacement class A-R and B-R notes are expected to be
issued at a floating spread, replacing the current fixed- and
floating-rate notes.
-- The stated maturity, reinvestment period, and non-call period
will be extended two, three, and two years, respectively.
-- Of the identified underlying collateral obligations, 100.00%
have credit ratings (which may include confidential ratings,
private ratings, and credit estimates) assigned by S&P Global
Ratings.
-- Of the identified underlying collateral obligations, 96.14%
have recovery ratings (which may include confidential ratings,
private ratings, and credit estimates) assigned by S&P Global
Ratings. S&P said, "Our review of this transaction included a cash
flow analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Generate CLO 8 Ltd./Generate CLO 8 LLC
Class X-R, $4.36 million: AAA (sf)
Class A-R, $310.00 million: AAA (sf)
Class B-R, $70.00 million: AA (sf)
Class C-R (deferrable), $30.00 million: A (sf)
Class D-R (deferrable), $30.00 million: BBB- (sf)
Class E-R (deferrable), $17.50 million: BB- (sf)
Subordinated notes, $36.50 million: Not rated
GS MORTGAGE 2021-INV2: Moody's Assigns B3 Rating to Cl. B-5 Certs
-----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 58
classes of residential mortgage-backed securities (RMBS) issued by
GS Mortgage-Backed Securities Trust (GSMBS) 2021-INV2. The ratings
range from Aaa (sf) to B3 (sf).
Goldman Sachs Mortgage Company (GSMC), is the sponsor of GS
Mortgage-Backed Securities Trust 2021-INV2 (GSMBS 2021-INV2). The
pool comprises of 924 newly originated fixed rate agency-eligible
mortgage loans secured by non-owner occupied investor properties
with up to 30 years of original term to maturity. The aggregate
principal balance of the pool is approximately $338,993,228. The
average stated principal balance is approximately $366,876 and the
weighted average (WA) current mortgage rate is 3.3%. The borrowers
have a WA credit score of 769, WA combined loan-to-value ratio
(CLTV) of 63.2% and WA debt-to-income ratio (DTI) of 37.8%.
Approximately 22.4% of the pool balance is related to borrowers
with more than one mortgage loan in the pool.
All the mortgage loans in the pool were originated by United
Wholesale Mortgage, LLC ("UWM") and acquired by GSMC, the sponsor
and the primary mortgage loan seller. On the closing date, GSMC
will sell all of its interest on the mortgage loans to the
depositor.
UWM will act as the servicer and Cenlar FSB (Cenlar) will act as
the subservicer of all the mortgage loans. Servicing compensation
is subject to a variable servicing fee (fee-for-service) framework.
The servicer is generally obligated to advance delinquent payments
of principal and interest (P&I) (to the extent such advances are
deemed recoverable). The master servicer, or a successor servicer,
will be obligated to make any required advance of delinquent
payments of principal and interest if the servicer fails in its
obligation to fund such required advance. Computershare Trust
Company, N.A. (Computershare) will be the master servicer.
All of the personal-use loans are "qualified mortgages" under
Regulation Z as a result of the temporary provision allowing
qualified mortgage status for loans eligible for purchase,
guaranty, or insurance by Fannie Mae and Freddie Mac (and certain
other federal agencies). If the Sponsor or the Reviewer determines
a Personal Use Loan is no longer a "qualified mortgage" under the
ATR Rules, the Sponsor will be required to repurchase such Personal
Use Loan. With the exception of personal-use loans, all other
mortgage loans in the pool are not subject to TILA because each
such mortgage loan is an extension of credit primarily for a
business purpose and is not a "covered transaction" as defined in
Section 1026.43(b)(1) of Regulation Z.
As of the closing date, the sponsor or a majority- owned affiliate
of the sponsor will retain at least 5% of the initial certificate
principal balance or notional amount of each class of certificates
issued by the trust to satisfy U.S. risk retention rules.
Moody's loss estimates are based on a loan-by-loan assessment of
the securitized collateral pool as of the cut-off date using
Moody's Individual Loan Level Analysis (MILAN) model. The expected
loss for this pool in a baseline scenario is 0.97% at the mean
(0.69% at the median) and reaches 6.81% at a stress level
consistent with Moody's Aaa ratings.
GSMBS 2021-INV2 has a shifting interest structure with a five-year
lockout period that benefits from a senior subordination floor and
a subordinate floor. Moody's base its ratings on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's review of the origination quality and servicing
arrangement, the strength of the TPR, the representations and
warranties (R&W) framework of the transaction, and the degree of
alignment of interests between the sponsor and the investors.
Issuer: GS Mortgage-Backed Securities Trust 2021-INV2
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Definitive Rating Assigned Aaa (sf)
Cl. A-1B, Definitive Rating Assigned Aaa (sf)
Cl. A-1-IO1*, Definitive Rating Assigned Aaa (sf)
Cl. A-1-IO2*, Definitive Rating Assigned Aaa (sf)
Cl. A-1-IO3*, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-2A, Definitive Rating Assigned Aaa (sf)
Cl. A-2B, Definitive Rating Assigned Aaa (sf)
Cl. A 2-IO1*, Definitive Rating Assigned Aaa (sf)
Cl. A 2-IO2*, Definitive Rating Assigned Aaa (sf)
Cl. A-2-IO3*, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-3A, Definitive Rating Assigned Aaa (sf)
Cl. A-3B, Definitive Rating Assigned Aaa (sf)
Cl. A-3-IO1*, Definitive Rating Assigned Aaa (sf)
Cl. A-3-IO2*, Definitive Rating Assigned Aaa (sf)
Cl. A-3-IO3*, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aa1 (sf)
Cl. A-4A, Definitive Rating Assigned Aa1 (sf)
Cl. A-4B, Definitive Rating Assigned Aa1 (sf)
Cl. A-4-IO1*, Definitive Rating Assigned Aa1 (sf)
Cl. A-4-IO2*, Definitive Rating Assigned Aa1 (sf)
Cl. A-4-IO3*, Definitive Rating Assigned Aa1 (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-5A, Definitive Rating Assigned Aaa (sf)
Cl. A-5B, Definitive Rating Assigned Aaa (sf)
Cl. A-5-IO1*, Definitive Rating Assigned Aa1 (sf)
Cl. A-5-IO2*, Definitive Rating Assigned Aa1 (sf)
Cl. A-5-IO3*, Definitive Rating Assigned Aa1 (sf)
Cl. A-6, Definitive Rating Assigned Aaa (sf)
Cl. A-6A, Definitive Rating Assigned Aaa (sf)
Cl. A-6B, Definitive Rating Assigned Aaa (sf)
Cl. A-6-IO1*, Definitive Rating Assigned Aaa (sf)
Cl. A-6-IO2*, Definitive Rating Assigned Aaa (sf)
Cl. A-6-IO3*, Definitive Rating Assigned Aaa (sf)
Cl. A-7, Definitive Rating Assigned Aaa (sf)
Cl. A-7A, Definitive Rating Assigned Aaa (sf)
Cl. A-7B, Definitive Rating Assigned Aaa (sf)
Cl. A-7-IO1*, Definitive Rating Assigned Aaa (sf)
Cl. A-7-IO2*, Definitive Rating Assigned Aaa (sf)
Cl. A-7-IO3*, Definitive Rating Assigned Aaa (sf)
Cl. A-8, Definitive Rating Assigned Aaa (sf)
Cl. A-8A, Definitive Rating Assigned Aaa (sf)
Cl. A-8B, Definitive Rating Assigned Aaa (sf)
Cl. A-8-IO1*, Definitive Rating Assigned Aaa (sf)
Cl. A-8-IO2*, Definitive Rating Assigned Aaa (sf)
Cl. A-8-IO3*, Definitive Rating Assigned Aaa (sf)
Cl. A-11, Definitive Rating Assigned Aaa (sf)
Cl. A-11-IO*, Definitive Rating Assigned Aaa (sf)
Cl. A-12, Definitive Rating Assigned Aaa (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A3 (sf)
Cl. B-3, Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Definitive Rating Assigned B3 (sf)
Cl. A-IO*, Definitive Rating Assigned Aa1 (sf)
Cl. S-IO*, Definitive Rating Assigned Aa1 (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
0.97%, in a baseline scenario-median is 0.69%, and reaches 6.81% at
stress level consistent with Moody's Aaa rating.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's assessments of the origination quality and servicing
arrangement, strength of the TPR and the R&W framework of the
transaction.
Collateral Description
The pool comprises of 924 newly originated fixed rate
agency-eligible mortgage loans secured by non-owner occupied
investor properties with up to 30 years of original term to
maturity. All of the mortgage loans are (i) originated in
accordance with Freddie Mac and Fannie Mae guidelines (ii) not
actively enrolled in a COVID-19 related forbearance plan and (iii)
current as of November 1, 2021 (cut-off date). The aggregate
principal balance of the pool is approximately $338,993,228. The
average stated principal balance is approximately $366,876 and the
weighted average (WA) current mortgage rate is 3.3%. The borrowers
have a WA credit score of 769, WA combined loan-to-value ratio
(CLTV) of 63.2% and WA debt-to-income ratio (DTI) of 37.8%.
Approximately 22.4% of the pool balance is related to borrowers
with more than one mortgage loan in the pool.
The mortgage loans in the pool were originated mostly in California
(50.5% by loan balance), in high cost metropolitan statistical
areas (MSAs) of Los Angeles (20.0%), San Diego (7.0%) and San
Francisco (6.8%). The geographic concentration in high cost MSAs is
reflected in the high average balance of the pool ($366,876).
Moody's made adjustments to its losses to account for this
geographic concentration risk.
Aggregator/Origination Quality
Moody's consider the aggregation/origination quality of this pool
to be adequate, and as a result Moody's did not make any
adjustments to its base case and Aaa stress loss assumptions.
The mortgage loans for this transaction were acquired by GSMC, the
sponsor and a mortgage loan seller. The mortgage loan seller does
not originate any mortgage loans, including the mortgage loans
included in the mortgage pool. Instead, GSMC acquired the mortgage
loans pursuant to contracts with the originators or the aggregator.
Overall, Moody's consider GSMC's aggregation platform to be
comparable to that of peer aggregators.
In addition to reviewing GSMC's aggregation quality, Moody's have
also reviewed the origination quality of UWM, which originated all
the mortgage loans in this transaction. Moody's consider UWM to be
an adequate originator of GSE eligible loans following its review
of its underwriting guidelines, quality control processes, policies
and procedures, and historical performance relative to its peers.
Servicing Arrangement
Moody's consider the overall servicing arrangement for this pool to
be adequate, and the presence of a master servicer to be a mitigant
for any servicing disruptions. As a result Moody's did not make any
adjustments to its base case and Aaa stress loss assumptions.
UWM will be the named servicer for this transaction and and Cenlar
FSB (Cenlar) will act as the subservicer for loans. UWM is an
approved servicer in good standing with Ginnie Mae, Fannie Mae and
Freddie Mac. As the subservicer, Cenlar is obligated to service the
related mortgage loans in accordance with the terms of its
subservicing agreement with UWM. Furthermore, Computershare Trust
Company, N.A. will act as the master servicer.
Computershare is a national banking association and a wholly-owned
subsidiary of Computershare Ltd (Computershare Limited) (Baa2, long
term rating), an Australian financial services company with over $5
billion (USD) in assets as of June 30, 2021. In March 2021,
Computershare, Computershare Delaware Trust Company (CDTC) and
Computershare Limited (collectively, CPU) announced that it will
acquire substantially all of Wells Fargo Corporate Trust Services
(CTS). The sale to CPU closed on November 1, 2021, and virtually
all CTS employees of Wells Fargo Bank, along with most existing CTS
systems, technology and offices, transferred to CPU as part of the
sale.
With its acquisition of the CTS business from Wells Fargo Bank, CPU
acquired a business that has been engaged in the business of master
servicing since June 30, 1995. Wells Fargo Bank is currently the
largest US RMBS master servicer. As a result of the CTS business
acquisition from Wells Fargo Bank, Computershare is acting as agent
for Wells Fargo Bank on approximately 1800 residential master
serviced mortgage-backed securities transactions with an aggregate
outstanding principal balance of approximately $200 billion (USD).
Third-party Review
AMC Diligence, LLC (AMC), the TPR firm, reviewed 50.6% of the loans
in this transaction for credit, regulatory compliance, property
valuation, and data accuracy. The number of loans that went through
a full due diligence review is above Moody's calculated
credit-neutral sample size. There were generally no material
findings. Moody's did not make any adjustments to its credit
enhancement for TPR scope, sample size and results.
Representations & Warranties
GSMBS 2021-INV2's R&W framework is in line with that of prior GSMBS
transactions Moody's have rated where an independent reviewer is
named at closing, and costs and manner of review are clearly
outlined at issuance. UWM as the originator, makes the loan-level
R&Ws. The loan-level R&Ws meet or exceed the baseline set of
credit-neutral R&Ws Moody's have identified for US RMBS. R&W
breaches are evaluated by an independent third-party using a set of
objective criteria. The transaction requires mandatory independent
reviews of loans that become 120 days delinquent, those where the
servicer stops advancing as they are deemed non-recoverable and
those that liquidate at a loss, to determine if any of the R&Ws are
breached. However, Moody's applied an adjustment to its expected
losses to account for the risk that UWM may be unable to repurchase
defective loans in a stressed economic environment in which a
substantial portion of the loans breach the R&Ws, given that it is
a non-bank entity with a monoline business (mortgage origination
and servicing) that is highly correlated with the economy. In
addition, a R&W breach will be deemed not to have occurred if it
arose as a result of a TPR exception disclosed in Appendix I of the
Private Placement Memorandum.
Tail Risk and Locked Out Percentage
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 subordinate bonds to pay down over time, senior bonds are
exposed to eroding credit enhancement as the pool balance declines,
and increased performance volatility as a result (tail risk). To
mitigate this risk, the transaction provides for a senior
subordination floor of 1.30% of the cut-off date pool balance, and
as subordination lockout amount of 1.30% of the cut-off date pool
balance. The floors are consistent with the credit neutral floors
for the assigned ratings according to Moody's methodology.
COVID-19 Impacted Borrowers
As of cut-off date, there is no mortgage loan subject to a COVID-19
related forbearance plan. However, in the event that after the
cut-off date a borrower enters into or requests a COVID-19 related
forbearance plan, such mortgage loan will remain in the mortgage
pool and the servicer will be required to make advances in respect
of delinquent interest and principal (as well as servicing
advances) on such mortgage loan during the forbearance period (to
the extent such advances are deemed recoverable).
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.
An IO bond may be upgraded or downgraded, within the constraints
and provisions of the IO methodology, based on improvement or
decline in the credit quality of the reference bond(s).
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 August 2021.
HILDENE COMMUNITY: Moody's Assigns Ba1 Rating to $18MM C-RR Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to three classes of
refinancing notes issued by Hildene Community Funding CDO, Ltd.
(the "Issuer").
Moody's rating action is as follows:
US$198,625,000 Class A-RR Senior Secured Fixed Rate Notes due 2035
(the "Class A-RR Notes"), Assigned Aa2 (sf)
US$8,625,000 Class B-RR Senior Secured Deferrable Fixed Rate Notes
due 2035 (the "Class B-RR Notes"), Assigned Baa2 (sf)
US$18,000,000 Class C-RR Senior Secured Deferrable Fixed Rate Notes
due 2035 (the "Class C-RR Notes"), Assigned Ba1 (sf)
Additionally, Moody's has taken rating action on the following
outstanding notes issued by the Issuer on November 2, 2020:
US$18,625,000 Class D Senior Secured Deferrable Fixed Rate Notes
due 2035 (the "Class D Notes"), Upgraded to B1 (sf); previously on
November 2, 2020 Definitive Rating Assigned B3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CDO's portfolio and structure.
The Issuer is a managed cash flow collateralized debt obligation
(CDO). The issued notes are collateralized primarily by a portfolio
of subordinated loans, senior unsecured notes and trust preferred
securities (TruPS) issued by US regional and community banks and
bank holding companies, the majority of which Moody's does not
rate. Moody's assesses the default probability of bank obligors
that do not have public ratings through credit scores derived using
RiskCalc(TM), an econometric model developed by Moody's Analytics.
Moody's evaluation of the credit risk of the bank obligors in the
pool relies on FDIC Q2-2021 financial data. Moody's assumes a fixed
recovery rate of 10% for bank obligations.
At least 90% of the portfolio must consist of senior loans, senior
notes, subordinated notes, subordinated loans issued by banks or
bank holding companies, and up to 10% of the portfolio may consist
of TruPS. The portfolio is close to fully ramped as of November 24,
2021 (the "Refinancing Date").
Hildene Structured Advisors, LLC (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's remaining
reinvestment period. Thereafter, the Manager is not permitted to
purchase additional assets, and principal payments and proceeds
from the sale of assets will be used to amortized the Refinancing
Notes in sequential order.
The Issuer previously issued one other classes of secured notes and
one class of subordinated notes, which will remain outstanding.
Moody's rating action on the Class D Notes is primarily a result of
the refinancing, which increases excess spread available as credit
enhancement to the rated notes.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, minimum unique obligors and
weighted average recovery rate, are based on its published
methodology and could differ from the trustee's reported numbers.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $265,000,000
Weighted Average Rating Factor (WARF): 1501
Weighted Average Coupon (WAC): 5.50%
Weighted Average Spread (WAS) for Fixed to Float assets only:
4.50%
Weighted Average Life (WAL): 10.9 years
Minimum Unique Obligors: 35
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Approach to Rating TruPS CDOs" published in July 2021.
Factors That Would Lead to an Upgrade or a Downgrade of the
Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The portfolio consists primarily
of unrated assets whose default probability Moody's assesses
through credit scores derived using RiskCalc(TM) or credit
estimates. Because these are not public ratings, they are subject
to additional estimation uncertainty.
HOTWIRE FUNDING 2021-1: Fitch Gives Final 'BB' on Class C Notes
----------------------------------------------------------------
Fitch Ratings has assigned final ratings to Hotwire Funding LLC's
Secured Fiber Network Revenue Notes, Series 2021-1 as follows:
-- $240 million(a) 2021-1 class A-1-VFN 'A'; Outlook Stable;
-- $895 million 2021-1 class A-2 'A'; Outlook Stable;
-- $150 million 2021-1 class B 'BBB'; Outlook Stable;
-- $295 million 2021-1 class C 'BB'; Outlook Stable.
(a) This note is a Variable Funding Note (VFN) and has a maximum
commitment of $240 million contingent on leverage consistent with
the class A-1 notes. This class will reflect a zero balance at
issuance.
The transaction is a securitization of the lease payments derived
from an existing Fiber to the Home (FTTH) network. The collateral
consists of conduits, cables, network-level equipment, access
rights, customer contracts, transaction accounts and an equity
pledge from the asset entities. Debt is secured by the net revenue
of operations and benefits from a perfected security interest in
the securitized assets.
RATING RATIONALE
The ratings reflect the cash flows of the transaction, as supported
by a best in class fiber network, which supports an essential
service at a price far below its competition. This is further
bolstered by meteoric growth in the usage of the internet and the
supporting data center infrastructure, which is expected to
continue growing over the near-to-medium term.
The ratings further reflect the protections afforded the collateral
assets and corresponding cash flows, which are protected by
first-mover advantage, substantially reducing the likelihood of a
new entrant given the barriers to entry. In addition, the majority
of capex have already been spent in deployment, and there are
limited operating expenses, which allow for stable cash flows.
Total leverage is low relative to comparable technological
infrastructure transactions and given the characteristics of the
collateral. The rating differentials between notes reflect the
priority of payments as well as the resultant spread in class
leverage and payback period.
KEY RATING DRIVERS
Exclusive Operator, Barriers to Entry, Creditworthy and Diverse
Counterparties (Revenue Risk: Stronger): Hotwire has deployed a
best-in-class fiber network to provide cable and internet to a
large and unique customer base in the Southeast United States.
Hotwire has exclusive rights to operate in the communities it
serves and benefits from significant barriers to entry, namely the
substantial upfront cost associated with deploying such a network.
Due to its best in class network, the company can provide service
that is unrivalled by other market participants, at a cost that is
cheaper than the highest level or service offered by its retail
competitors.
The collateral fiber network is supported by 515 contracts, which
in turn provide cable, internet, and voice services to 160,163
housing units. These agreements are executed with the associations
themselves, making the obligation to pay effectively joint several.
The households backing the associations reflect positive credit
metrics, including a weighted-average FICO score of 753 and income
levels well above the national median. In addition, should a
household stop paying the association will continue to pay the
contract and may put a lien on the delinquent party's house, as
well as shut off service.
Anticipated Repayment Date and Prefunding Debt Structure (Debt
Structure (A-1, A-2, B): Midrange; (Debt Structure (C): Weaker):
Hotwire's current issuance of three tranches of debt is secured by
a first priority perfected security interest in the company's fiber
network and benefits from its related cash flow. The tranches
contemplate an Anticipated Repayment Date (ARD) in 2026, prior to
which each tranche will only receive interest unless cash sweep
conditions related to the total leverage (greater-than 13.0x),
among other things are breached. The tranches pay sequentially with
the A and B notes being senior to the C notes. Post-ARD, 100% of
cash flow will paydown each series sequentially in alphabetical
order. The structure includes reserves accounts for fixed expenses
and insurance, advance fees, and liquidity.
The A-1 VFN notes can be drawn upon during the prefunding period if
DSCR (greater-than 1.85x) and class A leverage (less-than 7.0x)
metrics and certain conditions related to remaining contract term
and contract type are met. At issuance, $60 million of the proceeds
from class B and class C will be used to fund the prefunding
account which can be drawn upon if DSCR (greater-than 1.85x) and
total leverage (less-than 10x) metrics and certain conditions
related to remaining contract term and contract type are met. The
prefunding period will last for until May 2023, after which any
remaining funds will be used to pay down principal. Prefunding
amounts will be held back at issuance.
This transaction structure is consistent with, and in some ways
above-average relative to other transaction structures observed in
the digital infrastructure space.
Limited Capital Requirements (Infrastructure Development/Renewal:
Stronger): Limited lifecycle and infrastructure investment is
necessary given fiber optic cables have a physical useful life of
over 50 years, though the useful life may be shorter from a
technological perspective. The last mile portion of the collateral
network, which consists of around 11,806 route miles was installed
between 2012 and 2021. Continued improvements in fiber optic
technology is expected to drive a longer useful life of the conduit
and fiber lines. The majority of future infrastructure related
costs are expected to be periodic maintenance and routine repairs.
PEER GROUP
The closest GIG peers for Hotwire are Summit Issuer, LLC's Secured
Dark Fiber Network Revenue Notes (A-/Stable; A-/Stable;
BBB-/Stable; BB-/Stable), Kentucky Wired Infrastructure Company,
Inc. (BBB+/Stable) and Arqiva Financing plc (BBB/Stable). SummitIG
is a securitization backed by a high capacity network of dark fiber
optic cable assets which support the transfer of data between data
centers in the most interconnected data center hub in the world.
Kentucky Wired is an availability payment structured transaction
for a 3,400-mile high capacity fiber network serving the
Commonwealth of Kentucky.
Arqiva Financing is a whole business securitization and is the sole
UK national provider of network access and managed transmission
services for terrestrial television and radio broadcasting. Debt
service coverage ratios for SummitIG are consistent with Hotwire.
Debt service coverage ratios for Kentucky Wired are considerably
weaker than Hotwire's as a result of the stability afforded by an
availability payment structure with revenues appropriated from a
'AA'-category counterparty. Arqiva maintains considerably stronger
DSCRs than Hotwire, but its rating is largely driven by its debt
structuring.
Outside of the digital infrastructure space, several large and
mature toll road networks, were viewed as peers given the fact that
many of these assets share characteristics consistent with
Hotwire's operating profile. These include stability in operations,
a strong competitive position, and economic resiliency. DSCR for
these assets range from 1.5x to 3.5x, yet leverage is typically in
line with that of Hotwire.
The transaction shares many similarities with wireless tower
securitizations. These transactions are backed by portfolios of
wireless tower assets supported by leases. The transactions have
sponsors that are the dominant market players, have built out
significant networks that would be costly to replicate and provide
an essential service. The transmission of signal from these assets
is ultimately reliant upon fiber-optic cables, the assets which
back the Hotwire transaction. Cash flow is predominantly generated
from creditworthy counterparties on take or pay contracts with
contractual price escalators and very low contract churn. The
liability structures share substantial similarities with the
Hotwire transaction.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Higher site expenses or contract churn that lead to a 5%
reduction in cash flow relative to the Fitch Rating Case could
result in a downgrade of 1-2 notches depending on ranking;
-- Development of an alternative technology for digital
transmission or the creation of a competing network with
similar capacity and breadth of coverage that reduces
Hotwire's offerings in the service area.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Structural contract escalators or new contracts that lead to a
5% increase in cash flow without an increase in corresponding
debt could lead to upgrades of 1-2 notches depending on the
class and its subordination; However, the transaction is
capped at the 'A' category, given the potential for new
competitive technologies resulting adverse market dynamics,
geographic concentration, and operating and asset maintenance
risk.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Sovereigns, Public Finance
and Infrastructure 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 three 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.
TRANSACTION SUMMARY
The transaction is a securitization of the lease payments derived
from an existing FTTH network. The collateral consists of conduits,
cables, network-level equipment, access rights, customer contracts,
transaction accounts and an equity pledge from the asset entities.
Debt is secured by the net revenue of operations and benefits from
a perfected security interest in the securitized assets.
FINANCIAL ANALYSIS
Fitch Cases
The base case was provided by the sponsor. The revenue was based on
in-place contracts. The estimates for operational expenses were
derived from historical data and forward-looking cost estimates
provided by the sponsor, based on its operations and corroborated
by the back-up manager, which employs technical experts in the
sector.
Fitch's Rating Case Summary
Fitch's rating case assumptions were derived from information
provided by the sponsor. Revenue assumptions were based on Fitch's
analysis of in-place contracts and by applying a haircut to revenue
based on technology type, tenant creditworthiness, and contract
length. Estimates for operational expenses were based on Fitch's
analysis of the historical data and estimates provided by the
sponsor.
Under the Fitch Rating Case, the transaction reflects adequate debt
service coverage levels, averaging 2.44x through the anticipated
repayment date, which demonstrates the ability to withstand
potential decreases in monthly recurring revenue. The Fitch Rating
Case cash flow does not factor the potential for future customer
growth which would facilitate a more rapid retirement of debt
service obligations. Leverage levels considering Fitch's net cash
flow for the classes A, B and C, inclusive of incremental cash flow
growth required to achieve full leverage, are 8.0x, 9.1x and 11.1x,
respectively, in Fitch's rating case scenario.
Fitch ran a variety of sensitivities which reflect stresses on
monthly recurring revenue. These include (1) Break-even stresses to
revenue for each class; (2) Break-even stresses to expense margins
for each class; and (3) Stresses to renewal rate based on the
contract expiration profile of the collateral assets.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means 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.
HUNDRED ACRE 2021-INV3: Moody's Assigns B2 Rating to Cl. B5 Certs
-----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to
fifty-seven classes of residential mortgage-backed securities
(RMBS) issued by Hundred Acre Wood Trust 2021-INV3 (HAWT
2021-INV3). The ratings range from Aaa (sf) to B2 (sf).
Hundred Acre Wood Trust 2021-INV3 (HAWT 2021-INV3) is the third
issue from Finance of America Mortgage LLC (FAM) in 2021 backed by
investor properties.
HAWT 2021-INV3 is a securitization of GSE eligible first-lien
investment properties. FAM originated 93.3% (by UPB) loans and 6.7%
loans (by UPB) were originated by a third party originated and
acquired by FAM prior to cut-off date. All the loans are
underwritten in accordance with Freddie Mac or Fannie Mae
guidelines, which take into consideration, among other factors, the
income, assets, employment and credit score of the borrower as well
as loan-to-value (LTV). These loans were run through one of the
government-sponsored enterprises' (GSE) automated underwriting
systems (AUS) and received an "Approve" or "Accept"
recommendation.
In this transaction, the Class A-11 notes' coupon is indexed to
SOFR. In addition, the coupon on Class A-11X is also impacted by
changes in SOFR. However, based on the transaction's structure, the
particular choice of benchmark has no credit impact. First,
interest payments to the notes, including the floating rate notes,
are subject to the net WAC cap, which prevents the floating rate
notes from incurring interest shortfalls as a result of increases
in the benchmark index above the fixed rates at which the assets
bear interest. Second, the shifting-interest structure pays all
interest generated on the assets to the bonds and does not provide
for any excess spread.
Issuer: Hundred Acre Wood Trust 2021-INV3
Cl. A1, Definitive Rating Assigned Aaa (sf)
Cl. A2, Definitive Rating Assigned Aaa (sf)
Cl. A3, Definitive Rating Assigned Aaa (sf)
Cl. A4, Definitive Rating Assigned Aaa (sf)
Cl. A5, Definitive Rating Assigned Aaa (sf)
Cl. A6, Definitive Rating Assigned Aaa (sf)
Cl. A7, Definitive Rating Assigned Aaa (sf)
Cl. A8, Definitive Rating Assigned Aaa (sf)
Cl. A9, Definitive Rating Assigned Aaa (sf)
Cl. A10, Definitive Rating Assigned Aaa (sf)
Cl. A11, Definitive Rating Assigned Aaa (sf)
Cl. A11X*, Definitive Rating Assigned Aaa (sf)
Cl. A12, Definitive Rating Assigned Aaa (sf)
Cl. A13, Definitive Rating Assigned Aaa (sf)
Cl. A14, Definitive Rating Assigned Aaa (sf)
Cl. A15, Definitive Rating Assigned Aaa (sf)
Cl. A16, Definitive Rating Assigned Aaa (sf)
Cl. A17, Definitive Rating Assigned Aaa (sf)
Cl. A18, Definitive Rating Assigned Aaa (sf)
Cl. A19, Definitive Rating Assigned Aaa (sf)
Cl. A20, Definitive Rating Assigned Aaa (sf)
Cl. A21, Definitive Rating Assigned Aaa (sf)
Cl. A22, Definitive Rating Assigned Aaa (sf)
Cl. A23, Definitive Rating Assigned Aaa (sf)
Cl. A24, Definitive Rating Assigned Aaa (sf)
Cl. A25, Definitive Rating Assigned Aaa (sf)
Cl. A26, Definitive Rating Assigned Aaa (sf)
Cl. A27, Definitive Rating Assigned Aaa (sf)
Cl. A28, Definitive Rating Assigned Aaa (sf)
Cl. A29, Definitive Rating Assigned Aaa (sf)
Cl. A30, Definitive Rating Assigned Aaa (sf)
Cl. A31, Definitive Rating Assigned Aaa (sf)
Cl. AX1*, Definitive Rating Assigned Aaa (sf)
Cl. AX4*, Definitive Rating Assigned Aaa (sf)
Cl. AX5*, Definitive Rating Assigned Aaa (sf)
Cl. AX6*, Definitive Rating Assigned Aaa (sf)
Cl. AX8*, Definitive Rating Assigned Aaa (sf)
Cl. AX10*, Definitive Rating Assigned Aaa (sf)
Cl. AX13*, Definitive Rating Assigned Aaa (sf)
Cl. AX15*, Definitive Rating Assigned Aaa (sf)
Cl. AX17*, Definitive Rating Assigned Aaa (sf)
Cl. AX19*, Definitive Rating Assigned Aaa (sf)
Cl. AX21*, Definitive Rating Assigned Aaa (sf)
Cl. AX25*, Definitive Rating Assigned Aaa (sf)
Cl. AX26*, Definitive Rating Assigned Aaa (sf)
Cl. AX27*, Definitive Rating Assigned Aaa (sf)
Cl. AX28*, Definitive Rating Assigned Aaa (sf)
Cl. AX30*, Definitive Rating Assigned Aaa (sf)
Cl. B1, Definitive Rating Assigned Aa2 (sf)
Cl. B1A, Definitive Rating Assigned Aa2 (sf)
Cl. BX1*, Definitive Rating Assigned Aa2 (sf)
Cl. B2, Definitive Rating Assigned A2 (sf)
Cl. B2A, Definitive Rating Assigned A2 (sf)
Cl. BX2*, Definitive Rating Assigned A2 (sf)
Cl. B3, Definitive Rating Assigned Baa2 (sf)
Cl. B4, Definitive Rating Assigned Ba2 (sf)
Cl. B5, Definitive Rating Assigned B2 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss for this pool in a baseline scenario is 0.83%
at the mean, 0.58% at the median, and reaches 5.83% at a stress
level consistent with Moody's Aaa ratings.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's 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
As of November 1, 2021 (the "Cut-off Date"), the pool will consist
of 976 fully amortizing fixed-rate mortgage loans with an aggregate
unpaid stated principal balance of approximately $315,315,372. The
average stated principal balance is approximately $323,069 and the
weighted average (WA) current mortgage rate is approximately 3.5%.
The majority of the loans have a 30-year term, with 147 loans with
terms ranging from 10 to 25 years. All of the loans have a fixed
rate. The WA original credit score is 767 for the primary borrower
only and the WA combined original LTV (CLTV) is 63.0%. The WA
original debt-to-income (DTI) ratio is 36.1%. Approximately, 23.7%
by loan balance of the borrowers have more than one mortgage loan
in the mortgage pool.
Approximately 43.7% of the mortgage loans by loan balance are
backed by properties located in California. The next largest
geographic concentration of properties are Arizona, which
represents 9.3% by loan balance, Texas, which represents 5.9% by
loan balance. All other states each represents less than 5% by loan
balance. Loans backed by single family residential properties
represent 66.2% (by loan balance) of the pool.
Approximately 7.5% of the mortgage loans by count are "Appraisal
Waiver" (AW) loans, whereby the sponsor obtained an AW for each
such mortgage loan from Fannie Mae or Freddie Mac through their
respective programs. In each case, neither Fannie Mae nor Freddie
Mac required an appraisal of the related mortgaged property as a
condition of approving the related mortgage loan for purchase by
Fannie Mae or Freddie Mac, as applicable.
Origination quality
FAM originated 93.3% (by UPB) loans and 6.7% loans (by UPB) were
originated by a third party originated and acquired by FAM prior to
cut-off date. These loans were underwritten in conformity with GSE
guidelines with overlays. However, these overlays are predominantly
non-material with the exception of verbal verification of
employment and reserves for investment properties. Overall, Moody's
consider Finance of America Mortgage LLC to be an adequate
originator of conforming and nonconforming mortgages. As a result,
Moody's did not make any adjustments to Moody's base case and Aaa
stress loss assumptions based on Moody's review of the loan
performance and origination practices.
Headquartered in Conshohocken, Pennsylvania, FAM is a wholly-owned
subsidiary of Finance of America Holdings LLC, a Delaware limited
liability company ("FAH"). FAH is ultimately owned by Finance of
America Companies Inc., a publicly traded company, and certain
other investors, including funds affiliated with The Blackstone
Group Inc. FAM is licensed as a residential mortgage lender in all
fifty states.
Servicing arrangements
Moody's consider the overall servicing arrangement for this pool to
be adequate. Moody's did not make any adjustments to its base case
and Aaa stress loss assumptions based on the servicing arrangement.
Moody's also consider the presence of a strong master servicer to
be a mitigant against the risk of any servicing disruptions.
Although FAM is the named servicer, ServiceMac, LLC and LoanCare,
LLC will be the subservicers, servicing approximately 29.8% and
70.2% of the mortgage loans, respectively. Nationstar Mortgage LLC
will be the master servicer. FAM will be responsible for principal
and interest advances as well as servicing advances. The master
servicer will be required to make principal and interest advances
if FAM is unable to do so. The securities administrator, Citibank,
N.A., will make the required advances to the extent the master
servicer is unable to do so.
Third-party review
The independent third party review firm, Evolve Mortgage Services,
was engaged to conduct due diligence for the credit, regulatory
compliance, property valuation, and data accuracy on a total of
approximately 34.3% of the pool (by loan count). Evolve conducted
due diligence for a total random sample of 335 loans originated by
Finance of America Mortgage LLC and a third party originator in
this transaction (one sampled loan was excluded from the final
mortgage pool). Based on the sample size reviewed, the TPR results
indicate that there are no material compliance, credit, or data
issues and no appraisal defects. The sample size of 335 that went
through full due diligence meets Moody's credit neutral criteria.
However, unlike in other deals that have sampling in which the
loans are picked randomly for due diligence from the total pool of
loans, in this deal, FAM originated loans were picked randomly for
due diligence from the initial set of 578 loans funded. Since the
loans were not picked randomly from the total pool of loans, there
is a risk that the sample of loans might not be representative of
the overall pool of loans. However, Moody's did not make an
adjustment to its Aaa loss and EL as all the loans are GSE-eligible
loans underwritten to agency guidelines, originated by a single
originator and funded within a short period of time (all the loans
in the pool were funded during the period August 2021 to October
2021). In addition, the TPR results are satisfactory with no
material exceptions. Furthermore, FAM to date, has had consistent
operations and performance.
Overall, Moody's did not make any adjustment to its Aaa loss or EL
based on the third party due diligence.
Representations and Warranties Framework
Moody's increased its loss levels to account for weakness in the
overall R&W framework due to the financial weakness of the R&W
provider and the lack of repurchase mechanism for loans
experiencing an early payment default. The R&W provider may not
have the financial wherewithal to purchase defective loans.
Moreover, unlike other comparable transactions that Moody's have
rated, the R&W framework for this transaction does not include a
mechanism whereby loans that experience an early payment default
(EPD) are repurchased. However, the results of the independent due
diligence review revealed a high level of compliance with
underwriting guidelines and regulations, as well as overall strong
valuation quality. These results give us a clear indication that
the loans most likely do not breach the R&Ws. Also, the transaction
benefits from unqualified R&Ws and an independent breach reviewer.
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 (1) the loan becomes 120 days delinquent, (2)
the servicer stops advancing, (3) the loan is liquidated at a loss
or (4) the loan becomes between 30 days and 119 days delinquent and
is modified by the servicer. Similar to other private-label
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.
Transaction structure
The securitization has a shifting interest structure that benefits
from a senior subordination 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 prepayments
to the senior bond for a specified period of time, and increasing
amounts of prepayments to the subordinate bonds thereafter, but
only if loan performance satisfies delinquency and loss tests.
Realized losses are allocated in a reverse sequential order, first
to the lowest subordinate bond. After the balances of the
subordinate bonds are written off, losses from the pool begin to
write off the principal balances of the senior support bonds until
their principal balances are reduced to zero. Next, realized losses
are allocated to super senior bonds until their principal balance
is written off.
Tail risk & 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 eroding credit enhancement
over time and increased performance volatility, known as tail risk.
To mitigate this risk, the transaction provides for a senior
subordination floor of 1.20% 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 1.20% of the closing pool balance.
Moody's calculate the credit neutral floors for a given target
rating as shown in its principal methodology. The senior
subordination floor and the subordinate floor of 1.20% and 1.20%,
respectively, are consistent with the credit neutral floors for the
assigned ratings.
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 rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in August 2021.
JP MORGAN 2021-14: Moody's Assigns (P)B3 Rating to Cl. B-5 Certs
----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 58
classes of residential mortgage-backed securities (RMBS) issued by
J.P. Morgan Mortgage Trust (JPMMT) 2021-14. The ratings range from
(P)Aaa (sf) to (P)B3 (sf).
JPMMT 2021-14 is the fourteenth prime jumbo transaction in 2021
issued by J.P. Morgan Mortgage Acquisition Corporation (JPMMAC).
The credit characteristic of the mortgage loans backing this
transaction is similar to both recent JPMMT transactions and other
prime jumbo issuers that Moody's have rated. Moody's consider the
overall servicing framework for this pool to be adequate given the
servicing arrangement of the servicers, as well as the presence of
an experienced master servicer to oversee the servicers.
JPMMT 2021-14 has a shifting interest structure with a five-year
lockout period that benefits from a senior subordination floor and
a subordinate floor. Moody's coded the cash flow to each of the
certificate classes using Moody's proprietary cash flow tool. In
coding the cash flow, Moody's took into account the step-up
incentive servicing fee structure.
In this transaction, the Class A-11, A-11-A and A-11-B notes'
coupon is indexed to SOFR. However, based on the transaction's
structure, the particular choice of benchmark has no credit impact.
First, interest payments to the notes, including the floating rate
notes, are subject to the net WAC cap, which prevents the floating
rate notes from incurring interest shortfalls as a result of
increases in the benchmark index above the fixed rates at which the
assets bear interest. Second, the shifting-interest structure pays
all interest generated on the assets to the bonds and does not
provide for any excess spread.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's assessments of the origination quality and servicing
arrangement, the strength of the third-party review (TPR) and the
representations and warranties (R&W) framework of the transaction.
The complete rating actions are as follows:
Issuer: J.P. Morgan Mortgage Trust 2021-14
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-3-A, Assigned (P)Aaa (sf)
Cl. A-3-X*, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aaa (sf)
Cl. A-4-A, Assigned (P)Aaa (sf)
Cl. A-4-X*, Assigned (P)Aaa (sf)
Cl. A-5, Assigned (P)Aaa (sf)
Cl. A-5-A, Assigned (P)Aaa (sf)
Cl. A-5-B, Assigned (P)Aaa (sf)
Cl. A-5-X*, Assigned (P)Aaa (sf)
Cl. A-6, Assigned (P)Aaa (sf)
Cl. A-6-A, Assigned (P)Aaa (sf)
Cl. A-6-X*, Assigned (P)Aaa (sf)
Cl. A-7, Assigned (P)Aaa (sf)
Cl. A-7-A, Assigned (P)Aaa (sf)
Cl. A-7-B, Assigned (P)Aaa (sf)
Cl. A-7-X*, Assigned (P)Aaa (sf)
Cl. A-8, Assigned (P)Aaa (sf)
Cl. A-8-A, Assigned (P)Aaa (sf)
Cl. A-8-X*, Assigned (P)Aaa (sf)
Cl. A-9, Assigned (P)Aaa (sf)
Cl. A-9-A, Assigned (P)Aaa (sf)
Cl. A-9-X*, Assigned (P)Aaa (sf)
Cl. A-10, Assigned (P)Aaa (sf)
Cl. A-10-A, Assigned (P)Aaa (sf)
Cl. A-10-X*, Assigned (P)Aaa (sf)
Cl. A-11, Assigned (P)Aaa (sf)
Cl. A-11-X*, Assigned (P)Aaa (sf)
Cl. A-11-A, Assigned (P)Aaa (sf)
Cl. A-11-B, Assigned (P)Aaa (sf)
Cl. A-11-AI*, Assigned (P)Aaa (sf)
Cl. A-11-BI*, Assigned (P)Aaa (sf)
Cl. A-12, Assigned (P)Aaa (sf)
Cl. A-13, Assigned (P)Aaa (sf)
Cl. A-13-A, Assigned (P)Aaa (sf)
Cl. A-14, Assigned (P)Aa1 (sf)
Cl. A-15, Assigned (P)Aa1 (sf)
Cl. A-15-A, Assigned (P)Aa1 (sf)
Cl. A-15-B, Assigned (P)Aa1 (sf)
Cl. A-15-C, Assigned (P)Aa1 (sf)
Cl. A-16, Assigned (P)Aaa (sf)
Cl. A-17, Assigned (P)Aaa (sf)
Cl. A-X-1*, Assigned (P)Aa1 (sf)
Cl. A-X-2*, Assigned (P)Aa1 (sf)
Cl. A-X-3*, Assigned (P)Aaa (sf)
Cl. A-X-3-A*, Assigned (P)Aaa (sf)
Cl. A-X-4*, Assigned (P)Aa1 (sf)
Cl. B-1, Assigned (P)Aa3 (sf)
Cl. B-1-A, Assigned (P)Aa3 (sf)
Cl. B-1-X*, Assigned (P)Aa3 (sf)
Cl. B-2, Assigned (P)A3 (sf)
Cl. B-2-A, Assigned (P)A3 (sf)
Cl. B-2-X*, Assigned (P)A3 (sf)
Cl. B-3, Assigned (P)Baa3 (sf)
Cl. B-4, Assigned (P)Ba3 (sf)
Cl. B-5, Assigned (P)B3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Moody's expected loss for this pool in a baseline scenario-mean is
0.72%, in a baseline scenario-median is 0.49% and reaches 5.07% at
a stress level consistent with Moody's Aaa ratings.
Collateral Description
Moody's assessed the collateral pool as of November 1, 2021, the
cut-off date. The deal will be backed by 1,349 fully amortizing
fixed-rate mortgage loans with an aggregate unpaid principal
balance (UPB) of $1,396,697,526 and an original term to maturity of
up to 30 years. The pool consists of prime jumbo non-conforming
(99.4% by UPB) and GSE-eligible conforming (0.6% by UPB) mortgage
loans. The GSE-eligible loans were underwritten pursuant to GSE
guidelines and were approved by DU/LP.
All the loans with the exception of 48 loans were underwritten
pursuant to the new general QM rule. The other loans in the pool
either meet Appendix Q to the QM rules or the QM GSE patch.
There are 1,301 loans originated pursuant to the new general QM
rule in this pool. The third-party review verified that the loans'
APRs met the QM rule's thresholds (APOR + 1.5%). Furthermore, these
loans are typically underwritten and documented pursuant to the QM
rule's verification safe harbor via a mix of the Fannie Mae Single
Family Selling Guide, the Freddie Mac Single-Family Seller/Servicer
Guide, and the applicable program overlays. As part of the
origination quality review and based on the documentation
information Moody's received in the ASF tape, Moody's concluded
that these loans were fully documented and therefore, Moody's ran
these loans as "full documentation" loans in Moody's MILAN model.
Overall, the pool is of strong credit quality and includes
borrowers with high FICO scores (weighted average primary borrower
FICO of 764), low loan-to-value ratios (WA CLTV 70.7%), high
borrower monthly incomes (about $34,702 ) and substantial liquid
cash reserves (about $306,852 ), on a weighted-average basis,
respectively, which have been verified as part of the underwriting
process and reviewed by the TPR firms. Approximately 49.8% of the
mortgage loans (by balance) were originated in California which
includes metropolitan statistical areas (MSAs) Los Angeles (19.2%
by UPB) and San Francisco (8.8% by UPB). The high geographic
concentration in high-cost MSAs is reflected in the high average
balance of the pool ($1,035,358). Approximately 2.2% of the
mortgage loans by balance are designated as safe harbor Qualified
Mortgages (QM) and meet Appendix Q to the QM rules, 0.4% of the
mortgage loans by balance are designated as Agency Safe Harbor
loans, and 97.4% of the mortgage loans by balance are designated as
Safe Harbor APOR loans, for which mortgage loans are not
underwritten to meet Appendix Q but satisfy AUS with additional
overlays of originators.
As of the cut-off date, none of the borrowers of the mortgage loans
have inquired about or requested forbearance plans with the related
servicer or have previously entered into a COVID-19 related
forbearance plan with the related servicer. Certain borrowers may
become subject to forbearance plans or other payment relief plans
following the cutoff date. In the event a borrower requests or
enters into a COVID-19 related forbearance plan after the cut-off
date but prior to the closing date, JPMMAC will remove such
mortgage loan from the mortgage pool and remit the related closing
date substitution amount. 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.
Aggregation/Origination Quality
Moody's consider JPMMAC's aggregation platform to be adequate and
Moody's did not apply a separate loss-level adjustment for
aggregation quality. In addition to reviewing JPMMAC aggregation
quality, Moody's have also reviewed the origination quality of
originator(s) contributing a significant percentage of the
collateral pool (above 10%) and MAXEX Clearing LLC (an
aggregator).
United Wholesale Mortgage, LLC (UWM) and loanDepot (loanDepot.com,
LLC) sold/originated approximately 78.2% and 17.9% of the mortgage
loans (by UPB) in the pool. The remaining originators each account
for less than 1.0% (by UPB) in the pool (3.9% by UPB in the
aggregate). Approximately 0.5% (by UPB) of the mortgage loans were
acquired by JPMMAC from MAXEX Cleaning, LLC (aggregator),
respectively, which purchased such mortgage loans from the related
originators or from an unaffiliated third party which directly or
indirectly purchased such mortgage loans from the related
originators.
Moody's did not make an adjustment for GSE-eligible loans, since
those loans were underwritten in accordance with GSE guidelines.
Moody's increased its base case and Aaa loss expectations for
certain originators of non-conforming loans where Moody's do not
have clear insight into the underwriting practices, quality control
and credit risk management (except being neutral for Caliber Home
Loans, JPMorgan Chase Bank, loanDepot and NewRez, under the old QM
guidelines and for JPMorgan Chase Bank, and Rocket Mortgage under
the new QM guidelines).
UWM originated approximately 78.2% of the mortgage loans by pool
balance. The majority of these loans were originated under UWM's
prime jumbo program which are processed using the Desktop
Underwriter (DU) automated underwriting system and are therefore
predominantly underwritten to Fannie Mae guidelines. The loans
receive a DU Approve Ineligible feedback due to the 1) loan amount
or 2) LTV for non-released prime jumbo cash-out refinances is over
80%. Moody's increased its loss expectations for UWM loans due
mostly to the fact that underwriting prime jumbo loans mainly
through DU is fairly new and no performance history has been
provided to Moody's on these types of loans. More time is needed to
assess UWM's ability to consistently produce high-quality prime
jumbo residential mortgage loans under this program.
The loan pool backing this transaction include 1,042 UWM loans
originated pursuant to the new general QM rule. To satisfy the new
rule, UWM implemented its prime jumbo underwriting overlays over
the GSE Automated Underwriting System (AUS) for applications on or
after March 1, 2021. Under UWM's new general QM underwriting, the
APR on all loans will not exceed the average prime offer rate
(APOR) +1.5%, and income and asset documentation will be governed
by the following, designed to meet the verification safe harbor
provisions of the new QM Rule: (i) applicable overlays, (ii) one of
(x) Fannie Mae Single Family Selling Guide or (y) Freddie Mac
guidelines and (iii) Desktop Underwriter.
Servicing Arrangement
Moody's consider the overall servicing framework for this pool to
be adequate given the servicing arrangement of the servicers, as
well as the presence of an experienced master servicer. Nationstar
Mortgage LLC (Nationstar) (Nationstar Mortgage Holdings Inc.
corporate family rating B2) will act as the master servicer.
United Wholesale Mortgage, LLC (subserviced by Cenlar FSB),
JPMorgan Chase Bank, National Association (JPMCB), loanDepot.com,
LLC (subserviced by Cenlar FSB) and A&D Mortgage LLC (subserviced
by Specialized Loan Servicing LLC) are the principal servicers in
this transaction and will service approximately 78.2%, 3.5%, 17.9%
and 0.3% of loans (by UPB of the mortgage), respectively.
Shellpoint Mortgage Servicing will act as interim servicer for the
mortgage loans serviced by JPMCB from the closing date until the
servicing transfer date, which is expected to occur on or about
February 1, 2022 (but which may occur after such date).
The servicers are required to advance P&I on the mortgage loans. To
the extent that the servicers are unable to do so, the master
servicer will be obligated to make such advances. In the event that
the master servicer, Nationstar, is unable to make such advances,
the securities administrator, Citibank, N.A. (rated Aa3) will be
obligated to do so to the extent such advance is determined by the
securities administrator to be recoverable. The servicing fee for
loans in this transaction will be predominantly based on a step-up
incentive fee structure with a monthly base fee of $40 per loan and
additional fees for delinquent or defaulted loans (fixed fee
framework servicers, which will be paid a monthly flat servicing
fee equal to one-twelfth of 0.25% of the remaining principal
balance of the mortgage loans, account for less than 1.00% of
UPB).
Third-Party Review
The transaction benefits from a TPR on 100% of the loans for
regulatory compliance, credit, property valuation and data
integrity. The TPR results confirm compliance with the originator's
underwriting guidelines for the vast majority of loans, no material
regulatory compliance issues, and no material property valuation
issues. The loans that had exceptions to the originator's
underwriting guidelines had significant compensating factors that
were documented.
R&W Framework
Moody's review of the R&W framework takes into account the
financial strength of the R&W providers, scope of R&Ws (including
qualifiers and sunsets) and enforcement mechanisms. JPMMT 2021-14's
R&W framework is in line with that of other JPMMT transactions
Moody's have rated where an independent reviewer is named at
closing, and costs and manner of review are clearly outlined at
issuance. The loan-level R&Ws meet or exceed the baseline set of
credit-neutral R&Ws Moody's have identified for US RMBS. The R&W
framework is "prescriptive", whereby the transaction documents set
forth detailed tests for each R&W.
The originators and the aggregators each make a comprehensive set
of R&Ws for their loans. The creditworthiness of the R&W provider
determines the probability that the R&W provider will be available
and have the financial strength to repurchase defective loans upon
identifying a breach. JPMMAC does not backstop the originator R&Ws,
except for certain "gap" R&Ws covering the period from the date as
of which such R&W is made by an originator or an aggregator,
respectively, to the cut-off date or closing date. In this
transaction, Moody's made adjustments to Moody's base case and Aaa
loss expectations for R&W providers that are unrated and/or
financially weaker entities.
Transaction Structure
The transaction has a shifting interest structure in which the
senior bonds benefit from a number of protections. Funds collected,
including principal, are first used to make interest payments to
the senior bonds. Next, principal payments are made to the senior
bonds. Next, available distribution amounts are used to reimburse
realized losses and certificate write-down amounts for the senior
bonds (after subordinate bonds have been reduced to zero i.e. the
credit support depletion date). Finally, interest and then
principal payments are paid to the subordinate bonds in sequential
order. Realized losses are allocated in a reverse sequential order,
first to the lowest subordinate bond. After the balance of the
subordinate bonds is written off, losses from the pool begin to
write off the principal balance of the senior support bond, and
finally losses are allocated to the super senior bonds.
The Class A-11, A-11-A and A-11-B Certificates will have a
pass-through rate that will vary directly with the SOFR rate and
the Class A-11-X Certificates will have a pass-through rate that
will vary inversely with the SOFR rate.
Tail Risk & Subordination Floor
The transaction cash flows follow a shifting interest structure
that allows subordinate bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinate bonds to pay down over time as the loan pool
balance declines, senior bonds are exposed to eroding credit
enhancement over time, and increased performance volatility as a
result. To mitigate this risk, the transaction provides for a
senior subordination floor of 0.75% of the cut-off date pool
balance, and as subordination lockout amount of 0.75% of the
cut-off date pool balance. Moody's calculate the credit neutral
floors as shown in Moody's principal methodology.
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.
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 August 2021.
LCM 36 LTD: Moody's Assigns (P)Ba3 Rating to $16MM Class E Notes
----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to six
classes of notes to be issued by LCM 36 Ltd. (the "Issuer" or "LCM
36").
Moody's rating action is as follows:
US$248,000,000 Class A-1 Senior Floating Rate Notes due 2035,
Assigned (P)Aaa (sf)
US$12,000,000 Class A-2 Senior Floating Rate Notes due 2035,
Assigned (P)Aaa (sf)
US$44,000,000 Class B Senior Floating Rate Notes due 2035, Assigned
(P)Aa2 (sf)
US$24,000,000 Class C Deferrable Mezzanine Floating Rate Notes due
2035, Assigned (P)A2 (sf)
US$24,000,000 Class D Deferrable Mezzanine Floating Rate Notes due
2035, Assigned (P)Baa3 (sf)
US$16,000,000 Class E Deferrable Mezzanine Floating Rate Notes due
2035, Assigned (P)Ba3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
LCM 36 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90% of the portfolio must consist of
first lien senior secured loans, cash, and eligible investments,
and up to 10% of the portfolio may consist of second lien loans,
unsecured loans and fixed rate collateral debt obligations. Moody's
expect the portfolio to be approximately 90% ramped as of the
closing date.
LCM Asset Management LLC (the "Manager") will direct the selection,
acquisition and disposition of the assets on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's five year reinvestment period.
Thereafter, subject to certain restrictions, the Manager may
reinvest unscheduled principal payments and proceeds from sales of
credit risk assets. Thereafter, the manager may not reinvest and
all proceeds received will be used to amortize the notes in
sequential order.
In addition to the Rated Notes, the Issuer will issue subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2830
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 7.0%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 9.56 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
MADISON PARK XLIX: S&P Assigns BB- (sf) Rating in Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to Madison Park Funding
XLIX Ltd.'s fixed- and floating-rate notes.
The note issuance is a CLO securitization backed by primarily
broadly syndicated speculative-grade (rated 'BB+' and lower) senior
secured term loans.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Madison Park Funding XLIX Ltd.
Class A, $450.00 million: AAA (sf)
Class B-1, $110.00 million: AA (sf)
Class B-2, $10.00 million: AA (sf)
Class C, $45.00 million: A (sf)
Class D, $45.00 million: BBB- (sf)
Class E, $24.38 million: BB- (sf)
Subordinated notes, $68.40 million: Not rated
MED TRUST 2021-MDLN: Moody's Hikes Rating on Cl. F Certs to B2
--------------------------------------------------------------
Moody's Investors Service announced that it upgraded five classes
of CMBS securities, issued by MED Trust 2021-MDLN, Commercial
Mortgage Pass-Through Certificates, Series 2021-MDLN as a result of
the recent update of the "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-Backed Securitizations Methodology,"
as follows:
Cl. B, Upgraded to Aa1 (sf); previously on Nov 15, 2021 Definitive
Rating Assigned Aa3 (sf)
Cl. C, Upgraded to Aa3 (sf); previously on Nov 15, 2021 Definitive
Rating Assigned A3 (sf)
Cl. D, Upgraded to A3 (sf); previously on Nov 15, 2021 Definitive
Rating Assigned Baa3 (sf)
Cl. E, Upgraded to Ba2 (sf); previously on Nov 15, 2021 Definitive
Rating Assigned Ba3 (sf)
Cl. F, Upgraded to B2 (sf); previously on Nov 15, 2021 Definitive
Rating Assigned B3 (sf)
RATINGS RATIONALE
The rating actions result primarily from the methodology update for
rating large loan and single asset/single borrower (LL/SASB)
commercial mortgage-backed securities that included an addition of
a capitalization rate adjustment to account for the interest rate
environment and updates to Moody's loan-level legal analysis
framework.
As of result of the updated methodology, the adjusted Moody's LTV
ratio for the first-mortgage balance is 138.1%, compared to the
original LTV ratio of 159.0%.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Large Loan and
Single Asset/Single Borrower Commercial Mortgage-Backed
Securitizations Methodology" published in November 2021.
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. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
defeasance or an improvement in loan performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the loan or increase in interest
shortfalls.
MELLO MORTGAGE 2021-INV4: Moody's Gives (P)B3 Rating to B-5 Certs
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to
forty-seven classes of residential mortgage-backed securities
(RMBS) issued by Mello Mortgage Capital Acceptance 2021-INV4 (MMCA
2021-INV4). The ratings range from (P)Aaa (sf) to (P)B3 (sf).
MMCA 2021-INV4 is a securitization of GSE eligible first-lien
investment property loans. Similarly to the MMCA 2021-INV2 and
INV3, 100.0% of the pool by loan balance is originated by
loanDepot.com, LLC (loanDepot).
In this transaction, the Class A-11, Class A-11-A, and Class A-11-B
notes' coupon is indexed to SOFR. In addition, the coupon on Class
A-11-X, Class A-11-AI, and Class A-11-BI is also impacted by
changes in SOFR. However, based on the transaction's structure, the
particular choice of benchmark has no credit impact. First,
interest payments to the notes, including the floating rate notes,
are subject to the net WAC cap, which prevents the floating rate
notes from incurring interest shortfalls as a result of increases
in the benchmark index above the fixed rates at which the assets
bear interest. Second, the shifting-interest structure pays all
interest generated on the assets to the bonds and does not provide
for any excess spread.
Servicing compensation is subject to a step-up incentive fee
structure. Servicing fee includes base fee plus delinquency and
incentive fees. Delinquency and incentive fees will be deducted
reverse sequentially starting from the Class B-6 interest payment
amount first and could result in interest shortfall to the
certificates depending on the magnitude of the delinquency and
incentive fees.
The complete rating actions are as follows:
Issuer: Mello Mortgage Capital Acceptance 2021-INV4
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-3-A, Assigned (P)Aaa (sf)
Cl. A-3-X*, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aaa (sf)
Cl. A-4-A, Assigned (P)Aaa (sf)
Cl. A-4-X*, Assigned (P)Aaa (sf)
Cl. A-5, Assigned (P)Aaa (sf)
Cl. A-5-A, Assigned (P)Aaa (sf)
Cl. A-5-X*, Assigned (P)Aaa (sf)
Cl. A-6, Assigned (P)Aaa (sf)
Cl. A-6-A, Assigned (P)Aaa (sf)
Cl. A-6-X*, Assigned (P)Aaa (sf)
Cl. A-7, Assigned (P)Aaa (sf)
Cl. A-7-A, Assigned (P)Aaa (sf)
Cl. A-7-X*, Assigned (P)Aaa (sf)
Cl. A-8, Assigned (P)Aaa (sf)
Cl. A-8-A, Assigned (P)Aaa (sf)
Cl. A-8-X*, Assigned (P)Aaa (sf)
Cl. A-9, Assigned (P)Aaa (sf)
Cl. A-9-A, Assigned (P)Aaa (sf)
Cl. A-9-X*, Assigned (P)Aaa (sf)
Cl. A-10, Assigned (P)Aaa (sf)
Cl. A-10-A, Assigned (P)Aaa (sf)
Cl. A-10-X*, Assigned (P)Aaa (sf)
Cl. A-11, Assigned (P)Aaa (sf)
Cl. A-11-X*, Assigned (P)Aaa (sf)
Cl. A-11-A, Assigned (P)Aaa (sf)
Cl. A-11-AI*, Assigned (P)Aaa (sf)
Cl. A-11-B, Assigned (P)Aaa (sf)
Cl. A-11-BI*, Assigned (P)Aaa (sf)
Cl. A-12, Assigned (P)Aaa (sf)
Cl. A-13, Assigned (P)Aaa (sf)
Cl. A-14, Assigned (P)Aa1 (sf)
Cl. A-15, Assigned (P)Aa1 (sf)
Cl. A-16, Assigned (P)Aaa (sf)
Cl. A-17, Assigned (P)Aaa (sf)
Cl. A-X-1*, Assigned (P)Aa1 (sf)
Cl. A-X-2*, Assigned (P)Aa1 (sf)
Cl. A-X-3*, Assigned (P)Aaa (sf)
Cl. A-X-4*, Assigned (P)Aa1 (sf)
Cl. B-1, Assigned (P)Aa3 (sf)
Cl. B-2, Assigned (P)A3 (sf)
Cl. B-3, Assigned (P)Baa3 (sf)
Cl. B-4, Assigned (P)Ba3 (sf)
Cl. B-5, Assigned (P)B3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss for this pool in a baseline scenario is 0.92%
at the mean, 0.64% at the median, and reaches 6.58% at a stress
level consistent with Moody's Aaa ratings.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's 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
As of the cut-off date of November 1, 2021, the $370,943,494 pool
consisted of 952 mortgage loans secured by first liens on
residential investment properties. All the loans are underwritten
in accordance with Freddie Mac or Fannie Mae guidelines, which take
into consideration, among other factors, the income, assets,
employment and credit score of the borrower as well as
loan-to-value (LTV). These loans are run through one of the
government-sponsored enterprises' (GSE) automated underwriting
systems (AUS) and have received an "Approve" or "Accept"
recommendation.
The average stated principal balance is $389,647 and the weighted
average (WA) current mortgage rate is 3.3%. The majority of the
loans have a 30 year term. All of the loans have a fixed rate. The
WA original credit score is 767 for the primary borrower only and
the WA combined original LTV (CLTV) is 64.1%. The WA original
debt-to-income (DTI) ratio is 36.0%. Approximately, 9.1% by loan
balance of the borrowers have more than one mortgage loan in the
mortgage pool.
Over a third of the mortgages (37.3% by loan balance) are backed by
properties located in California. The next largest geographic
concentration is New York (9.1% by loan balance), Washington (8.5%
by loan balance),Texas (7.4% by loan balance) and New Jersey (5.6%
by loan balance). All other states each represent less than 5.0% by
loan balance. Loans backed by single family residential properties
represent 37.3% (by loan balance) of the pool. Approximately 1.9%
of the mortgage loans by count are "Appraisal Waiver" (AW) loans,
whereby the sponsor obtained an AW for each such mortgage loan from
Fannie Mae or Freddie Mac through their respective programs. In
each case, neither Fannie Mae nor Freddie Mac required an appraisal
of the related mortgaged property as a condition of approving the
related mortgage loan for purchase by Fannie Mae or Freddie Mac, as
applicable.
Origination quality
LoanDepot originated 100% of the loans in the pool. These loans
were underwritten in conformity with GSE guidelines with
predominantly non-material overlays. Moody's consider loanDepot's
origination quality to be in line with its peers due to: (1)
adequate underwriting policies and procedures, (2) acceptable
performance with low delinquency and repurchase and (3) adequate
quality control. Therefore, Moody's have not applied an additional
adjustment for origination quality.
Servicing arrangements
Moody's consider the overall servicing arrangement for this pool to
be adequate. Cenlar FSB (Cenlar) will service all the mortgage
loans in the transaction. Computershare Trust Company, N.A. will
serve as the master servicer. The servicing administrator,
loanDepot, will be primarily responsible for funding certain
servicing advances of delinquent scheduled interest and principal
payments for the mortgage loans, unless the servicer determines
that such amounts would not be recoverable. The master servicer
will be obligated to fund any required monthly advance if the
servicing administrator fails in its obligation to do so. Moody's
did not make any adjustments to Moody's base case and Aaa stress
loss assumptions based on this servicing arrangement.
Servicing compensation in this transaction is based on a
fee-for-service incentive structure. The servicer receives higher
fees for labor-intensive activities that are associated with
servicing delinquent loans, including loss mitigation, than they
receive for servicing a performing loan, which is less labor
intensive. The fee-for-service compensation is reasonable and
adequate for this transaction because it better aligns the
servicer's costs with the deal's performance. Furthermore, higher
fees for the more labor-intensive tasks make the transfer of these
loans to another servicer easier, should that become necessary.
Third-party review
Full due diligence (i.e. compliance, credit, property valuation and
data integrity review) was conducted by the TPR firms on a sample
of 206 loans in the pool and a valuation-only review was conducted
on the remaining loans (i.e. property valuation review was done on
100% of the loans in the pool). Moody's calculated the
credit-neutral sample size using a confidence interval, error rate
and a precision level of 95%/5%/2%. The number of loans that went
through a full due diligence review does not meet Moody's
calculated threshold. With sampling, there is a risk that loan
defects may not be discovered and such loans would remain in the
pool. Moreover, vulnerabilities of the R&W framework, such as the
lack of an automatic review of R&Ws by independent reviewer and the
weaker financial strength of the R&W provider, reduce the
likelihood that such defects would be discovered and cured during
the transaction's life. As a result, Moody's made an adjustment to
its Aaa loss and EL after taking account the risks associated with
these factors.
Representations and Warranties Framework
The R&W provider is mello Securitization Depositor LLC and the
guarantor is LD Holdings Group LLC. The Guarantor (LD Holdings
Group LLC) will guarantee certain performance obligations of the
R&W provider (mello Securitization Depositor LLC). These entities
may not have the financial wherewithal to purchase defective loans.
Moreover, unlike other transactions that Moody's have rated, the
R&W framework for this transaction does not include a mechanism
whereby loans that experience an early payment default (EPD) are
repurchased. In addition, the loss amount remedy is subject to
conflicts of interest and will likely not adequately compensate the
transaction for loans that breach R&Ws. Moody's have adjusted
Moody's loss levels to account for these weaknesses in the R&W
framework.
Unlike most other comparable transactions that Moody's have rated,
the R&W framework in this transaction has a "loss amount" remedy.
Specifically, in case there is a material breach to the R&Ws, the
depositor, who is the R&W provider, is tasked with calculating the
loss amount to indemnify the trust. Unlike buying a defective loan
at par, this loss amount remedy is subject to conflicts of
interest. The party determining the loss amount will have a natural
incentive to determine a low amount since it will have to pay that
amount. Furthermore, there may be no objective way to determine
such amount since the decrease in the value of a loan that breaches
a R&W may not be quantifiable at the time the breach is discovered.
The fact that the controlling holder can bring the depositor to
arbitration if it deems that a R&W breach is not resolved in a
satisfactory manner is a partial mitigant. However, there may be no
good way to prove in arbitration that the depositor's determination
is not adequate because the determination of the loss payment will
be, in many cases, subjective. Furthermore, the controlling holder
must expend its own funds to go to arbitration, which could
disincentivize it to pursue arbitration. Another partial mitigant
is that the loans in the pool were originated by loanDepot, an
originator whose repurchase statistics are equal to or better than
the GSEs' average.
Transaction structure
The securitization has a shifting interest structure that benefits
from a senior subordination 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 prepayments
to the senior bond for a specified period of time, and increasing
amounts of prepayments to the subordinate bonds thereafter, but
only if loan performance satisfies delinquency and loss tests.
Realized losses are allocated in a reverse sequential order, first
to the lowest subordinate bond. After the balances of the
subordinate bonds are written off, losses from the pool begin to
write off the principal balances of the senior support bonds until
their principal balances are reduced to zero. Next, realized losses
are allocated to super senior bonds until their principal balance
is written off.
Tail risk & 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 eroding credit enhancement
over time and increased performance volatility, known as tail risk.
To mitigate this risk, the transaction provides for a senior
subordination floor of 0.95% 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 0.85% of the closing pool balance.
Moody's calculate the credit neutral floors for a given target
rating as shown in Moody's principal methodology. The senior
subordination floor and the subordinate floor of 0.95% and 0.85%,
respectively, are consistent with the credit neutral floors for the
assigned ratings. Specifically, the subordinate floor is consistent
with a Aa1 rating or lower.
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 rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in August 2021.
MONROE CAPITAL VIII: Moody's Assigns Ba3 Rating to $32MM E-R Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
CLO refinancing notes issued by Monroe Capital MML CLO VIII, Ltd.
(the "Issuer").
Moody's rating action is as follows:
US$277,850,000 Class A-R Senior Floating Rate Notes Due 2033,
Definitive Rating Assigned Aaa (sf)
US$40,400,000 Class B-R Floating Rate Notes Due 2033, Definitive
Rating Assigned Aa2 (sf)
US$31,500,000 Class C-R Deferrable Mezzanine Floating Rate Notes
Due 2033, Definitive Rating Assigned A2 (sf)
US$36,250,000 Class D-R Deferrable Mezzanine Floating Rate Notes
Due 2033, Definitive Rating Assigned Baa3 (sf)
US$32,000,000 Class E-R Deferrable Mezzanine Floating Rate Notes
Due 2033, Definitive Rating Assigned Ba3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of middle market loans. At least 95.0% of the portfolio must
consist of senior secured loans and eligible investments, and up to
5.0% of the portfolio may consist of second lien loans, permitted
non-loan assets and senior unsecured loans.
Monroe Capital Asset Management LLC (the "Manager") will continue
to direct the selection, acquisition and disposition of the assets
on behalf of the Issuer and may engage in trading activity,
including discretionary trading, during the transaction's extended
four year reinvestment period. Thereafter, the manager may not
reinvest in new assets and all principal proceeds will be used to
amortize the Refinancing Notes in accordance with the priority of
payments.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: extension of the reinvestment
period; extensions of the stated maturity and non-call period;
changes to certain collateral quality tests; and changes to the
overcollateralization test levels; the modification of Libor
replacement provisions; additions to the CLO's ability to hold
workout and restructured assets; changes to the definition of
"Moody's Default Probability Rating" and changes to the base matrix
and modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Performing par and principal proceeds balance: $475,000,000
Diversity Score: 52
Weighted Average Rating Factor (WARF): 4007
Weighted Average Spread (WAS): 4.60%
Weighted Average Coupon (WAC): 7.50%
Weighted Average Recovery Rate (WARR): 46.75%
Weighted Average Life (WAL): 8.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
MORGAN STANLEY 2014-C14: Fitch Raises Class G Certs to 'B'
----------------------------------------------------------
Fitch Ratings has upgraded seven classes and affirmed six classes
of Morgan Stanley Bank of America Merrill Lynch Trust, Series
2014-C14 (MSBAM 2014-C14) commercial mortgage pass-through
certificates. Fitch has also revised four Rating Outlooks to
Positive from Stable and one Rating Outlook to Stable from
Negative.
DEBT RATING PRIOR
---- ------ -----
Morgan Stanley Bank of America Merrill Lynch Trust 2014-C14
A-4 61690GAE1 LT AAAsf Affirmed AAAsf
A-5 61690GAF8 LT AAAsf Affirmed AAAsf
A-S 61690GAH4 LT AAAsf Affirmed AAAsf
A-SB 61690GAC5 LT AAAsf Affirmed AAAsf
B 61690GAJ0 LT AAAsf Upgrade AA-sf
C 61690GAL5 LT AAsf Upgrade A-sf
D 61690GAT8 LT BBBsf Upgrade BBB-sf
E 61690GAW1 LT BB+sf Affirmed BB+sf
F 61690GAZ4 LT BBsf Upgrade BB-sf
G 61690GBC4 LT Bsf Upgrade CCCsf
PST 61690GAK7 LT AAsf Upgrade A-sf
X-A 61690GAG6 LT AAAsf Affirmed AAAsf
X-B 61690GAM3 LT AAAsf Upgrade AA-sf
Classes X-A and X-B are interest only.
The class A-S, B and C certificates may be exchanged for class PST
certificates, and class PST certificates may be exchanged for the
class A-S, B and C certificates.
KEY RATING DRIVERS
Improved Loss Expectations; Better than Expected Recovery on
Disposed Loan: The upgrades and Outlook revisions to Positive and
Stable reflect lower overall expected losses on the pool as loans
continue to stabilize as well as a substantially better than
expected recovery on a disposed loan. Fitch's current ratings for
the transaction reflect an improved base case loss of 3.9%. Fitch
has designated nine loans (42.3% of the pool) as Fitch Loans of
Concern (FLOCs), including four loans/REO assets in special
servicing (10.2%).
Since the last rating action, the defaulted Aspen Heights -
Columbia loan, which was secured by a 972-bed student housing
property located near the campus of the University of Missouri -
Columbia, was disposed. The loan was resolved in October 2021 with
a realized loss of nearly $20 million, including approximately $8.8
million in expenses. The recovery was significantly in excess of a
servicer provided appraised value as well as Fitch's estimated
value, which was based on the property's consistently poor cash
flow performance prior to the pandemic and weak position in the
submarket.
Largest Contributors to Base Case Loss: The largest contributor to
base case loss is the REO Pence Building (1.2% of the pool), which
is a 91,446-sf office building located in Minneapolis, MN. The
property was built in 1909 with recent renovations, including
common area improvements and roof replacement, completed in 2020.
The loan transferred to the special servicer in July 2018 for
imminent monetary default after losing its largest tenant, Art
Institute International (32,781 SF or 36% of the NRA), at its lease
expiration in December 2017. A foreclosure sale occurred in May
2019, and the property became REO in September 2019.
Leasing momentum in the Minneapolis downtown office market is
reportedly not strong, and the property was only 51.3% leased, as
of the September 2020 rent roll. The servicer expects to market the
property for sale in the next few months. Fitch's modeled loss
reflects a value of $76 psf.
The next largest contributor to base case loss is the REO Round
Rock Crossing (3.9% of the pool). The loan transferred to special
servicing in June 2020 due to imminent default related to the
coronavirus pandemic. A foreclosure action was pursued and the
property became REO in May 2021. The servicer is reportedly
pursuing a 2Q23 sale.
The property is a 245,512-sf retail center located in Round Rock,
TX, a suburb of Austin; the center is shadow-anchored by Target.
The property is located at the intersection of Interstate 35 and
State Highway 45, a busy retail area with high reported traffic
counts. The economic recovery of the Austin - Round Rock market has
reportedly been among the fastest in the nation.
The subject is leased to a mix of over 15 national and local
tenants, including Best Buy, Michaels, Dollar Tree, LensCrafters,
and Five Guys Burgers & Fries. Per the October 2021 rent roll,
property occupancy had declined to 62% compared to 71.6% in
September 2020, and 95.4% at issuance (as of October 2013). After
parent company bankruptcies, Stein Mart (14.7% of NRA) closed its
store in late 2020, while Gander Mountain (19.9% of NRA) vacated in
2017; both spaces remain vacant. Only 2.2% of the NRA is month to
month or scheduled to roll in the next year.
Fitch's expected loss reflects a value per square foot of $106
psf.
Significant Credit Enhancement (CE): The upgrades and outlook
revisions also reflect the classes' high CE relative to expected
losses. As of the October 2021 distribution date, the pool's
aggregate principal balance has been reduced by 49.4% to $748.5
million from $1.48 billion at issuance. Since issuance, 16 loans
have been paid off with one additional loan resolved since the last
rating action with a realized loss of $20 million.
Only two loans (1.6%) are full term interest only; all other loans
are now amortizing. Three loans (4.7%) have defeased. The majority
of the pool is scheduled to mature in 4Q23 (42.1%) and 2024
(51.3%).
Alternative Loss Scenario
Fitch ran an additional sensitivity, which further stressed cap
rates by an additional 1% and NOI haircuts by an additional 5%, to
test for upgrades; the ratings reflect this sensitivity.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades to the 'AAAsf' and 'AAsf' classes are not likely
due to their position in the capital structure and the high
CE, but may occur should interest shortfalls impact these
classes. Downgrades to classes rated 'BBBsf' and below may
occur should pool level losses increase significantly and/or
loans that are susceptible to the pandemic fail to fully
stabilize or should additional losses be realized.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Stable to improved asset performance, coupled with additional
paydown and/or defeasance. Upgrades to the 'AAsf' through
'BB+sf' rated classes may occur with further increases in CE
and/or defeasance, in addition to the continued stabilization
of properties impacted from the coronavirus pandemic.
-- Upgrades to the 'BBsf' and 'Bsf' category rated classes are
considered unlikely, but may occur as the number of FLOCs are
reduced, as properties that have been vulnerable to the
pandemic return to pre-pandemic levels, and there is
sufficient CE to the classes. Upgrades would be limited based
on the sensitivity to concentrations or the potential for
future concentrations. Classes will not be upgraded above
'Asf' if there is a likelihood of interest shortfalls.
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.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means 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.
MORGAN STANLEY 2015-C23: Fitch Affirms B- Rating on Class F Certs
-----------------------------------------------------------------
Fitch Ratings has affirmed 12 classes of Morgan Stanley Bank of
America Merrill Lynch Trust (MSBAM) Commercial Mortgage
Pass-Through Certificates, series 2015-C23. Rating Outlooks on
classes E and F remain Negative.
DEBT RATING PRIOR
---- ------ -----
MSBAM 2015-C23
A-3 61690QAD1 LT AAAsf Affirmed AAAsf
A-4 61690QAE9 LT AAAsf Affirmed AAAsf
A-S 61690QAG4 LT AAAsf Affirmed AAAsf
A-SB 61690QAC3 LT AAAsf Affirmed AAAsf
B 61690QAH2 LT AA-sf Affirmed AA-sf
C 61690QAK5 LT A-sf Affirmed A-sf
D 61690QAS8 LT BBB-sf Affirmed BBB-sf
E 61690QAU3 LT BB-sf Affirmed BB-sf
F 61690QAW9 LT B-sf Affirmed B-sf
PST 61690QAJ8 LT A-sf Affirmed A-sf
X-A 61690QAF6 LT AAAsf Affirmed AAAsf
X-B 61690QAL3 LT AAAsf Affirmed AAAsf
KEY RATING DRIVERS
Stable Loss Expectations: Overall pool performance remains
generally stable with a slight increase in loss expectations from
issuance offset by increased credit enhancement from paydown and
amortization. Fitch has identified 12 Fitch Loans of Concern
(FLOCS; 31.78%), including three specially serviced loans (5.5%).
Fitch's ratings reflect a base case loss of 5.7% and a sensitivity
scenario where losses could reach 6.4%. The sensitivity applied
higher losses on multifamily assets in volatile energy-reliant
markets and a student housing property with declining performance.
Largest Drivers to Loss: The TKG 3 Retail Portfolio (9.1%) is
secured by a portfolio of six retail centers (five anchored, one
shadow anchored) totaling 1.4 million sf, and spread across six
tertiary markets in six different states. The two oldest properties
(built in 1966 and 1973) were most recently renovated between 2013
and 2015. The remaining four properties were constructed between
1999 and 2006. The largest tenants within the portfolio include
Walmart (14.4% of NRA; through February 2025), Lowe's (9.1% of NRA;
through November 2027) and BJ's Wholesale Club (8.0% of NRA;
through January 2024). As of YE 2020, the servicer-reported
occupancy and NOI DSCR declined to 91.2% and 1.83x, respectively,
from 97.5% and 2.12x at YE 2019.
The next largest driver of loss is the Aviare Place Apartments loan
(2.3%), which is secured by a 266-unit garden style multifamily
property located in Midland, TX. Property performance has been
impacted by volatility in the oil & gas sector, coupled with
pandemic-related disruption. Although occupancy has remained
relatively stable, rents at the property have declined
dramatically, dropping to an average of $786 for in-place rents as
of June 2021 compared to $860 at YE 2020 and $1,215 at YE 2019.
The decline in rents at the subject reflects the broader
Odessa-Midland market, as Reis reported market vacancy spiked to
15.6%, and average asking rents dropped to $952 as of 3Q21,
compared to vacancy of 5.9% and average asking rents of $1,353 at
YE 2019. The subject's occupancy and rents are below average for
the submarket; however, the subject is a much older vintage and of
lower quality than nearby competing properties. Several properties
have been built in the last decade including 336-unit Oasis at
Pavilion Park in 2016, 288-unit Mesquite Terraces and 210-unit
Midway Station, both built in 2014.
The Hawthorne House Apartments loan (1.4%), which is secured by a
126-unit multifamily property shares the same sponsor as Aviare
Place and is also located in Midland, TX. The property is
exhibiting comparable declines in performance and losses as the
Aviare Place loan.
Change in Credit Enhancement: As of the October 2021 distribution
date, the pool's aggregate principal balance has been paid down by
18.1% to $879.5 million from $1.07 billion at issuance. Six loans
(3.2% of current pool) are fully defeased. Eight loans (8.9% of
original pool balance) have paid off since issuance. Loan
maturities are concentrated in 2025 when 96.4% of the pool
matures.
Alternative Loss Considerations: Fitch performed an additional
sensitivity scenario that assumed potential outsized losses on the
maturity balances of the Aviare Place and Hawthorne House Apartment
loans, as the properties are in markets reliant on the energy
sector causing volatility in performance. An additional sensitivity
was also performed on The Quarters loan to reflect student housing
exposure with continued headwinds affecting enrollment and housing
demand.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades would occur with an increase in pool level losses
from underperforming or specially serviced loans. Downgrades
of the 'AA-sf' and 'AAAsf' categories are not considered
likely due to the position in the capital structure and the
relatively stable performance of the pool, but may occur
should interest shortfalls affect these classes.
-- Downgrades of the 'A-sf' and 'BBB-sf' categories could occur
if expected losses increase significantly or the performance
of the FLOCs continue to decline further and/or fail to
stabilize. Downgrades to the 'B-sf' and 'BB-sf' categories
would occur should overall pool performance decline and/or
loans of concern continue to underperform.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades would occur with stable to improved asset performance
coupled with paydown and/or defeasance. Upgrades of the 'A-sf'
and 'AA-sf' categories would likely occur with significant
improvement in credit enhancement (CE) and/or defeasance;
however, adverse selection, increased concentrations and
further underperformance of the FLOCs and/or loans considered
to be negatively impacted by the pandemic could cause this
trend to reverse.
-- An upgrade to the 'BBB-sf' category 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 likelihood for interest
shortfalls. Upgrades to the 'B-sf' and 'BB-sf' categories are
not likely until the later years in a transaction and only if
the performance of the remaining pool is stable and there is
sufficient CE to the classes.
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.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means 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.
NEUBERGER BERMAN 45: S&P Assigns BB- (sf) Rating on Class E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Neuberger Berman Loan
Advisers CLO 45 Ltd./Neuberger Berman Loan Advisers CLO 45 LLC's
floating-rate notes.
The note issuance is a CLO transaction governed by collateral
quality tests and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' and lower) senior secured term
loans.
The ratings reflect:
-- 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 manager's 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.
Ratings Assigned
Neuberger Berman Loan Advisers CLO 45 Ltd./
Neuberger Berman Loan Advisers CLO 45 LLC
Class A, $372 million: AAA (sf)
Class B, $84 million: AA (sf)
Class C (deferrable), $36 million: A (sf)
Class D (deferrable), $36 million: BBB- (sf)
Class E (deferrable), $24 million: BB- (sf)
Subordinated notes, $59 million: Not rated
NLT 2021-INV3: S&P Assigns B (sf) Rating on Class B-2 Notes
-----------------------------------------------------------
S&P Global Ratings assigned its ratings to NLT 2021-INV3 Trust's
mortgage-backed notes series 2021-INV3.
The note issuance is an RMBS transaction backed by fixed-rate and
adjustable-rate, business purpose, investor, fully amortizing
residential mortgage loans that are secured by first liens on
primarily one- to four-family residential properties, planned unit
developments, condominiums, five- to 10-unit multi-family
properties and mixed-use properties with 30-year original terms to
maturity to nonconforming (both prime and nonprime) borrowers. The
pool consists of 908 loans backed by 1,103 properties that are
exempt from the qualified mortgage and ability-to-repay rules; of
the 908 loans, 50 are cross collateralized, which were broken down
to their constituents at the property level (making up 245
properties).
The ratings reflect S&P's view of:
-- The collateral included in the pool;
-- The credit enhancement provided in the transaction;
-- The representation and warranty framework;
-- The pool's geographic concentration;
-- The transaction's associated structural mechanics;
-- The transaction's mortgage loan originators/aggregator; and
-- The impact the COVID-19 pandemic will likely have on the
performance of the mortgage borrowers in the pool and liquidity
available in the transaction.
Ratings Assigned
NLT 2021-INV3 Trust(i)
Class A-1, $153,219,000: AAA (sf)
Class A-2, $14,744,000: AA (sf)
Class A-3, $27,128,000: A (sf)
Class M-1, $12,857,000: BBB (sf)
Class B-1, $11,441,000: BB (sf)
Class B-2, $8,847,000: B (sf)
Class B-3, $7,667,113: Not rated
Class XS, notional(ii): Not rated
Class PT, $235,903,113(iii): Not rated
Class A-IO-S, notional(ii): Not rated
Class R, not applicable: Not rated
(i)The collateral and structural information in this report
reflects the term sheet dated Nov. 8, 2021. The ratings address the
ultimate payment of interest and principal; they do not address
payment of cap carryover amounts.
(ii)The notional amount equals the loans' stated principal balance.
(iii)All or a portion of the initial exchangeable notes can be
exchanged for the exchangeable notes.
NORTHWOODS CAPITAL 27: Moody's Assigns Ba3 Rating to $21MM E Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to seven classes of
notes issued and one class of loans incurred by Northwoods Capital
27, Limited (the "Issuer" or "Northwoods Capital 27").
Moody's rating action is as follows:
US$173,600,000 Class A-L Loans maturing 2034, Assigned Aaa (sf)
Up to US$173,600,000 Class A-N Senior Secured Floating Rate Notes
due 2034, Assigned Aaa (sf)
US$74,400,000 Class A-1 Senior Secured Floating Rate Notes due
2034, Assigned Aaa (sf)
US$12,000,000 Class A-2 Senior Secured Floating Rate Notes due
2034, Assigned Aaa (sf)
US$43,600,000 Class B Senior Secured Floating Rate Notes due 2034,
Assigned Aa2 (sf)
US$18,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned A2 (sf)
US$25,400,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2034, Assigned Baa3 (sf)
US$21,000,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2034, Assigned Ba3 (sf)
The notes and loans listed are referred to herein, collectively, as
the "Rated Debt."
On the closing date, the Class A-L Loans and the Class A-N Notes
have a principal balance of $173,600,000 and $0, respectively. At
any time, the Class A-L Loans may be converted in whole or in part
to Class A-N Notes, thereby decreasing the principal balance of the
Class A-L Loans and increasing, by the corresponding amount, the
principal balance of the Class A-N Notes. The aggregate principal
balance of the Class A-L Loans and Class A-N Notes will not exceed
$173,600,000, less the amount of any principal repayments.
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Northwoods Capital 27 is a managed cash flow CLO. The issued notes
will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 90% of the portfolio must consist
of senior secured loans, and up to 10% of the portfolio may consist
of non senior secured loans. The portfolio is approximately 70%
ramped as of the closing date.
Angelo, Gordon & Co., L.P. (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Debt, the Issuer issued subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2801
Weighted Average Spread (WAS): 3.30%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 46.50%
Weighted Average Life (WAL): 9.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Debt is subject to uncertainty. The
performance of the Rated Debt is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Debt.
OBX TRUST 2021-INV3: Moody's Assigns B3 Rating to Cl. B-5 Certs
---------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 48
classes of residential mortgage-backed securities (RMBS) issued by
OBX 2021-INV3 Trust (OBX 2021-INV3). The ratings range from Aaa
(sf) to B3 (sf).
OBX 2021-INV3, the ninth rated issue from Onslow Bay Financial LLC
(Onslow Bay) in 2021, is a prime RMBS securitization of 15 to
30-year fixed-rate, predominantly agency-eligible mortgage loans
secured by first liens on mainly non-owner occupied residential
properties (designated for investment purposes by the borrower).
All the loans were underwritten using one of the
government-sponsored enterprises' (GSE) automated underwriting
systems (AUS) and 98.9% by unpaid principal balance (UPB) received
an "Approve" or "Accept" recommendation whereas 1.1% by UPB were
ineligible due to higher loan balance. As of the cut-off date, no
borrower under any mortgage loan is currently in an active Covid-19
related forbearance plan with the related servicer.
Onslow Bay does not originate residential mortgage loans. Onslow
Bay, the seller/sponsor, purchased approximately 32.3%, 17.0%,
14.6% and 11.5% by UPB, from Rocket Mortgage, LLC (Rocket Mortgage;
f/k/a Quicken Loans, LLC, rated Ba1 (CFR) with Positive outlook),
Caliber Home Loans, Inc. (Caliber), loanDepot.com, LLC (loanDepot)
and LendUS, LLC (LendUS), respectively, and the remainder from
various other mortgage originators.
Select Portfolio Servicing, Inc. (SPS) and NewRez LLC d/b/a
Shellpoint Mortgage Servicing (Shellpoint) will service 67.8% and
32.2% (by UPB) of the mortgage loans respectively on behalf of the
issuing entity, starting November 1, 2021. Wells Fargo Bank, N.A.
(Wells Fargo; long term deposit Aa1, long term debt Aa2) will act
as master servicer but Computershare Trust Company, N.A. (CTCNA)
will perform all of Wells Fargo obligations as an Agent. Certain
servicing advances and advances for delinquent scheduled interest
and principal payments will be funded, unless the related mortgage
loan is 120 days or more delinquent or the servicer determines that
such delinquency advances would not be recoverable. The master
servicer is obligated to fund any required monthly advances if the
servicer fails in its obligation to do so. The master servicer and
servicer will be entitled to reimbursements for any such monthly
advances from future payments and collections with respect to those
mortgage loans.
The sponsor, directly or through a majority-owned affiliate,
intends to retain an eligible horizontal residual interest with a
fair value of at least 5% of the aggregate fair value of the notes
issued by the trust.
OBX 2021-INV3 has a shifting interest structure with a five-year
lockout period that benefits from a senior subordination floor and
a subordination floor. In Moody's analysis of tail risk, Moody's
considered the increased risk from borrowers with more than one
mortgage in the pool.
The complete rating actions are as follows:
Issuer: OBX 2021-INV3 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-11IO*, 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 Aaa (sf)
Cl. A-18, Definitive Rating Assigned Aa1 (sf)
Cl. A-19, Definitive Rating Assigned Aa1 (sf)
Cl. A-20, Definitive Rating Assigned Aa1 (sf)
Cl. A-21, Definitive Rating Assigned Aaa (sf)
Cl. A-22, Definitive Rating Assigned Aaa (sf)
Cl. A-23, Definitive Rating Assigned Aaa (sf)
Cl. A-24, Definitive Rating Assigned Aaa (sf)
Cl. A-IO1*, Definitive Rating Assigned Aaa (sf)
Cl. A-IO4*, Definitive Rating Assigned Aaa (sf)
Cl. A-IO5*, Definitive Rating Assigned Aaa (sf)
Cl. A-IO6*, Definitive Rating Assigned Aaa (sf)
Cl. A-IO8*, Definitive Rating Assigned Aaa (sf)
Cl. A-IO10*, Definitive Rating Assigned Aaa (sf)
Cl. A-IO13*, Definitive Rating Assigned Aaa (sf)
Cl. A-IO15*, Definitive Rating Assigned Aaa (sf)
Cl. A-IO17*, Definitive Rating Assigned Aaa (sf)
Cl. A-IO20*, Definitive Rating Assigned Aa1 (sf)
Cl. A-IO21*, Definitive Rating Assigned Aa1 (sf)
Cl. A-IO24*, Definitive Rating Assigned Aaa (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-1A, Definitive Rating Assigned Aa3 (sf)
Cl. B-IO1*, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A2 (sf)
Cl. B-2A, Definitive Rating Assigned A2 (sf)
Cl. B-IO2*, Definitive Rating Assigned A2 (sf)
Cl. B-3, Definitive Rating Assigned Baa2 (sf)
Cl. B-3A, Definitive Rating Assigned Baa2 (sf)
Cl. B-IO3*, Definitive Rating Assigned Baa2 (sf)
Cl. B-4, Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Definitive Rating Assigned B3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected losses in a base case scenario are 0.89% and reach
6.37% at a stress level consistent with Moody's Aaa rating
scenario.
Moody's base its ratings on the notes on the credit quality of the
mortgage loans, the structural features of the transaction, Moody's
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 OBX 2021-INV3 transaction is a securitization of 1,301 mortgage
loans (1,297 agency-eligible conforming loans and 4
non-agency-eligible loans), secured by 15 to 30-year fixed-rate,
mainly non-owner occupied first liens on one-to four-family
residential properties, planned unit developments, condominiums and
townhouses with an unpaid principal balance of approximately
$470,576,068. The notes are backed by 99.8% investment property
mortgage loans and the remaining 0.2% are second home loans. The
mortgage pool has a WA seasoning of about 5 months. The loans in
this transaction have strong borrower credit characteristics with a
weighted average current FICO score of 771 and a weighted-average
original combined loan-to-value ratio (CLTV) of 63.6%. In addition,
16.7% of the borrowers are self-employed and refinance loans
comprise about 66.0% of the aggregate pool. The pool has a high
geographic concentration with 51.3% of the aggregate pool located
in California, with 19.4% located in the Los Angeles-Long
Beach-Anaheim MSA and 9.5% located in the San
Francisco-Oakland-Hayward MSA. The characteristics of the loans
underlying the pool are generally comparable to other recent prime
RMBS transactions backed by investment property mortgage loans that
Moody's have rated.
As of the cut-off date, no borrower under any mortgage loan is
currently in an active Covid-19 related forbearance plan with the
related servicer. However, there were two loans that were
previously in a Covid-19 forbearance plan (0.1% by UPB), but both
are current on payment status since December 2020. In the event
that, after cut-off date, a borrower enters into or requests an
active Covid-19 related forbearance plan, such mortgage loan will
remain in the mortgage pool. Furthermore, there are also six loans
(0.3% by UPB) that are 30-day delinquent as per MBA Method due to
servicing transfer.
Appraisal Waiver (AW) loans, all of which are agency-eligible
loans, which constitute approximately 2.5% of the mortgage loans by
aggregate cut-off date balance, may present a greater risk as the
value of the related mortgaged properties may be less than the
value ascribed to such mortgaged properties. Moody's made an
adjustment in Moody's analysis to account for the increased risk
associated with such loans. However, Moody's have tempered this
adjustment by taking into account the GSEs' robust risk modeling,
which helps minimize collateral valuation risk, as well as the
GSEs' conservative eligibility requirements for AW loans which
helps to support deal collateral quality.
Origination Quality
Majority of the mortgage loans in the pool were originated by
Rocket Mortgage, Caliber, loanDepot and LendUS. All other
originators represent less than 5.0% by loan balance. All the
mortgage loans comply with Freddie Mac and Fannie Mae underwriting
guidelines, with 98.9% receiving an "Approve" or "Accept"
recommendation, which take into consideration, among other factors,
the income, assets, employment and credit score of the borrower.
The remaining 1.1% were ineligible due to higher loan balance and
Moody's analyze such prime jumbo loans using Moody's private-label
model to assess the loan default probability and loss severity.
With exception for loans originated by Rocket Mortgage
(approximately 32.3% by UPB), LendUS (approximately 11.5% by UPB)
and Stearns Lending, LLC (approximately 0.1% by UPB), Moody's did
not make any adjustments to Moody's base case and Aaa stress loss
assumptions, regardless of the originator, since the loans were all
underwritten in accordance with GSE guidelines.
Moody's increased its loss assumption for loans originated by
Rocket Mortgage due to the relatively weaker performance of their
investment property mortgage transactions compared to similar
transactions from other originators. Moody's increased its loss
assumption for loans originated by LendUS due to insufficient
performance information. Moody's increased its loss assumption for
the loans originated by Stearns Lending, LLC, recently out of
bankruptcy, because sufficient time has not elapsed to assess
whether the originator had corrected any origination issues that
contributed to the bankruptcy filing.
Servicing Arrangement
Moody's consider the overall servicing arrangement for this pool to
be adequate, and as a result Moody's did not make any adjustments
to its base case and Aaa stress loss assumptions based on the
servicing arrangement.
Shellpoint and SPS will be the named primary servicer for this
transaction and will service 32.2% and 67.8% of the pool
respectively, starting November 1, 2021. Shellpoint is an approved
servicer in good standing with Ginnie Mae, Fannie Mae and Freddie
Mac. Shellpoint's primary servicing location is in Greenville,
South Carolina. Shellpoint services residential mortgage assets for
investors that include banks, financial services companies, GSEs
and government agencies. Wells Fargo will act as master servicer
but CTCNA will perform all of Wells Fargo obligations as an Agent.
The P&I Advancing Party (Onslow Bay) will make principal and
interest advances (subject to a determination of recoverability)
for the mortgage loans but only to the extent that such delinquency
advances are not funded by amounts held for future distribution, a
reduction in the excess servicing strip fee or a reduction in the
P&I advancing party fee.
Similarly to the OBX 2021-INV2 transaction Moody's have rated, and
in contrast to the OBX 2021-J shelf, no advances of delinquent
principal or interest will be made for mortgage loans that become
120 days or more delinquent under the MBA method. Subsequently, if
there are mortgage loans that are 120 days or more delinquent on
any payment date, there will be a reduction in amounts available to
pay principal and interest otherwise payable to note holders.
Moody's did not make an adjustment for the stop advance feature due
to the strong reimbursement mechanism for liquidated mortgage
loans. Proceeds from liquidated mortgage loans are included in the
available distribution amount and are paid according to the
waterfall.
Third Party Review (TPR)
Five independent TPR firms, AMC Diligence, LLC (AMC), Consolidated
Analytics, Inc, Inglet Blair, LLC, Canopy Financial Technology
Partners, LLC and Recovco Mortgage Management, LLC were engaged to
conduct due diligence for the credit, compliance, property
valuation and data integrity for approximately 87.0% of the final
mortgage pool (by loan count). The original population included
1,229 loans in the initial securitized pool. During the course of
the review, 97 loans were removed for various reasons. The final
population of the review consisted of 1,132 loans in the final
securitized pool. The TPR results indicated compliance with the
originators' underwriting guidelines for most of the loans without
any material compliance issues or appraisal defects. 100.0% of the
loans reviewed in the final population received a grade B or higher
with 89.0% of loans receiving an A grade.
Representations & Warranties (R&W)
Moody's analysis of the R&W framework considers the adequacy of the
R&Ws and enforcement mechanisms, and the creditworthiness of the
R&W provider.
Overall, the loan-level R&Ws are strong and, in general, either
meet or exceed the baseline set of credit-neutral R&Ws Moody's
identified for US RMBS. Among other considerations, the R&Ws
address property valuation, underwriting, fraud, data accuracy,
regulatory compliance, the presence of title and hazard insurance,
the absence of material property damage, and the enforceability of
the mortgage.
Each originator will provide comprehensive loan level
representations and warranties for their respective loans. BANA
will assign each originator's R&W to the seller (OBX) through AAR,
who will in turn assign to the depositor, which will assign to the
trust. To mitigate the potential concerns regarding the
originators' ability to meet their respective R&W obligations,
Onslow Bay Financial LLC (the seller, an unrated party) will
backstop the R&Ws for all originator's loans. The R&W provider's
obligation to backstop third party R&Ws will terminate 5 years
after the closing date, subject to certain performance conditions.
The R&W provider will also provide the gap reps. The rep provider
is an unrated entity with weak financial that may not have the
financial wherewithal to purchase defective loans. Moody's have
increased Moody's loss levels to account for the financial weakness
of the R&W provider (Onslow Bay).
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
balance declines, senior bonds are exposed to eroding credit
enhancement over time, and increased performance volatility, as a
result. To mitigate this risk, the transaction provides for a
senior subordination floor of 1.00% of the closing pool balance,
and a subordination lock-out amount equal to 1.00% of the closing
pool balance. The floors are consistent with the credit neutral
floors for the assigned ratings according to Moody's methodology.
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 rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in August 2021.
OBX TRUST 2021-NQM4: Fitch Assigns B Rating on Class B-2 Debt
-------------------------------------------------------------
Fitch Ratings has assigned ratings to OBX 2021-NQM4 Trust (OBX
2021-NQM4).
DEBT RATING PRIOR
---- ------ -----
OBX 2021-NQM4
Class A-1 LT AAAsf New Rating AAA(EXP)sf
Class A-2 LT AAsf New Rating AA(EXP)sf
Class A-3 LT Asf New Rating A(EXP)sf
Class M-1 LT BBBsf New Rating BBB(EXP)sf
Class B-1 LT BBsf New Rating BB(EXP)sf
Class B-2 LT Bsf New Rating B(EXP)sf
Class B-3 LT NRsf New Rating NR(EXP)sf
Class A-IO-S LT NRsf New Rating NR(EXP)sf
Class R LT NRsf New Rating NR(EXP)sf
Class XS LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch has rated the residential mortgage-backed notes issued by OBX
2021-NQM4 as indicated above. The notes are supported by 785 loans
with a total unpaid principal balance of approximately $542.84
million as of the cutoff date. The pool consists of fixed-rate
mortgages (FRMs) and adjustable-rate mortgages (ARMs) acquired by
Annaly Capital Management, Inc. (Annaly) from various originators
and aggregators.
Distributions of principal and interest (P&I) and loss allocations
are based on a modified sequential payment structure. The
transaction has a stop advance feature where the P&I advancing
party will advance delinquent P&I for up to 120 days. Of the loans,
76% are designated as non-qualified mortgage (Non-QM) and 24% are
investment properties not subject to the Ability to Repay (ATR)
Rule.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 12% above a long-term sustainable level (vs. 11.7%
on a national level). Underlying fundamentals are not keeping pace
with the growth in prices, which is a result of a supply/demand
imbalance driven by low inventory, low mortgage rates and new
buyers entering the market. These trends have led to significant
home price increases over the past year, with home prices rising
18.6% yoy nationally as of June 2021.
Non-Prime Credit Quality (Mixed): The collateral consists of 15-,
30- and 40-year fixed- rate and adjustable-rate loans (12.4% are
adjustable rate); 16.9% of the loans are interest-only (IO) loans
and the remaining 83.1% are fully amortizing loans. The pool is
seasoned approximately six months in aggregate. The borrowers in
this pool have relatively strong profiles with a 755 weighted
average (WA) Fitch-calculated model FICO and moderate leverage
(77.3% sustainable loan to value ratio [sLTV]). The pool
characteristics resemble recent non-prime collateral.
Investor Properties, Non-QM and Alternative Documentation
(Negative): The pool contains a meaningful amount of investor
properties (24%), non-qualified mortgage (non-QM) loans (76%) and
non-full documentation loans (83%). Fitch's loss expectations
reflect the higher default risk associated with these attributes as
well as loss severity (LS) adjustments for potential
ability-to-repay (ATR) challenges. Higher LS assumptions are
assumed for the investor property product to reflect potential risk
of a distressed sale or disrepair.
High California Concentration (Negative): Approximately 55% of the
pool is located in California. In addition, the MSA concentration
is large, as the top three MSAs (Los Angeles, New York and San
Francisco) account for 48% of the pool. As a result, a geographic
concentration penalty of 1.13x was applied to the probability of
default (PD).
Modified Sequential Payment Structure with Limited Advancing
(Mixed): The structure distributes principal pro rata among the
senior notes while shutting out the subordinate bonds from
principal until all senior classes are reduced to zero. If a
cumulative loss trigger event, delinquency trigger event or credit
enhancement (CE) trigger event occurs in a given period, principal
will be distributed sequentially to class A-1, A-2 and A-3 notes
until they are reduced to zero.
Advances of delinquent P&I will be made on the mortgage loans for
the first 120 days of delinquency, to the extent such advances are
deemed recoverable. The P&I Advancing Party (Onslow Bay Financial
LLC) is obligated to fund delinquent P&I advances for the
Shellpoint, SPS and SLS loans. AmWest will be responsible for
making P&I Advances with respect to the AmWest Serviced Mortgage
Loans. If AmWest or the P&I Advancing Party, as applicable, fails
to remit any P&I Advance required to be funded, the Master Servicer
(Wells Fargo) will fund the advance.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- The 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 42.8% 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.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- This defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. Excluding the senior class,
which is already rated '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'.
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 (Form 15E) as
prepared by Clayton, IngletBlair, Covius, AMC, and Evolve. The
third-party due diligence described in Form 15E focused on three
areas: compliance review, credit review, and valuation review.
Fitch considered this information in its analysis and, as a result,
Fitch did not make any adjustment(s) to its analysis due to the
loan-level due diligence findings. Based on the results of the 100%
due diligence performed on the pool, the overall expected loss was
reduced by 0.43%.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means 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.
OCTAGON 57: S&P Assigns BB- (sf) Rating on $20MM Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to Octagon 57 Ltd./Octagon
57 LLC's floating- and fixed-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Octagon Credit Investors LLC.
The ratings reflect:
-- 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 manager's 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.
Ratings Assigned
Octagon 57 Ltd./Octagon 57 LLC
Class X(i), $1.00 million: AAA (sf)
Class A, $315.00 million: AAA (sf)
Class B-1, $50.00 million: AA (sf)
Class B-2, $15.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $20.00 million: BB- (sf)
Subordinated notes, $48.30 million: Not rated
(i)The class X note is expected to be paid down using interest
proceeds over the course of six payment dates starting on the July
15, 2022, payment date.
OCTAGON INVESTMENT 48: S&P Assigns BB-(sf) Rating on Cl. E-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R, and E-R replacement notes from Octagon Investment Partners 48
Ltd./Octagon Investment Partners 48 LLC, a CLO originally issued in
September 2020 that is managed by Octagon Credit Investors LLC. At
the same time, S&P withdrew its ratings on the original class A, B,
C, D, and E notes following payment in full on the Nov. 18, 2021,
refinancing date.
The replacement notes will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement notes.
According to the proposed supplemental indenture:
-- The replacement class A-R, B-R, C-R, D-R, and E-R notes were
issued at a lower spread over three-month LIBOR than the original
notes.
-- The stated maturity and reinvestment period was extended by
three years.
-- The non-call period/weighted average life test date was
extended to October 2023.
-- The weighted average life test was extended to nine years from
the refinancing date.
-- Of the identified underlying collateral obligations, 99.41%
have credit ratings (which may include confidential ratings,
private ratings, and credit estimates) assigned by S&P Global
Ratings.
-- Of the identified underlying collateral obligations, 90.86%
have recovery ratings (which may include confidential ratings,
private ratings, and credit estimates) assigned by S&P Global
Ratings.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Octagon Investment Partners 48 Ltd./
Octagon Investment Partners 48 LLC
Class A-R, $320.00 million: AAA (sf)
Class B-R, $60.00 million: AA (sf)
Class C-R, $30.00 million: A (sf)
Class D-R (deferrable), $30.00 million: BBB- (sf)
Class E-R (deferrable), $20.00 million: BB- (sf)
Subordinated notes, $42.55 million: NR
Ratings Withdrawn
Octagon Investment Partners 48 Ltd./
Octagon Investment Partners 48 LLC
Class A to NR from 'AAA (sf)'
Class B to NR from 'AA (sf)'
Class C to NR from 'A (sf)'
Class D to NR from 'BBB- (sf)'
Class E to NR from 'BB- (sf)'
NR--Not rated.
OCTAGON INVESTMENT 50: S&P Assigns BB- (sf) Rating Class E-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R, and E-R notes and the new class X notes from Octagon
Investment Partners 50 Ltd., a CLO originally issued in November
2020 that is managed by Octagon Credit Investors LLC.
On the Nov. 19, 2021, refinancing date, the proceeds from the
replacement notes were used to redeem the original notes. At that
time, S&P withdrew its ratings on the original notes and assigned
ratings to the replacement notes.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The replacement class B-R, C-R, D-R, and E-R notes were issued
at a lower spread over three-month LIBOR than the original notes.
-- The replacement class A-R notes were issued at a floating
spread, replacing the current class A-1 floating spread notes and
the class A-2 fixed coupon notes.
-- New class X notes were issued in connection with this
refinancing. These notes are expected to be paid down using
interest proceeds during the first two payment dates beginning with
the payment date in April 2022.
-- The reinvestment period was extended to January 2027 and the
non-call period was extended to November 2023. The stated maturity
date was extended to January 2035.
-- The weighted average life test will be reset to nine years
after the refinancing date.
-- The required minimum overcollateralization (O/C) ratio with
respect to the class E-R notes and the interest diversion test was
amended.
-- The transaction modified its investment criteria, including
certain concentration limitations and provisions relating to the
acquisition of non-loan and workout related assets. In addition,
the transaction made updates to conform to current rating agency
methodology.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Octagon Investment Partners 50 Ltd./
Octagon Investment Partners 50 LLC
Class X, $1.00 million: AAA (sf)
Class A-R, $256.00 million: AAA (sf)
Class B-R, $48.00 million: AA (sf)
Class C-R (deferrable), $24.00 million: A (sf)
Class D-R (deferrable), $24.00 million: BBB- (sf)
Class E-R (deferrable), $16.00 million: BB- (sf)
Subordinated notes, $41.20 million: NR
Ratings Withdrawn
Octagon Investment Partners 50 Ltd./
Octagon Investment Partners 50 LLC
Class A-1 to NR from 'AAA (sf)'
Class A-2 to NR from 'AAA (sf)'
Class B to NR from 'AA (sf)'
Class C to NR from 'A (sf)'
Class D to NR from 'BBB- (sf)'
Class E to NR from 'BB- (sf)'
NR--Not rated.
OHA LOAN 2015-1: S&P Assigns Prelim BB- (sf) Rating on E-R3 Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-R3, B-R3, C-R3, D-R3, and E-R3 replacement notes and proposed new
class X notes from OHA Loan Funding 2015-1 Ltd./OHA Loan Funding
2015-1 Inc., a CLO previously issued in December 2019 that is
managed by Oak Hill Advisors L.P.
The preliminary ratings are based on information as of Nov. 22,
2021. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Dec. 2, 2021, refinancing date, the proceeds from the
replacement notes will be used to redeem the original notes. S&P
said, "At that time, we expect to withdraw our ratings on the
original notes and assign ratings to the replacement notes.
However, if the refinancing doesn't occur, we may affirm our
ratings on the original notes and withdraw our preliminary ratings
on the replacement notes."
The replacement notes will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement notes.
According to the proposed supplemental indenture:
-- The replacement class A-R3, B-R3, C-R3, D-R3, and E-R3 notes
are expected to be issued at a lower spread over three-month LIBOR
than the original notes.
-- The replacement class A-R3 and B-R3 notes are expected to be
issued at a floating spread, replacing the current class A-2-R2 and
B-2-R2 fixed coupon notes.
-- The weighted average cost of debt will tighten to 1.67% from
1.91%.
-- The stated maturity will be extended approximately four years.
-- The reinvestment period will be extended approximately two
years.
-- The weighted average life test date will be extended to 10
years post the refinancing date.
-- A two-year non-call period will be implemented.
-- The class X notes will be issued in connection with this
refinancing. These notes are expected to be paid down using
interest proceeds over eight payment dates beginning with the July
2022 payment date.
Replacement And Original Note Issuances
Replacement notes
Class X, $1.50 million: Three-month LIBOR + 0.70%
Class A-R3, $400.00 million: Three-month LIBOR + 1.15%
Class B-R3, $90.20 million: Three-month LIBOR + 1.70%
Class C-R3 (deferrable), $38.70 million: Three-month LIBOR +
2.05%
Class D-R3 (deferrable), $113.34 million: Three-month LIBOR +
3.20%
Class E-R3 (deferrable), $25.80 million: Three-month LIBOR +
6.65%
Subordinated notes, $89.16 million: Not applicable
Original notes
Class A-1-R2, $409.00 million: Three-month LIBOR + 1.35%
Class A-2-R2, $7.00 million: 3.248%
Class B-1-R2, 470.00 million: Three-month LIBOR + 1.90%
Class B-2-R2, $4.40 million: 3.508%
Class C-R2 (deferrable), $38.50 million: Three-month LIBOR +
2.65%
Class D-R2 (deferrable), $39.00 million: Three-month LIBOR +
4.00%
Class E-R2 (deferrable), $25.40 million: Three-month LIBOR +
7.00%
Subordinated notes, $89.157 million: Not applicable
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
OHA Loan Funding 2015-1 Ltd./OHA Loan Funding 2015-1 Inc.
Class X, $1.50 million: AAA (sf)
Class A-R3, $400.00 million: AAA (sf)
Class B-R3, $90.20 million: AA (sf)
Class C-R3 (deferrable), $38.70 million: A (sf)
Class D-R3 (deferrable), $38.70 million: BBB- (sf)
Class E-R3 (deferrable), $25.80 million: BB- (sf)
Subordinated notes, $89.16 million: Not rated
PARTS PRIVATE 2007-CT1: Fitch Affirms C Rating on Class C Bonds
---------------------------------------------------------------
Fitch Ratings has affirmed the student loan revenue bonds issued by
PARTS Private Student Loan Trust (PARTS) 2007-CT1.
DEBT RATING PRIOR
---- ------ -----
PARTS Private Student Loan Trust Series 2007-CT1
B 702148AB3 LT CCsf Affirmed CCsf
C 702148AC1 LT Csf Affirmed Csf
TRANSACTION SUMMARY
The class B and C notes remain undercollateralized. Transaction
performance has not materially changed since the last review.
KEY RATING DRIVERS
Collateral Performance: The PARTS 2007-CT1 trust is currently
collateralized by approximately $15 million of private student
loans originated according to either The Education Resources
Institute (TERI) or the Lutheran Education Assistance Resource
Network (LEARN) underwriting guidelines by Liberty Bank, N.A. or
Charter One Bank, N.A. Education Funding Resources, LLC, a wholly
owned subsidiary of Student Loan Xpress, Inc. (SLX). SLX became a
wholly owned subsidiary of CIT Group, Inc. in 2005 and ceased
originating loans on April 3, 2008. Fitch does not give any credit
to the guarantees provided by TERI or LEARN. Both parties have
stopped paying claims filed by the trust.
Fitch's key performance assumptions remain unchanged with a
sustainable constant default rate (sCDR) of 2.5% and principal
payment rate of 20.0%. The base case recovery rate was maintained
at 10.0%. These assumptions are supported by the historical
performance data provided by the issuer, current transaction
performance and current portfolio characteristics and
concentrations. Fitch applies a default stress multiple of 4.0x at
the 'AAAsf' stress level reflecting the expected performance of the
trust, performance data history, the level of the base case
compared to peers and structural considerations.
Payment Structure: Credit enhancement (CE) for the class B notes is
provided by excess spread and the subordination of the class C
notes. CE for the class C notes is provided by excess spread.
As of the August 2021 distribution date, the class B and C parity
ratios (excluding claims in process) were 98.7%, and 67.0%,
respectively. Liquidity support is provided by a reserve fund,
currently fully funded at $1 million, which is the minimum required
reserve fund balance.
The class C junior subordinate note interest and the turbo triggers
are currently in effect. As a result, interest is not paid on the
class C notes, the class B and C notes are redeemed sequentially,
and no cash can be released from the trust.
Operational Capabilities: Day-to-day servicing is provided by
American Education Services (AES), a wholly owned subsidiary of
Pennsylvania Higher Education Assistance Agency (PHEAA). Fitch
considers AES an acceptable servicer for the trust portfolio.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- As Fitch's base case default proxy is derived primarily from
historical collateral performance, actual performance may
differ from the expected performance, resulting in higher loss
levels than the base case. This will result in a decline in
available CE and the remaining loss coverage levels available
to the notes. Therefore, note ratings may be susceptible to
potential negative rating actions depending on the extent of
the decline in the coverage.
-- A downside sensitivity was not run for the class B and C notes
as they are rated below 'Bsf'.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- An upside sensitivity was run by decreasing the lifetime
default rate (calculated in the GALA model based on the CDR)
by 10%, 25%, and 50%. This did not result in any model implied
upgrades.
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.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means 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.
PIKES PEAK 2: Moody's Assigns Ba3 Rating to $16MM Class E-R Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to eight classes of
CLO refinancing notes issued by Pikes Peak CLO 2 (the "Issuer").
Moody's rating action is as follows:
US$2,000,000 Class X Senior Secured Floating Rate Notes Due 2034,
Assigned Aaa (sf)
US$256,000,000 Class A-R Senior Secured Floating Rate Notes Due
2034, Assigned Aaa (sf)
US$14,000,000 Class B-1-R Senior Secured Floating Rate Notes Due
2034, Assigned Aa2 (sf)
US$34,000,000 Class B-2-R Senior Secured Fixed Rate Notes Due 2034,
Assigned Aa2 (sf)
US$20,000,000 Class C-R Mezzanine Secured Deferrable Floating Rate
Notes Due 2034, Assigned A2 (sf)
US$18,000,000 Class D-1-R Mezzanine Secured Deferrable Floating
Rate Notes Due 2034, Assigned Baa2 (sf)
US$10,000,000 Class D-2-R Mezzanine Secured Deferrable Floating
Rate Notes Due 2034, Assigned Ba1 (sf)
US$16,000,000 Class E-R Junior Secured Deferrable Floating Rate
Notes Due 2034, Assigned Ba3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least
90.0% of the portfolio must consist of first lien senior secured
loans, cash, and eligible investments, and up to 10.0% of the
portfolio may consist of second lien loans and unsecured loans.
Partners Group US Management CLO LLC (the "Manager") will continue
to direct the selection, acquisition and disposition of the assets
on behalf of the Issuer and may engage in trading activity,
including discretionary trading, during the transaction's extended
4.9 year reinvestment period. Thereafter, subject to certain
restrictions, the Manager may reinvest unscheduled principal
payments and proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes, and
additional subordinated notes, a variety of other changes to
transaction features will occur in connection with the refinancing.
These include: extension of the reinvestment period; extensions of
the stated maturity and non-call period; changes to certain
collateral quality tests; and changes to the overcollateralization
test levels; the inclusion of Libor replacement provisions;
additions to the CLO's ability to hold workout and restructured
assets; changes to the definition of "Weighted Average Moody's
Rating Factor" and changes to the base matrix and modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Portfolio par: $400,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2864
Weighted Average Spread (WAS): 3.35%
Weighted Average Recovery Rate (WARR): 47.00%
Weighted Average Life (WAL): 9 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
PRIME STRUCTURED 2021-1: Moody's Gives (P)B1 Rating to Cl. F Certs
------------------------------------------------------------------
Moody's Investors Service has assigned provisional credit ratings
to the following classes of certificates to be issued by Prime
Structured Mortgage (PriSM) Trust:
Issuer: Prime Structured Mortgage (PriSM) Trust, Mortgage-Backed
Certificates, Series 2021-1
CAD450,000,000 Cl. A Certificate, Assigned (P)Aaa (sf)
CAD192,267,000 Cl. VFC Certificate, Assigned (P)Aaa (sf)
CAD11,800,000 Cl. B Certificate, Assigned (P)Aa2 (sf)
CAD6,743,000 Cl. C Certificate, Assigned (P)A2 (sf)
CAD5,057,000 Cl. D Certificate, Assigned (P)Baa2 (sf)
CAD4,046,000 Cl. E Certificate, Assigned (P)Ba1 (sf)
CAD2,697,000 Cl. F Certificate, Assigned (P)B1 (sf)
This transaction represents the second issuance by PriSM Trust,
which is sponsored by TD Securities Inc. (TDSI), a wholly owned
subsidiary of The Toronto-Dominion Bank (TD, Aa1, stable; a1,
Aa2(cr); Prime-1). The certificates are supported by 1,844 prime
quality, amortizing, uninsured, conventional fixed rate mortgage
loans originated by, First National Financial LP, CMLS Financial
Ltd., Marathon Mortgage Corp, Paradigm Quest Inc.,and RFA Bank of
Canada with a total balance of CAD674,296,212 as of the November 1,
2021 cut-off date. All mortgage loans were extended to obligors
located in Canada and are secured by Canadian residential
properties.
RATINGS RATIONALE
The ratings of the certificates are based on an analysis of the
characteristics of the underlying portfolio, protection provided by
credit enhancement and the structural integrity of the
transaction.
In analyzing the portfolio, Moody's determined the MILAN Credit
Enhancement (CE) of 5% and the portfolio Expected Loss (EL) of
0.45%. The MILAN CE and portfolio EL are key input parameters for
Moody's cash flow model.
MILAN CE of 5%: This is consistent with the average MILAN CE
assumption for the previous PriSM transaction (Series 2020-1) and
other prime Canadian RMBS and covered bond transactions. It follows
Moody's assessment of the loan-by-loan information taking into
account the historical performance and the pool composition
including (i) the relatively low weighted average current
loan-to-value (LTV) ratio of 65.08% (ii) and high weighted average
borrower credit score of 793.
The MILAN CE may be different from the credit enhancement that is
consistent with a Aaa rating for a tranche, because the MILAN CE
does not take into account the structural features of the
transaction. Moody's took this difference into account in its
ratings of the senior classes.
The Class A and Class VFC certificates together comprise the senior
principal certificates. The Class A certificate is a bullet bond
with a targeted final distribution date of November 15, 2024 and
the Class VFC is a variable funding certificate that will be
purchased by TD Bank (or an asset-backed commercial paper conduit
administered by TDSI). Prior to Class A maturity, the principal
repayments from the mortgages will be used to repay the principal
of the VFC certificate, with any excess deposited into the
principal accumulation account. On the targeted final distribution
date for the Class A certificate, it is intended that the amount on
deposit in the principal accumulation account will be used in
conjunction with the issuance of an additional Class VFC
certificate, to repay the Class A certificate in full. Subsequent
to this, the scheduled and unscheduled principal payments will be
used to repay the additional Class VFC certificate, and then the
subordinate classes of certificates in order of seniority.
Portfolio expected loss of 0.45%: This is based on Moody's
assessment of the lifetime loss expectation for the pool taking
into account (i) the historical collateral performance of similar
loans to date; as provided by the seller; (ii) the current
macroeconomic environment in Canada and (iii) benchmarking with
similar RMBS transactions.
Credit Enhancement: Credit enhancement in this transaction is
primarily comprised of subordination provided by the junior
tranches and excess spread. Under the sequential pay structure, all
scheduled principal payments and prepayments are used to pay down
the certificates in order of seniority.
Operational Risk Analysis: TDSI's is considered to be a strong
master servicer, given TD Bank's credit rating of Aa2(cr)/P-1 and
its decades of experience in the Canadian residential mortgage
market. TDSI has also provided representations and warranties and
is ultimately responsible for all the servicing obligations of the
mortgages. Moody's believe that TDSI has adequate controls and
procedures in place to provide high quality servicing.
Balloon Risk Analysis: TDSI (the seller) is required to (or cause
the applicable originator to) offer to renew or refinance all
mortgage loans at their contractual maturity, provided the borrower
is not in default and satisfies TD's third party lender
underwriting criteria at such time. Upon renewal or refinance of a
mortgage loan, TDSI will repurchase that mortgage loan from the
custodian for an amount equal to the full principal amount of the
loan plus accrued interest. If, prior to the end of the contractual
term of a performing mortgage loan, the related borrower has not
received an offer from TDSI or the originator or entered into an
agreement with another party to renew, refinance, or repay the
loan, then TDSI as master servicer of the portfolio will be
required to extend all such loans at the greater of the prevailing
market interest rate and the rate in force on that loan immediately
before the extension. Mortgage loans that are extended by the
master servicer would continue to be held by the custodian and
collections would continue to flow through to the certificate
holders. The combination of TDSI's conditional obligation to offer
to renew all mortgage loans at the end of their contractual term,
and the requirement on the part of the master servicer to extend
any remaining performing loans at the end of their contractual
term, eliminates the risk that a performing borrower may be pushed
into default by a demand for repayment at the end of the
contractual term. This effectively mitigates the balloon risk
associated with the mortgage pool.
The principal methodology used in these ratings was "Moody's
Approach to Rating RMBS Using the MILAN Framework" published in
December 2020.
This methodology was calibrated based on settings specific for
Canada.
Factors that would lead to an upgrade or downgrade of the ratings:
Significantly different loss assumptions compared with Moody's
expectations at close, due to either a change in economic
conditions from Moody's central scenario forecast or idiosyncratic
performance factors would lead to rating actions. For instance,
should economic conditions be worse than forecast, the higher
defaults and loss severities resulting from higher unemployment,
worsening household affordability and a weaker housing market could
result in a downgrade of the ratings. Deleveraging of the capital
structure or conversely a deterioration in the certificate's
available credit enhancement could result in an upgrade or a
downgrade of the rating, respectively.
Moody's issues provisional ratings in advance of the final sale of
securities, but these ratings only represent Moody's preliminary
credit opinion. Upon a conclusive review of the transaction and
associated documentation, Moody's will endeavor to assign
definitive ratings to the certificates. A definitive rating may
differ from a provisional rating.
RATE MORTGAGE 2021-J4: Fitch Assigns B+ Rating on B-5 Certs
-----------------------------------------------------------
Fitch rates the residential mortgage-backed certificates issued by
RATE Mortgage Trust 2021-J4 (RATE 2021-J4). The pool is backed by
prime collateral.
DEBT RATING PRIOR
---- ------ -----
RATE 2021-J4
A-1 LT AAAsf New Rating AAA(EXP)sf
A-10 LT AAAsf New Rating AAA(EXP)sf
A-11 LT AAAsf New Rating AAA(EXP)sf
A-12 LT AAAsf New Rating AAA(EXP)sf
A-13 LT AAAsf New Rating AAA(EXP)sf
A-14 LT AAAsf New Rating AAA(EXP)sf
A-15 LT AAAsf New Rating AAA(EXP)sf
A-16 LT AAAsf New Rating AAA(EXP)sf
A-17 LT AAAsf New Rating AAA(EXP)sf
A-18 LT AAAsf New Rating AAA(EXP)sf
A-19 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-20 LT AAAsf New Rating AAA(EXP)sf
A-21 LT AAAsf New Rating AAA(EXP)sf
A-22 LT AAAsf New Rating AAA(EXP)sf
A-23 LT AAAsf New Rating AAA(EXP)sf
A-24 LT AAAsf New Rating AAA(EXP)sf
A-25 LT AAAsf New Rating AAA(EXP)sf
A-26 LT AAAsf New Rating AAA(EXP)sf
A-27 LT AAAsf New Rating AAA(EXP)sf
A-28 LT AAAsf New Rating AAA(EXP)sf
A-29 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-30 LT AAAsf New Rating AAA(EXP)sf
A-31 LT AAAsf New Rating AAA(EXP)sf
A-32 LT AAAsf New Rating AAA(EXP)sf
A-33 LT AAAsf New Rating AAA(EXP)sf
A-34 LT AAAsf New Rating AAA(EXP)sf
A-35 LT AAAsf New Rating AAA(EXP)sf
A-36 LT AAAsf New Rating AAA(EXP)sf
A-4 LT AAAsf New Rating AAA(EXP)sf
A-5 LT AAAsf New Rating AAA(EXP)sf
A-6 LT AAAsf New Rating AAA(EXP)sf
A-7 LT AAAsf New Rating AAA(EXP)sf
A-8 LT AAAsf New Rating AAA(EXP)sf
A-9 LT AAAsf New Rating AAA(EXP)sf
A-X1 LT AAAsf New Rating AAA(EXP)sf
A-X10 LT AAAsf New Rating AAA(EXP)sf
A-X11 LT AAAsf New Rating AAA(EXP)sf
A-X12 LT AAAsf New Rating AAA(EXP)sf
A-X13 LT AAAsf New Rating AAA(EXP)sf
A-X14 LT AAAsf New Rating AAA(EXP)sf
A-X15 LT AAAsf New Rating AAA(EXP)sf
A-X16 LT AAAsf New Rating AAA(EXP)sf
A-X17 LT AAAsf New Rating AAA(EXP)sf
A-X18 LT AAAsf New Rating AAA(EXP)sf
A-X19 LT AAAsf New Rating AAA(EXP)sf
A-X2 LT AAAsf New Rating AAA(EXP)sf
A-X20 LT AAAsf New Rating AAA(EXP)sf
A-X21 LT AAAsf New Rating AAA(EXP)sf
A-X22 LT AAAsf New Rating AAA(EXP)sf
A-X23 LT AAAsf New Rating AAA(EXP)sf
A-X24 LT AAAsf New Rating AAA(EXP)sf
A-X25 LT AAAsf New Rating AAA(EXP)sf
A-X26 LT AAAsf New Rating AAA(EXP)sf
A-X27 LT AAAsf New Rating AAA(EXP)sf
A-X28 LT AAAsf New Rating AAA(EXP)sf
A-X29 LT AAAsf New Rating AAA(EXP)sf
A-X30 LT AAAsf New Rating AAA(EXP)sf
A-X31 LT AAAsf New Rating AAA(EXP)sf
A-X32 LT AAAsf New Rating AAA(EXP)sf
A-X33 LT AAAsf New Rating AAA(EXP)sf
A-X34 LT AAAsf New Rating AAA(EXP)sf
A-X35 LT AAAsf New Rating AAA(EXP)sf
A-X36 LT AAAsf New Rating AAA(EXP)sf
A-X37 LT AAAsf New Rating AAA(EXP)sf
A-X4 LT AAAsf New Rating AAA(EXP)sf
A-X5 LT AAAsf New Rating AAA(EXP)sf
A-X6 LT AAAsf New Rating AAA(EXP)sf
A-X7 LT AAAsf New Rating AAA(EXP)sf
A-X8 LT AAAsf New Rating AAA(EXP)sf
A-X9 LT AAAsf New Rating AAA(EXP)sf
A-XS LT NRsf New Rating NR(EXP)sf
A-x3 LT AAAsf New Rating AAA(EXP)sf
B-1 LT AAsf New Rating AA(EXP)sf
B-1A LT AAsf New Rating AA(EXP)sf
B-2 LT Asf New Rating A(EXP)sf
B-2A LT Asf New Rating A(EXP)sf
B-3 LT BBBsf New Rating BBB(EXP)sf
B-4 LT BBsf New Rating BB(EXP)sf
B-5 LT B+sf New Rating B+(EXP)sf
B-6 LT NRsf New Rating NR(EXP)sf
B-X1 LT AAsf New Rating AA(EXP)sf
B-X2 LT Asf New Rating A(EXP)sf
R LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
The certificates are supported by 469 loans with a total balance of
approximately $430.64 million as of the cutoff date. The pool
consists of prime fixed-rate mortgages originated by Guaranteed
Rate, Inc. (GRI). Distributions of principal and interest and loss
allocations are based on a senior-subordinate, shifting-interest
structure.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 10.7% above a long-term sustainable level (versus
11.7% on a national level). Underlying fundamentals are not keeping
pace with the growth in prices, which is a result of a
supply/demand imbalance driven by low inventory, low mortgage rates
and new buyers entering the market. These trends have led to
significant home price increases over the past year, with home
prices rising 18.6% yoy nationally as of June 2021.
High-Quality Mortgage Pool (Positive): The collateral consists of
469 loans, totaling $430.64 million, and seasoned approximately
four months in the aggregate (calculated as the difference between
origination date and first pay date). The borrowers have a strong
credit profile (779 FICO and 32% debt to income ratio [DTI]) and
moderate leverage (72% current mark to market loan to value ratio
[cLTV]). The pool consists of 90.3% of loans where the borrower
maintains a primary residence, while 9.7% comprise a second home,
or loans made to nonpermanent resident aliens treated as investment
properties. Additionally, 96.5% of the loans were originated
through a retail channel and 100% are designated as safe-harbor
qualified mortgage (QM).
Shifting Interest Structure (Mixed): 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. While there is
only minimal leakage to the subordinate bonds early in the life of
the transaction, the structure is more vulnerable to defaults
occurring at a later stage compared to a sequential or modified
sequential structure.
Interest Reduction Risk (Negative): The transaction incorporates a
structural feature for loans more than 120 days delinquent (a
stop-advance loan). Unpaid interest on stop-advance loans reduces
the amount of interest that is contractually due to bondholders in
reverse-sequential order. While this feature helps limit cash flow
leakage to subordinate bonds, it can result in interest reductions
to rated bonds in high-stress scenarios. A key difference with this
transaction, compared to other programs that treat stop-advance
loans similarly, is that liquidation proceeds are allocated to
interest before principal. As a result, Fitch included the full
interest carry in its loss projections and views the risk of
permanent interest reductions as lower than for other programs with
a similar feature.
Low Operational Risk (Positive): Operational risk is well
controlled for in this transaction. GRI is assessed as an 'Average'
originator and is contributing all the loans to the pool. The
originator has a robust origination strategy and maintains
experienced senior management and staff, strong risk management and
corporate governance controls, and a robust due diligence process.
Primary servicing functions will be performed by ServiceMac. Fitch
conducted an abbreviated review and determined the servicer meets
the industry standards necessary to effectively subservice mortgage
loans.
Credit Enhancement (CE) Floor (Positive): To mitigate tail risk,
which arises as the pool seasons and fewer loans are outstanding, a
subordination floor of 1.20% of the original balance will be
maintained for the subordinate classes. The floor is sufficient to
protect against the five largest loans defaulting at Fitch's
'AAAsf' average loss severity of 48%.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Fitch's analysis 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 may be
considered in the surveillance of the transaction. Three sets
of sensitivity analyses were conducted at the state and
national levels to assess the effect of higher MVDs for the
subject pool.
-- The 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 42% 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.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- The defined positive rating sensitivity analysis demonstrates
how the ratings would react to positive home price growth of
10% with no assumed overvaluation. Excluding the senior class,
which is already rated '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.
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 (Form 15E) as
prepared by Consolidated Analytics. The third-party due diligence
described in Form 15E focused on credit, compliance and property
valuation review. Fitch considered this information in its analysis
and, as a result, Fitch made the following adjustment(s) to its
analysis: a 5% default reduction at the loan level. This resulted
in 23bps reduction to the 'AAAsf' expected loss.
DATA ADEQUACY
Fitch relied in its analysis on an independent third-party due
diligence review performed on 100% of the pool. The third-party due
diligence was consistent with Fitch's "U.S. RMBS Rating Criteria."
Consolidated Analytics was 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 of this
report for further 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
(ASF) data layout format, and the data are considered
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.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means 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.
REESE PARK CLO: Moody's Assigns Ba3 Rating to Class E-R Notes
-------------------------------------------------------------
Moody's Investors Service has assigned ratings to three classes of
CLO refinancing notes issued by Reese Park CLO, Ltd. (the
"Issuer").
Moody's rating action is as follows:
US$5,000,000 Class X-R Senior Secured Floating Rate Notes Due 2034,
Assigned Aaa (sf)
US$310,000,000 Class A-R Senior Secured Floating Rate Notes Due
2034, Assigned Aaa (sf)
US$20,750,000 Class E-R Junior Secured Deferrable Floating Rate
Notes Due 2034, Assigned Ba3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least 90%
of the portfolio must consist of first lien loans, cash, and
eligible investments, and up to 10% of the portfolio may consist of
second lien loans, first lien last out loans, unsecured loans, and
bonds.
Blackstone Liquid Credit Strategies LLC (the "Manager") will
continue to direct the selection, acquisition and disposition of
the assets on behalf of the Issuer and may engage in trading
activity, including discretionary trading, during the transaction's
extended five-year reinvestment period. Thereafter, subject to
certain restrictions, the Manager may reinvest unscheduled
principal payments and proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: extension of the reinvestment
period; extensions of the stated maturity and non-call period;
changes to certain collateral quality tests; and changes to the
overcollateralization test levels; the inclusion of Libor
replacement provisions; additions to the CLO's ability to hold
workout and restructured assets; changes to the definition of
"Adjusted Weighted Average Rating Factor" and changes to the base
matrix and modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Portfolio par: $500,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 3141
Weighted Average Spread (WAS): 3.30%
Weighted Average Coupon (WAC): 6.00%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 9 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
SOUTHWICK PARK: S&P Assigns BB- (sf) Rating on Class E-R Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-2R, B-1R,
B-2R, C-R, D-R, and E-R replacement notes from Southwick Park CLO
Ltd./Southwick Park CLO LLC, a CLO originally issued in 2019 that
is managed by Blackstone Liquid Credit Strategies LLC. At the same
time, S&P withdrew its ratings on the original class A-2, B-1, B-2,
C, D, and E notes following payment in full on the Nov. 23 2021,
refinancing date. The class A-1R replacement notes will not be
rated.
The replacement notes were issued via a supplemental indenture,
which outlines the terms of the replacement notes. According to the
supplemental indenture:
-- The non-call period will be extended to Nov. 23, 2022.
-- No additional subordinated notes will be issued on the
refinancing date.
-- The transaction has adopted benchmark replacement language and
made updates to conform to current rating agency methodology.
Replacement And Original Note Issuances
Replacement notes
Class A-1R, $320.00 million: Three-month LIBOR + 1.06%
Class A-2R, $10.00 million: Three-month LIBOR + 1.25%
Class B-1R, $28.75 million: Three-month LIBOR + 1.50%
Class B-2R, $20.00 million: 2.46%
Class C-R, $29.75 million: Three-month LIBOR + 1.95%
Class D-R, $30.00 million: Three-month LIBOR + 2.95%
Class E-R, $21.50 million: Three-month LIBOR + 6.25%
Original notes
Class A-1, $320.00 million: Three-month LIBOR + 1.30%
Class A-1, $10.00 million: Three-month LIBOR + 1.65%
Class B-1, $28.75 million: Three-month LIBOR + 1.75%
Class B-2, $20.00 million: 3.95%
Class C, $29.75 million: Three-month LIBOR + 2.50%
Class D, $30.00 million: Three-month LIBOR + 3.85%
Class E, $21.50 million: Three-month LIBOR + 6.70%
Subordinated notes, $43.45 million: Not applicable
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Southwick Park CLO Ltd./Southwick Park CLO LLC
Class A-1R, $320.00 million: NR
Class A-2R, $10.00 million: AAA (sf)
Class B-1R, $28.75 million: AA (sf)
Class B-2R, $20.00 million: AA (sf)
Class C-R (deferrable), $29.75 million: A (sf)
Class D-R (deferrable), $30.00 million: BBB- (sf)
Class E-R (deferrable), $21.50 million: BB- (sf)
Ratings Withdrawn
Southwick Park CLO Ltd./Southwick Park CLO LLC
Class A-2 to NR from 'AAA (sf)'
Class B-1 to NR from 'AA (sf)'
Class B-2 to NR from 'AA (sf)'
Class C to NR from 'A (sf)'
Class D to NR from 'BBB- (sf)'
Class E to NR from 'BB- (sf)'
Other Outstanding Classes
Southwick Park CLO Ltd./Southwick Park CLO LLC
Subordinated notes: NR
NR--Not rated.
SPRITE 2021-1: S&P Assigns B+ (sf) Rating on $60MM Class C Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to SPRITE 2021-1
Ltd./SPRITE 2021-1 US LLC's series A, B, and C notes.
The note issuance is an ABS securitization backed by a portfolio of
35 aircraft and the related leases, shares, and beneficial
interests in entities that directly and indirectly receive aircraft
portfolio lease rental and residual cash flows, among others.
The ratings reflect S&P's view of:
-- The likelihood of timely interest on the series A notes
(excluding step-up interest) on each payment date, the timely
interest on the series B notes (excluding step up interest) on each
payment date when the series A notes are no longer outstanding, the
ultimate interest on the series C notes (excluding step up
interest), and the ultimate principal payment on the series A, B,
and C notes on or prior to the legal final maturity date at their
respective rating stress.
-- The portfolio of 35 aircraft, which comprise 31 narrowbody
aircraft (Airbus A319/A320: 34%; and Boeing 737-800: 46%) and four
widebody aircraft, including one widebody freighter (A330-300: 8%;
B777-300ER: 8%; and B747-400F: 4%).
-- The weighted average age (by the lower of the mean and median
[LMM] of the half-life values) of the aircraft of 12.9 years.
Currently, all aircraft in the portfolio are subject to a lease or
a pending lease, with a weighted average remaining lease term of
approximately 4.0 years. The weighted average age and remaining
term are calculated as of the economic closing date.
-- Approximately 67% (by LMM of half-life values) of the lessees
operate in developed markets, where domestic air traffic levels
have picked up recently--following the global air travel shutdown
that was imposed in 2020 at the height of the COVID-19 pandemic.
-- The existing and future lessees' estimated credit quality and
diversification.
-- Each series' scheduled amortization profile, which is a
straight line over 11 years for the series A and B notes and a
straight line over seven years for the series C notes.
-- The transaction's performance triggers and conditions, which
include the debt service coverage ratios and utilization levels
falling below their respective thresholds, the notes remain
outstanding after year seven, and/or the number of aircraft in the
portfolio is less than eight, would result in the series A and B
notes' turbo amortization if triggered.
-- The series C cash sweep, which pays 10% from month 36 through
month 60; pays 15% from month 60 through month 72; and pays 20% of
the remaining available collections to the series' principal from
month 72 through month 84, provided the issuers own a minimum of
eight aircraft.
-- The end-of-lease payment that will be paid to the series A, B,
and C notes according to a percentage equaling each series'
then-current loan-to-value ratio.
-- The subordination of the series C notes' principal and interest
to the series A and B notes' principal and interest.
-- The revolving credit facility from MUFG Bank Ltd., which is
equal to 18 months' interest on the series A and B notes and is
available to cover senior expenses, including the permitted engine
leases, hedge payments, and interest on the series A and B notes.
-- Alton Aviation Consultancy LLC's maintenance analysis before
closing. After closing, the servicer will perform a
forward-looking, 24-month maintenance analysis at least
semiannually, which will be reviewed by Alton for reasonableness
and achievability.
-- The maintenance reserve account (which has an initial deposit
of approximately $5 million at closing), will be used to cover
maintenance costs and has a floor of $1 million. The account is
replenished to 25% of the required amount after paying interest to
the series A and B notes and to 100% of the required amount after
paying scheduled principal to the series A and B notes. The
required amount is sized based on a forward-looking schedule of
maintenance outflows and asset trade payments. The excess amounts
in the account over the required maintenance amount will be
transferred to the payment waterfall on or after the first
anniversary of the closing date.
-- The security deposit ($11.625 million at closing), will be used
to repay security deposits due, as well as other senior expenses
and interest and principal on the series A and B notes if a
shortfall occurs--to the extent the amount on deposit exceeds the
target amount.
-- The expense reserve account, which was funded at closing from
note proceeds with approximately $2,000,000.
-- The series C reserve account, which was funded at closing from
note proceeds with approximately $1 million, may be used to pay
interest and principal on the series C notes.
-- The senior indemnification (excluding indemnification amounts
to lessees under leases entered into before the transaction closing
date) is capped at $10 million and modelled to occur in the first
12 months.
-- The junior indemnification (uncapped) is subordinated to the
rated series' principal payment.
-- World Star Aviation (UK) Ltd. as the servicer of the
transaction.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
SPRITE 2021-1 Ltd./SPRITE 2021-1 US LLC
Class A, $485.000 million: A- (sf)
Class B, $88.000 million: BBB- (sf)
Class C, $60.000 million: B+ (sf)
START II LTD: Fitch Affirms B Rating on Class C Notes
-----------------------------------------------------
Fitch Ratings has affirmed the outstanding ratings on START II Ltd.
(START II) series A, B and C fixed-rate secured notes. The Rating
Outlook remains Negative.
DEBT RATING PRIOR
---- ------ -----
START II Ltd.
Class A 85573LAA9 LT BBBsf Affirmed BBBsf
Class B 85573LAB7 LT BBsf Affirmed BBsf
Class C 85573LAC5 LT Bsf Affirmed Bsf
TRANSACTION SUMMARY
The affirmations reflect ongoing stress and pressure on airline
lessee credits backing the leases in the pool, downward pressure on
aircraft values, Fitch's updated assumptions and stresses, and
ongoing transaction performance since the prior review in November
2020.
The Outlook remains Negative on all series of notes, reflecting
Fitch's base case expectation for the structure to withstand
immediate and near-term stresses at the updated assumptions, and
stressed scenarios commensurate with their respective ratings.
Continued global travel restrictions driven by the pandemic and the
subsequent airlines recovery, including ongoing regional flareups
and potential for and occurrence of new virus variants, resulted in
continued delays in recovery of the airline industry.
This remains a credit negative for these aircraft ABS transactions,
and airlines globally remain under pressure, despite the recent
opening up of borders regionally and pick-up in air travel across
many regions. This could lead to additional near-term lease
deferrals, airline defaults and bankruptcies, along with lower
aircraft demand and value impairments, which can be impactful on
the pool. These negative factors could manifest in the transaction
resulting in lower cash flows and pressure on ratings in the near
term.
Fitch updated rating assumptions for both rated and non-rated
airlines and also aircraft values. These updates were key drivers
of today's rating actions along with ongoing performance metrics,
which remain mostly within Fitch expectations, and modeled
scenarios for certain elements from the prior review.
START II experienced stability-to-improving airline lessee credit
with the 'CCC' and below rated bucket declining materially to 47.5%
from 69% in the prior review and utilization being stable along
with other metrics since the last review. Principal note payments
were slightly outside of Fitch's expectations on the notes but only
marginally and more so for the class B and C notes. This did not
significantly impact Fitch's analysis.
With the recent October 2021 updated aircraft appraisals received
and utilized for this review, values remained fairly consistent
versus a year ago, benefitting from positive-to-neutral maintenance
adjustments. This supported the total pool value, resulting in a
material improvement in loan-to-values (LTV) for all notes and
benefitting credit enhancement when compared to the prior review.
Therefore, Fitch did not conduct cash flow modeling for START II as
performance has been within expectations and the transaction was
modeled within the past 18 months, which is consistent with Fitch
criteria.
AerCap Holdings N.V. (BBB-/Stable) now acts as servicer for START
II, through its wholly-owned subsidiary Celestial Aviation Services
Limited, formerly known as GECAS (the initial servicer). OZ
Aviation 2019-1, LLC is the asset manager and E Note Holder for
START II (not rated).
KEY RATING DRIVERS
Stable-to-Improving Airline Lessee Credit
The credit profiles of the airline lessees in the pool improved
since the prior review but remain under stress due to the
coronavirus-related impact on all global airlines in 2020-2021. The
proportion of the START II pool assumed at a 'CCC' Issuer Default
Rate (IDR) and below declined to 47.5%, notably down from 69.0% in
the prior review (36.3% at closing).
The assumptions are reflective of these airlines' ongoing credit
profiles and fleets in the current operating environment, due to
the continued coronavirus-related impact on the sector. Any
publicly rated airlines in the pool with ratings that have shifted
have been updated, and there were a few airlines with higher
ratings at this review versus in 2020.
Asset Quality and Appraised Pool Value:
The pool features 100% liquid narrowbody (NB) aircraft, which Fitch
views positively. Elevated uncertainty remains about market values
and how the current environment will impact near-term lease
maturities. Fitch expects downward pressure on values in the
short-to-medium term, but values have stabilized somewhat in late
2021.
The pool remains backed by 15 aircraft across eight lessees after
two A319s on lease to Alaska Airlines (MSN 2773 and 2811) were
recently returned following lease expiration. These two aircraft
are grounded (aircraft on ground (AOG) as of today, totaling 5.6%
of the pool value. The two aircraft on lease to Aegean Airlines
were extended for three-year lease terms starting in November
2021.
The appraisers for the transaction are IBA Group Ltd. (IBA), Morten
Beyer & Agnew Inc. (mba) and AVITAS, Inc. (Avitas). The transaction
document value is $334.8 million (as of October 2021), a very
slight decrease from $337.3 million a year prior due to overall
positive maintenance adjustments. This benefitted LTVs for each
note and is an overall positive for the transaction while
offsetting low note principal payments over the past year, along
with recent aircraft on the ground.
Fitch utilized conservative asset values as there is continued
pressure and weaker market values for certain aircraft variants. To
value the pool for this review, Fitch utilized the average
excluding highest value (AEH) of the maintenance-adjusted base
values (MABVs) for all aircraft, which is mostly consistent with
the prior review This resulted in a Fitch value assumption of
$327.3 million, an approximately 2.2% haircut down from the
transaction document value of $334.8 million.
Transaction Performance:
Lease collections have been stable since the last review in late
2020, with a notable increase seen in the recent two periods. As of
the October collection period, START II received $4.5 million in
basic rent compared to average monthly collections of $3.3 million
over the last 12 months. A $2.2 million end of lease payment was
received last month in October as well.
All notes continue to receive interest payments through the current
period. Given increased maintenance reserve requirements, no series
A principal was paid in the prior five months. However, the series
A notes benefitted from a recent $2.2 million end of lease payment
which increased total collections enough to pay the scheduled A
principal. All series of notes remain behind schedule. LTVs
declined during the month of October due to better than expected
appraisal values, which is a net positive for the notes.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- The Negative Outlooks on all series of notes reflect the
potential for further negative rating actions due to concerns
over the ultimate impact of the coronavirus pandemic, the
resulting concerns associated with airline performance and
aircraft values and other assumptions across the aviation
industry due to the severe decline in travel and grounding of
airlines.
-- At close Fitch conducted multiple rating sensitivity analyses
to evaluate the impact of changes to a number of the variables
in the analysis. The performance of aircraft operating lease
securitizations is affected by various factors, which could
have an impact on the assigned ratings. Due to the correlation
between global economic conditions and the airline industry,
the ratings can be affected by the strength of the macro-
environment over the remaining terms of these transactions.
-- In the initial analysis, Fitch found the transactions to
exhibit sensitivity to the timing and severity of assumed
recessions. Fitch also found that greater default probability
of the leases has a material impact on the ratings. The timing
and degree of technological advancement in the commercial
aviation space, and the resulting impact on aircraft values,
lease rates and utilization would also have a moderate impact
on the ratings. Due to continuing MV pressure on asset values
and worsening supply and demand dynamics, Fitch explored the
potential cash flow decline if residual proceeds received were
less than anticipated under Fitch's primary scenarios as in
prior review. Under this scenario, the transaction could
experience further downgrades.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- The aircraft ABS sector has a rating cap of 'Asf'. All
subordinate tranches carry one category of ratings lower than
the senior tranche and below the ratings at close. However, if
the assets in this pool receive stronger residual proceeds
than Fitch's stressed scenarios, the transactions could
perform better than expected.
-- In Fitch's prior review, Fitch utilized stronger residual
value assumptions. START II experienced improvement in cash
flows, and would remain at their current ratings under this
scenario.
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.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means 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.
TCI-SYMPHONY 2016-1: Moody's Gives Ba3 Rating to Class E-R-2 Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
CLO refinancing notes issued by TCI-Symphony CLO 2016-1 Ltd. (the
"Issuer").
Moody's rating action is as follows:
US$1,000,000 Class X Amortization Senior Floating Rates Notes Due
2032, Assigned Aaa (sf)
US$320,000,000 Class A-R-2 Senior Secured Floating Rate Notes Due
2032, Assigned Aaa (sf)
US$60,000,000 Class B-R-2 Senior Secured Floating Rate Notes Due
2032, Assigned Aa2 (sf)
US$27,500,000 Class C-R-2 Senior Secured Deferrable Floating Rate
Notes Due 2032, Assigned A2 (sf)
US$28,500,000 Class D-R-2 Senior Secured Deferrable Floating Rate
Notes Due 2032, Assigned Baa3 (sf)
US$24,000,000 Class E-R-2 Senior Secured Deferrable Mezzanine
Floating Rate Notes Due 2032, Assigned Ba3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least 90%
of the portfolio must consist of senior secured loans and eligible
investments, and up to 10% of the portfolio may consist of
second-lien loans, unsecured loans, and non-loan assets.
TCI Capital Management II LLC (the "Manager") will continue to
direct the selection, acquisition and disposition of the assets on
behalf of the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's extended two year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: extension of the reinvestment
period; extensions of the stated maturity and non-call period;
changes to certain collateral quality tests; changes to certain
concentration limitations; changes to the overcollateralization
test levels; changes to the definition of "Moody's Default
Probability Rating"; and changes to the base matrix and modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Portfolio par: $500,000,000
Diversity Score: 80
Weighted Average Rating Factor (WARF): 2997
Weighted Average Spread (WAS): 3.30%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 6 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
TRESTLES CLO V: S&P Assigns BB- (sf) Rating on Class E Notes
------------------------------------------------------------
S&P Global Ratings assigned its ratings to Trestles CLO V
Ltd./Trestles CLO V LLC's floating- and fixed-rate notes.
The note issuance is a CLO transaction backed primarily by broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans that are governed by collateral quality tests.
The ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Trestles CLO V Ltd./Trestles CLO V LLC
Class A-1, $234.50 million: AAA (sf)
Class A-2, $9.50 million: AAA (sf)
Class B-1, $40.00 million: AA (sf)
Class B-2, $20.00 million: AA (sf)
Class C (deferrable), $22.00 million: A (sf)
Class D (deferrable), $26.00 million: BBB- (sf)
Class E (deferrable), $14.00 million: BB- (sf)
Subordinated notes, $39.00 million: Not rated
TRINITAS CLO VII: S&P Assigns Prelim B- (sf) Rating on F-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Trinitas CLO
VII Ltd.'s fixed- and floating-rate notes.
The note issuance is a CLO securitization backed by primarily
broadly syndicated speculative-grade (rated 'BB+' and lower) senior
secured term loans.
The preliminary ratings are based on information as of Nov. 18,
2021. 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 subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Trinitas CLO VII Ltd.
Class X, $6.00 million: AAA (sf)
Class A-1R, $363.00 million: AAA (sf)
Class A-2R, $15.00 million: AAA (sf)
Class B-1R, $63.00 million: AA (sf)
Class B-2R, $15.00 million: AA (sf)
Class C-R (deferrable), $33.00 million: A (sf)
Class D-1R (deferrable), $6.00 million: BBB- (sf)
Class D-2R (deferrable), $20.00 million: BBB+ (sf)
Class D-3R (deferrable), $10.00 million: BBB- (sf)
Class E-R (deferrable), $21.00 million: BB- (sf)
Class F-R (deferrable), $9.00 million: B- (sf)
Subordinated notes, $73.30 million: Not rated
UWM MORTGAGE 2021-INV4: Moody's Assigns B3 Rating to Cl. B-5 Certs
------------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to
thirty-four classes of residential mortgage-backed securities
(RMBS) issued by UWM Mortgage Trust 2021-INV4. The ratings range
from Aaa (sf) to B3 (sf).
UWM Mortgage Trust 2021-INV4 is a securitization of 2,119
fully-amortizing, fixed rate, first-lien non-owner occupied
residential investor properties mortgage loans with original terms
to maturity between 17 and 30 years, with an aggregate stated
principal balance of approximately $762,335,879. All the loans in
the pool are originated by United Wholesale Mortgage, LLC (UWM -
Ba3 long-term corporate family and Ba3 senior unsecured bond
ratings, with stable outlook) in accordance with the underwriting
guidelines of Fannie Mae or Freddie Mac, subject to certain
permitted variances, with additional credit overlays. The average
stated principal balance is approximately $359,762 and the weighted
average (WA) current mortgage rate is 3.4%.
All of the personal-use loans are "qualified mortgages" under
Regulation Z as a result of the temporary provision allowing
qualified mortgage status for loans eligible for purchase,
guaranty, or insurance by Fannie Mae and Freddie Mac (and certain
other federal agencies). With respect to these mortgage loans, the
sponsor will represent that such mortgage loans are "qualified
mortgages" under Regulation Z. With the exception of personal-use
loans, all other mortgage loans in the pool are not subject to TILA
because each such mortgage loan is an extension of credit primarily
for a business purpose and is not a "covered transaction" as
defined in Section 1026.43(b)(1) of Regulation Z.
Cenlar FSB (Cenlar) will service all the mortgage loans in the
pool. Servicing compensation is subject to a step-up incentive fee
structure. UWM will be the servicing administrator and Nationstar
Mortgage LLC (Nationstar - B2 long-term issuer rating, with
positive outlook) will be the master servicer. UWM will be
responsible for principal and interest advances as well as other
servicing advances. The master servicer will be required to make
principal and interest advances if UWM is unable to do so.
Third-party review (TPR) firms conducted credit, data accuracy, and
compliance reviews on approximately 27.5% of the loans in the pool
by loan count and property valuation review on 100.0% of the loans
in the pool. The number of loans that went through a full due
diligence review is above Moody's credit-neutral sample size. Also,
the TPR results indicate that there are no material compliance,
credit, or data issues and no appraisal defects.
Moody's analyzed the underlying mortgage loans using Moody's
Individual Loan Analysis (MILAN) model. Moody's expected loss for
this pool in a baseline scenario-mean is 1.11% in a baseline
scenario-median is 0.82% and reaches 7.02% at a stress level
consistent with Moody's Aaa ratings. Moody's also compared the
collateral pool to other securitizations with agency eligible
loans. Overall, this pool has average credit risk profile as
compared to that of recent transactions.
The securitization has a shifting interest structure with a
five-year lockout period that benefits from a senior subordination
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: UWM Mortgage Trust 2021-INV4
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-3-A, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-4-A, Definitive Rating Assigned Aaa (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-6, Definitive Rating Assigned Aaa (sf)
Cl. A-6-A, 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-9-X*, Definitive Rating Assigned Aaa (sf)
Cl. A-9-A, Definitive Rating Assigned Aaa (sf)
Cl. A-9-AI*, Definitive Rating Assigned Aaa (sf)
Cl. A-9-B, Definitive Rating Assigned Aaa (sf)
Cl. A-9-BI*, 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 Aa1 (sf)
Cl. A-15, Definitive Rating Assigned Aa1 (sf)
Cl. A-16, Definitive Rating Assigned Aaa (sf)
Cl. A-17, Definitive Rating Assigned Aaa (sf)
Cl. A-X-1*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-2*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-3*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-4*, Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A3 (sf)
Cl. B-3, Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Definitive Rating Assigned B3 (sf)
*Reflects Interest Only Classes
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss for this pool in a baseline scenario is 1.11%
at the mean, 0.82% at the median, and reaches 7.02% at a stress
level consistent with Moody's Aaa ratings.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's 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 transaction is backed by 2,119 fully-amortizing, fixed rate,
first-lien non-owner occupied residential investor properties
mortgage loans with original terms to maturity between 17 and 30
years, with an aggregate stated principal balance of approximately
$762,335,879. The average stated principal balance is approximately
$359,762 and the weighted average (WA) current mortgage rate is
3.4%. Borrowers of the mortgage loans backing this transaction have
strong credit profiles demonstrated by strong credit scores and low
combined loan-to-value (CLTV) ratios. The weighted average primary
borrower original FICO score and original CLTV ratio of the pool is
766 and approximately 65.8% respectively. The WA original debt-to
income (DTI) ratio is approximately 37.7%. All of the loans are
designated as Qualified Mortgages (QM) under the GSE temporary
exemption under the Ability-to-Repay (ATR) rules.
Approximately 46.7% of the mortgages (by loan balance) are backed
by properties located in California. The next largest geographic
concentration is Florida (approximately 6.2% by loan balance),
Arizona (approximately 5.6% by loan balance), Utah (approximately
5.3% by loan balance) and Colorado (approximately 4.9% by loan
balance). All other states each represent 4.5% or less by loan
balance. Approximately 24.6% (by loan balance) of the pool is
backed by properties that are two-to-four family residential
properties whereas loans backed by single family residential
properties represent approximately 43.6% (by loan balance) of the
pool.
Approximately 80.1% and 18.9% (by loan balance) of the loans were
originated through the broker and the correspondent channels
respectively. Irrespective of the origination channel, UWM
underwrites all the loans it originates through its underwriting
process. Nevertheless, the MILAN model adjusts the loan probability
of default (PD) to account for different loan origination channels
- retail (the least risk), broker (the most risk) and correspondent
(intermediate risk) channels.
Origination Quality and Underwriting Guidelines
All the mortgage loans in this pool (including correspondent
channel loans) were originated in accordance with the underwriting
guidelines of Fannie Mae or Freddie Mac, subject to certain
permitted variances, with additional credit overlays and approved
for origination through Fannie Mae's Desktop Underwriter Program or
Freddie Mac's Loan Prospector Program. Loan file reviews are
conducted through a pre-funding and post-closing quality control
(QC) process.
Moody's consider UWM to be an adequate originator of GSE eligible
loans following Moody's review of its underwriting guidelines,
quality control processes, policies and procedures, and historical
performance relative to its peers. As a result, Moody's did not
make any adjustments to its base case and Aaa stress loss
assumptions.
Servicing arrangement
Cenlar (the servicer) will service all the mortgage loans in the
transaction. UWM will serve as the servicing administrator and
Nationstar will serve as the master servicer. The servicing
administrator will be required to (i) make advances in respect of
delinquent interest and principal on the mortgage loans and (ii)
make certain servicing advances with respect to the preservation,
restoration, repair and protection of a mortgaged property,
including delinquent tax and insurance payments, unless the
servicer determines that such amounts would not be recoverable. The
master servicer will be obligated to fund any required monthly
advance if the servicing administrator fails in its obligation to
do so. Moody's consider the overall servicing arrangement for this
pool as adequate given the ability and experience of Cenlar as a
servicer and the presence of a master servicer. As a result,
Moody's did not make any adjustments to its base case and Aaa
stress loss assumptions.
Servicing compensation in this transaction is based on a
fee-for-service incentive structure. The servicer receives higher
fees for labor-intensive activities that are associated with
servicing delinquent loans, including loss mitigation, than they
receive for servicing a performing loan, which is less labor
intensive. The fee-for-service incentive structure includes an
initial monthly base servicing fee of $40 for all performing loans
and increases according to certain delinquent and incentive fee
schedules. The fees in this transaction are similar to other
transactions with fee-for-service structure which Moody's have
rated.
Third-party review (TPR)
Two independent third-party review firms, Wipro Opus Risk
Solutions, LLC and Consolidated Analytics, Inc., were engaged to
conduct due diligence on approximately 27.5% (by loan count) of the
loans in the pool for credit, compliance and data accuracy and
100.0% of the loans for property valuation review. The number of
loans that went through a full due diligence review is above
Moody's calculated credit-neutral sample size. Also, there were
generally no material findings. The loans that had exceptions to
the originators' underwriting guidelines had significant
compensating factors that were documented. Moody's did not make any
adjustments to Moody's credit enhancement for TPR scope, sample
size and results.
Representations and Warranties Framework
UWM as the sponsor, makes the loan-level R&Ws for the mortgage
loans. The R&Ws cover most of the categories that Moody's
identified in its methodology as credit neutral. Further, R&W
breaches are evaluated by an independent third party using a set of
objective criteria. The independent reviewer will perform detailed
reviews to determine whether any R&Ws were breached when any loan
becomes a severely delinquent mortgage loan, a delinquent modified
mortgage loan, or is liquidated at a loss. These reviews are
thorough in that the transaction documents set forth detailed tests
for each R&W that the independent reviewer will perform. However,
Moody's applied an adjustment to its expected losses to account for
the risk that UWM may be unable to repurchase defective loans in a
stressed economic environment in which a substantial portion of the
loans breach the R&Ws, given that it is a non-bank entity with a
monoline business (mortgage origination and servicing) that is
highly correlated with the economy.
Transaction structure
The securitization has a shifting interest structure that benefits
from a senior subordination floor and a subordinate floor. Funds
collected, including principal, are first used to make interest
payments and then principal payments on a pro-rata basis up to the
senior bonds principal distribution amount, and then interest and
principal payments on a sequential basis up to each subordinate
bond principal distribution amount. As in all transactions with
shifting interest structures, the senior bonds benefit from a cash
flow waterfall that allocates all prepayments to the senior bonds
for a specified period of time, and increasing amounts of
prepayments to the subordinate bonds thereafter, but only if loan
performance satisfies delinquency and loss tests.
Realized losses are allocated reverse sequentially among the
subordinate and senior support certificates and on a pro-rata basis
among the super senior certificates.
Tail risk & 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 eroding credit enhancement
over time and increased performance volatility, known as tail risk.
To mitigate this risk, the transaction provides for a senior
subordination floor of 0.95% 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 0.85% of the closing pool balance.
Moody's calculate the credit neutral floors for a given target
rating as shown in its principal methodology. The senior
subordination floor and the subordinate floor of 0.95% and 0.85%,
respectively, are consistent with the credit neutral floors for the
assigned ratings.
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 rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in August 2021.
VERUS SECURITIZATION 2021-7: S&P Assigns 'B-' Rating on B-2 Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Verus Securitization
Trust 2021-7's mortgage-backed notes.
The note issuance is an RMBS securitization backed by primarily
first-lien, fixed-rate, and adjustable-rate residential mortgage
loans, including mortgage loans with initial interest-only periods
and/or balloon terms. The loans are secured primarily by
single-family residences, planned unit developments, two- to
four-family residential properties, condominiums, multifamily
homes, manufactured housing, and mixed-use properties to both prime
and nonprime borrowers. The pool has 1,210 loans backed by 1,224
properties, which are primarily non-qualified
mortgage/ability-to-repay (ATR) compliant and ATR-exempt loans. Six
of the 1,210 loans are cross-collateralized loans backed by 20
properties.
Since S&P assigned the preliminary ratings and published its
presale report on Nov. 17, 2021, the sponsor (VMC Asset Pooler LLC)
decreased the size of the A-1 and M-1 notes and increased the size
of the class A-2, B-2, and B-3 notes, resulting in an increase in
the credit enhancement of the A-1, M-1, B-1, and B-2 notes. The
re-sizing did not affect the ratings, which remain the same as the
preliminary ratings.
The ratings reflect S&P's view of:
-- The pool's collateral composition;
-- The transaction's credit enhancement;
-- The transaction's associated structural mechanics;
-- The transaction's representation and warranty framework;
-- The transaction's geographic concentration;
-- The mortgage aggregator, Invictus Capital Partners; and
-- The impact the COVID-19 pandemic will likely have on the
performance of the mortgage borrowers in the pool and liquidity
available in the transaction.
Ratings Assigned(i)
Verus Securitization Trust 2021-7
Class A-1, $467,657,000: AAA (sf)
Class A-2, $46,967,000: AA (sf)
Class A-3, $70,785,000: A (sf)
Class M-1, $29,187,000: BBB (sf)
Class B-1, $22,142,000: BB (sf)
Class B-2, $20,464,000: B- (sf)
Class B-3, $13,755,007: Not rated
Class A-IO-S, $670,957,007(ii): Not rated
Class XS, $670,957,007(ii): Not rated
Class DA: Not rated
Class R: Not rated
(i)The ratings address the ultimate payment of interest and
principal.
(ii)The notional amount equals the aggregate stated principal
balance of loans in the pool.
WELLS FARGO 2021-INV2: Moody's Assigns B3 Rating to Cl. B-5 Certs
-----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 25
classes of residential mortgage-backed securities (RMBS) issued by
Wells Fargo Mortgage Backed Securities 2021-INV2 Trust (WFMBS
2021-INV2). The ratings range from Aaa (sf) to B3 (sf). Since
issuing provisional ratings, the issuer has dropped seven loans
from the pool, bringing the aggregate unpaid principal balance from
$362,368,153 to $359,751,376, which in-turn had no impact on
Moody's ratings.
WFMBS 2021-INV2 is the second ever 100% agency-eligible
"investor-only" RMBS issuance sponsored by Wells Fargo Bank, N.A.
(Wells Fargo Bank, the sponsor and mortgage loan seller) consisting
of 1,270 primarily 30-year, fixed rate, prime residential mortgage
loans with an unpaid principal balance (UPB) of $359,751,376. The
mortgage loans for this transaction were originated by Wells Fargo
Bank, through its retail and correspondent channels, in accordance
with its agency underwriting that generally conform to either or
both of the Federal National Mortgage Association (Fannie Mae) and
the Federal Home Loan Mortgage Corporation (Freddie Mac)
(collectively, GSEs) guidelines.
Wells Fargo Bank (Aa1 long term deposit; Aa2 long term debt) will
service all the mortgage loans and Computershare Trust Company,
N.A. (Computershare) will act as master servicer.
The transaction is subject to the Dodd-Frank Act's risk retention
rules. The sponsor or one or more majority owned affiliates of the
sponsor will retain a 5% vertical residual interest in all the
offered certificates. The sponsor or one or more majority owned
affiliates of the sponsor will also be the holder of the residual
certificate.
WFMBS 2021-INV2 has a shifting interest structure with a five-year
lockout period that benefits from a senior subordination floor and
a subordinate floor. Moody's coded the cash flow to each of the
certificate classes using Moody's proprietary cash flow tool.
Moody's base its ratings on the certificates on the credit quality
of the mortgage loans, the structural features of the transaction,
Moody's assessments of the origination quality and servicing
arrangement, the strength of the third-party review (TPR) and the
representations and warranties (R&W) framework.
The complete rating actions are as follows:
Issuer: Wells Fargo Mortgage Backed Securities 2021-INV2 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 Baa3 (sf)
Cl. B-4, Definitive Rating Assigned Ba3 (sf)
Cl. B-5, Definitive Rating Assigned B3 (sf)
RATINGS RATIONALE
Moody's expected loss for this pool in a baseline scenario-mean is
1.37%, in a baseline scenario-median is 1.08%, and reaches 7.00% at
a stress level consistent with Moody's Aaa ratings.
Collateral Description
Moody's have assessed the collateral pool based on UPB of the
mortgage loans rolled forward to November 1, 2021 to take into
account the scheduled amortization of the mortgage loans and
curtailments received and applied through October 21, 2021. The
statistical characteristics as of the actual cut-off date for the
final pool of mortgage loans may thus vary.
The deal will be backed by approximately 1,270 fully amortizing,
fixed-rate mortgage loans with a UPB of approximately $359,751,376
and an original term to maturity of up to 30 years. All of the
mortgage loans are secured by first liens on single family
residential properties, two-to-four family residential properties,
planned unit developments, townhouses and condominiums,
underwritten through Fannie Mae's Desktop Underwriter Program or
Freddie Mac's Loan Product Advisor. Overall, the pool is of strong
credit quality and includes borrowers with high FICO scores
(weighted average (WA) primary borrower FICO of 764), low
loan-to-value ratios (WA CLTV 66.9%), WA borrower total monthly
income of approximately $18,723, and clean pay histories.
Approximately 24.1% (by UPB) of the borrowers are self-employed.
The WA seasoning of the pool is approximately 4.4 months.
Approximately 47.6% (by UPB) of the properties backing the mortgage
loans are located in five states: California, Texas, Florida, New
York, and Washington with 25.6% (by stated principle balance) of
the properties located in California. Properties located in the
states of North Carolina, Virginia, Tennessee, Pennsylvania and New
Jersey round out the top ten states by UPB.
Approximately 57.1% (by UPB) of the properties backing the mortgage
loans included in WFMBS 2021-INV2 are located in these ten states.
Origination Quality
Wells Fargo Bank is an indirect, wholly-owned subsidiary of Wells
Fargo & Company (long term debt A1). Wells Fargo & Company is a
U.S. bank holding company with approximately $1.97 trillion in
assets and approximately 266,000 employees as of June 30, 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. 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 Wells Fargo Bank 's agency underwriting
guidelines, staff and processes, quality control procedures, risk
management practices and performance history, Moody's made no
additional adjustments to its base case and Aaa loss expectations
for origination.
Third Party Review
The credit, compliance, property valuation, and data integrity
portion of the TPR was conducted on a random sample of 340
(approximately 26.7%, by final loan count) out of a prospective
securitization population of 1,270 mortgage loans. The due
diligence results confirm compliance with the originator's
underwriting guidelines for the vast majority of loans, no material
regulatory compliance issues, and no material property valuation
issues. The loans that had exceptions to the originator's
underwriting guidelines had sufficient compensating factors that
were documented. Overall, Moody's did not make adjustments to its
losses as (i) the sample size that went through full due-diligence
either met or exceeded Moody's credit-neutral criteria and (ii)
after reviewing the 4 loans which received a final grade of "D" (2
of which remain in the pool), Moody's did not deem these exceptions
to be material and therefore did not extrapolate these TPR results
on the unsampled portion of the pool.
Representation & Warranties
Moody's assessed the R&W framework for this transaction as
adequate. Moody's analyzed the strength of the R&W provider, the
loan-level R&Ws for the mortgage loans and the enforcement
mechanism. The R&W provider is highly rated, the loan-level R&Ws
are strong and, in general, either meet or exceed the baseline set
of credit-neutral R&Ws Moody's have identified for US RMBS, an
independent breach reviewer is named at closing, and the breach
review process is thorough, transparent and objective. As a result,
Moody's did not make any additional adjustment to its losses for
the R&Ws framework.
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.
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 0.80% 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 0.80% of the closing pool
balance.
Moody's calculate the credit neutral floors for a given target
rating as shown in its principal methodology. The senior
subordination floor of 0.80% and subordinate floor of 0.80% are
consistent with the credit neutral floors for the assigned
ratings.
Servicing Arrangement
Moody's consider the overall servicing framework for this pool to
be adequate given the servicing arrangement of the servicer, as
well as the presence of an experienced master servicer. As a
result, Moody's did not make any additional adjustment to its
losses.
Unlike prior transactions, in which Wells Fargo Bank fulfilled the
roles of both the servicer and master servicer, in this
transaction, Wells Fargo Bank will service all of the mortgage
loans while Computershare will act as master servicer. The
transaction documents contain a clause whereby the master servicer
will maintain a long-term senior unsecured credit rating of "Baa3"
or higher from Moody's.
Computershare is a national banking association and a wholly-owned
subsidiary of Computershare Ltd. (Baa2, long term rating), an
Australian financial services company with over $5 billion (USD) in
assets as of June 30, 2021. Computershare Ltd. and its affiliates
have been engaging in financial service activities, including stock
transfer related services since 1997, and corporate trust related
services since 2000.
The servicer is required to advance interest and principal payments
on the mortgage loans. To the extent that the servicer is unable to
do so, the master servicer will be obligated to make such advances.
The aggregate servicing fee rate is 25 basis points (bps) and the
servicer will advance delinquent principal and interest (P&I),
unless deemed nonrecoverable.
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.
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
August 2021.
WESTLAKE AUTOMOBILE 2021-3: S&P Assigns B (sf) Rating on F Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Westlake Automobile
Receivables Trust 2021-3's automobile receivables-backed notes.
The note issuance is an ABS securitization backed by subprime auto
loan receivables.
The ratings reflect S&P's view of:
-- The availability of approximately 45.24%, 38.99%, 30.45%,
23.60%, 20.68%, and 17.06% credit support for the class A-1, A-2,
A-3 (collectively, class A), B, C, D, E, and F notes, respectively,
based on stressed cash flow scenarios (including excess spread).
These provide approximately 3.50x, 3.00x, 2.30x, 1.75x, 1.50x, and
1.10x, respectively, of S&P's 12.50%-13.00% expected cumulative net
loss range.
-- The transaction's ability to make timely interest and principal
payments under stressed cash flow modeling scenarios appropriate
for the assigned ratings.
-- The expectation that under a moderate ('BBB') stress scenario
(1.75x S&P's expected loss level), all else being equal, its
ratings will be within the credit stability limits specified by
section A.4 of the Appendix contained in "S&P Global Ratings
Definitions," published Nov. 10, 2021. The collateral
characteristics of the securitized pool of subprime automobile
loans.
-- The originator/servicer's long history in the
subprime/specialty auto finance business.
-- S&P's analysis of approximately 16 years (2006-2021) of static
pool data on the company's lending programs.
-- The transaction's payment, credit enhancement, and legal
structures.
Ratings Assigned
Westlake Automobile Receivables Trust 2021-3
Class A-1, $298.50 million: A-1+ (sf)
Class A-2, $656.75 million: AAA (sf)
Class A-3, $285.38 million: AAA (sf)
Class B, $159.03 million: AA (sf)
Class C, $220.27 million: A (sf)
Class D, $177.79 million: BBB (sf)
Class E, $66.18 million: BB (sf)
Class F, $101.74 million: B (sf)
WFRBS COMMERCIAL 2014-LC14: Fitch Affirms CCC Rating on Cl. F Certs
-------------------------------------------------------------------
Fitch Ratings has affirmed 12 classes of WFRBS Commercial Mortgage
Trust 2014-LC14 commercial mortgage pass-through certificates.
Fitch revises the Rating Outlook on class E to Stable from
Negative.
DEBT RATING PRIOR
---- ------ -----
WFRBS 2014-LC14
A-4 96221TAD9 LT AAAsf Affirmed AAAsf
A-5 96221TAE7 LT AAAsf Affirmed AAAsf
A-S 96221TAG2 LT AAAsf Affirmed AAAsf
A-SB 96221TAF4 LT AAAsf Affirmed AAAsf
B 96221TAK3 LT AA-sf Affirmed AA-sf
C 96221TAL1 LT A-sf Affirmed A-sf
D 96221TAQ0 LT BBB-sf Affirmed BBB-sf
E 96221TAS6 LT BBsf Affirmed BBsf
F 96221TAU1 LT CCCsf Affirmed CCCsf
PEX 96221TAM9 LT A-sf Affirmed A-sf
X-A 96221TAH0 LT AAAsf Affirmed AAAsf
X-B 96221TAJ6 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Stable Loss Expectations: The affirmations and revised Outlook to
Stable on class E reflect overall stable loss expectations since
the prior rating action as performance of loans impacted by the
pandemic have begun to stabilize. There are 16 Fitch Loans of
Concern (FLOCs; 39.7% of pool), including four loans (11%) in
special servicing. Fitch's current ratings reflect a base case loss
of 5.90%.
Fitch Loans of Concern/Specially Serviced Loans: The largest
contributor to Fitch's base case loss is Williams Center Towers
(5%), which is secured by two office towers totaling 765,809 sf
located within the CBD of Tulsa, OK. Occupancy as of March 2021 was
66.8%, down from 91.6% at issuance and 79% as of September 2019.
The largest tenant at issuance, Samson Energy, first downsized and
then completely left the building in 2017 after filing bankruptcy.
The property suffered a further occupancy drop in December 2019
when the Bank of Oklahoma terminated its lease. Current largest
tenants include Community Care HMO (17.7% NRA, LXD 2033), Doerner,
Saunders, Daniel and Anderson, LLP (6.4%, 2027 LXD), Southwest
Power Administration (5.4%, 2033 LXD), and McAfee and Taft, PC
(5.0%, 2027 LXD). The loan transferred to Special Servicing in
April 2018 due to a low debt service coverage ratio (DSCR) but
remains current with cash management in place. The YE 2020 NOI DSCR
is 1.15x. Fitch's loss expectation of approximately 30% reflects a
20% stress to the value derived from a 9.5% cap rate on YE 2020
NOI.
The second largest contributor to Fitch's base case loss is
Canadian Pacific Plaza (4.3%), which is secured by a 393,902-sf
office building located at 120 South 6th Street in the CBD of
Minneapolis, MN. A large lease, Nilan Johnson Lewis PA (19.6% of
NRA), expired in February 2020 and the tenant vacated. Occupancy as
of June 2021 was 63%, down from 87% as of YE 2019 and 93% for YE
2018. The only remaining large tenant is Soo Line Railroad (23.4%,
August 2027 LXD) with no other tenant occupying more than 3% of
NRA. DSCR has dropped to 1.03x in 2020 compared to 1.92x in 2019
and 2.01x in 2018. Fitch's loss expectation of 17% reflects 9% cap
rate on the YE 2020 NOI.
The third largest contributor to Fitch's base case loss is West
Side Mall (2.8%), which is secured by a 420,434-sf retail power
center anchored by Lowe's (32.8%, January 2027 LXD), Price Chopper
(16.6%, August 2024 LXD), and Jo-Ann Stores (5.7%, January 2023
LXD) located in Edwardsville, PA. The loan transferred to special
servicing in June 2021 due to multiple events of default but the
borrower has continued to make monthly debt service payments and
the loan remains current. The property was originally constructed
in 1960 as an enclosed mall and has undergone significant
renovation in the decades since, converting to an open-air shopping
center. While occupancy at the property remains low at 70.2% as of
August 2021 compared to 85% at issuance, upcoming rollover is not
significant at .3% in 2021, 5.2% in 2022 (includes Petco), and 3%
in 2023 (includes Dollar Tree). The September 2020 NOI DSCR was
1.42x compared to 1.12x in 2019 and .98x in 2018. Fitch's loss
expectation of 23% reflects 10.5% cap rate and 20% stress on the
September 2020 annualized NOI.
The fourth largest contributor to Fitch's base case loss is H. H.
Gregg Boca Raton (0.7%), which is secured by a 100% vacant 41,520
sf single tenant retail property, located in Boca Raton, FL. At
Issuance, the property was 100% occupied by H. H. Gregg with a NCF
DSCR of 1.39x. As a result of H. H. Gregg's bankruptcy filing, the
location has been vacant since 2016. As of November 2021, the
property is still not occupied but the borrower is working with a
fitness tenant to lease the entire space. The NOI DSCR as of YE
2020 was -0.50x compared to -0.46x as of YE 2019. The loan remains
current. Fitch's loss expectation of 65% is due to the property
being vacant for five years.
Credit Enhancement Improvement; Defeasance: As of the October 2021
distribution date, the pool's aggregate principal balance has been
paid down by 31.9% to $854.5 million from $1,255.6 million at
issuance. Fourteen loans (16.6%) have been defeased. Of the current
pool there are no full-term IO loans and all partial term IO loans
are amortizing. Realized losses since issuance total $9.1 million
and interest shortfalls totaling approximately $1.8 million are
impacting the non-rated class.
Fifteen loans are scheduled to mature in 2023 (35.5% of pool),
while the majority of the pool, 45 loans are scheduled to mature in
2024 (65.5%).
Coronavirus Exposure: There are 11 hotel loans (13.9% of the pool)
and 19 retail loans (22.3% of the pool).
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades to the 'AAAsf' through 'A-sf' classes are not
currently considered likely due to the expectation of
continued increase in CE from amortization and future
dispositions, but may occur if a high proportion of the pool
defaults and expected losses increase significantly or if
interest shortfalls should occur to classes rated 'AAAsf' or
'AA-sf'.
-- Downgrades to 'BBB-sf' and 'BBsf' classes are possible should
performance of the FLOC continue to decline, should loans
susceptible to the coronavirus pandemic not stabilize and/or
should further loans transfer to special servicing. Downgrades
to the 'CCCsf' rated class would occur with greater certainty
of loss or as losses are realized.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades to the 'A-sf'- and 'AA-sf'-rated classes are not
expected but would likely occur with significant improvement
in CE and/or defeasance and/or the stabilization to the
properties impacted from the coronavirus pandemic. Upgrades to
the 'BBB-sf' and 'BBsf' rated classes are considered unlikely
and would be limited based on the 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 'CCCsf'
rated class is not likely unless the performance of the
remaining pool stabilizes and the senior classes pay off.
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.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means 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.
WHITEBOX CLO II: Moody's Assigns Ba3 Rating to $21.75MM E-R Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
CLO refinancing notes issued by Whitebox CLO II Ltd (the
"Issuer").
Moody's rating action is as follows:
US$240,000,000 Class A-1-R Senior Secured Floating Rate Notes Due
2034, Assigned Aaa (sf)
US$20,000,000 Class A-2-R Senior Secured Floating Rate Notes Due
2034, Assigned Aaa (sf)
US$41,000,000 Class B-R Senior Secured Floating Rate Notes Due
2034, Assigned Aa2 (sf)
US$20,000,000 Class C-R Secured Deferrable Floating Rate Notes Due
2034, Assigned A2 (sf)
US$24,000,000 Class D-R Secured Deferrable Floating Rate Notes Due
2034, Assigned Baa3 (sf)
US$21,750,000 Class E-R Secured Deferrable Floating Rate Notes Due
2034, Assigned Ba3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least
90.0% of the portfolio must consist of senior secured loans and
eligible investments, and up to 10.0% of the portfolio may consist
of second-lien loans, unsecured loans and permitted assets,
provided that not more than 5.0% of the portfolio may consist of
permitted assets.
Whitebox Capital Management LLC (the "Manager") will continue to
direct the selection, acquisition and disposition of the assets on
behalf of the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's extended five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes, a variety of
other changes to transaction features will occur in connection with
the refinancing. These include: extension of the reinvestment
period; extensions of the stated maturity and non-call period;
changes to certain collateral quality tests; and changes to the
overcollateralization test levels; the inclusion of Libor
replacement provisions; additions to the CLO's ability to hold
workout and restructured assets; changes to the definition of
"Adjusted Weighted Average Rating Factor" and changes to the base
matrix and modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2020.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Portfolio par: $400,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 2933
Weighted Average Spread (WAS): 3.25%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 47.75%
Weighted Average Life (WAL): 9 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2020.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
[*] Moody's Puts 9 Securities From 4 US CLOs on Review for Upgrade
------------------------------------------------------------------
Moody's Investors Service announced that it placed on review for
upgrade 9 securities issued by 4 commercial real estate
collateralized loan obligations (CRE CDO CLOs) as a result of the
recent action on CMBS single asset and single borrower (SASB)
transactions.
The following transactions are impacted by Moody's action.
Issuer: Prima Capital CRE Securitization 2015-IV Ltd.
Cl. C, Baa1 (sf) Placed Under Review for Possible Upgrade;
previously on Feb 8, 2018 Affirmed Baa1 (sf)
Issuer: Prima Capital CRE Securitization 2019-VII Ltd.
Cl. B, Aa3 (sf) Placed Under Review for Possible Upgrade;
previously on Oct 23, 2019 Assigned Aa3 (sf)
Cl. C, Baa3 (sf) Placed Under Review for Possible Upgrade;
previously on Oct 23, 2019 Assigned Baa3 (sf)
Cl. D, B3 (sf) Placed Under Review for Possible Upgrade; previously
on Oct 23, 2019 Assigned B3 (sf)
Issuer: Prima Capital CRE Securitization 2020-VIII Ltd.
Cl. B, A3 (sf) Placed Under Review for Possible Upgrade; previously
on Jul 16, 2020 Assigned A3 (sf)
Cl. C, Ba3 (sf) Placed Under Review for Possible Upgrade;
previously on Jul 16, 2020 Assigned Ba3 (sf)
Issuer: Prima Capital CRE Securitization 2021-X Ltd.
Cl. A, Aa3 (sf) Placed Under Review for Possible Upgrade;
previously on Nov 16, 2021 Assigned Aa3 (sf)
Cl. B, Baa3 (sf) Placed Under Review for Possible Upgrade;
previously on Nov 16, 2021 Assigned Baa3 (sf)
Cl. C, B3 (sf) Placed Under Review for Possible Upgrade; previously
on Nov 16, 2021 Assigned B3 (sf)
RATINGS RATIONALE
These actions include Moody's placement on review for possible
upgrade of its ratings or assessments on one or more underlying
collateral interests as a result of the "Large Loan and Single
Asset/Single Borrower Commercial Mortgage-Backed Securitizations
Methodology" update.
The changes to the CMBS SASB methodology primary relate to
analytical treatment of certain obligors whose ratings or
assessments may be positively impacted as a result of posititive
WARF migration on certain CRE CDO CLO transactions. If an obligor's
rating is on review for possible upgrade or assessment, it would be
adjusted up by two notches. The most significant consequence of
these changes is that Moody's calculation of WARF- WARF - a measure
of the weighted average default probability of a CLO's collateral
assets - is now generally lower than before the placement on review
of underlying obligors as a result of the methodology update.
Moody's strives to conclude rating reviews within 90 days. However,
due to the high degree of uncertainty in the current credit
environment, the resolution of these watchlist actions may extend
beyond the usual timeframe.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Approach to Rating SF CDOs" published in June 2021.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The trust advisor's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
Together with the set of modeling assumptions above, Moody's
conducted an additional sensitivity analysis, which was a component
in determining the ratings assigned to the Rated Notes. This
sensitivity analysis includes increased default probability
relative to the base-case.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment.
[*] S&P Takes Various Actions on 43 Classes from 16 US RMBS Deals
-----------------------------------------------------------------
S&P Global Ratings completed its review of 43 ratings from 16 U.S.
RMBS transactions issued between 2004 and 2007. The review yielded
21 upgrades, one downgrade, and 21 affirmations (see list).
A list of Affected Ratings can be viewed at:
https://bit.ly/32qH3k2
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by its projected cash flows. These considerations
are based on transaction-specific performance and/or structural
characteristics, and their potential effects on certain classes.
Some of these considerations may include:
-- Factors related to the COVID-19 pandemic,
-- Historical interest shortfalls or missed interest payments,
-- Assessment of reduced interest payments due to loan
modifications and other credit-related events,
-- Insufficient subordination or overcollateralization; and
-- Increases or decreases in credit support.
Rating Actions
S&P said, "The rating changes reflect our view of the associated
transaction-specific collateral performance, structural
characteristics, and/or the application of specific criteria
applicable to these classes. See the ratings list below for the
specific rationales associated with each class with rating
transition.
"The affirmations reflect our view that our projected credit
support and collateral performance on these classes remain
relatively consistent with our previous projections."
[*] S&P Takes Various Actions on 49 Classes from 22 US RMBS Deals
-----------------------------------------------------------------
S&P Global Ratings completed its review of 49 ratings from 22 U.S.
RMBS transactions issued between 2000 and 2007. These transactions
are backed by subprime U.S. RMBS collateral types. The review
yielded 37 upgrades and 12 affirmations.
A list of Affected Ratings can be viewed at:
https://bit.ly/3oVAe1d
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by its projected cash flows. These considerations
are based on transaction-specific performance and/or structural
characteristics, and their potential effects on certain classes.
Some of these considerations may include:
-- Factors related to the COVID-19 pandemic,
-- Collateral performance or delinquency trends,
-- Increase or decrease in available credit support,
-- Available subordination and/or overcollateralization,
-- Expected duration,
-- Historical and/or outstanding missed interest payments, and
Payment priority.
Rating Actions
S&P said, "The rating changes reflect our opinion regarding the
associated transaction-specific collateral performance and/or
structural characteristics, and/or reflect the application of
specific criteria applicable to these classes. Please see the
ratings list below for the specific rationales associated with each
of the classes with rating transitions.
"The ratings affirmations reflect our opinion that our projected
credit support, collateral performance, and credit-related
reductions in interest on these classes has remained relatively
consistent with our prior projections.
"We raised our ratings on 37 classes because of increased credit
support, including five ratings that were raised by five notches.
These classes have benefited from performance trigger failures
and/or reduced subordinate class principal distribution amounts,
which has built each class' credit support as a percent of their
respective deal balance. Ultimately, we believe these classes have
credit support that is sufficient to withstand losses at higher
rating levels."
[*] S&P Takes Various Actions on 79 Classes from 10 US RMBS Deals
-----------------------------------------------------------------
S&P Global Ratings completed its review of 79 classes from 10 U.S.
RMBS non-qualified mortgage (QM) and prime jumbo transactions. The
review yielded 17 upgrades and 62 affirmations.
A list of Affected Ratings can be viewed at:
https://bit.ly/3nRncTs
S&P said, "For all transactions, we performed credit analysis using
updated loan-level information from which we determined foreclosure
frequency, loss severity, and loss coverage amounts commensurate
for each rating level. In addition, we used the same mortgage
operational assessment, representation and warranty, and due
diligence factors that were applied at issuance. Our geographic
concentration and prior-credit-event adjustment factors were based
on the transactions' current pool composition."
The upgrades primarily reflect deleveraging because each respective
transaction benefits from low or zero accumulated losses to date,
high prepayment speeds, a growing percentage of credit support to
the rated classes, and, for the non-QM transactions,
senior-sequential payment priority. Although the transactions'
delinquency percentages remain somewhat elevated compared with
pre-COVID-19 levels due to extended forbearances and declining pool
balances, they have generally been leveling off or declining in the
reviewed transactions.
The affirmations reflect S&P's view that the projected collateral
performance relative to S&P's projected credit support on these
classes remain relatively consistent with our prior projections.
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by the application of our criteria. These
considerations are based on transaction-specific performance or
structural characteristics (or both) and their potential effects on
certain classes. Some of these considerations include:
-- Factors related to the COVID-19 pandemic;
-- Collateral performance or delinquency trends;
-- Priority of principal payments;
-- Priority of loss allocation;
-- Expected short duration;
-- Available subordination and/or credit enhancement floors; and
-- Potential excess spread.
*********
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. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than $3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
On Thursdays, the TCR delivers a list of recently filed
Chapter 11 cases involving less than $1,000,000 in assets and
liabilities delivered to nation's bankruptcy courts. The list
includes links to freely downloadable images of these small-dollar
petitions in Acrobat PDF format.
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
Monthly Operating Reports are summarized in every Saturday edition
of the TCR.
The Sunday TCR delivers securitization rating news from the week
then-ending.
TCR subscribers have free access to our on-line news archive.
Point your Web browser to http://TCRresources.bankrupt.com/and use
the e-mail address to which your TCR is delivered to login.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published
by Bankruptcy Creditors Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine
Tumanda, Valerie Udtuhan, Howard C. Tolentino, Carmel Paderog,
Meriam Fernandez, Joel Anthony G. Lopez, Cecil R. Villacampa,
Sheryl Joy P. Olano, Psyche A. Castillon, Ivy B. Magdadaro, Carlo
Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors.
Copyright 2021. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers. Information contained
herein is obtained from sources believed to be reliable, but is
not guaranteed.
The TCR subscription rate is $975 for 6 months delivered via
e-mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance thereof
are $25 each. For subscription information, contact Peter A.
Chapman at 215-945-7000.
*** End of Transmission ***