/raid1/www/Hosts/bankrupt/TCR_Public/220501.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, May 1, 2022, Vol. 26, No. 120
Headlines
ACC AUTO 2022-A: Moody's Assigns (P)B2 Rating to Class D Notes
APEX CREDIT 2022-I: Moody's Assigns Ba3 Rating to Class E Notes
ARES LXIII CLO: Moody's Assigns Ba3 Rating to $20MM Class E Notes
BAIN CAPITAL 2022-2: Moody's Assigns Ba3 Rating to Class E Notes
BARINGS CLO 2022-I: Moody's Assigns Ba3 Rating to Class E Notes
BLUEMOUNTAIN CLO XXXIV: S&P Assigns BB- (sf) Rating on Cl. E Notes
BOCA 2022-BOCA: S&P Assigns Prelim B- (sf) Rating on Cl. F Certs
CARLYLE US 2022-1: Moody's Assigns Ba3 Rating to $16MM Cl. E Notes
COMM 2019-521F: S&P Lowers Class F Certs Rating to 'CCC (sf)'
CONNECTICUT 2022-R05: Moody's Assigns (P)Ba1 Rating to 27 Tranches
CSMC 2022-NQM3: S&P Assigns Prelim B- (sf) Rating on B-2 Certs
DRYDEN 109 CLO: Moody's Assigns Ba3 Rating to $20MM Class E Notes
GCAT 2022-NQM2: S&P Assigns Prelim B (sf) Rating on Cl. B-2 Certs
GCAT TRUST 2022-INV2: Moody's Assigns B2 Rating to Cl. B-5 Debt
GS MORTGAGE 2018-RIVR: S&P Cuts Class D Certs Rating to 'BB (sf)'
HILTON GRAND 2022-1D: Moody's Gives Ba1 Rating to Class D Notes
HILTON GRAND 2022-1D: S&P Assigns BB- (sf) Rating on Class D Notes
HOME RE 2022-1: Moody's Assigns B2 Rating to Cl. B-1 Notes
NAVIENT STUDENT 2014-1: Fitch Lowers Rating on Class B Debt to 'BB'
OCTAGON 59 LTD: Moody's Assigns Ba3 Rating to Cl. E Notes
RCKT MORTGAGE 2022-3: Moody's Assigns B3 Rating to Cl. B-5 Debt
SLM STUDENT 2007-7: S&P Raises Class B Note Rating to 'BB (sf)'
UBSCM 2018-NYCH: S&P Lowers Class F Certs Rating to 'CCC (sf)'
VERUS SECURITIZATION 2022-4: S&P Assigns (P) B-(sf) on B-2 Notes
VOYA CLO 2022-1: Moody's Assigns Ba3 Rating to $16MM Class E Notes
WELLS FARGO 2022-2: Moody's Assigns B2 Rating to Cl. B-5 Debt
[*] S&P Lowers Ratings on 24 Classes from 20 US RMBS Transactions
[*] S&P Takes Various Actions on 147 Classes from 10 US RMBS Deals
[*] S&P Takes Various Actions on 30 Classes from 12 US RMBS Deals
*********
ACC AUTO 2022-A: Moody's Assigns (P)B2 Rating to Class D Notes
--------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to the
notes to be issued by ACC Auto Trust 2022-A (AUTOC 2022-A). This is
the second securitization of non-prime quality auto loans sponsored
by Automotive Credit Corporation (ACC; Not Rated). The notes will
be backed by a pool of retail automobile loan contracts originated
by ACC, who is also the servicer and administrator for the
transaction.
The complete rating actions are as follows:
Issuer: ACC Auto Trust 2022-A
Class A Notes, Assigned (P)A3 (sf)
Class B Notes, Assigned (P)Baa2 (sf)
Class C Notes, Assigned (P)Ba2 (sf)
Class D Notes, Assigned (P)B2 (sf)
RATINGS RATIONALE
The ratings are based on the quality of the underlying collateral
and its expected performance, the strength of the capital
structure, the experience and expertise of ACC as the servicer and
the presence of Vervent, Inc. (unrated) as named backup servicer.
Moody's median cumulative net loss expectation for the 2022-A pool
is 20.5% and the loss at a Aaa stress (for model calibration
purposes) is 56.0%. Moody's based its cumulative net loss
expectation on an analysis of the credit quality of the underlying
collateral; the historical performance of similar collateral,
including securitization performance and managed portfolio
performance; the ability of ACC to perform the servicing functions;
and current expectations for the macroeconomic environment during
the life of the transaction.
At closing, the Class A notes, Class B notes, Class C notes and
Class D notes benefit 33.70%, 26.50%, 20.45% and 10.50% of hard
credit enhancement, respectively. Hard credit enhancement for the
notes consists of a combination of overcollateralization, a
non-declining reserve account, and subordination, except for the
Class D notes, which do not benefit from subordination. The notes
will also benefit from excess spread.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's
Global Approach to Rating Auto Loan- and Lease-Backed ABS"
published in September 2021.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the notes if levels of credit enhancement are
higher than necessary to protect investors against current
expectations of portfolio losses. 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 vehicles securing an
obligor's promise of payment. Portfolio losses also depend greatly
on the US job market and the market for used vehicles. Other
reasons for better-than-expected performance include changes to
servicing practices that enhance collections or refinancing
opportunities that result in prepayments
Down
Moody's could downgrade the notes if, given current expectations of
portfolio losses, levels of credit enhancement are consistent with
lower ratings. Credit enhancement could decline if excess spread is
not sufficient to cover losses in a given month. Moody's
expectation of pool losses could rise as a result of a higher
number of obligor defaults or deterioration in the value of the
vehicles securing an obligor's promise of payment. Portfolio losses
also depend greatly on the US job market, the market for used
vehicles, and poor servicing. Other reasons for worse-than-expected
performance include error on the part of transaction parties,
inadequate transaction governance, and fraud.
APEX CREDIT 2022-I: Moody's Assigns Ba3 Rating to Class E Notes
---------------------------------------------------------------
Moody's Investors Service has assigned ratings to five classes of
notes and one class of loans incurred by Apex Credit CLO 2022-I,
Ltd. (the "Issuer").
Moody's rating action is as follows:
US$123,250,000 Class A-1 Senior Secured Floating Rate Notes due
2033, Assigned Aaa (sf)
US$62,750,000 Class A-L Loans due 2033, Assigned Aaa (sf)
US$42,000,000 Class B Senior Secured Floating Rate Notes due 2033,
Assigned Aa1 (sf)
US$16,500,000 Class C Secured Deferrable Floating Rate Notes due
2033, Assigned A2 (sf)
US$18,000,000 Class D Secured Deferrable Floating Rate Notes due
2033, Assigned Baa3 (sf)
US$13,500,000 Class E Secured Deferrable Floating Rate Notes due
2033, Assigned Ba3 (sf)
The debt listed are referred to herein, collectively, as the "Rated
Debt."
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.
Apex Credit CLO 2022-I, Ltd. is a managed cash flow CLO. The issued
debt 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 second lien loans, unsecured loans and
bonds. The portfolio is approximately 95% ramped as of the closing
date.
Apex Credit Partners 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 three 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 debt 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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $300,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2681
Weighted Average Spread (WAS): 3.66%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 6.5 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 2021.
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.
ARES LXIII CLO: Moody's Assigns Ba3 Rating to $20MM Class E Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to four classes of
notes issued by Ares LXIII CLO Ltd. (the "Issuer" or "Ares
LXIII").
Moody's rating action is as follows:
US$292,500,000 Class A-1A Senior Floating Rate Notes due 2035,
Assigned Aaa (sf)
US$15,000,000 Class A-1B Senior Fixed Rate Notes due 2035, Assigned
Aaa (sf)
US$17,500,000 Class A-2 Senior Floating Rate Notes due 2035,
Assigned Aaa (sf)
US$20,000,000 Class E Mezzanine Deferrable Floating Rate Notes due
2035, 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.
Ares LXIII is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90.0% of the portfolio must consist of
senior secured loans and eligible investments, and up to 10.0% of
the portfolio may consist of non-senior secured loans provided that
not more than 5.0% of the portfolio may consist of permitted
non-loan assets. The portfolio is approximately 70% ramped as of
the closing date.
Ares CLO 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.
In addition to the Rated Notes, the Issuer issued four other
classes of secured notes and one class of 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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 3033
Weighted Average Spread (WAS): 3mS + 3.40%
Weighted Average Coupon (WAC): 5.50%
Weighted Average Recovery Rate (WARR): 47.5%
Weighted Average Life (WAL): 8.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 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 Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
BAIN CAPITAL 2022-2: Moody's Assigns Ba3 Rating to Class E Notes
----------------------------------------------------------------
Moody's Investors Service has assigned ratings to two classes of
notes issued by Bain Capital Credit CLO 2022-2, Limited (the
"Issuer" or "Bain 2022-2").
Moody's rating action is as follows:
US$378,000,000 Class A-1 Senior Secured Floating Rate Notes due
2035, Definitive Rating Assigned Aaa (sf)
US$21,000,000 Class E Secured Deferrable Floating Rate Notes due
2035, 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.
Bain 2022-2 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
obligations that are not senior secured loans, 5% of which may
consist of permitted non-loan assets and 2.5% of senior unsecured
bonds. The portfolio is approximately 90% ramped as of the closing
date.
Bain Capital Credit U.S. CLO Manager II, LP (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 six other classes
of secured notes and one class of 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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $600,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2808
Weighted Average Spread (WAS): 3.30%
Weighted Average Coupon (WAC): 5.75%
Weighted Average Recovery Rate (WARR): 46.5%
Weighted Average Life (WAL): 8 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 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 Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
BARINGS CLO 2022-I: Moody's Assigns Ba3 Rating to Class E Notes
---------------------------------------------------------------
Moody's Investors Service has assigned ratings to three classes of
notes issued by Barings CLO Ltd. 2022-I (the "Issuer" or "Barings
2022-I").
Moody's rating action is as follows:
US$232,000,000 Class A-1 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$24,000,000 Class A-2 Senior Secured Fixed Rate Notes due 2035,
Assigned Aaa (sf)
US$16,000,000 Class E Secured Deferrable Mezzanine Floating Rate
Notes due 2035, 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.
Barings 2022-I is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90.0% of the portfolio must consist of
senior secured loans and eligible investments, and up to 10.0% of
the portfolio may consist of second lien loans, unsecured loans and
bonds. The portfolio is approximately 85% ramped as of the closing
date.
Barings 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.
In addition to the Rated Notes, the Issuer issued three classes of
secured notes and one class of 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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2899
Weighted Average Spread (WAS): 3.50%
Weighted Average Recovery Rate (WARR): 46.22%
Weighted Average Life (WAL): 8.5 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 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 Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
BLUEMOUNTAIN CLO XXXIV: S&P Assigns BB- (sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to BlueMountain CLO XXXIV
Ltd./BlueMountain CLO XXXIV LLC's floating- and fixed-rate notes
(see list). The transaction is managed by Assured Investment
Management LLC.
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 ratings reflect:
-- S&P's view of the collateral pool's diversification;
-- 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
BlueMountain CLO XXXIV Ltd./BlueMountain CLO XXXIV LLC
Class A, $315.0 million: AAA (sf)
Class B-1, $47.0 million: AA (sf)
Class B-2, $18.0 million: AA (sf)
Class C (deferrable), $30.0 million: A (sf)
Class D (deferrable), $30.0 million: BBB- (sf)
Class E (deferrable), $20.0 million: BB- (sf)
Subordinated notes, $43.4 million: Not rated
BOCA 2022-BOCA: S&P Assigns Prelim B- (sf) Rating on Cl. F Certs
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to BOCA
Commercial Mortgage Trust 2022-BOCA's commercial mortgage
pass-through certificates.
The certificate issuance is a CMBS transaction backed by a
commercial mortgage loan that is secured by the borrower's fee
simple interest in The Boca Raton, a 1,047-guestroom luxury resort
hotel, private beach and golf club, and 18-hole golf course in Boca
Raton, Fla.
The preliminary ratings are based on information as of April 25,
2022. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P Global Ratings' view of the
collateral's historical and projected performance, the experience
of the sponsor and the manager, the trustee-provided liquidity, the
mortgage loan terms, and the transaction's structure. S&P
determined that the trust loan has a beginning and ending
loan-to-value ratio of 107.5%, based on its value of the property
backing the transaction.
Preliminary Ratings Assigned
BOCA Commercial Mortgage Trust 2022-BOCA
Class A, $271.98 million: AAA (sf)
Class B, $94.56 million: AA- (sf)
Class C, $70.29 million: A- (sf)
Class D, $92.89 million: BBB- (sf)
Class E, $146.45 million: BB- (sf)
Class F, $129.71 million: B- (sf)
Class G, $49.12 million: Not rated
Class HRR(i), $45.00 million: Not rated
(i)Horizontal risk retention interest.
CARLYLE US 2022-1: Moody's Assigns Ba3 Rating to $16MM Cl. E Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued and one class of loans incurred by Carlyle US CLO
2022-1, Ltd. (the "Issuer").
Moody's rating action is as follows:
US$142,250,000 Class A-1 Senior Secured Floating Rate Notes due
2035, Definitive Rating Assigned Aaa (sf)
US$100,000,000 Class A-L Loans maturing 2035, Definitive Rating
Assigned Aaa (sf)
US$13,750,000 Class A-F Senior Secured Fixed Rate Notes due 2035,
Definitive Rating Assigned Aaa (sf)
US$48,000,000 Class B Senior Secured Floating Rate Notes due 2035,
Definitive Rating Assigned Aa2 (sf)
US$24,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Definitive Rating Assigned A2 (sf)
US$24,000,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Definitive Rating Assigned Baa3 (sf)
US$16,000,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2035, Definitive Rating Assigned Ba3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Debt." The Class A-L Loans may not be exchanged or converted
into notes at any time.
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.
Carlyle US CLO 2022-1, Ltd. is a managed cash flow CLO. The issued
debt will be collateralized primarily by broadly syndicated 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, first lien last out
loans and permitted debt securities, provided that no more than
5.0% of the portfolio consists of permitted debt securities. The
portfolio is approximately 95% ramped as of the closing date.
Carlyle CLO Management 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 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 debt 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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2805
Weighted Average Spread (WAS): SOFR+3.70%
Weighted Average Coupon (WAC): 7.50%
Weighted Average Recovery Rate (WARR): 46.5%
Weighted Average Life (WAL): 8.5
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 2021.
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.
COMM 2019-521F: S&P Lowers Class F Certs Rating to 'CCC (sf)'
-------------------------------------------------------------
S&P Global Ratings lowered its ratings on three classes of
commercial mortgage pass-through certificates from COMM 2019-521F
Mortgage Trust, a U.S. CMBS transaction. At the same time, S&P
affirmed its ratings on three classes from the transaction.
This U.S. CMBS transaction is backed by a floating-rate
interest-only (IO) mortgage loan secured by a 39-story, class A
office building located in Manhattan's Grand Central office
submarket.
Rationale
S&P said, "The downgrades of classes D, E, and F, and the
affirmations of classes A, B, and C reflect our reevaluation of the
office property that secures the sole loan in the transaction. Our
analysis considers the declining occupancy rates in the past two
years and the sponsor's inability to increase the property's
occupancy rate to historical or market occupancy levels. As of the
Dec. 31, 2021, rent roll, the property was 78.4% leased. According
to a third-party market data provider and various media reports,
six tenants may have signed or are interested in signing leases
comprising approximately 10.2% of the net rentable area (NRA) at
the property. Meanwhile, seven tenants representing approximately
15.9% of NRA have leases that expire in 2022. The largest of these
tenants is BMO Capital Markets Corp. (22,368 sq. ft.; 4.5% of NRA;
May 2022 lease expiration). The servicer has not provided an update
on whether BMO or any other tenants with 2022 lease expiration
dates will vacate or renew their leases.
"Our property-level analysis also reflects the softened office
submarket fundamentals due to lower demand and longer re-leasing
timeframes as more companies adopt a hybrid work arrangement. As a
result, we revised and lowered our sustainable net cash flow (NCF)
to $13.6 million (negative 17.4% from issuance) using a 78.4%
in-place occupancy rate as of the Dec. 31, 2021, rent roll and
aligning our net operating income (NOI) closer to the 2021
servicer-reported figures. Using an S&P Global Ratings
capitalization rate of 6.50%, we arrived at an expected-case
valuation of $209.9 million or $423 per sq. ft., a 17.4% decrease
from our issuance value of $254.0 million. This yielded an S&P
Global Ratings loan-to-value (LTV) ratio of 115.3% on the mortgage
loan balance.
"The downgrade of the class F certificates also reflects our view
that, based on an S&P Global Ratings' LTV ratio of over 100%, this
class is more susceptible to reduced liquidity support, and the
risk of default and loss has increased due to current market
conditions.
"Although the model-indicated ratings were lower than the classes'
revised or current rating levels, we tempered our downgrades on
classes D and E and affirmed our ratings on classes A, B, and C
because we weighed certain qualitative considerations." These
include:
-- The property's desirable location in Midtown Manhattan;
-- The potential that the office property's operating performance
could improve above our revised expectations;
-- The relatively high appraised land value of $250.0 million in
2019;
-- The significant market value decline that would be needed
before these classes experience principal losses;
-- The liquidity support provided in the form of servicer
advancing; and
-- The relative position of the classes in the payment waterfall.
The mortgage loan had a reported current payment status through its
April 2022 debt service payment date, and the borrower did not
request COVID-19-related relief. According to the master servicer,
KeyBank Real Estate Capital, the capital improvement, leasing, and
other reserve accounts total $998,467. KeyBank reported a 4.48x
debt service coverage as of Dec. 31, 2021.
If the property's performance does not improve or if there are
reported negative changes in the performance beyond what we have
already considered, S&P may revisit its analysis and adjust its
ratings as necessary.
Property-Level Analysis
The property is a 39-story, 495,636-sq.-ft. class A office building
located at 512 Fifth Avenue in midtown Manhattan, within the Grand
Central office submarket. According to the December 2021 rent roll,
the five largest tenants at the property comprised 23.2% of NRA:
Urban Outfitters Inc. (5.2% of NRA; 16.4% of gross rent, as
calculated by S&P Global Ratings; February 2026 lease expiration),
Equinox Inc. (5.1%; 2.6%; January 2035), BMO Capital markets Corp.
(4.5%; 5.3%; May 2022), Laidlaw & Co. (4.2%; 4.7%; February 2029),
and Major, Lindsey & Africa (4.2%; 4.0%; January 2024).
From 2013 through 2019, the property received $5.4 million ($10.90
per sq. ft.) in capital improvements. At issuance, S&P noted that
the current sponsor, Savanna Real Estate Fund, planned to infuse
$16.1 million into the property to enhance its street presence and
tenant experience. The capital improvement plan would include a
lobby renovation, facade work, and signage and rebranding. The
servicer did not provide an update on the status of any recent
renovations.
S&P said, "The property's occupancy level declined to 78.4% in 2021
from 89.6% in 2020 and 92.8% in 2019, and it is significantly below
the assumed 92.8% occupancy rate we had derived at issuance. The
property also faces elevated rollover risk in 2022 (15.9% of NRA),
2024 (14.9%), and 2029 (18.9%). We have revised and lowered our
expected-case assumptions and valuation of the property, based on
the declining occupancy at the property, weakened office submarket
fundamentals due to the COVID-19 pandemic and more companies
embracing flexible work arrangements, concentrated rollover risk,
potential tenant movements, and longer re-tenancy timing.
"Our current analysis considered these developments, as well as
current office market data and conditions. According to CoStar,
market rent for three- to five-star office properties in the Grand
Central office submarket declined 0.7% as of April 2022, following
a 3.4% decrease in 2020 and a 0.3% increase in 2021. Although
CoStar projects 1.1% and 5.4% rent growth in 2022 and 2023,
respectively, continued above average market vacancy rates could
hurt rent rates. As of April 2022, asking rent for three- to
five-star office properties in the submarket was $76.21 per sq.
ft., while vacancy and availability rates were 13.5% and 18.2%,
respectively. CoStar projects average office submarket vacancy rate
of 13.2% and asking rent of $81.64 per sq. ft. in 2023.
"We assumed an occupancy rate of 78.4% using the December 2021 rent
roll and an in-place gross rent of $63.03 per sq. ft., which result
in an S&P Global Ratings NCF of $13.6 million. Using an S&P Global
Ratings capitalization rate of 6.50%, we derived an expected-case
value of $209.9 million, or $423 per sq. ft.
Transaction Summary
This is a U.S. stand-alone (single-borrower) transaction backed by
a two-year, floating-rate IO mortgage loan with three, one-year
extension options. The loan is secured by the borrower's fee simple
interest in an office property in midtown Manhattan. The IO
mortgage loan had an initial and current $242.0 million trust
balance (according to the April 15, 2022, trustee remittance
report), pays an annual floating interest rate of one-month LIBOR
plus 1.36%, and matures on June 9, 2022. The remaining two
extension options are exercisable as long as the borrower obtains a
replacement interest rate cap agreement, among other factors. The
fully extended maturity date is June 9, 2024. To date, the trust
has not incurred any principal losses.
The recent rapid spread of the omicron variant highlights the
inherent uncertainties of the pandemic, as well as the importance
and benefits of vaccines. While the risk of new, more severe
variants displacing omicron and evading existing immunity cannot be
ruled out, our current base case assumes that existing vaccines can
continue to provide significant protection against severe illness.
Furthermore, many governments, businesses, and households around
the world are tailoring policies to limit the adverse economic
impact of recurring COVID-19 waves. Consequently, S&P does not
expect a repeat of the sharp global economic contraction of
second-quarter 2020. Meanwhile, it continue to assess how well each
issuer adapts to new waves in its geography or industry.
Ratings Lowered
COMM 2019-521F Mortgage Trust
Class D to 'BB+ (sf)' from 'BBB- (sf)'
Class E to 'B (sf)' from 'BB- (sf)'
Class F to 'CCC (sf)' from 'B- (sf)'
Ratings Affirmed
COMM 2019-521F Mortgage Trust
Class A: AAA (sf)
Class B: AA- (sf)
Class C: A- (sf)
CONNECTICUT 2022-R05: Moody's Assigns (P)Ba1 Rating to 27 Tranches
------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 65
classes of residential mortgage-backed securities (RMBS) issued by
Connecticut Avenue Securities, Series 2022-R05, and sponsored by
The Federal National Mortgage Association (Fannie Mae).The
securities reference a pool of mortgages loans acquired by Fannie
Mae, and originated and serviced by multiple entities.
The complete rating actions are as follows:
Issuer: Connecticut Avenue Securities, Series 2022-R05
Cl. 2M-1, Assigned (P)Baa1 (sf)
Cl. 2M-2A, Assigned (P)Baa3 (sf)
Cl. 2M-2B, Assigned (P)Baa3 (sf)
Cl. 2M-2C, Assigned (P)Ba1 (sf)
Cl. 2M-2, Assigned (P)Baa3 (sf)
Cl. 2B-1A, Assigned (P)Ba1 (sf)
Cl. 2B-1B, Assigned (P)Ba2 (sf)
Cl. 2B-1, Assigned (P)Ba2 (sf)
Cl. 2B-2, Assigned (P)B3 (sf)
Cl. 2E-A1, Assigned (P)Baa3 (sf)
Cl. 2A-I1*, Assigned (P)Baa3 (sf)
Cl. 2E-A2, Assigned (P)Baa3 (sf)
Cl. 2A-I2*, Assigned (P)Baa3 (sf)
Cl. 2E-A3, Assigned (P)Baa3 (sf)
Cl. 2A-I3*, Assigned (P)Baa3 (sf)
Cl. 2E-A4, Assigned (P)Baa3 (sf)
Cl. 2A-I4*, Assigned (P)Baa3 (sf)
Cl. 2E-B1, Assigned (P)Baa3 (sf)
Cl. 2B-I1*, Assigned (P)Baa3 (sf)
Cl. 2E-B2, Assigned (P)Baa3 (sf)
Cl. 2B-I2*, Assigned (P)Baa3 (sf)
Cl. 2E-B3, Assigned (P)Baa3 (sf)
Cl. 2B-I3*, Assigned (P)Baa3 (sf)
Cl. 2E-B4, Assigned (P)Baa3 (sf)
Cl. 2B-I4*, Assigned (P)Baa3 (sf)
Cl. 2E-C1, Assigned (P)Ba1 (sf)
Cl. 2C-I1*, Assigned (P)Ba1 (sf)
Cl. 2E-C2, Assigned (P)Ba1 (sf)
Cl. 2C-I2*, Assigned (P)Ba1 (sf)
Cl. 2E-C3, Assigned (P)Ba1 (sf)
Cl. 2C-I3*, Assigned (P)Ba1 (sf)
Cl. 2E-C4, Assigned (P)Ba1 (sf)
Cl. 2C-I4*, Assigned (P)Ba1 (sf)
Cl. 2E-D1, Assigned (P)Baa3 (sf)
Cl. 2E-D2, Assigned (P)Baa3 (sf)
Cl. 2E-D3, Assigned (P)Baa3 (sf)
Cl. 2E-D4, Assigned (P)Baa3 (sf)
Cl. 2E-D5, Assigned (P)Baa3 (sf)
Cl. 2E-F1, Assigned (P)Ba1 (sf)
Cl. 2E-F2, Assigned (P)Ba1 (sf)
Cl. 2E-F3, Assigned (P)Ba1 (sf)
Cl. 2E-F4, Assigned (P)Ba1 (sf)
Cl. 2E-F5, Assigned (P)Ba1 (sf)
Cl. 2-X1*, Assigned (P)Baa3 (sf)
Cl. 2-X2*, Assigned (P)Baa3 (sf)
Cl. 2-X3*, Assigned (P)Baa3 (sf)
Cl. 2-X4*, Assigned (P)Baa3 (sf)
Cl. 2-Y1*, Assigned (P)Ba1 (sf)
Cl. 2-Y2*, Assigned (P)Ba1 (sf)
Cl. 2-Y3*, Assigned (P)Ba1 (sf)
Cl. 2-Y4*, Assigned (P)Ba1 (sf)
Cl. 2-J1, Assigned (P)Ba1 (sf)
Cl. 2-J2, Assigned (P)Ba1 (sf)
Cl. 2-J3, Assigned (P)Ba1 (sf)
Cl. 2-J4, Assigned (P)Ba1 (sf)
Cl. 2-K1, Assigned (P)Ba1 (sf)
Cl. 2-K2, Assigned (P)Ba1 (sf)
Cl. 2-K3, Assigned (P)Ba1 (sf)
Cl. 2-K4, Assigned (P)Ba1 (sf)
Cl. 2M-2Y, Assigned (P)Baa3 (sf)
Cl. 2M-2X, Assigned (P)Baa3 (sf)
Cl. 2B-1Y, Assigned (P)Ba2 (sf)
Cl. 2B-1X, Assigned (P)Ba2 (sf)
Cl. 2B-2Y, Assigned (P)B3 (sf)
Cl. 2B-2X, Assigned (P)B3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings are based on the credit quality of the mortgage loans,
the structural features of the transaction, the origination quality
and the servicing arrangement, the third-party review, and the
representations and warranties framework.
Moody's expected loss for this pool in a baseline scenario-mean is
0.85%, in a baseline scenario-median is 0.66% and reaches 4.34% at
a stress level consistent with Moody's Aaa ratings.
PRINCIPAL 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 February 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of 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.
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.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
CSMC 2022-NQM3: S&P Assigns Prelim B- (sf) Rating on B-2 Certs
--------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to CSMC
2022-NQM3 Trust's mortgage pass-through notes.
The note issuance is a RMBS transaction backed by U.S. residential
mortgage loans.
The preliminary ratings are based on information as of April 27,
2022. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- 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, DLJ Mortgage Capital Inc., and the
originators, which include AmWest Funding Corp., Hometown Equity
Mortgage LLC d/b/a theLender, Visio Financial Corp., Impac Mortgage
Corp., and SG Capital; and
-- The potential impact current and near-term macroeconomic
conditions may have on the performance of the mortgage borrowers in
the pool. S&P said, "On April 17, 2020, we updated our mortgage
outlook and corresponding archetypal foreclosure frequency levels
to account for the potential impact of the COVID-19 pandemic on the
overall credit quality of collateralized pools. While pandemic
related performance concerns have waned, given our current outlook
for the U.S. economy considering the impact of the Russia-Ukraine
military conflict, supply-chain disruptions, and rising inflation
and interest rates, we continue to maintain our updated 'B'
foreclosure frequency for the archetypal pool at 3.25%."
Preliminary Ratings(i) Assigned
CSMC 2022-NQM3 Trust
Class A-1A, $324,826,000: AAA (sf)
Class A-1B, $56,198,000: AAA (sf)
Class A-1, $381,024,000: AAA (sf)
Class A-2, $35,967,000: AA (sf)
Class A-3, $48,893,000: A (sf)
Class M-1, $31,752,000: BBB (sf)
Class B-1, $23,041,000: BB (sf)
Class B-2, $23,885,000: B- (sf)
Class B-3, $17,421,580: Not rated
Class A-IO-S, notional(ii): Not rated
Class XS, notional(ii): Not rated
Class PT, $561,983,580: Not rated
Class R, not applicable: Not rated
(i)The collateral and structural information in this report
reflects the preliminary private placement memorandum dated April
26, 2022. The preliminary ratings address the ultimate payment of
interest and principal.
(ii)The notional amount will equal the aggregate balance of the
mortgage loans as of the first day of the related due period.
DRYDEN 109 CLO: Moody's Assigns Ba3 Rating to $20MM Class E Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued and one class of loans incurred by Dryden 109 CLO,
Ltd. (the "Issuer" or "Dryden 109").
Moody's rating action is as follows:
US$107,000,000 Class A-1 Loan Maturing 2035, Definitive Rating
Assigned Aaa (sf)
US$208,000,000 Class A-1 Senior Secured Floating Rate Notes Due
2035, Definitive Rating Assigned Aaa (sf)
US$5,000,000 Class A-2 Senior Secured Floating Rate Notes Due 2035,
Definitive Rating Assigned Aaa (sf)
US$60,000,000 Class B Senior Secured Floating Rate Notes Due 2035,
Definitive Rating Assigned Aa2 (sf)
US$30,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes Due 2035, Definitive Rating Assigned A2 (sf)
US$30,000,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes Due 2035, Definitive Rating Assigned Baa3 (sf)
US$20,000,000 Class E Junior Secured Deferrable Floating Rate Notes
Due 2035, Definitive Rating Assigned Ba3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Debt." The Class A-1 Loan may not be exchanged or converted
into notes at any time.
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.
Moody's previously assigned a provisional rating to Class B of
(P)Aa1 (sf), described in the prior press release, dated March 28,
2022. Subsequent to the release of the provisional ratings for this
transaction, based on new information related to collateral quality
tests, Moody's downgraded and converted the rating to Aa2 (sf).
Dryden 109 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90.0% of the portfolio must consist of
senior secured loans, and up to 10.0% of the portfolio may consist
of second-lien loans or unsecured loans. The portfolio is
approximately 90% ramped as of the closing date.
PGIM, Inc. (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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 90
Weighted Average Rating Factor (WARF): 2705
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 47.0%
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 2021.
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.
GCAT 2022-NQM2: S&P Assigns Prelim B (sf) Rating on Cl. B-2 Certs
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to GCAT
2022-NQM2 Trust's mortgage pass-through certificates.
The certificate issuance is an RMBS transaction backed by
first-lien, fixed- and adjustable-rate, fully amortizing, and
interest-only residential mortgage loans primarily secured by
single-family residential properties, townhouses, planned-unit
developments, condominiums, cooperatives, and two- to four-family
residential properties to both prime and nonprime borrowers. The
pool has 699 loans, which are nonqualified, qualified mortgage safe
harbor, or ability to repay-exempt mortgage loans.
The preliminary ratings are based on information as of April 22,
2022. 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 II LLC; and
-- The potential impact current and near term macroeconomic
conditions may have on the performance of the mortgage borrowers in
the pool. S&P saiod, "On April 17, 2020, we updated our mortgage
outlook and corresponding archetypal foreclosure frequency levels
to account for the potential impact of the COVID-19 pandemic on the
overall credit quality of collateralized pools. While pandemic
related performance concerns have waned, given our current outlook
for the U.S. economy considering the impact of the Russia-Ukraine
military conflict, supply-chain disruptions, and rising inflation
and interest rates, we continue to maintain our updated 'B'
foreclosure frequency for the archetypal pool at 3.25%."
Preliminary Ratings Assigned
GCAT 2022-NQM2 Trust
Class A-1, $254,581,000: AAA (sf)
Class A-2, $26,271,000: AA (sf)
Class A-3, $43,848,000: A (sf)
Class M-1, $17,955,000: BBB (sf)
Class B-1, $11,529,000; BB (sf)
Class B-2, $13,797,000: B (sf)
Class B-3, $10,017,429: Not rated
Class A-IO-S, notional(i): Not rated
Class X, notional(i): Not rated
Class R, not applicable: Not rated
(i)The notional amount equals the aggregate principal balance of
the loans.
GCAT TRUST 2022-INV2: Moody's Assigns B2 Rating to Cl. B-5 Debt
---------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 41
classes of residential mortgage-backed securities (RMBS) issued by
GCAT 2022-INV2 Trust, and sponsored by Blue River Mortgage III
LLC.
The securities are backed by a pool of GSE-eligible (100%)
residential mortgages originated by Arc Home, LLC (50.3% by UPB),
Home Point Financial Corporation (21.2% by UPB), Fairway
Independent Mortgage Corporation (13.4% by UPB), and Cardinal
Financial Company LP (11.4% by UPB). All other originators
represent less than 10% by UPB. The securities are serviced by
NewRez LLC d/b/a Shellpoint Mortgage Servicing ("Shellpoint").
The complete rating actions are as follows:
Issuer: GCAT 2022-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 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-25, Definitive Rating Assigned Aaa (sf)
Cl. A-26, Definitive Rating Assigned Aaa (sf)
Cl. A-27, Definitive Rating Assigned Aaa (sf)
Cl. A-28, Definitive Rating Assigned Aaa (sf)
Cl. A-29, Definitive Rating Assigned Aaa (sf)
Cl. A-30, Definitive Rating Assigned Aaa (sf)
Cl. A-X-1*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-23*, Definitive Rating Assigned Aaa (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-1A, Definitive Rating Assigned Aa3 (sf)
Cl. B-X-1*, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A2 (sf)
Cl. B-2A, Definitive Rating Assigned A2 (sf)
Cl. B-X-2*, Definitive Rating Assigned A2 (sf)
Cl. B-3, Definitive Rating Assigned Baa2 (sf)
Cl. B-4, Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Definitive Rating Assigned B2 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings are based on the credit quality of the mortgage loans,
the structural features of the transaction, the origination quality
and the servicing arrangement, the third-party review, and the
representations and warranties framework.
Moody's expected loss for this pool in a baseline scenario-mean is
1.44%, in a baseline scenario-median is 1.07% and reaches 9.59% at
a stress level consistent with Moody's Aaa ratings.
PRINCIPAL 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 February 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of 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.
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.
GS MORTGAGE 2018-RIVR: S&P Cuts Class D Certs Rating to 'BB (sf)'
-----------------------------------------------------------------
S&P Global Ratings lowered its ratings on the class B, C, and D
commercial mortgage pass-through certificates from GS Mortgage
Securities Corp. Trust 2018-RIVR, a U.S. CMBS transaction. At the
same time, we affirmed our rating on the class A certificates from
the same transaction.
This U.S. CMBS transaction is backed by a floating-rate,
interest-only (IO) mortgage loan secured by River North Point, a
mixed-use (office with a hotel component) property in Chicago,
Ill.
Rating Actions
S&P said, "The downgrades of classes B, C, and D and the
affirmation of class A certificates reflect our reevaluation of the
mixed-use (office/hotel-–representing 95.2% and 4.8% of effective
gross income (EGI), respectively, as calculated by S&P Global
Ratings) property that secures the sole loan in the transaction.
Our analysis considers the declining office occupancy rates over
the past two years and the sponsor's inability to increase the
property's occupancy rate to historical or market occupancy levels.
As of the Dec. 31, 2021, rent roll, the office component was 72.9%
leased. According to media reports, a tenant, Stripe, may have
signed a lease comprising approximately 3.0% of the net rentable
area (NRA) at the property. After analyzing the potential tenancy
changes, we expect occupancy to be approximately 75.9%, compared
with 82.5% at issuance.
"Our property-level analysis also reflects the softened office
submarket fundamentals from lower demand and longer re-leasing time
frames as more companies adopt a hybrid work arrangement.
Therefore, we revised and lowered our sustainable net cash flow
(NCF) to $17.6 million (down 14.4% from our issuance NCF of $20.5
million) using a projected 75.9% occupancy rate and aligning our
NCF closer to the 2020 servicer-reported figures. Using a S&P
Global Ratings capitalization rate of 7.25%, we arrived at an
expected-case valuation of $242.1 million or $139 per sq. ft., a
12.0% decrease from our issuance value of $275.0 million. This
yielded an S&P Global Ratings loan-to-value ratio of 127.9% on the
mortgage loan balance."
Although the model-indicated ratings were lower than the classes'
revised or current rating levels, S&P tempered its downgrades on
classes B, C, and D and affirmed its rating on class A because we
weighed certain qualitative considerations, including:
-- The potential that the office component's operating performance
could improve above our revised expectations;
-- The significant market value decline that would be needed
before these classes experience principal losses;
-- The liquidity support provided in the form of servicer
advancing; and
-- The relative position of the classes in the waterfall.
The mortgage loan had a reported current payment status through its
April 2022 debt service payment date, and the borrower did not
request COVID-19-related relief. According to the master servicer,
Wells Fargo Bank N.A., there is $9.3 million in the other reserves
and $5.8 million in the tenant reserve accounts.
If the property's performance does not improve or if there are
reported negative changes in the performance beyond what S&P has
already considered, it may revisit its analysis and adjust its
ratings as necessary.
Property-Level Analysis
The property is a 1.7 million-sq.-ft. mixed-use building comprising
approximately 1.3 million sq. ft. of LEED certified gold,
multi-tenanted class-A office space and 437,609 sq. ft. of
additional space leased to the 535-key Holiday Inn Mart Plaza Hotel
in Chicago, Ill. The hotel portion occupies the south office tower
on floors 14 to 23 and operates under a lease with the sponsor that
expires in August 2042. According to its website, the hotel is
currently closed and is expected to reopen in the second half of
2022.
The property was built in 1977 and originally served as a wholesale
buying center for the clothing industry, adjacent to the
Merchandise Center. The sponsor, Blackstone Real Estate Partners
VIII L.P., acquired the property in 2015, and as part of its $135.1
million capital improvement plan, spent approximately $49.8 million
through 2018 in leasing costs and base building capital to create a
modern office environment with amenities such as a fitness center,
lounge/conference center, roof deck, new windows, and improved
security system. The servicer did not provide an update on whether
the sponsor infused the additional $85.3 million capital for
primarily additional building amenities, façade improvement, and
leasing costs into the property.
The office and hotel portions represent 74.8% and 25.2% of total
NRA, respectively; however, they make up 95.2% and 4.8% of EGI,
respectively, as calculated by S&P Global Ratings.
According to the December 2021 rent roll, the five largest office
tenants at the property comprise 31.6% of NRA: GGPLP Reil Services
Inc. (13.0% of NRA; 18.9% of gross rent, as calculated by S&P
Global Ratings; December 2027 lease expiration), Gartner Inc.
(5.6%; 8.3%; August 2032), Virtu KCG Holdings LLC (5.3%; 6.4%;
August 2026), Affirm Inc. (4.3%; 5.2%; November 2030), and Fiserv
Solutions Inc. (3.4%; 5.4%; February 2025).
S&P's property-level analysis considered that while the sponsor was
able to partly re-tenant the office component after two large
office tenants, The Ogilvy Group Inc. (186,811 sq. ft.; 14.4% of
NRA) and Illinois Institute of Art (98,997 sq. ft.; 7.6% of NRA),
vacated in 2020 and 2021, respectively, the occupancy level is
still below our expectations.
Fiserv Solutions Inc. rescinded its prior notice to exercise its
termination option and vacate, and is currently at the property
with a February 2025 lease expiration. In addition, flex,
co-working tenant, EQSpaces (3.4% of NRA), signed a 29-year lease
at the property in 2021. Lastly, according to various news reports,
the San Francisco-based company, Stripe, has signed a lease
comprising approximately 3.0% of NRA at the subject property,
although not yet confirmed by the master servicer. After
considering the known tenancy movements, we expect an occupancy
rate of approximately 75.9%, which is slightly above the 72.9%
occupancy rate in the December 2021 rent roll.
S&P said, "Although we were aware at issuance that the two
aforementioned tenants will vacate, our analysis also factored in
the property's occupancy history (averaging 87.2% between 2009 and
2017), the strong submarket fundamentals, and sponsor's recent and
planned capital improvements. At that time, we assumed an 82.5%
occupancy rate. However, the office component is currently
underperforming and faces elevated rollover in 2024 and 2027 when
leases comprising 10.6% and 17.0% of total NRA, respectively, roll.
As a result of declining occupancy and increasing expenses, the
servicer reported NCF declined 27.0% in 2020 to $16.8 million from
$23.1 million in 2019 and another 43.0% to $9.6 million in 2021.
Revenue decreased to $38.6 million in 2021 from $43.8 million in
2020, while expenses increased to $27.5 million from $25.5 million
for the same period. Wells Fargo reported a 1.91x debt service
coverage in 2021, down from 2.50x in 2020. We have revised and
lowered our expected-case assumptions and property valuation, based
on declining occupancy and higher-than-expected expenses at the
property, weakened office submarket fundamentals due to the
COVID-19 pandemic and more companies embracing flexible work
arrangements, concentrated rollover risk, and longer re-tenancy
timing.
"Our analysis considered these developments, as well as current
office market data and conditions. According to CoStar, market rent
for three-star office properties in the River North office
submarket declined 0.2% as of April 2022, following a 0.5% decrease
in 2021 and a 4.2% decrease in 2020. Although CoStar projects 1.0%
and 3.6% rent growth in 2022 and 2023, respectively, continued
above average market vacancy rates could hurt rent rates. As of
April 2022, asking rent for three-star office properties in the
submarket was $31.47 per sq. ft., while vacancy and availability
rates were 16.7% and 20.6%, respectively. This compares with the
submarket asking rent and vacancy rate of $32.52 per sq. ft. and
10.1%, respectively, in 2018 when the transaction was issued.
CoStar projects average office submarket vacancy rate of 16.7% and
asking rent of $33.00 per sq. ft. in 2023.
"We assumed an occupancy rate of 75.9%, an in-place gross rent of
$31.54 per sq. ft. using the December 2021 rent roll, and 52.6%
operating expense ratio, which result in an S&P Global Ratings NCF
of $17.6 million. Using an S&P Global Ratings capitalization rate
of 7.25%, we derived an expected-case value of $242.1 million or
$139 per sq. ft."
Transaction Summary
This is a U.S. stand-alone (single-borrower) transaction backed by
a two-year, floating-rate, IO mortgage loan with five one-year
extension options. The loan is secured by the borrower's fee simple
interest in River North Point, a mixed-use property in Chicago,
Ill. The IO loan had an initial trust balance of $310.0 million at
issuance and a current trust balance of $309.8 million (according
to the April 15, 2022, trustee remittance report) after applying
the remaining upfront leasing holdback reserve funds in February
2020. It pays an annual floating interest rate of one-month LIBOR
plus an initial weighted average component spread of 1.495% (will
increase by 0.25% upon commencement of the fourth extension term),
and matures on July 9, 2022. The remaining three extension options
are exercisable if the borrower obtains a replacement interest rate
cap agreement, among other factors. The fully extended maturity
date is July 9, 2025. To date, the trust has not incurred any
principal losses.
In addition to the mortgage loan, the borrower obtained a
subordinate mezzanine loan totaling $60.0 million at issuance and a
current balance of $59.9 million as of the April 2022 trustee
remittance report. The mezzanine loan is IO, pays a floating
interest rate of one-month LIBOR plus 4.3% and is co-terminous with
the mortgage loan.
S&P said, "The recent rapid spread of the omicron variant
highlights the inherent uncertainties of the COVID-19 pandemic, as
well as the importance and benefits of vaccines. While the risk of
new, more severe variants displacing omicron and evading existing
immunity cannot be ruled out, our current base case assumes that
existing vaccines can continue to provide significant protection
against severe illness. Furthermore, many governments, businesses,
and households around the world are tailoring policies to limit the
adverse economic impact of recurring COVID-19 waves. Consequently,
we do not expect a repeat of the sharp global economic contraction
of second-quarter 2020. Meanwhile, we continue to assess how well
each issuer adapts to new waves in its geography or industry."
Rating Lowered
GS Mortgage Securities Corp. Trust 2018-RIVR
Class B to 'A+ (sf)' from 'AA- (sf)'
Class C to 'BBB+ (sf)' from 'A- (sf)'
Class D to 'BB (sf)' from 'BBB- (sf)'
Rating Affirmed
GS Mortgage Securities Corp. Trust 2018-RIVR
Class A: AAA (sf)
HILTON GRAND 2022-1D: Moody's Gives Ba1 Rating to Class D Notes
---------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to the
notes issued by Hilton Grand Vacations Trust 2022-1D (HGVT
2022-1D). HGVT 2022-1D is backed by a pool of timeshare loans
originated by Diamond Resorts Corporation (DRC) or one of its
affiliates. Diamond Resorts Financial Services, Inc. (DRFS) is the
servicer and Hilton Resorts Corporation (HRC) is the administrator
for the transaction. Both DRC and DRFS are indirect, wholly-owned
subsidiaries of Hilton Grand Vacations Inc. (HGV). HGV is a global
timeshare company engaged in developing, marketing, selling and
managing timeshare resorts. Hilton Grand Vacations Borrower, LLC
(HGV Borrower), an indirect wholly-owned subsidiary of HGV, is the
performance guarantor of DRFS. Computershare Trust Company, N.A.
(Computershare) is the backup servicer.
Issuer: Hilton Grand Vacations Trust 2022-1D
$106,470,000, 3.61%, Class A Notes, Definitive Rating Assigned Aaa
(sf)
$84,110,000, 4.10%, Class B Notes, Definitive Rating Assigned A3
(sf)
$22,360,000, 4.69%, Class C Notes, Definitive Rating Assigned Baa1
(sf)
$33,150,000, 6.79%, Class D Notes, Definitive Rating Assigned Ba1
(sf)
RATINGS RATIONALE
The rating is based on the quality of the underlying collateral and
its expected performance, the capital structure, and the experience
and expertise of DRFS as servicer and the back-up servicing
arrangement with Computershare.
Moody's expected median cumulative net loss expectation for HGVT
2022-1D is 22.1% and the loss at a Aaa stress is 64%. Moody's based
its cumulative gross and net loss expectations on an analysis of
the credit quality of the underlying collateral; the historical
performance of similar collateral, including securitization
performance and managed portfolio performance; the ability of DRFS
to perform the servicing functions and Computershare to perform the
backup servicing functions; and current expectations for the
macroeconomic environment during the life of the transaction.
At closing, the Class A notes, Class B notes, Class C notes and
Class D notes are expected to benefit from 60.05%, 27.70%, 19.10%
and 6.35% of hard credit enhancement, respectively. Hard credit
enhancement for the notes consists of a combination of
overcollateralization, a non-declining reserve account and
subordination. The notes may also benefit from excess spread.
The social risk for this transaction is moderate, driven by
customer relations risk. Some borrowers have legally challenged
directly or via timeshare exit companies the ability to terminate
their timeshare contract. Such challenges have resulted in legal
holds that have increased borrower default rates and could lead to
higher defaults to the extent there are no alternatives offered by
timeshare companies to end the contracts or if the perceived value
of the timeshare decreases.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Vacation
Timeshare Loan Securitizations Methodology" published in April
2020.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the notes if, given current expectations of
portfolio losses, levels of credit enhancement are consistent with
higher ratings. In partial sequential pay structures, such as the
one in this transaction, credit enhancement grows as a percentage
of the collateral balance as collections pay down senior notes,
until certain enhancement levels are reached. Moody's expectation
of pool losses could decline as a result of better than expected
improvements in the economy, changes to servicing practices that
enhance collections or refinancing opportunities that result in
prepayments.
Down
Moody's could downgrade the ratings of the notes if pool losses
exceed its expectations and levels of credit enhancement are
consistent with lower ratings. Credit enhancement could decline if
excess spread is not sufficient to cover losses in a given month.
Moody's expectation of pool losses may increase, for example, due
to performance deterioration stemming from a downturn in the US
economy, deficient servicing, errors on the part of transaction
parties, inadequate transaction governance or fraud.
HILTON GRAND 2022-1D: S&P Assigns BB- (sf) Rating on Class D Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Hilton Grand Vacations
Trust 2022-1D's timeshare loan-backed notes series 2022-1D.
The note issuance is an ABS securitization backed by vacation
ownership interest (timeshare) loans.
S&P said, "The ratings reflect our view of the credit enhancement
that is available in the form of subordination,
overcollateralization, a reserve account, and available excess
spread. The ratings also reflect our view of Diamond Resorts
Financial Services Inc.'s servicing ability and experience in the
timeshare market."
Ratings Assigned
Hilton Grand Vacations Trust 2022-1D
Class A, $106.47 million: AAA (sf)
Class B, $84.11 million: A- (sf)
Class C, $22.36 million: BBB (sf)
Class D, $33.15 million: BB- (sf)
HOME RE 2022-1: Moody's Assigns B2 Rating to Cl. B-1 Notes
----------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to five
classes of mortgage insurance credit risk transfer (MI CRT) notes
issued by Home Re 2022-1 Ltd.
The securities reference a pool of mortgages insurance policies
issued by Mortgage Guaranty Insurance Corporation, the ceding
insurer, on a portfolio of mortgage loans predominantly acquired by
Fannie Mae and Freddie Mac, and originated and serviced by multiple
entities.
The complete rating actions are as follows:
Issuer: Home Re 2022-1 Ltd.
Cl. M-1A, Definitive Rating Assigned Baa2 (sf)
Cl. M-1B, Definitive Rating Assigned Baa3 (sf)
Cl. M-1C, Definitive Rating Assigned Ba2 (sf)
Cl. M-2, Definitive Rating Assigned B1 (sf)
Cl. B-1, Definitive Rating Assigned B2 (sf)
RATINGS RATIONALE
The ratings are based on the credit quality of the mortgage loans,
the structural features of the transaction, the operational
strength of the ceding insurer, the third-party review, and the
representations and warranties framework.
Moody's expected loss on the pool's aggregate exposed principal
balance in a baseline scenario-mean is 2.12%, in a baseline
scenario-median is 1.82% and reaches 14.67% at a stress level
consistent with Moody's Aaa ratings.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
February 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of 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.
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.
NAVIENT STUDENT 2014-1: Fitch Lowers Rating on Class B Debt to 'BB'
-------------------------------------------------------------------
Fitch Ratings has downgraded the ratings of all outstanding classes
of Navient Student Loan Trust (NAVSL) 2014-1. The Rating Outlooks
are Negative. Fitch has also affirmed the ratings of all
outstanding classes of Navient Student Loan Trust 2014-8 and
Navient Student Loan Trust 2015-1 and maintained their current
Outlooks.
DEBT RATING PRIOR
---- ------ -----
Navient Student Loan Trust 2014-1
A-3 63938EAC8 LT BBsf Downgrade BBBsf
A-4 63938EAD6 LT Asf Downgrade AAsf
B 63938EAE4 LT BBsf Downgrade BBBsf
Navient Student Loan Trust 2014-8
A-3 63939DAC9 LT AAAsf Affirmed AAAsf
B 63939DAD7 LT Asf Affirmed Asf
Navient Student Loan Trust 2015-1
A-2 63939FAB6 LT AAsf Affirmed AAsf
B 63939FAC4 LT A+sf Affirmed A+sf
NAVSL 2014-1: The class A-3 notes have been downgraded to 'BBsf'
from 'BBBsf' due to increased maturity risk in the transaction,
resulting from the continued increase in the remaining loan term
and the decrease in the principal payment rate. The weighted
average remaining term has increased to 174 months, up from 170
months at the last review in June 2021. The Negative Outlook on
this class reflects the possibility of further negative rating
pressure in the next one to two years, if the remaining term
continues to increase or if the principal payment rate remains low.
The model-implied rating of the class A-3 notes is 'Bsf'. However,
the legal final maturity date is June 25, 2031, which is more than
nine years away. Fitch's FFELP rating criteria allow rating
tolerance for surveillance for maturity stress failure of up to two
categories for classes with more than seven years remaining to
maturity.
The class A-4 notes have been downgraded to 'Asf' from 'AAsf' also
due to the transaction's increased maturity risk. The rating of
this class is maintained at no more than two rating categories
above the preceding senior notes, consistent with Fitch's rating
criteria.
The class B notes have been downgraded to 'BBsf' from 'BBBsf', as
this rating is constrained by the rating of the class A-3 notes.
The Negative Outlooks for the class A-4 and class B notes reflect
that any future negative rating actions on the class A-3 notes will
have a negative impact on their ratings.
NAVSL 2014-8: Both the class A-3 and class B notes passed the
credit and maturity stresses for their respective ratings with
their Outlooks maintained at current levels. The Outlook on the
class A-3 notes remains Negative due to the Outlook assigned to the
U.S. sovereign Issuer Default Rating.
NAVSL 2015-1: Both the class A-2 and class B notes have been
affirmed at their respective ratings with their Outlooks maintained
at current levels. There is increased maturity risk in the
transaction, as the weighted average remaining term has risen to
173 months from 169 months since the last review. The model-implied
rating of the class A-2 notes is 'Asf'; however, the rating has
been affirmed at 'AAsf' using the one-category general tolerance as
well as the rating tolerance for surveillance for maturity stress
failure allowed by Fitch's rating criteria. The Negative Outlook
reflects the possibility of further negative rating pressure in the
next one to two years, if the remaining term continues to
increase.
KEY RATING DRIVERS
U.S. Sovereign Risk: The trust collateral comprises 100% Federal
Family Education Loan Program (FFELP) loans with guaranties
provided by eligible guarantors and reinsurance provided by the
U.S. Department of Education (ED) for at least 97% of principal and
accrued interest. The U.S. sovereign rating is currently
'AAA'/Outlook Negative.
Collateral Performance: Based on transaction-specific performance
to date, Fitch assumes a cumulative default rate of 21.75%, 37.50%
and 35.75% under the base case scenario and a default rate of
61.49%, 100.00% and 99.21% under the 'AAA' credit stress scenario
for NAVSL 2014-1, 2014-8 and 2015-1, respectively.
Fitch is maintaining its sustainable constant default rate (sCDR)
at 3.2%, 5.3% and 4.8% for NAVSL 2014-1, 2014-8 and 2015-1,
respectively, in cash flow modeling. Fitch is also maintaining its
sustainable constant prepayment rate (sCPR; voluntary and
involuntary prepayments) at 11.0% and 9.5% for NAVSL 2014-1 and
2015-1, respectively, and revising its sCPR to 9.0% for NAVSL
2014-8. Fitch applies the standard default timing curve in its
credit stress cash flow analysis. The claim reject rate is assumed
to be 0.25% in the base case and 2.0% in the 'AAA' case for all
three transactions.
The TTM levels of deferment are 5.66%, 6.27% and 5.56% for NAVSL
2014-1, 2014-8 and 2015-1, respectively. The TTM levels of
forbearance are 15.30%, 18.39% and 17.61% for NAVSL 2014-1, 2014-8
and 2015-1, respectively. The TTM levels of income-based repayment
(IBR; prior to adjustment) are 28.20%, 24.93% and 25.63% for NAVSL
2014-1, 2014-8 and 2015-1, respectively. These assumptions are used
as the starting points in cash flow modeling, and subsequent
declines or increases are modeled as per criteria. The borrower
benefit is assumed to be approximately 0.10%, 0.04% and 0.04% for
NAVSL 2014-1, 2014-8 and 2015-1, respectively, based on information
provided by the sponsor. Approximately 7.52%, 21.30% and 16.09% of
the pool are rehab loans for NAVSL 2014-1, 2014-8 and 2015-1,
respectively.
Basis and Interest Rate Risk: Basis risk for these transactions
arises from any rate and reset frequency mismatch between interest
rate indices for Special Allowance Payments (SAP) and the
securities. As of February 2022, for NAVSL 2014-1, approximately
97.59% of the student loans are indexed to LIBOR, and 2.41% are
indexed to the 91-day T-bill rate. For NAVSL 2014-8, approximately
90.42% of the student loans are indexed to LIBOR, and 9.58% are
indexed to the 91-day T-bill rate. For NAVSL 2015-1, approximately
86.39% of the student loans are indexed to LIBOR, and 13.61% are
indexed to the 91-day T-bill rate. All the notes in the three
transactions are indexed to one-month LIBOR. Fitch applies its
standard basis and interest rate stresses to the transactions as
per criteria.
Payment Structure: Credit enhancement (CE) is provided by
overcollateralization (OC), excess spread and for the class A
notes, subordination. As of February 2022, the senior parity ratios
(including the reserve) are 109.41% (8.60% CE), 108.85% (8.13% CE)
and 107.80% (7.24% CE) for NAVSL 2014-1, 2014-8 and 2015-1,
respectively. The total parity ratios are 101.54% (1.51% CE),
101.23% (1.22% CE) and 101.52% (1.50% CE) for NAVSL 2014-1, 2014-8
and 2015-1, respectively. Liquidity support is provided by a
reserve account currently sized their floors of $748,891 and
$1,019,764 for NAVSL 2014-1 and NAVSL 2014-8, respectively, and at
0.25% of the outstanding pool balance ($1,160,311.57) for NAVSL
2015-1. The transactions will continue to release cash as long as
the target OC is maintained.
Operational Capabilities: Day-to-day servicing is provided by
Navient Solutions. LLC. Fitch believes Navient to be an acceptable
servicer, due to its extensive track record as one of the largest
servicers of FFELP loans. Fitch also confirmed with the servicer
the availability of a business continuity plan to minimize
disruptions in the collection process during the coronavirus
pandemic.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
'AAAsf' rated tranches of most FFELP securitizations will likely
move in tandem with the U.S. sovereign rating given the strong
linkage to the U.S. sovereign, by nature of the reinsurance
provided by the Department of Education. Aside from the U.S.
sovereign rating, defaults, basis risk and loan extension risk
account for the majority of the risk embedded in FFELP student loan
transactions.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. Fitch conducts credit and maturity stress
sensitivity analysis by increasing or decreasing key assumptions by
25% and 50% over the base case. The credit stress sensitivity is
viewed by stressing both the base case default rate and the basis
spread. The maturity stress sensitivity is viewed by stressing
remaining term, IBR usage and prepayments. The results below should
only be considered as one potential outcome, as the transactions
are exposed to multiple dynamic risk factors. It should not be used
as an indicator of possible future performance.
Fitch has revised its global economic outlook forecasts as a result
of the war in Ukraine and related economic sanctions. Downside
risks have increased and Fitch published, "What a Stagflation
Scenario Would Mean for Global Structured Finance," an assessment
of the potential rating and asset performance impact of a
plausible, albeit worse than expected, adverse stagflation
scenario.
Fitch expects the FFELP student loan ABS sector to experience mild
to modest asset performance deterioration, indicating some Outlook
changes (between 5% and 20% of outstanding ratings). Asset
performance under this adverse scenario is expected to be more
modest than the most severe sensitivity scenario below. The
severity and duration of the macroeconomic disruption and thus
portfolio performance is uncertain and is balanced by a strong
labor market and the build-up of household savings during the
pandemic, which will provide some support in the near term to
households faced with falling real incomes.
Navient Student Loan Trust 2014-1
Current Ratings: class A-3 'BBsf'; class A-4 'Asf'; class B 'BBsf'
Current Model-Implied Ratings: class A-3 'AAAsf' (Credit Stress) /
'Bsf' (Maturity Stress); class A-4 'AAAsf' (Credit Stress) / 'Asf'
(Maturity Stress); class B 'AAAsf' (Credit Stress) / 'AAAsf'
(Maturity Stress)
Credit Stress Rating Sensitivity
-- Default increase 25%: class A-3 'AAAsf'; class A-4 'AAAsf';
class B 'AAsf';
-- Default increase 50%: class A-3 'AAsf'; class A-3 'AAsf';
class B 'Asf';
-- Basis Spread increase 0.25%: class A-3 'AAAsf'; class A-4
'AAAsf'; class B 'AAsf';
-- Basis Spread increase 0.5%: class A-3 'AAAsf'; class A-4
'AAAsf'; class B 'Asf'.
Maturity Stress Rating Sensitivity
-- CPR decrease 25%: class A-3 'CCCsf'; class A-4 'BBsf'; class B
'AAAsf';
-- CPR decrease 50%: class A-3 'CCCsf'; class A-4 'CCCsf'; class B
'AAAsf';
-- IBR Usage increase 25%: class A-3 'CCCsf'; class A-4 'BBBsf';
class B 'AAAsf';
-- IBR Usage increase 50%: class A-3 'CCCsf'; class A-4 'BBBsf';
class B 'AAAsf';
-- Remaining Term increase 25%: class A-3 'CCCsf'; class A-4
'BBsf'; class B 'AAAsf';
-- Remaining Term increase 50%: class A-3 'CCCsf'; class A-4
'CCCsf'; class B 'Asf'.
Navient Student Loan Trust 2014-8
Current Ratings: class A 'AAAsf'; class B 'Asf'
Current Model-Implied Ratings: class A 'AAAsf' (Credit Stress) /
'AAAsf' (Maturity Stress); class B 'Asf' (Credit Stress) / 'AAAsf'
(Maturity Stress)
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'AAAsf'; class B 'BBBsf';
-- Default increase 50%: class A 'AAAsf'; class B 'BBBsf';
-- Basis Spread increase 0.25%: class A 'AAAsf'; class B 'Asf';
-- Basis Spread increase 0.5%: class A 'AAAsf'; class B 'BBBsf'.
Maturity Stress Rating Sensitivity
-- CPR decrease 25%: class A 'AAAsf'; class B 'AAAsf';
-- CPR decrease 50%: class A 'AAAsf'; class B 'AAAsf';
-- IBR Usage increase 25%: class A 'AAAsf'; class B 'AAAsf';
-- IBR Usage increase 50%: class A 'AAAsf'; class B 'AAAsf';
-- Remaining Term increase 25%: class A 'AAAsf'; class B 'AAAsf';
-- Remaining Term increase 50%: class A 'AAAsf'; class B 'AAsf'.
Navient Student Loan Trust 2015-1
Current Ratings: class A 'AAsf'; class B 'A+'
Current Model-Implied Ratings: class A 'AAAsf' (Credit Stress) /
'Asf' (Maturity Stress); class B 'Asf' (Credit Stress) / 'AAAsf'
(Maturity Stress)
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'AAAsf'; class B 'BBBsf';
-- Default increase 50%: class A 'AAAsf'; class B 'BBBsf';
-- Basis Spread increase 0.25%: class A 'AAAsf'; class B 'Asf';
-- Basis Spread increase 0.5%: class A 'AAAsf'; class B 'BBBsf'.
Maturity Stress Rating Sensitivity
-- CPR decrease 25%: class A 'BBBsf'; class B 'AAAsf';
-- CPR decrease 50%: class A 'Bsf'; class B 'AAAsf';
-- IBR Usage increase 25%: class A 'Asf'; class B 'AAAsf';
-- IBR Usage increase 50%: class A 'BBBsf'; class B 'AAAsf';
-- Remaining Term increase 25%: class A 'Bsf'; class B 'AAAsf';
-- Remaining Term increase 50%: class A 'CCCsf'; class B 'AAAsf'.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Navient Student Loan Trust 2014-1
No upgrade credit stress sensitivity is provided for the class A-3,
class A-4 and class B notes, as they are already at their highest
possible model-implied ratings. No upgrade maturity stress
sensitivity is provided for the class B notes, as they are already
at their highest possible model-implied rating.
Maturity Stress Sensitivity
-- CPR increase 25%: class A-3 'Asf'; class A-4 'AAsf';
-- IBR usage decrease 25%: class A-3 'BBsf'; class A-4 'AAsf';
-- Remaining term decrease 25%: class A-3 'Asf'; class A-4
'AAAsf'.
Navient Student Loan Trust 2014-8
No upgrade credit stress sensitivity is provided for the class A
notes, as they are already at their highest possible model-implied
ratings. No upgrade maturity stress sensitivity is provided for the
class A and class B notes, as they are already at their highest
possible model-implied rating.
Credit Stress Sensitivity
-- Default decrease 25%: class B 'AAsf';
-- Basis spread decrease 0.25%: class B 'Asf'.
Navient Student Loan Trust 2015-1
No upgrade credit stress sensitivity is provided for the class A
notes, as they are already at their highest possible model-implied
rating. No upgrade maturity stress sensitivity is provided for the
class B notes, as they are already at their highest possible
model-implied rating.
Credit Stress Sensitivity
-- Default decrease 25%: class B 'AAsf';
-- Basis spread decrease 0.25%: class B 'Asf'.
Maturity Stress Sensitivity
-- CPR increase 25%: class A 'AAsf';
-- IBR usage decrease 25%: class A 'AAsf';
-- Remaining term decrease 25%: class A '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.
OCTAGON 59 LTD: Moody's Assigns Ba3 Rating to Cl. E Notes
---------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by Octagon 59, Ltd. (the "Issuer" or "Octagon 59").
Moody's rating action is as follows:
US$310,000,000 Class A-1 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$10,000,000 Class A-2 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$60,000,000 Class B Senior Secured Floating Rate Notes due 2035,
Assigned Aa2 (sf)
US$26,500,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned A2 (sf)
US$30,000,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned Baa3 (sf)
US$23,500,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2035, 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.
Octagon 59 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 non-senior secured loans, provided that
not more than 5% of the portfolio consists of permitted non-loan
assets. The portfolio is approximately 95% ramped as of the closing
date.
Octagon Credit Investors, 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.
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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 2849
Weighted Average Spread (WAS): 3mS + 3.75%
Weighted Average Coupon (WAC): 5.50%
Weighted Average Recovery Rate (WARR): 46.5%
Weighted Average Life (WAL): 8.05 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 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 Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
RCKT MORTGAGE 2022-3: Moody's Assigns B3 Rating to Cl. B-5 Debt
---------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 47
classes of residential mortgage-backed securities (RMBS) issued by
RCKT Mortgage Trust 2022-3, and sponsored by Woodward Capital
Management LLC.
The securities are backed by a pool of prime jumbo residential
mortgages originated and serviced by Rocket Mortgage, LLC (long
term corporate family rating, Ba1).
The complete rating actions are as follows:
Issuer: RCKT Mortgage Trust 2022-3
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 Aaa (sf)
Cl. A-18, Definitive Rating Assigned Aaa (sf)
Cl. A-19, Definitive Rating Assigned Aaa (sf)
Cl. A-20, Definitive Rating Assigned Aaa (sf)
Cl. A-21, Definitive Rating Assigned Aa1 (sf)
Cl. A-22, Definitive Rating Assigned Aa1 (sf)
Cl. A-23, Definitive Rating Assigned Aa1 (sf)
Cl. A-24, Definitive Rating Assigned Aa1 (sf)
Cl. A-1A Loans, Definitive Rating Assigned Aaa (sf)
Cl. A-X-1*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-2*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-3*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-4*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-5*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-6*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-7*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-8*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-9*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-10*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-11*, Definitive Rating Assigned Aaa (sf)
Cl. A-X-12*, Definitive Rating Assigned Aa1 (sf)
Cl. A-X-13*, Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-1A, Definitive Rating Assigned Aa3 (sf)
Cl. B-X-1*, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A3 (sf)
Cl. B-2A, Definitive Rating Assigned A3 (sf)
Cl. B-X-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
The ratings are based on the credit quality of the mortgage loans,
the structural features of the transaction, the origination quality
and the servicing arrangement, the third-party review, and the
representations and warranties framework.
Moody's expected loss for this pool in a baseline scenario-mean is
0.69%, in a baseline scenario-median is 0.47% and reaches 4.86% at
a stress level consistent with Moody's Aaa ratings.
PRINCIPAL 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 February 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of 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.
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.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
SLM STUDENT 2007-7: S&P Raises Class B Note Rating to 'BB (sf)'
---------------------------------------------------------------
S&P Global Ratings raised its rating on the class B notes from SLM
Student Loan Trust 2007-7 (SLM 2007-7) to 'BB (sf)' from 'CC (sf)'.
At the same time, S&P removed the rating from CreditWatch, where
S&P placed it with developing implications on Jan. 14, 2022. SLM
2007-7 is a student loan asset-backed securities (ABS) transaction
backed by student loans originated through the U.S. Department of
Education's (ED) Federal Family Education Loan Program (FFELP).
The upgrade reflects the strength of the collateral, the current
overcollateralization that is expected to build over time, the
pay-in-kind (PIK) nature of the interest on the notes, and the
strong liquidity position resulting from a maturity date in 2070,
which is well after when the pool of loans is expected to be
repaid. However, S&P has limited the rating on the class B notes to
a 'BB (sf)' rating, which reflects uncertainties that exist due to
an ongoing event of default (EOD) on the notes, which is expected
to remain in place for approximately eight years. The 'BB' rating
reflects the modest credit enhancement (primarily due to
overcollateralization) that is in place to protect against the
ongoing uncertainty resulting from the EOD.
Losses
ED reinsures at least 97% of the principal and interest on
defaulted loans serviced, according to FFELP guidelines. Due to the
high level of recoveries from ED on defaulted loans, defaults
effectively function similarly to prepayments. Thus, S&P expects
net losses to be minimal.
Liquidity
The class A-4 default was primarily caused by a decline in the pace
of amortization of the loans due to an increase in borrowers that
have qualified for income-based repayment (IBR) plans. The IBR
plans allow a borrower's monthly payment to be lowered and can
allow the loan term to be extended by up to 25 years. Class B does
not face the same liquidity pressures because its legal final
maturity date is in 2070. The loans in the pool are expected to be
repaid through the guaranty recovery on default, borrower
repayment, or ED loan forgiveness well in advance of the class B
maturity date.
Class B Interest Payments
S&P said, "On Jan. 26, 2022, we lowered our rating on SLM Student
Loan Trust 2007-7's class A-4 notes to 'D (sf)' because the class
was not repaid by its legal final maturity date, which triggered an
event of default (class A EOD) under the transaction documents. As
a result of the Class A EOD, the waterfall changed--principal
payments to the class A-4 notes were reprioritized in front of
interest to the class B notes--triggering an additional EOD under
the transaction documents because the class B notes are not
receiving payments for their current interest.
"The transaction documents define the current interest payable to
the class B noteholders to comprise interest for the current
payment, as well as any cumulative interest shortfall, including
interest on the cumulative interest shortfall. As such, we view the
note as a PIK note. This transaction is similar to the SLM Student
Loan Trust 2008-3 transaction, which also had an EOD occur on its
senior class due to failure to repay by the legal final maturity
date, also triggering the reprioritization of interest payments to
the class B PIK note."
Comparison With 2008-3 Transaction
S&Ps aid, "We previously ran various cash flow runs for the 2008-3
deal, which included additional scenarios to stress for high levels
of IBR. The class B notes received all the interest (including
interest on any shortfalls owed due to the notes' PIK nature) and
principal by their legal final maturity date. The cash flow results
show that class B was repaid all interest and principal three to
five years after class A was repaid." The PIK feature had minimal
impact on the cash flows, primarily because:
-- The class B maturity date is well past the expected paydown of
the loan pool,
-- Net losses on the loan pool are expected to be minimal due to
the guarantee from the ED,
-- The size of class B, which is paying interest in kind, is small
relative to the size of the loan pool, and
-- Most nonpaying loans accrue interest that is capitalized upon
entering repayment, so the collateral pool grows until repaid
either by the borrower or the ED through loan forgiveness or
recovery of default.
S&P said, "We believe the 2007-7 deal is similar to the 2008-3 deal
that we recently reviewed after we qualitatively compared the two
transactions. The legal final maturity for SLM 2007-7 class B is in
2070, which is far beyond when the IBR loans (and remaining loan
pool) are expected to be repaid. Because of these reasons, we
believe that the cash flows would generate similar results to the
SLM 2008-3 deal."
While the SLM 2008-3 cash flows can support a 'AA+' rating, they
cannot account for the various outcomes that could be exercised in
the future because of the ongoing EOD. Before an EOD, the
transaction documents define the payment priority, cap the fees and
expenses, and limit actions the trust can take that can result in
losses to the noteholders. After an EOD, numerous alternatives are
available to the trustee and noteholders that can result in actions
such as uncapping certain expenses paid before payments to the
noteholders and liquidating the collateral.
Uncertainty Relating To EOD
While the parties have not yet exercised their remedies under the
EOD provisions, they retain those rights until the class A-4 notes
are repaid and until the class B interest shortfalls, which include
the PIK interest, have been repaid. The transaction's
overcollateralization is expected to grow, as the trust is no
longer allowed to release amounts.
Based on the current pace of payments, the class A-4 notes are
expected to be repaid in approximately eight years, unless the
notes are repaid earlier through the potential sale of the
collateral when the collateral pool factor falls below 10%
(estimated to occur in approximately four years). Noteholders may
have competing interests (which may change over time) as to how
they would like the EOD to be addressed. The ongoing EOD and the
parties' ongoing right to enact the post-EOD remedies introduce
uncertainty relating to the future course of action, which did not
exist prior to the EOD. The class B note is the most subordinate
bond and, as such, it would be the first class exposed to any
losses if the parties take a course of action with negative
consequences to the timing or amount of the cash flows.
UBSCM 2018-NYCH: S&P Lowers Class F Certs Rating to 'CCC (sf)'
--------------------------------------------------------------
S&P Global Ratings lowered its ratings on the class A, B, C, D, E,
F, and X-NCP commercial mortgage pass-through certificates from
UBSCM 2018-NYCH Mortgage Trust, a U.S. CMBS transaction.
This transaction is backed by a floating-rate, interest-only
mortgage loan secured by the borrower's fee interest in six
limited-service hotels and one extended-stay hotel located in the
Manhattan submarkets of Times Square, Midtown South, and Downtown.
Rating Actions
S&P said, "The downgrades of classes A, B, C, and D, and the
further downgrades on classes E and F (first initiated in August
2020), reflect our re-evaluation of the seven-hotel portfolio in
Manhattan, New York City that secures the sole loan in the
transaction. Our analysis included a review of the most-recent
available operating data provided by the servicer, and our
assessment that demand, particularly corporate transient, meeting
and group demand, and international demand at the property and in
New York City overall, have been severely impacted since the onset
of the COVID-19 pandemic. In addition, continued supply growth in
the New York City lodging market has negatively impacted the
performance fundamentals of the city's existing hotel stock,
including the subject portfolio, prolonging its recovery timeframe.
According to CoStar, the number of available guestrooms in New York
City increased about 30% from 2012 to 2019, with an average
addition of 31 new hotels (around 5,000 guestrooms) per year
between 2014 and 2019. It remains the highest supply growth market
in the country, with 94 hotels (approximately 14,000 guestrooms)
currently under construction. As a result, revenue per available
room (RevPAR) in New York City declined each year from 2015-2017
and in 2019. Due to the COVID-19 pandemic, RevPAR declined by 40.2%
in 2020 to $71.12, from $219.03 in 2019. While it rebounded to
$125.28 in 2021, it remained 42.8% below the 2019 pre-pandemic
level. According to CoStar, the New York City lodging market's
RevPAR is not expected to return to pre-pandemic levels until
approximately 2025, compared to 2023 for the U.S. lodging sector
overall based on most industry estimates. Our rating actions today
reflect our concern that continued growth in supply could further
pressure the city's already-labored recovery. Specifically, we
believe that the subject portfolio will see a reduction in its
long-term net cash flow (NCF) performance due to reduced occupancy
and average daily rate (ADR) due to the continued effects of the
pandemic as well as the recent and continued influx of new supply.
The portfolio's underlying net operating income (NOI) was negative
$3.3 million in 2020 and positive $1.9 million in 2021, compared to
$28.0 million in 2019. We believe that a return to pre-pandemic
demand levels at the portfolio hotels and in the New York City
market overall will take longer than some of the other major
central business district (CBD) markets.
"As a result, our expected-case valuation has declined 17.4% since
our last review in August 2020, driven largely by the lower S&P
Global Ratings' sustainable NCF to account for the aforementioned
challenges facing the portfolio. Based on our current analysis, we
revised our RevPAR and sustainable NCF to $162.83 and $19.4
million, respectively, down from $180.00 and $23.5 million, at
issuance and last review. Using an S&P Global Ratings'
capitalization rate of 10.75%, the same as in our last review but
up from 9.25% at issuance, our expected-case valuation of $180.3
million ($165,826 per guestroom) yielded an S&P Global Ratings'
loan-to-value (LTV) ratio of 160.9%. The debt service coverage
(DSC) is 1.10x (using the LIBOR cap of 3.00%, the 2.78% spread, and
the S&P Global Ratings' NCF). The appraiser's "as-is" valuation of
$357.5 million, or $328,887 per guestroom, as of June 2021 reflects
a decline of 38.4% from the appraised value of $580.7 million
($534,223 per guestroom) at issuance."
Although the model-indicated ratings were lower than the revised
rating levels for classes B and C, S&P tempered its downgrades on
these two bonds because we weighed certain qualitative
considerations, including:
-- The potential that the operating performance of the portfolio
could improve above our revised expectations;
-- The 2017 appraised land value of $178.1 million;
-- The significant market value decline (based on the June 2021
appraisal value of $357.5 million ($328,887 per guestroom)) that
would be needed before these classes experience principal losses;
-- The liquidity support provided in the form of servicer
advancing; and
-- The relative position of the classes in the waterfall.
The loan had a reported current payment status through its April
2022 debt service payment date. The loan transferred to special
servicing in April 2020 due to imminent payment default, at which
time the former sponsor, a joint venture between Hersha Hospitality
Trust and Cindat Capital Management Ltd., requested payment relief
due to the pandemic. An $85.0 million mezzanine loan to Mack Real
Estate Group also fell into payment default. In Feb. 2021, default
notices for the loan's initial Feb. 9, 2021, maturity date were
issued as the collateral failed to meet the debt yield requirements
for a loan extension. The mezzanine lender subsequently completed a
UCC foreclosure, became the new sponsor, and the loan was modified
and returned to the master servicer in September 2021 as a
corrected mortgage; and it has remained current in its payments
since. The key modification terms included a $10.0 million paydown
of the trust loan balance and an extension of the loan's final
maturity date to Feb. 9, 2024.
S&P downgraded its rating on class F to 'CCC (sf)' because, based
on an S&P Global Ratings' LTV ratio markedly greater than 100%, its
view is that the class is more susceptible to reduced liquidity
support and that the risk of default and losses has increased under
the market conditions.
S&P lowered its rating on the class X-NCP IO certificates based on
its criteria for rating IO securities, in which the rating on the
IO securities would not be higher than that of the lowest-rated
reference class. The notional amount of the class X-NCP
certificates references classes A, B, C, and D.
Property-Level Analysis
The collateral portfolio consists of six limited-service hotels and
one extended-stay hotel comprising 1,087 guestrooms in the
Manhattan submarkets of Times Square, Midtown South, and Downtown.
The hotels are operated under four different nationally-recognized
brands: Hampton Inn (three hotels; 44.0% by allocated loan amount);
Holiday Inn Express (two hotels; 29.0%); Candlewood Suites (one
hotel; 17.6%); and Holiday Inn (one hotel; 9.4%). The average room
count is 155 guestrooms, and the average age of the properties,
constructed from 2003-2010, is 14 years. The hotels continue to be
managed by Hersha Hospitality Management (HHM) (an entity related
to the former sponsor) under management agreements expiring in
April 2026, which will automatically renew for two successive
five-year periods subject to certain performance tests. The manager
is entitled to receive a management fee of 3.0% of gross revenues
plus other fees, and an annual incentive management fee in an
amount equal to 10% of the amount by which NOI for the applicable
year exceeds a 12% return on total costs for the property for such
year. Notwithstanding the foregoing, in no event shall the
manager's total compensation exceed 4.0% of total revenues. All the
hotels' franchise agreements expire in April 2031 (with no
extension options), and the franchise fees generally consist of a
monthly royalty fee of 5.0%-6.0% of rooms revenue, a monthly
marketing assessment of 2.5%-4.0% of rooms revenue, and a monthly
reservation fee. The seven hotels in the portfolio are:
-- Holiday Inn Express Times Square: 210-guestrooms, opened in
2009, limited-service, Times Square submarket;
-- Candlewood Suites Times Square: 188-guestrooms, opened in 2009,
extended-stay, Times Square submarket;
-- Hampton Inn Times Square: 184-guestrooms, opened in 2009,
limited-service, Times Square submarket;
-- Hampton Inn Chelsea: 144-guestrooms, opened in 2003,
limited-service, Midtown South submarket;
-- Hampton Inn Herald Square: 136-guestrooms, opened in 2005,
limited-service, Midtown South submarket;
-- Holiday Inn Wall Street: 113-guestrooms, opened in 2008,
limited-service, Downtown submarket; and
-- Holiday Inn Express Wall Street: 118-guestrooms, opened in
2010, limited-service, Downtown submarket.
In late 2016 and throughout 2017, the portfolio underwent an
extensive property improvement plan (PIP) totaling $15.2 million
($13,983 per guestroom). Based on information received from the
master servicer, there have been various capital improvements
performed at the hotels, including room refurbishments such as new
carpet, furniture, and window treatment and re-painting and
re-wallpapering of walls, among other items. However, a detailed
expense itemization/timeline of the updates was not available. All
seven hotels are currently in operation (although the Holiday Inn
Express Times Square, Hampton Inn Herald Square, and Holiday Inn
Express Wall Street were each closed temporarily during the
pandemic).
The collateral exhibited stable to declining performance prior to
the COVID-19 pandemic. The portfolio's RevPAR was $195.76 in 2017
and $204.12 in 2018 before falling to $195.15 in 2019. The reported
NCF was $28.5 million in 2017 and $28.8 million in 2018, and
declined to $24.8 million in 2019, driven mainly by a reduction in
ADR, which S&P attributes to increased competitive pressures
associated with new supply. In 2020, RevPAR was $91.50, and the
portfolio reported a negative $4.9 million NCF, due to the impact
of the pandemic when demand was severely depressed and occupancy
dropped to 58.1%. Based on sponsor-provided financials, the
portfolio reported a RevPAR of $78.46 and $1.9 million in NOI in
2021. The portfolio's 2022 budget forecasts a 70.2% occupancy,
$188.60 ADR, $132.46 RevPAR, and $13.6 million NCF.
S&P said, "Our property-level analysis included a re-evaluation of
the lodging loan securitized in the pool using servicer-provided
operating statements from 2018 through 2020, and sponsor-provided
financials for 2021. We also utilized the most-recent STR reports
through December 2021 and the 2022 budget report to supplement our
analysis.
"To account for the portfolio's pre-pandemic performance decline,
coupled with the additional uncertainty around the New York City
lodging market's recovery and the continued influx of new supply,
we revised our assumptions by using a lower occupancy rate of 83.5%
(compared to 90.0% at issuance and last review) and an ADR of
$195.00 (compared to $200.00 at issuance and last review), to
derive an S&P Global Ratings' sustainable NCF of $19.4 million,
which is 17.4% lower than our last review in August 2020 and at
issuance. In reviewing the portfolio's performance, we also noted
an increase in rooms-related expense, and thus adjusted our rooms
expense upward. Overall, while we expect the portfolio's
performance to slowly rebound as demand recovers, it will likely do
so at a slow pace. We divided this revised sustainable NCF by an
S&P Global Ratings' capitalization rate of 10.75% (unchanged from
our last review but up from 9.25% at issuance), arriving at our
expected-case value of $180.3 million ($165,826 per guestroom),
which is down 17.4% from our last review value of $218.3 million
and 28.9% from our issuance value of $253.7 million. Our value is
49.6% below the most recent appraised value of $357.5 million
($328,887 per guestroom) completed in June 2021."
Transaction Summary
This is a U.S. stand-alone, single-borrower CMBS transaction backed
by a floating-rate, interest-only mortgage loan secured by the
borrower's fee interest in six limited-service hotels and one
extended-stay hotel located in the Manhattan submarkets of Times
Square, Midtown South, and Downtown. According to the April 18,
2022 trustee remittance report, the loan has a trust balance of
$290.0 million, down from $300.0 million at issuance and our last
review. The loan originally had an initial three-year term with two
one-year extension options. Following the loan modification, the
loan's maturity date was extended to Feb. 9, 2024, and there was a
$10.0 million paydown. The loan pays a per annum floating-rate
equal to one-month LIBOR plus 2.78%. At issuance, there was an
$85.0 million mezzanine loan which was extinguished upon the
mezzanine lender becoming the new sponsor via UCC foreclosure.
The recent rapid spread of the omicron variant highlights the
inherent uncertainties of the pandemic as well as the importance
and benefits of vaccines. S&P said, "While the risk of new, more
severe variants displacing omicron and evading existing immunity
cannot be ruled out, our current base case assumes that existing
vaccines can continue to provide significant protection against
severe illness. Furthermore, many governments, businesses, and
households around the world are tailoring policies to limit the
adverse economic impact of recurring COVID-19 waves. Consequently,
we do not expect a repeat of the sharp global economic contraction
of second-quarter 2020. Meanwhile, we continue to assess how well
each issuer adapts to new waves in its geography or industry."
Ratings Lowered
UBSCM 2018-NYCH Mortgage Trust
Class A to 'AA+ (sf)' from 'AAA (sf)'
Class B to 'A- (sf)' from 'AA- (sf)'
Class C to 'BBB- (sf)' from 'A- (sf)'
Class D to 'BB- (sf)' from 'BBB- (sf)'
Class E to 'B- (sf)' from 'B (sf)'
Class F to 'CCC (sf)' from 'B- (sf)'
Class X-NCP to 'BB- (sf)' from 'BBB- (sf)'
VERUS SECURITIZATION 2022-4: S&P Assigns (P) B-(sf) on B-2 Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Verus
Securitization Trust 2022-4's mortgage-backed notes.
The note issuance is an RMBS securitization backed by seasoned and
unseasoned first-lien, fixed, and adjustable-rate residential
mortgage loans, including mortgage loans with initial interest-only
periods and/or balloon terms, to both prime and non-prime
borrowers. The loans are secured by single-family residences,
planned-unit developments, two- to four-family residential
properties, condominiums, a condotel, a manufactured housing
property, mixed-use properties, and five-to-10-unit multifamily
residences to both prime and non-prime borrowers. The pool has
1,391 loans backed by 1,490 properties, which are primarily
non-qualified mortgage/ATR compliant and ATR-exempt loans. Of the
1,391 loans, 16 are cross-collateralized loans backed by 115
properties.
The preliminary ratings are based on information as of April 21,
2022. 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 transaction's credit enhancement, associated structural
mechanics, representations and warranties framework, and geographic
concentration;
-- The mortgage aggregator, Invictus Capital Partners; and
-- S&P said, "The potential impact current and near term
macroeconomic conditions may have on the performance of the
mortgage borrowers in the pool. On April 17, 2020, we updated our
mortgage outlook and corresponding archetypal foreclosure frequency
levels to account for the potential impact of the COVID-19 pandemic
on the overall credit quality of collateralized pools. While
pandemic-related performance concerns have waned, given our current
outlook for the U.S. economy considering the impact of the
Russia-Ukraine military conflict, supply-chain disruptions, and
rising inflation and interest rates, we continue to maintain our
updated 'B' foreclosure frequency for the archetypal pool at
3.25%."
Preliminary Ratings Assigned
Verus Securitization Trust 2022-4
Class A-1, 447,617,000: AAA (sf)
Class A-2, 58,832,000: AA (sf)
Class A-3, 85,058,000: A (sf)
Class M-1, 44,301,000: BBB- (sf)
Class B-1, 20,555,000: BB (sf)
Class B-2, 28,707,000: B– (sf)
Class B-3, 23,746,304: NR
Class A-IO-S, 708,816,304(vii): NR
Class XS, 708,816,304: NR
Class DA, 2,049,450: NR
Class R, N/A: NR
(i)The notional amount equals the aggregate stated principal
balance of loans in the pool as of the cut-off date.
VOYA CLO 2022-1: Moody's Assigns Ba3 Rating to $16MM Class E Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by Voya CLO 2022-1, Ltd. (the "Issuer" or "Voya
2022-1").
Moody's rating action is as follows:
US$228,000,000 Class A-1 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$28,000,000 Class A-2 Senior Secured Fixed Rate Notes due 2035,
Assigned Aaa (sf)
US$48,000,000 Class B Senior Secured Floating Rate Notes due 2035,
Assigned Aa2 (sf)
US$24,000,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned A2 (sf)
US$24,000,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes due 2035, Assigned Baa3 (sf)
US$16,000,000 Class E Junior Secured Deferrable Floating Rate Notes
due 2035, 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.
Voya 2022-1 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 second lien loans, senior secured bonds,
senior unsecured bonds, senior secured notes, and unsecured loans.
The portfolio is approximately 80% ramped as of the closing date.
Voya Alternative 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.
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 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 80
Weighted Average Rating Factor (WARF): 2732
Weighted Average Spread (WAS): 3.40%
Weighted Average Coupon (WAC): 5.70%
Weighted Average Recovery Rate (WARR): 47.50%
Weighted Average Life (WAL): 8 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 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 Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
WELLS FARGO 2022-2: Moody's Assigns B2 Rating to Cl. B-5 Debt
-------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 25
classes of residential mortgage-backed securities (RMBS) issued by
Wells Fargo Mortgage Backed Securities 2022-2 Trust, and sponsored
by Wells Fargo Bank, N.A.
The securities are backed by a pool of 515 GSE-eligible and 1 prime
jumbo residential mortgage loans, originated and serviced by Wells
Fargo Bank, N.A., with an unpaid principal balance of
$348,786,956.
The complete rating actions are as follows:
Issuer: Wells Fargo Mortgage Backed Securities 2022-2 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 A3 (sf)
Cl. B-3, Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Definitive Rating Assigned B2 (sf)
RATINGS RATIONALE
The ratings are based on the credit quality of the mortgage loans,
the structural features of the transaction, the origination quality
and the servicing arrangement, the third-party review, and the
representations and warranties framework.
Moody's expected loss for this pool in a baseline scenario-mean is
0.27%, in a baseline scenario-median is 0.11% and reaches 4.61% at
a stress level consistent with Moody's Aaa ratings.
PRINCIPAL METHODOLOGY
The principal methodology used in rating the securities was
"Moody's Approach to Rating US RMBS Using the MILAN Framework"
published in February 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of 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.
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.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] S&P Lowers Ratings on 24 Classes from 20 US RMBS Transactions
-----------------------------------------------------------------
S&P Global Ratings completed its review of 25 classes from 21 U.S.
RMBS transactions. The review yielded nine downgrades due to
observed principal write-downs, three downgrades due to observed
interest shortfalls/missed interest payments, and 12 ratings due to
reduced interest payments because of loan modifications. At the
same time, S&P discontinued one rating as it has been paid in full.
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by its projected cash flows. These considerations
are based on transaction-specific performance or structural
characteristics (or both) and their potential effects on certain
classes.
Some of these considerations may include:
-- Historical and/or outstanding interest shortfalls/missed
interest payments;
-- Reduced interest payments due to loan modifications; and
-- Available and/or insufficient subordination and/or
overcollateralization.
Rating Actions
The rating changes reflect our view of the associated
transaction-specific collateral performance, the structural
characteristics, or the application of criteria relevant to these
classes.
S&P said, "The lowered ratings due to interest shortfalls are
consistent with our "S&P Global Ratings Definitions," published
Nov. 10, 2021, which imposes a maximum rating threshold on classes
that have incurred missed interest payments resulting from credit
or liquidity erosion. In applying our ratings definitions, we
looked to see if the applicable class received additional
compensation beyond the imputed interest due as direct economic
compensation for the delay in interest payments (e.g., interest on
interest) and if the missed interest payments will be repaid by the
maturity date.
"In instances where the class does receive additional compensation
for outstanding interest shortfalls, our analysis considers the
likelihood that the missed interest payments, including the
capitalized interest, would be reimbursed under our various rating
scenarios. One class from one transaction was impacted in this
review.
"In instances where the class does not receive additional
compensation for outstanding interest shortfalls, our analysis
focuses on our expectations regarding the length of the interest
payment interruptions to assign the rating on the class. Two
classes from two transactions were impacted in this review.
"The lowered ratings due to outstanding principal write-downs
reflect our assessment of the principal write-downs' impact on the
affected classes during recent remittance periods. Eight of these
classes were rated 'CCC (sf)' or 'CC (sf)' before the rating
actions. We also lowered the rating on the class B-1 certificate
issued from MASTR Adjustable Rate Mortgages Trust 2004-4 to 'D
(sf)' from 'BB- (sf)'." The class B-1 certificate incurred a
principal write-down due to the erosion of credit support and
servicer adjustments, such as adjustments for non-advancing loans,
reimbursements on non-advancing loans, modification-related
incentives and adjustments, and expenses that caused the trust to
not have enough funds after paying interest to all classes and
principal to the senior classes. On the Feb. 25, 2022, distribution
date, credit support decreased to zero from 6.77% ($339,556) from
one month prior on the Jan. 25, 2022, distribution date.
Ratings List
RATING
ISSUER NAME SERIES CLASS CUSIP TO FROM MAIN
RATIONALE
Alternative
Loan Trust Principal
2007-OA9 2007-OA9 A1 02150YAA7 D (sf) CCC (sf) write-down
DSLA Mortgage
Loan Trust Principal
2004-AR3 2004-AR3 B3 23332UBN3 D (sf) CC (sf) write-down
MASTR
Alternative
Loan Trust Principal
2005-3 2005-3 30PO 576434P40 D (sf) CCC (sf) write-down
MASTR
Alternative
Loan Trust Principal
2005-3 2005-3 5A2 576434M92 D (sf) CCC (sf) write-down
MASTR
Adjustable 2004-4 B1 576433MM5 D (sf) BB- (sf) Principal
Rate Mortgages write-down
Trust 2004-4
MASTR
Adjustable 2006-2 1A1 576438AA3 D (sf) CCC (sf) Principal
Rate Mortgage write-down
Trust 2006-2
Sequoia
Mortgage Principal
Trust 10 10 B1 81743VAG8 D (sf) CCC (sf) write-down
Thornburg
Mortgage 2007-1 A3A 88522EAE3 D (sf) CCC (sf) Principal
Securities write-down
Trust 2007-1
Wells Fargo
Mortgage
Backed 2004-J B1 949813AC3 D (sf) CCC (sf) Principal
Securities write-down
2004-J Trust
American Home Reduced
Mortgage interest
Investment 2005-2 VA4A 02660TFK4 D (sf) CC (sf) payments
Trust 2005-2 due to loan
modifications
American Home Reduced
Mortgage interest
Investment 2005-2 VA4C 02660TFJ7 D (sf) CC (sf) payments
Trust 2005-2 due to loan
modifications
American Home Reduced
Mortgage interest
Investment 2005-2 VA4D 02660TFM0 D (sf) CC (sf) payments
Trust 2005-2 due to loan
modifications
Citigroup Reduced
Mortgage interest
Loan Trust 2006-FX1 A6 17309YAF4 D (sf) CC (sf) payments
2006-FX1 due to loan
modifications
Citigroup Reduced
Residential interest
Mortgage 2006-2 M2 17310EAH1 D (sf) CC (sf) payments
Trust due to loan
Series 2006-2 modifications
CHL Mortgage Reduced
Pass-Through interest
Trust 2004-HYB7 M 12669GCG4 D (sf) B (sf) payments
2004-HYB7 due to loan
modifications
CHL Mortgage Reduced
Pass-Through interest
Trust 2004-HYB8 2M 12669GGS4 D (sf) B- (sf) payments
2004-HYB8 due to loan
modifications
Fannie Mae Reduced
REMIC Trust interest
2003-W10 2003-W10 2B4 31393DUM1 D (sf) CC (sf) payments
due to loan
modifications
Structured Reduced
Asset interest
Securities 2004-11XS 1A5A 86359BUE9 D (sf) CCC(sf) payments
Corp. due to loan
modifications
Structured Reduced
Asset interest
Securities 2004-11XS 11XS 86359BUF6 D (sf) CCC(sf) payments
Corp. due to loan
modifications
WaMu Mortgage Reduced
Pass-Through interest
Certs 2005-AR10 1A3 92922FW46 D (sf) CCC(sf) payments
Series 2005-AR10 due to loan
Trust modifications
WaMu Mortgage Reduced
Pass-Through interest
Certs 2005-AR12 1A6 92922F3L0 D (sf) CCC(sf) payments
Series 2005-AR12 due to loan
Trust modifications
Credit Suisse
First Boston Interest
Mortgage 2005-3 VIIA1 225458LH9 AA- (sf) AA (sf) shortfall
Securities Corp.
RAMP
Series 2004-SL1 Interest
Trust 2004-SL1 AVI 760985W72 D (sf) CCC (sf) shortfall
C-BASS
2006-SC1
Trust 2006-SC1 B1 12498SAG7 NR BB+ (sf) Paid off.
Homebanc Ultimate
Mortgage repayment
Trust 2005-1 2005-1 M5 43739EAW7 D (sf) CC (sf) of missed
interest
unlikely at
higher
rating levels.
NR--Not rated.
[*] S&P Takes Various Actions on 147 Classes from 10 US RMBS Deals
------------------------------------------------------------------
S&P Global Ratings completed its review of 147 classes from 10 U.S.
RMBS transactions issued between 2019 and 2021. The review yielded
37 upgrades and 110 affirmations).
S&P said, "For each transaction, we performed a credit analysis
using updated loan-level information from which we determined
foreclosure frequency, loss severity, and loss coverage amounts
commensurate for each rating level. We also 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 reflect the
transactions' current pool composition."
The upgrades primarily reflect deleveraging because the related
transactions each benefit from low or zero accumulated losses to
date, high prepayment speeds, and a growing percentage of credit
support to the rated classes. In addition, transactions'
delinquency levels have generally been declining, partly due to
borrowers exiting COVID-19-related forbearance plans via deferrals
and/or loan modifications, or upon the completion of repayment
plans. However, delinquency levels remain relatively elevated in
some transactions because the borrowers who remain delinquent
represent a higher proportion of the pool as it pays down.
The affirmations reflect S&P's view that the classes' projected
collateral performance relative to our projected credit support
remains relatively consistent with our previous 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 its criteria. These
considerations are based on transaction-specific performance or
structural characteristics (or both) and their potential effects on
certain classes. These considerations include:
-- 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.
[*] S&P Takes Various Actions on 30 Classes from 12 US RMBS Deals
-----------------------------------------------------------------
S&P Global Ratings completed its review of 30 classes from 12 U.S.
RMBS transactions issued between 2003 and 2007. The review yielded
17 upgrades, 12 affirmations, and one discontinuance (see list).
A list of Affected Ratings can be viewed at:
https://bit.ly/3MwLyeL
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by our projected cash flows. These considerations
are based on transaction-specific performance and structural
characteristics, and their potential effects on certain classes.
These considerations may include:
-- Collateral performance or delinquency trends,
-- Available subordination and/or overcollateralization,
-- Increases in credit support,
-- Expected short duration,
-- Payment priority, and
-- A small loan count.
Rating Actions
The rating changes reflect S&P's view regarding the associated
transaction-specific collateral performance and structural
characteristics, as well as the application of specific criteria
applicable to these classes.
The rating affirmations reflect S&P's view that our projected
credit support, the collateral performance, and the credit-related
reductions in interest on these classes have remained relatively
consistent with our prior projections.
The upgrades primarily reflect increased credit support and the
related classes' ability to withstand higher projected losses than
we had previously expected.
*********
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