/raid1/www/Hosts/bankrupt/TCR_Public/220925.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, September 25, 2022, Vol. 26, No. 267
Headlines
AMUR EQUIPMENT 2022-2: Moody's Assigns B3 Rating to Class F Notes
BBCMS MORTGAGE 2022-C17: Fitch Assigns BB- Rating to Class F Certs
BELLEMEADE RE 2022-2: Moody's Gives (P)B3 Rating to Cl. M-2 Notes
BENCHMARK 2018-B7: Fitch Affirms CCC Rating on Class G-RR Debt
BMO 2022-C3: Fitch Gives 'B-(EXP)sf' Rating on Class J-RR Certs
CIFC FUNDING 2022-VI: Fitch Assigns 'BB-' Rating on Class E Notes
CITIGROUP 2018-C6: Fitch Affirms B-sf Rating on Class J-RR Certs
COMM 2013-CCRE10: Moody's Downgrades Rating on Cl. E Certs to B1
COMM 2014-CCRE16: Fitch Affirms CCsf Rating on Class F Certs
CONNECTICUT AVENUE 2022-R09: Moody's Assigns (P)Ba1 to 26 Tranches
CROWN CITY IV: S&P Assigns Prelim BB- (sf) Rating on Class D Notes
CSAIL 2016-C7: Fitch Affirms CCCsf Rating on 2 Tranches
CXP TRUST 2022-CXP1: Moody's Assigns B3 Rating to Cl. F Certs
DBGS 2018-C1: Fitch Lowers Rating on 2 Tranches to B-sf
EFMT 2022-4: Fitch Assigns 'B(EXP)sf' Rating to Class B-2 Debt
ELMWOOD CLO 19: S&P Assigned Prelim B- (sf) Rating on Cl. F Notes
FREDDIE MAC 2022-DNA6: S&P Assigns BB- (sf) Rating on M-2B Notes
GLS AUTO 2022-3: S&P Assigns BB- (sf) Rating on Class E Notes
GS MORTGAGE 2022-PJ6: Moody's Assigns (P)B3 Rating to Cl. B-5 Debt
JP MORGAN 2022-NXSS: Moody's Assigns (P)B2 Rating to 2 Tranches
JPMCC MORTGAGE 2019-BROOK: Fitch Affirms B- Rating on Cl. F Certs
LCM 39: Fitch to Rate Class E Debt 'BB-'
MADISON PARK LIV: S&P Assigns Prelim BB-(sf) Rating on Cl. E Notes
MELLO WAREHOUSE 2021-1: Moody's Cuts Rating on Cl. G Bonds to Caa1
MORGAN STANLEY 2016-BNK2: Fitch Affirms CCC Rating on 2 Tranches
MSBAM 2016-C32: Fitch Lowers Rating on Class F Debt to CCC
NEUBERGER BERMAN 51: Fitch Assigns BB+(EXP) Rating to Class E Debt
NEUBERGER CLO 15: Fitch Assigns BB+ Rating to Class E Debt
PALMER SQUARE 2022-5: S&P Assigns Prelim BB-(sf) Rating on E Notes
PRKCM 2022-AFC2: S&P Assigns B (sf) Rating on Class B-2 Notes
RADNOR RE 2022-1: Moody's Assigns B1 Rating to Cl. M-1B Notes
SANTANDER BANK 2022-B: Moody's Assigns (P)B2 Rating to Cl. F Notes
SLM STUDENT 2008-5: S&P Lowers Class B Notes Rating to B (sf)
STRUCTURED ASSET 2007-AR1: Moody's Upgrades 2 Tranches to Caa1
TOWD POINT 2022-4: Fitch Assigns 'B-(EXP)' Rating on Class B2 Notes
US CAPITAL II: Moody's Hikes Rating on 2 Tranches to 'Ba2'
WELLS FARGO 2015-C31: Fitch Affirms CCCsf Rating on Class F Certs
WELLS FARGO 2017-RC1: S&P Lowers Class E Certs Rating to 'B (sf)'
[*] Moody's Takes Action on $162MM of US RMBS Issued 2003-2007
*********
AMUR EQUIPMENT 2022-2: Moody's Assigns B3 Rating to Class F Notes
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Moody's Investors Service has assigned definitive ratings to the
Series 2022-2 notes issued by Amur Equipment Finance Receivables XI
LLC (Amur 2022-2). Amur Equipment Finance, Inc. (Amur) is the
sponsor of the securitization, which is backed by fixed-rate loans
and leases secured primarily by trucking, transportation,
industrial and construction equipment. Amur is the servicer of the
pool to be securitized. Amur 2022-2 is Amur's eleventh transaction
backed by somewhat similar collateral and the fifth that Moody's
rated.
The complete rating actions are as follows:
Issuer: Amur Equipment Finance Receivables XI LLC, Series 2022-2
Class A-1 Notes, Definitive Rating Assigned P-1 (sf)
Class A-2 Notes, Definitive Rating Assigned Aaa (sf)
Class B Notes, Definitive Rating Assigned Aa3 (sf)
Class C Notes, Definitive Rating Assigned A2 (sf)
Class D Notes, Definitive Rating Assigned Baa3 (sf)
Class E Notes, Definitive Rating Assigned Ba3 (sf)
Class F Notes, Definitive Rating Assigned B3 (sf)
RATINGS RATIONALE
The definitive ratings for the notes are based on the credit
quality of the securitized equipment loan and lease pool and its
expected performance, the historical performance of Amur's managed
portfolio and that of its prior securitizations, the experience and
expertise of Amur as the originator and servicer of the underlying
pool, the back-up servicing arrangement with UMB Bank, N.A., the
transaction structure including the level of credit enhancement
supporting the notes, and the legal aspects of the transaction.
Moody's median cumulative net loss expectation for the Amur 2022-2
collateral pool is 4.5% and loss at a Aaa stress is 28.00%. Moody's
cumulative net loss expectation and loss at a Aaa stress is based
on an analysis of the credit quality of the underlying collateral
pool and the historical performance of similar collateral,
including Amur's managed portfolio performance, the track-record,
ability and expertise of Amur to perform the servicing functions,
and current expectations for the macroeconomic environment during
the life of the transaction including the current economic and
geopolitical environment characterized by inflationary pressures
and uncertainty related to the war in Ukraine.
Additionally, in assigning a P-1 (sf) rating to the Class A-1
Notes, Moody's considered the cash flows the underlying receivables
are expected to generate prior to the Class A-1 notes' legal final
maturity date.
The classes of notes will be paid sequentially. At transaction
closing, the Class A, Class B, Class C, Class D, Class E and Class
F notes will benefit from 25.45%, 20.05%, 17.05%, 12.05%, 9.25% and
8.05% of hard credit enhancement, respectively. Initial hard credit
enhancement for the notes consists of (1) subordination, (2)
over-collateralization (OC) of 7.05% of the initial adjusted
discounted pool balance with the transaction utilizing excess
spread to build to an OC target of 8.50% of the outstanding
adjusted discounted pool balance, and (3) a fully funded,
non-declining reserve account of 1.00% of the initial adjusted
discounted pool balance. The transaction benefits from an OC floor
of 1.75%. Excess spread may be available as additional credit
protection for the notes. The sequential-pay structure and
non-declining reserve account will likely result in a build-up of
credit enhancement supporting the rated notes.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Equipment
Lease and Loan Securitizations Methodology" published in July
2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the ratings on the notes if levels of credit
protection are greater than necessary to protect investors against
current expectations of loss. Moody's then current expectations of
loss may be better than its original expectations because of lower
frequency of default by the underlying obligors or slower
depreciation in the value of the equipment securing obligors'
promise of payment. As the primary drivers of performance, positive
changes in the US macro economy and the performance of various
sectors in which the obligors operate could also affect the
ratings. This transaction has a sequential pay structure and
therefore credit enhancement should grow as a percentage of the
collateral balance as collections pay down senior notes.
Prepayments and interest collections directed toward note principal
payments should accelerate this build-up of enhancement.
Down
Moody's could downgrade the notes if levels of credit protection
are insufficient to protect investors against current expectations
of portfolio losses. Credit enhancement could decline if excess
spread is not sufficient to cover losses in a given month. 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 equipment securing obligors' promise of payment. As the primary
drivers of performance, negative changes in the US macro economy
and the performance of various sectors in which the obligors
operate could also affect the ratings. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties and inadequate transaction
governance. Additionally, Moody's could downgrade the Class A-1
short term rating following a significant slowdown in principal
collections that could result from, among other reasons, high
delinquencies or a servicer disruption that impacts obligors'
payments.
BBCMS MORTGAGE 2022-C17: Fitch Assigns BB- Rating to Class F Certs
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Fitch Ratings has assigned final ratings and Rating Outlooks to
BBCMS Mortgage Trust 2022-C17, commercial mortgage pass-through
certificates, series 2022-C17 as follows:
-- $9,177,000 class A-1 'AAAsf'; Outlook Stable;
-- $68,038,000 class A-2 'AAAsf'; Outlook Stable;
-- $27,121,000 class A-3 'AAAsf'; Outlook Stable;
-- $196,458,000a class A-4 'AAAsf'; Outlook Stable;
-- $314,842,000a class A-5 'AAAsf'; Outlook Stable;
-- $17,866,000 class A-SB 'AAAsf'; Outlook Stable;
-- $633,502,000b class X-A 'AAAsf'; Outlook Stable;
-- $169,688,000b class X-B 'A-sf'; Outlook Stable;
-- $85,975,000 class A-S 'AAAsf'; Outlook Stable;
-- $46,381,000 class B 'AA-sf'; Outlook Stable;
-- $37,322,000 class C 'A-sf'; Outlook Stable;
-- $40,725,000b class X-D 'BBB-sf'; Outlook Stable;
-- $20,362,000b class X-F 'BB-sf'; Outlook Stable;
-- $16,969,000b class D 'BBBsf'; Outlook Stable;
-- $23,756,000b class E 'BBB-sf'; Outlook Stable;
-- $20,362,000b class F 'BB-sf'; Outlook Stable;
-- $9,050,000bc class G-RRe 'B-sf'; Outlook Stable.
The following class is not rated by Fitch:
-- $31,676,063bc class H-RRe 'NR'.
a) Since Fitch published its expected ratings on Aug. 10, 2022, the
balances for classes A-4 and A-5 were finalized. At the time the
expected ratings were published, the initial certificate balances
of classes A-4 and A-5 were expected to be $511,300,000 in the
aggregate, subject to a 5% variance. The classes above reflect the
final ratings and deal structure.
b) Privately placed and pursuant to Rule 144A.
c) The class G-RR and H-RR Certificates (excluding the portion
included in the eligible vertical interest) collectively represent
an eligible horizontal retention interest and are expected to be
acquired and retained by Argentic Real Estate Finance LLC or an
affiliate. Argentic Real Estate Finance LLC or an affiliate will
also acquire a specified percentage of each class of certificates,
collectively constituting an eligible vertical interest.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 53 loans and one subordinate
companion loan secured by 119 commercial properties having an
aggregate principal balance of $905,003,064 as of the cut-off date.
The loans were contributed to the trust by Barclays Capital Real
Estate Inc., Bank of Montreal, Societe Generale Financial
Corporation, UBS AG, BSPRT CMBS Finance, LLC, LMF Commercial, LLC,
KeyBank National Association and Argentic Real Estate Finance LLC.
The Master Servicer is expected to be KeyBank National Association,
and the Special Servicer (other than with respect to the Park West
Village whole loan) is expected to be Argentic Services Company
LP.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 22.3% of the loans by
balance, cash flow analysis of 78.4% of the pool and asset summary
review on 100.0% of the pool.
KEY RATING DRIVERS
Lower Leverage Compared with Recent Transactions: The pool has
slightly lower leverage compared with recent multiborrower
transactions rated by Fitch. The pool's Fitch loan to value ratio
(LTV) of 98.8% is lower than both the YTD 2022 and 2021 averages of
100.9% and 103.3%, respectively. However, the pool's Fitch trust
debt service coverage ratio (DSCR) of 1.17x is lower than the YTD
2022 and 2021 averages of 1.34x and 1.38x, respectively. Excluding
credit opinion loans (7.5% of pool), the pool's Fitch LTV and DSCR
are 100.2% and 1.17x, respectively. This is lower leverage relative
to the equivalent conduit YTD 2022 LTV and DSCR averages of 108.9%
and 1.24x, respectively.
Minimal Amortization: Based on the scheduled balances at maturity,
the pool will only pay down by 3.2%, which is slightly below 2022
YTD and 2021 average of 3.4% and 4.8%, respectively. The pool has
36 interest-only loans (73.9% of pool by balance), which is lower
than the YTD 2022 average of 79.2% but above the 2021 average of
70.5%. Nine loans (14.2% of pool by balance) are partial
interest-only loans, which is above the YTD 2022 average of 10.0%
but below the 2021 average of 16.8%. Additionally, eight loans have
balloon payments.
High Retail and Low Office Exposure Relative to Recent
Transactions: Retail properties represent the largest concentration
at 29.0%, which is higher than the 2022 YTD and 2021 averages of
21.6% and 21.8%, respectively. Office properties represent 24.0%,
which is significantly lower than the YTD 2022 and 2021 averages of
40.1% and 36.5%, respectively. Industrial properties represent
15.4%, which is higher than the YTD 2022 and 2021 averages of 9.2%
and 12.5%, respectively. The pool also features a hotel
concentration of 14.3%, which is significantly above the YTD 2022
and 2021 averages of 5.5% and 3.0%, respectively. In Fitch's
multiborrower model, hotel properties have a likelihood of default,
all else being equal.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Declining cash flow decreases property value and capacity to meet
its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes to the same one
variable, Fitch net cash flow (NCF):
--Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' / 'BBB-sf'
/ 'BB-sf' / 'B-sf';
--10% NCF Decline: 'A+sf' / 'BBB+sf' / 'BBB-sf' / 'BB+sf' / 'BB-sf'
/ 'CCCsf' / 'CCCsf';
--20% NCF Decline: 'BBB+sf' / 'BBB-sf' / 'BBsf' / 'Bsf' / 'CCCsf' /
'CCCsf' / 'CCCsf';
--30% NCF Decline: 'BBB-sf' / 'BB-sf' / 'CCCsf' / 'CCCsf' / 'CCCsf'
/ 'CCCsf' / 'CCCsf'.
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, therefore, Fitch has published an
assessment of the potential rating and asset performance impact of
a plausible, albeit worse than expected, adverse stagflation
scenario on Fitch's major structured finance and covered bond
subsectors (What a Stagflation Scenario Would Mean for Global
Structured Finance).
Fitch expects the North American CMBS sector in the assumed adverse
scenario to experience virtually no impact on ratings performance,
indicating very few rating or Outlook changes. Fitch expects the
asset performance impact of the adverse case scenario to be more
modest than the most stressful scenario shown above, which assumes
a further 30% decline from Fitch's NCF at issuance.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes in one variable, Fitch
NCF:
-- Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' /
'BBB-sf' / 'BB-sf' / 'B-sf';
-- 20% NCF Increase: 'AAAsf' / 'AAAsf' / 'AA+sf' / 'AA-sf' /
'A-sf' / 'BBBsf' / 'BBB-sf'.
BELLEMEADE RE 2022-2: Moody's Gives (P)B3 Rating to Cl. M-2 Notes
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Moody's Investors Service has assigned provisional ratings to 3
classes of mortgage insurance-linked notes issued by Bellemeade Re
2022-2 Ltd.
The securities reference a pool of mortgage insurance policies
issued by Arch Mortgage Insurance Company and United Guaranty
Residential Insurance Company, the ceding insurers, 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: Bellemeade Re 2022-2 Ltd.
CI. M-1A, Assigned (P)Baa3 (sf)
CI. M-1B, Assigned (P)Ba3 (sf)
CI. M-2, Assigned (P)B3 (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 2.68%, in a baseline
scenario-median is 2.32% and reaches 17.56% 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
July 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.
BENCHMARK 2018-B7: Fitch Affirms CCC Rating on Class G-RR Debt
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Fitch Ratings has affirmed 15 classes of Benchmark 2018-B7
Mortgage Trust. The Rating Outlooks for four classes have been
revised to Stable from Negative.
RATING ACTIONS
ENTITY / DEBT RATING PRIOR
Benchmark 2018-B7
A-1 08162TAX1 LT AAAsf Affirmed AAAsf
A-2 08162TAY9 LT AAAsf Affirmed AAAsf
A-3 08162TBA0 LT AAAsf Affirmed AAAsf
A-4 08162TBB8 LT AAAsf Affirmed AAAsf
A-M 08162TBD4 LT AAAsf Affirmed AAAsf
A-SB 08162TAZ6 LT AAAsf Affirmed AAAsf
B 08162TBE2 LT AA-sf Affirmed AA-sf
C 08162TBF9 LT A-sf Affirmed A-sf
D 08162TAG8 LT BBBsf Affirmed BBBsf
E 08162TAJ2 LT BBB-sf Affirmed BBB-sf
F 08162TAL7 LT B-sf Affirmed B-sf
G-RR 08162TAN3 LT CCCsf Affirmed CCCsf
X-A 08162TBC6 LT AAAsf Affirmed AAAsf
X-D 08162TAC7 LT BBB-sf Affirmed BBB-sf
X-F 08162TAE3 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Improved Loss Expectations: Overall pool-level performance remains
stable since the prior review. The Outlook revisions to Stable on
classes E and F and the associated IO classes reflect performance
stabilization of loans impacted by the pandemic, the return of the
specially serviced loans to the master servicer, as well as the
improved loss expectation of the 710 Bridgeport loan, which was the
largest loss contributor at the prior review.
Fitch's current ratings incorporate a base case loss of 4.8%. All
three specially serviced loans at the prior review returned to the
master servicer as performing loans. Seven loans (11.4% of the
pool) have been designated as Fitch Loans of Concern (FLOCs).
Largest Drivers to Loss: 192 Lexington Avenue (4.0%) is a
132,049-sf office building in Midtown South in New York City.
Occupancy has declined to 70.4% as of TTM June 2022 with NOI debt
service coverage ratio (DSCR) of 0.9x. This compares with occupancy
of 78% at YE 2020 and 89% at YE 2019. The decline in occupancy is
driven by the departure of multiple tenants, including the top
tenants at issuance Broadway Suites III (6.4% of the NRA) and
Silverson Pareres, Lombardi (5.1%), which both vacated upon their
lease expirations in 2019. YE 2021 NOI declined 5% compared to YE
2020 and is 46.0% below Fitch's expectations at issuance due to
lower revenue as a result of the occupancy decline. Per the June
2022 rent roll, five leases accounting for 23% of total base rent
are scheduled to expire in 2022 including two large tenants ZDG LLC
(6.4% of the NRA) and Synergistic Marketing (5.0%). Per the
borrower, ZDG has signed a 10-year lease renewal for the 14th floor
with lease begins on Sept. 1, 2022. The space ZDG is vacating on
the third floor has been rented to VFS Global for 10 years.
Synergistic vacated the property. Their space is under renovation
before put back on market. The departure of Synergistic will reduce
the occupancy to 65%.
Fitch modeled loss of approximately 28% is based on a cap rate of
8.5% and a 5% stress to YE 2021 NOI to reflect the declined NOI and
occupancy.
Outlet Shoppes at El Paso (3.0%), is a 433,849-sf outlet shopping
center in Canutillo, TX. The loan transferred to special servicing
due to the sponsor, CBL Properties, filing bankruptcy in November
2020. The company emerged from bankruptcy in November 2021 and the
loan has returned to master servicing as of May 2022.
YE 2021 NOI has improved 21% above YE 2020 and is 8% higher than
NOI from issuance. As of March 2022, occupancy was 92.4% with NOI
DSCR of 1.88x which is in-line with levels from 2019. The April
2022 rent roll reflected 25% of leases scheduled to expire in 2022
and an additional 44% in 2023. The mall reported in-line tenant
sales of $428 psf as of TTM May 2022, $318 psf at YE2021, $321 psf
at YE 2020, compared with pre-pandemic sales of $424 psf at YE
2019, $406 at TTM July 2018 and $390 at YE 2017. Fitch modeled a
loss of approximately 12% based on a cap rate of 12% and a 25%
stress applied to YE 2021 NOI to account for near-term rollover.
In addition, Fitch modeled a loss of approximately 63% on May &
Ellis Building (0.72%) due to the decline in NOIs resulting from
the downward trend in the rent revenue.
Minimal Change to Credit Enhancement: As of the August 2022
distribution date, the pool's aggregate balance has been reduced by
1.28% to $1.15 billion, from $1.17 billion at issuance. Two loans
(3.7%) have been fully defeased. Twenty-two full-term, IO loans
account for 58.1% of the pool, and 18 loans representing 23.9% of
the pool are partial IO. One IO ARD loan represents 3.5% of the
pool and the remainder of the pool consists of 11 balloon loans
representing 18.2% of the pool. Interest shortfalls are currently
affecting the non-rated class J-RR.
Credit Opinion Loans: At issuance, Fitch considered five loans
(22.7%) to have investment-grade characteristics. These include
Dumbo Heights Portfolio (BBB-sf), Moffett Towers - Buildings E, F
and G (BBB-sf), Aventura Mall (Asf), Aon Center (BBB-sf), and
Workspace (Asf). Based on collateral quality and continued stable
performance, the loans retain characteristics consistent with a
credit opinion loan.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Downgrades to the senior classes, A-1, A-2, A-3, A-4, A-SB, X-A,
A-M, B and C are less likely due to the high credit enhancement
(CE), but may occur should interest shortfalls occur or if any
large FLOCs default/transfer to special servicing. Downgrades to
classes D, E and X-D would occur should overall pool losses
increase and/or one or more large loans have an outsized loss,
which would erode CE. Downgrades to F and X-F would occur should
loss expectations increase or if any large loans transfer to
special servicing. Downgrades to class G-RR would occur as losses
are realized.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrades of classes B and C would only occur with significant
improvement in CE and/or defeasance, but would be limited should
the deal be susceptible to a concentration whereby the
underperformance of particular loan(s) could cause this trend to
reverse. An upgrade to classes, D, E, and X-D would also consider
these factors, but would be limited based on sensitivity to
concentrations or the potential for future concentration. Classes
would not be upgraded above 'Asf' if there is a likelihood for
interest shortfalls. An upgrade to the F, X-F and G-RR categories
is not likely until the later years in a transaction and only if
the performance of the remaining pool is stable and/or if there is
sufficient CE, which would likely occur when the senior classes
payoff and if the non-rated classes are not eroded.
BMO 2022-C3: Fitch Gives 'B-(EXP)sf' Rating on Class J-RR Certs
---------------------------------------------------------------
Fitch Ratings has issued a presale report on BMO 2022-C3 Mortgage
Trust, commercial mortgage pass-through certificates, series
2022-C3.
Debt Rating
---- ------
BMO 2022-C3 Mortgage Trust
A-1 LT AAA (EXP)sf Expected Rating
A-2 LT AAA (EXP)sf Expected Rating
A-3 LT AAA (EXP)sf Expected Rating
A-4 LT AAA (EXP)sf Expected Rating
A-5 LT AAA (EXP)sf Expected Rating
A-S LT AAA (EXP)sf Expected Rating
A-SB LT AAA (EXP)sf Expected Rating
B LT AA- (EXP)sf Expected Rating
C LT A- (EXP)sf Expected Rating
D LT BBB (EXP)sf Expected Rating
E LT BBB-(EXP)sf Expected Rating
F-RR LT BB+ (EXP)sf Expected Rating
G-RR LT BB- (EXP)sf Expected Rating
J-RR LT B- (EXP)sf Expected Rating
K-RR LT NR (EXP)sf Expected Rating
VRR LT NR (EXP)sf Expected Rating
X-A LT AAA (EXP)sf Expected Rating
X-B LT A- (EXP)sf Expected Rating
X-D LT BBB (EXP)sf Expected Rating
X-E LT BBB-(EXP)sf Expected Rating
Fitch expects to rate the transaction and assign Rating Outlooks,
as follows:
-- $7,733,000 class A-1 'AAAsf'; Outlook Stable;
-- $98,048,000 class A-2 'AAAsf'; Outlook Stable;
-- $13,327,000 class A-3 'AAAsf'; Outlook Stable;
-- $82,500,000a class A-4 'AAAsf'; Outlook Stable;
-- $285,194,000a class A-5 'AAAsf'; Outlook Stable;
-- $11,207,000 class A-SB 'AAAsf'; Outlook Stable;
-- $498,009,000bc class X-A 'AAAsf'; Outlook Stable;
-- $65,808,000 class A-S 'AAAsf'; Outlook Stable;
-- $32,905,000 class B 'AA-sf'; Outlook Stable;
-- $31,125,000 class C 'A-sf'; Outlook Stable;
-- $129,838,000bc class X-B 'A-sf'; Outlook Stable;
-- $19,565,000c class D 'BBBsf'; Outlook Stable;
-- $19,565,000bc class X-D 'BBBsf'; Outlook Stable;
-- $15,118,000c class E 'BBB-sf'; Outlook Stable;
-- $15,118,000bc class X-E 'BBB-sf'; Outlook Stable;
-- $8,893,000cd class F-RR 'BB+sf'; Outlook Stable;
-- $7,114,000cd class G-RR 'BB-sf'; Outlook Stable;
-- $7,115,000cd class J-RR 'B-sf'; Outlook Stable.
Fitch does not expect to rate the following classes:
-- $25,790,184cd class K-RR;
-- $15,260,762ce VRR Interest.
a) The initial certificate balances of classes A-4 and A-5 are not
yet known but are expected to be $397,694,000 in aggregate, subject
to a 5% variance. The certificate balances will be determined based
on the final pricing of those classes of certificates. The expected
class A-4 balance range is $0 -$165,000,000, and the expected class
A-5 balance range of $165,000,000 to $367,694,000. The balances for
classes A-4 and A-5 reflect midpoint of each range.
b) Notional amount and IO.
c) Privately placed and pursuant to Rule 144A.
d) Horizontal risk retention interest estimated to be 2.93% of the
certificates.
e) Vertical risk retention interest.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 48 loans secured by 89
commercial properties having an aggregate principal balance of
$726.7 million as of the cut-off date. The loans were contributed
to the trust by Bank of Montreal, Citigroup Global Markets Realty
Corp., 3650 REIT, LMF Commercial, LLC, UBS Real Estate Securities
Inc., Sabal Capital II, LLC, ReadyCap Commercial, LLC and Starwood
Mortgage Capital LLC. The Master Servicer is expected to be Midland
Loan Services LLC and the Special Servicer is expected to be
Midland Loan Services LLC.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 31.5% of the loans by
balance, cash flow analysis of 88.1% of the pool and asset summary
reviews on 100% of the pool.
KEY RATING DRIVERS
Higher Leverage Compared to Recent Transactions: The pool has
higher leverage compared to recent multiborrower transactions rated
by Fitch. The pool's Fitch debt service coverage ratio (DSCR) of
1.10x is lower than the YTD 2022 and 2021 averages of 1.33x and
1.38x, respectively. The pool's Fitch loan-to value ratio (LTV) of
102.2% is slightly higher than the YTD 2022 average of 100.3%, but
lower than the 2021 average of 103.3%. Excluding credit opinion
loans (11.6% of the pool), the pool's Fitch LTV and DSCR are 105.4%
and 1.10x, respectively, compared to the equivalent conduit YTD
2022 LTV and DSCR averages of 107.9% and 1.24x, respectively.
Investment-Grade Credit Opinion Loans: Three loans representing
11.6% of the pool received an investment-grade credit opinion. Park
West Village (5.2%), Yorkshire & Lexington (5.1%), and 111 River
Street (1.4%), each received a standalone credit opinion of
'BBB-sf*'. The pool's total credit opinion percentage of 11.6% is
lower the YTD 2022 and 2021 averages of 15.4% and 13.3%,
respectively.
Property Type Concentrations: Multifamily properties represent the
largest concentration at 30.8%, which is higher than the YTD 2022
and 2021 averages of 13.7% and 17.4%, respectively. Office
properties represent 22%, which is significantly lower than the YTD
2022 and 2021 averages of 40.2% and 36.5%, respectively. Industrial
properties represent 18.0%, which is higher than the YTD 2022 and
2021 averages of 9.5% and 12.5%, respectively. The pool also
features a hotel concentration of 6.8%, which is slightly higher
than YTD 2022 and 2021 averages of 5.8% and 3.0%, respectively.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
This section provides insight into the sensitivity of ratings when
one assumption is modified, while holding others equal. For U.S.
CMBS, the sensitivity reflects the impact of changes to property
net cash flow (NCF) in up- and down-environments. The results below
should only be considered as one potential outcome, as the
transaction is exposed to multiple dynamic risk factors. It should
not be used as an indicator of possible future performance.
Declining cash flow decreases property value and capacity to meet
its debt service obligations. The table below indicates the model
implied rating sensitivity to changes in one variable, Fitch NCF:
Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBB-sf' / 'BBB-sf' /
'BB+sf' / 'BB-sf' / 'B-sf';
10% NCF Decline: 'Asf' / 'BBB+sf' / 'BBB-sf' / 'BBsf' / 'Bsf' /
'CCCsf' / 'CCCsf' / 'CCCsf';
20% NCF Decline: 'BBB+sf' / 'BBB-sf' / 'BB-sf' / 'CCCsf' / 'CCCsf'
/ 'CCCsf' / 'CCCsf' / 'CCCsf';
30% NCF Decline: 'BBB-sf' / 'BB+sf' / 'CCCsf' / 'CCCsf' / 'CCCsf' /
'CCCsf' / 'CCCsf' / 'CCCsf'.
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, therefore, Fitch has published an
assessment of the potential rating and asset performance impact of
a plausible, albeit worse than expected, adverse stagflation
scenario on Fitch's major structured finance and covered bond
subsectors (What a Stagflation Scenario Would Mean for Global
Structured Finance).
Fitch expects the North American CMBS sector in the assumed adverse
scenario to experience virtually no impact on ratings performance,
indicating very few rating or Outlook changes. Fitch expects the
asset performance impact of the adverse case scenario to be more
modest than the most stressful scenario shown above, which assumes
a further 30% decline from Fitch's NCF at issuance.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model implied rating sensitivity to changes to the same one
variable, Fitch NCF:
Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBB-sf' / 'BBB-sf' /
'BB+sf' / 'BB-sf' / 'B-sf';
20% NCF Increase: 'AAAsf' / 'AAAsf' / 'AA+sf' / 'AA-sf' / 'Asf' /
'BBB+sf' / 'BBB+sf' / 'BBB-sf'.ons.
CIFC FUNDING 2022-VI: Fitch Assigns 'BB-' Rating on Class E Notes
-----------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
CIFC Funding 2022-VI, Ltd.
Debt Rating Prior
---- ------ -----
CIFC Funding 2022-VI, Ltd.
A LT NRsf New Rating NR(EXP)sf
B-1 LT AAsf New Rating AA(EXP)sf
B-2 LT AAsf New Rating AA(EXP)sf
C LT Asf New Rating A(EXP)sf
D LT BBB-sf New Rating BBB-(EXP)sf
E LT BB-sf New Rating BB-(EXP)sf
Subordinated Notes LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
CIFC Funding 2022-VI, Ltd. is an arbitrage cash flow collateralized
loan obligation (CLO) that will be managed by CIFC Asset Management
LLC. Net proceeds from the issuance of secured and subordinated
notes will provide financing on a portfolio of approximately $400
million of primarily first lien senior secured loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 25.0 versus a maximum covenant, in
accordance with the initial expected matrix point of 25.5. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from appropriate credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
95.7% first-lien senior secured loans and has a weighted average
recovery assumption of 76.42% versus a minimum covenant, in
accordance with initial matrix point of 75.60%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 45.0% of the portfolio balance in aggregate while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
U.S. CLOs.
Portfolio Management (Neutral): The transaction has a 4.8-year
reinvestment period and reinvestment criteria similar to other U.S.
CLOs. Fitch's analysis was based on a stressed portfolio created by
making adjustments to the indicative portfolio to reflect
permissible concentration limits and collateral quality test
levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios at the initial expected
matrix point, the rated notes can withstand default and recovery
assumptions consistent with their assigned ratings. The performance
of all classes of rated notes at the other permitted matrix points
is in line with other recent CLOs.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are between
'BB+sf' and 'AA+sf' for class B-1, between 'BB+sf' and 'AA+sf' for
class B-2, between 'Bsf' and 'A+sf' for class C, between less than
'B-sf' and 'BBB-sf' for class D, and between less than 'B-sf' and
'B+sf' for class E.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; results under these sensitivity scenarios are 'AAAsf' for
class B-1 notes, 'AAAsf' for class B-2 notes, between 'A+sf' and
'AAsf' for class C notes, 'A+sf' for class D notes and 'BBB+sf' for
class E notes.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
CITIGROUP 2018-C6: Fitch Affirms B-sf Rating on Class J-RR Certs
----------------------------------------------------------------
Fitch Ratings has affirmed 15 classes of Citigroup Commercial
Mortgage Trust 2018-C6 Commercial Mortgage Pass-Through
Certificates series 2018-C6 (CGCMT 2018-C6).
RATING ACTIONS
ENTITY / DEBT RATING PRIOR
------------- ------ -----
CGCMT 2018-C6
A-1 17327GAV6 LT AAAsf Affirmed AAAsf
A-2 17327GAW4 LT AAAsf Affirmed AAAsf
A-3 17327GAX2 LT AAAsf Affirmed AAAsf
A-4 17327GAY0 LT AAAsf Affirmed AAAsf
A-AB 17327GAZ7 LT AAAsf Affirmed AAAsf
A-S 17327GBA1 LT AAAsf Affirmed AAAsf
B 17327GBB9 LT AA-sf Affirmed AA-sf
C 17327GBC7 LT A-sf Affirmed A-sf
D 17327GAA2 LT BBB-sf Affirmed BBB-sf
E-RR 17327GAC8 LT BBB-sf Affirmed BBB-sf
F-RR 17327GAE4 LT BBsf Affirmed BBsf
G-RR 17327GAG9 LT BB-sf Affirmed BB-sf
J-RR 17327GAJ3 LT B-sf Affirmed B-sf
X-A 17327GAU8 LT AAAsf Affirmed AAAsf
X-B 17327GAQ7 LT AA-sf Affirmed AA-sf
KEY RATING DRIVERS
Stable Loss Expectations: Pool loss expectations have remained
generally stable since Fitch's prior rating action. There are nine
(25.9%) Fitch Loans of Concern (FLOCs) one of which is in special
servicing. Fitch's current ratings incorporate a base case loss of
5.60%.
Specially Serviced Loan: The Holiday Inn FIDI (3.7% of the pool),
is secured by 492 key full-service Holiday Inn Express in the
financial district of New York City that was built in 2014. The
loan transferred to special servicing in May 2020 at the borrower's
request due to imminent monetary default. The hotel re-opened for
business in April 2021 and the loan remains 90+ days delinquent.
Foreclosure was filed in March 2022 and the lender is awaiting the
court's ruling for summary judgement.
Room Revenue increased significantly in YE 2021 compared to YE 2020
but NOI DSCR still remains low at -0.15x as of YE 2021, however,
this was an improvement from -0.75x at YE 2020. The TTM June 2022
occupancy, ADR, and RevPar are 69.8%, $144, and $100 compared to
65.7%, $166, and $109 for the comp set. The hotel's TTM June 2022
penetration ratios for occupancy, ADR and RevPAR were 106%, 86.6%,
and 91.9%, respectively Fitch's base case loss expectation of 5%
reflects a stress to the most recent appraisal and implies a
stressed value per key of $174,539.
The largest increase in loss expectations since Fitch's prior
rating action is Liberty Portfolio (7.3% of the pool), which is
secured by a 805,746-sf portfolio comprised of two office
properties located in Tempe, AZ and Scottsdale, AZ. Occupancy
across the portfolio declined to 90.5% as of June 2022 from 100% at
YE 2021. Previous major tenant Wage Works (previously 11.2% of NRA)
lease expired in December 2021, the tenant did not renew its lease
at the property and the space still remains vacant.
As of the June 2022 rent roll, the property's largest tenants
include; Centene Management (43.8% of NRA; lease expiry in January
2028), The Vanguard Group (15.3%; July 2026), and DHL Express
(14.6%; May 2028). Per CoStar as of 2Q 2022 CoStar, the properties
fall within the Tempe Office and Scottsdale Airpark Office
submarkets, the weighted average market rent per sq. ft. (psf) was
$32 and weighted average vacancy rate of 13.3%. Fitch base case
modeled loss of 4% is based on an 10% cap rate for property quality
and 5% stress to YE 2021 NOI which equates to a value psf of $189.
Increased Credit Enhancement: As of the August 2022 distribution
date, the pool's aggregate principal balance has paid down by 1.5%
to $725.6 million from $736.4 million at issuance. Since the prior
rating action, two loans have been defeased (4.1% of the pool). One
loan, DUMBO Heights Portfolio (9.6% of the pool) matures in 2023
and the remaining pool matures in 2028. The pool has not
experienced any realized losses since issuance.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Sensitivity factors that lead to downgrades include an increase in
pool-level losses from underperforming or specially serviced
loans/assets. Downgrades to the senior classes (A-1 through A-S)
and X-A are unlikely due to increasing credit enhancement (CE) and
expected continued amortization, but may occur should interest
shortfalls affect these classes.
Downgrades to the classes B, C, D, E-RR and X-B could occur if a
high proportion of the pool defaults and/or transfers to special
servicing and expected losses increase significantly. Downgrades to
the F-RR, G-RR and J-RR could occur should loss expectations
increase due to an increase in specially serviced loans and/or the
loans vulnerable to the pandemic do not stabilize
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Rating Outlook changes. However, for
some transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Sensitivity factors that lead to upgrades would include stable to
improved asset performance coupled with pay down and/or defeasance.
Upgrades to the classes B and C could occur with significant
improvement in CE and/or defeasance; however, adverse selection,
increased concentrations and/or further underperformance of the
FLOCs or loans that have been negatively affected by the pandemic
could cause this trend to reverse.
Classes would not be upgraded above 'Asf' if there were likelihood
for interest shortfalls. Upgrades to the classes D, E-RR, F-RR and
G-RR are not likely until the later years in a transaction and only
if the performance of the remaining pool is stable and/or
properties vulnerable to the coronavirus return to pre-pandemic
levels, and there is sufficient CE to the classes.
COMM 2013-CCRE10: Moody's Downgrades Rating on Cl. E Certs to B1
----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on eleven
classes and downgraded the ratings on two classes in COMM
2013-CCRE10 Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2013-CCRE10 as follows:
Cl. A-3, Affirmed Aaa (sf); previously on Jul 10, 2020 Affirmed Aaa
(sf)
Cl. A-3FL, Affirmed Aaa (sf); previously on Jul 10, 2020 Affirmed
Aaa (sf)
Cl. A-3FX, Affirmed Aaa (sf); previously on Jul 10, 2020 Affirmed
Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Jul 10, 2020 Affirmed
Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Jul 10, 2020 Affirmed Aaa
(sf)
Cl. A-M, Affirmed Aaa (sf); previously on Jul 10, 2020 Affirmed Aaa
(sf)
Cl. B, Affirmed Aa2 (sf); previously on Jul 10, 2020 Affirmed Aa2
(sf)
Cl. C, Affirmed A2 (sf); previously on Jul 10, 2020 Affirmed A2
(sf)
Cl. D, Affirmed Baa3 (sf); previously on Jul 10, 2020 Affirmed Baa3
(sf)
Cl. E, Downgraded to B1 (sf); previously on Jul 10, 2020 Confirmed
at Ba3 (sf)
Cl. F, Downgraded to Caa2 (sf); previously on Jul 10, 2020
Downgraded to Caa1 (sf)
Cl. PEZ, Affirmed Aa2 (sf); previously on Jul 10, 2020 Affirmed Aa2
(sf)
Cl. X-A*, Affirmed Aaa (sf); previously on Jul 10, 2020 Affirmed
Aaa (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on nine P&I classes were affirmed because of their
credit support and the transaction's key metrics, including Moody's
loan-to-value (LTV) ratio and Moody's stressed debt service
coverage ratio (DSCR) are within acceptable ranges. These classes
will also benefit from principal paydowns as the remaining loans
approach their maturity dates and defeased loans now represent 51%
of the pool.
The ratings on two P&I Classes, Cl. E and Cl. F, were downgraded
due to the potential refinance challenges for certain poorly
performing loans with upcoming maturity days in the next nine to
eleven months. Three loans, representing 11% of the pool, have an
NOI DSCR less than 1.00X based on their most recently reported
financials. These loans include the General Motors Innovation
Center (4.7% of the pool) which is only 56% leased to a single
tenant; Starks Parking Louisville (0.8% of the pool) which has had
an NOI DSCR below 0.30X since 2020; and the SpringHill Suites /
Fairfield Inn & Suites - Louisville (5.2%) which has experienced
improving performance since 2020, however, the most recent NOI DSCR
was still below 0.60X. Furthermore, all the remaining loans mature
by August 2023 and if certain loans are unable to pay off at their
maturity date, the outstanding classes may face increased interest
shortfall risk.
The ratings on one interest only (IO) class, Cl. X-A, was affirmed
based on the credit quality of the referenced classes.
The ratings on one exchangeable class, Cl. PEZ, was affirmed based
on the credit quality of its referenced exchangeable classes.
Moody's rating action reflects a base expected loss of 3.4% of the
current pooled balance, compared to 2.2% at Moody's last review.
Moody's base expected loss plus realized losses is now 3.8% of the
original pooled balance, compared to 3.5% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in rating all classes except interest-only
classes were "US and Canadian Conduit/Fusion Commercial
Mortgage-Backed Securitizations Methodology" published in July
2022.
DEAL PERFORMANCE
As of the September 12, 2022, distribution date, the transaction's
aggregate certificate balance has decreased by 38% to $628.6
million from $1.01 billion at securitization. The certificates are
collateralized by 44 mortgage loans ranging in size from less than
1% to 5.9% of the pool, with the top ten loans (excluding
defeasance) constituting 38.6% of the pool. Twenty-two loans,
constituting 51.5% of the pool, have defeased and are secured by US
government securities.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 13, compared to 16 at Moody's last review.
As of the September 2022 remittance report, loans representing
98.7% were current or within their grace period on their debt
service payments, and 1.3% were between 60 – 89 days delinquent.
Nine loans, constituting 32.8% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
One loan has been liquidated from the pool, resulting in a realized
loss of $17.2 million (a loss severity of 99.8%). There is
currently one loan in special servicing, the Best Western Plus
Coyote Point Loan ($8.2 million – 1.3% of the pool), which is
secured by a 99 room limited-service hotel property located in San
Mateo, CA. The loan is 60+ days delinquent and the property's
decline in performance was primarily drive by the impacts of the
coronavirus pandemic.
Moody's has also assumed a high default probability for two poorly
performing loans, constituting 5.5% of the pool (the General Motors
Innovation Center and Starks Parking Louisville), and has estimated
an aggregate loss of $6.5 million (a 19% expected loss on average)
from these troubled loans.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this
transaction, we make various adjustments to the MLTV. Moody's
adjust the MLTV for each loan using a value that reflects
capitalization (cap) rates that are between Moody's sustainable cap
rates and market cap rates. Moody's also use an adjusted loan
balance that reflects each loan's amortization profile. The MLTV
reported in this publication reflects the MLTV before the
adjustments described in the methodology.
Moody's received full year 2021 operating results for 91% of the
pool, and partial year 2022 operating results for 70% of the pool
(excluding specially serviced and defeased loans). Moody's weighted
average conduit LTV is 101%, compared to 99% at Moody's last
review. Moody's conduit component excludes loans with structured
credit assessments, defeased and CTL loans, and specially serviced
and troubled loans. Moody's net cash flow (NCF) reflects a weighted
average haircut of 19% to the most recently available net operating
income (NOI), excluding hotel properties that had significantly
depressed NOI in 2021. Moody's value reflects a weighted average
capitalization rate of 10.1%.
Moody's actual and stressed conduit DSCRs are 1.36X and 1.13X,
respectively, compared to 1.42X and 1.10X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 16.1% of the pool balance.
The largest loan is the Prince Kuhio Plaza Loan ($36.8 million –
5.9% of the pool), which is secured by a 444,240 SF retail property
located in Hilo, HI. The property represents the only regional and
enclosed shopping center on the Big Island. The property's NOI has
generally remained above expectations at securitization. As of June
2022, the property reported NOI DSCR was 2.71X, compared to 2.36X
as of year-end 2021 and 2.30X in 2020. The property currently has a
vacant anchor, a former Sears (74,000 SF or 17% NRA), that vacated
in 2021. The occupancy as of June 2022 (including the Sears 16%
GLA) was 88%, and 77% if excluding Sears. The inline occupancy was
reported at 75%. As of June 2022, the comparable in-line tenants
less than 10,000 SF sales were reported at $469 PSF for the
trailing 12 months period, compared to $466 PSF as of December
2021. The loan benefits from amortization and has amortized 18%
since securitization. The loan matures in July 2023 and Moody's
LTV and stressed DSCR are 82% and 1.32X, respectively, compared to
87% and 1.24X at the last review.
The second largest loan is the SpringHill Suites / Fairfield Inn &
Suites - Louisville Loan ($32.5 million – 5.2% of the pool),
which is secured by a 333 rooms limited-serviced lodging property
located in Louisville, KY. The loan is on the servicer's watchlist
due to a decline in performance and is currently cash managed due
to a DSCR Trigger Event. The actual NOI DSCR was 0.54X for the
trailing twelve month period ending March 2022, compared to 0.31X
at year-end 2021 and negative cash flow in 2020. The property has
slowly rebounded from the pandemic's impact, but the DSCR remains
significantly below the 2.30X at year-end 2019. The loan has
amortized 16% since securitization and matures in August 2023. If
the loan's performance does not improve over the next 10 – 12
months, the loan may face potential refinance challenges at its
scheduled maturity date. Moody's LTV and stressed DSCR are 130% and
0.96X, respectively, compared to 104% and 1.20X at the last
review.
The third largest loan is the Center Pointe Plaza I Loan ($31.7
million – 5.1% of the pool), which is secured by a 252,393 SF
retail power center property located in Newark, DE. Performance has
slightly declined since last review due to lower revenues and
higher expenses. The year end 2021 NOI was approximately 20% lower
than in 2013. The NOI DSCR was 1.24X as of June 2022, compared to
1.31X at year-end 2020 and the property's occupancy was 86% and
88%, respectively. The loan is on the servicer's watchlist due to a
decline in financial performance. The loan has amortized 9% since
securitization and matures in August 2023. Due to the declining NOI
in recent years, this loan may face potential refinance challenges
at its scheduled maturity date. Moody's LTV and stressed DSCR are
120% and 0.86X, respectively, compared to 118% and 0.87X at the
last review.
COMM 2014-CCRE16: Fitch Affirms CCsf Rating on Class F Certs
------------------------------------------------------------
Fitch Ratings has affirmed 13 classes of Deutsche Bank Securities,
Inc.'s COMM 2014-CCRE16 Mortgage Trust commercial mortgage
pass-through certificates. In addition, Fitch revised the Rating
Outlook for one class to Stable from Negative.
Debt Rating Prior
---- ------ -----
COMM 2014-CCRE16 Mortgage Trust
A-3 12591VAD3 LT AAAsf Affirmed AAAsf
A-4 12591VAE1 LT AAAsf Affirmed AAAsf
A-M 12591VAG6 LT AAAsf Affirmed AAAsf
A-SB 12591VAC5 LT AAAsf Affirmed AAAsf
B 12591VAH4 LT AA-sf Affirmed AA-sf
C 12591VAK7 LT A-sf Affirmed A-sf
D 12591VAQ4 LT BBsf Affirmed BBsf
E 12591VAS0 LT CCCsf Affirmed CCCsf
F 12591VAU5 LT CCsf Affirmed CCsf
KEY RATING DRIVERS
Stable Performance and Loss Expectations: Overall pool performance
and base case loss expectations have remained relatively stable
since Fitch's prior rating action. The Outlook revision to Stable
from Negative reflects the performance stabilization for the
majority of properties affected by the pandemic. Fitch has
identified six Fitch Loans of Concern (FLOCs; 14.1% of the pool
balance), including two (8%) specially serviced loans. Six loans
(7.7%) are on the master servicer's watchlist for declines in
occupancy, performance declines due to the pandemic, upcoming
rollover and/or deferred maintenance.
Fitch's current ratings incorporate a base case loss of 8.2%. The
majority of the overall pool loss expectations are from the two
specially serviced loans/assets.
The largest contributor to Fitch's overall loss expectations is the
REO West Ridge Mall & Plaza asset (5.8%). The asset originally
consisted of 392,000 sf of inline space within the 1.0 million-sf
enclosed regional West Ridge Mall, and the adjacent 90,353 sf West
Ridge Plaza retail center, located in Topeka, KS. In January 2022,
the West Ridge Mall portion was sold and liquidated, and only the
West Ridge Plaza which is anchored by a non-collateral Target
remains. The loan transferred to special servicing in November 2018
for imminent default and the asset became REO in December 2019.
According to the servicer, the remaining property is not currently
listed for sale as efforts to lease the two remaining vacant spaces
are ongoing. The property is currently 90% occupied, with TJ Maxx
as the largest collateral tenant. Fitch's base case loss of 81% is
based on a discount to the January 2022 appraisal, reflecting a
Fitch-stressed value of approximately $100 psf.
The second largest contributor to overall loss expectations is the
specially serviced 555 West 59th Street loan (2.2%), which is
secured by a mixed-use property that operates primarily as a
parking garage located about five blocks from Lincoln Center on
11th Avenue between West 59th and 60th Streets in Manhattan. The
loan transferred to special servicing in July 2020 for payment
default after the borrower had requested debt service payment
relief. The largest tenant at the property, Hertz, filed bankruptcy
and rejected the lease at the subject property. The special
servicer is dual tracking a modification and foreclosure which was
recently filed. The servicer-reported NOI debt service coverage
ratio (DSCR) for this loan was 1.07x as of TTM March 2020, down
from 1.18x as of YE 2019 and 1.35x at issuance. Fitch's base case
loss of 55% is based on a discount to the January 2022 appraisal,
implying a Fitch-stressed value of $246 psf.
Increasing Credit Enhancement (CE): As of the August 2022
distribution date, the pool's aggregate balance has been reduced by
24.8% to $800.1 million from $1.1 billion at issuance. Defeased
collateral now represents 14.5% of the pool, up from 13.4% at the
last rating action. Three loans (24.7%) are interest-only (IO) for
the full term. An additional 16 loans (42.9%) were structured with
partial IO periods that have expired.
All of the outstanding loans are scheduled to mature in 2024. Fitch
expects there to be some adverse selection as loans mature and
those with strong credit metrics refinance, leading to increased
pool concentration. Interest shortfalls are currently impacting
classes D through G.
Property Type Concentration: The highest concentration is office
(38.5%), followed by hotel (16.3%), mixed use (16.2%) and retail
(15.8%).
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Sensitivity factors that lead to downgrades include an increase in
pool-level losses from underperforming or specially serviced
loans/assets. Downgrades to the 'AA-sf' and 'AAAsf' categories are
unlikely due to increasing CE and expected continued amortization,
but may occur should interest shortfalls affect these classes.
Downgrades to the 'BBsf' and 'A-sf' would likely occur if overall
pool performance declines or loss expectations increase
significantly. Downgrades to the distressed rated classes E and F
would occur with greater certainty of losses and/or as losses are
realized.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Sensitivity factors that lead to upgrades would occur with improved
performance coupled with paydown and/or increased defeasance.
Upgrades to the 'A-sf' and 'AA-sf' categories could occur with
improvement in CE and/or additional defeasance, and with the
stabilization of performance amongst the FLOCs and specially
serviced loans/assets. Upgrades to the 'BBsf' category would also
consider these factors, but would be limited based on sensitivity
to concentrations or the potential for future concentrations.
Classes would not be upgraded above 'Asf' if there is likelihood of
interest shortfalls. An upgrade to classes E and F is not likely
unless performance and/or valuations of the specially serviced
loans/assets improve and/or are disposed with significantly better
than expected recoveries.
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.
CONNECTICUT AVENUE 2022-R09: Moody's Assigns (P)Ba1 to 26 Tranches
------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 62
classes of residential mortgage-backed securities (RMBS) issued by
Connecticut Avenue Securities Trust 2022-R09, 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 Trust 2022-R09
Cl. 2M-1, Assigned (P)A3 (sf)
Cl. 2M-2A, Assigned (P)Baa2 (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)Ba2 (sf)
Cl. 2B-1B, Assigned (P)B1 (sf)
Cl. 2B-1, Assigned (P)Ba3 (sf)
Cl. 2E-A1, Assigned (P)Baa2 (sf)
Cl. 2A-I1*, Assigned (P)Baa2 (sf)
Cl. 2E-A2, Assigned (P)Baa2 (sf)
Cl. 2A-I2*, Assigned (P)Baa2 (sf)
Cl. 2E-A3, Assigned (P)Baa2 (sf)
Cl. 2A-I3*, Assigned (P)Baa2 (sf)
Cl. 2E-A4, Assigned (P)Baa2 (sf)
Cl. 2A-I4*, Assigned (P)Baa2 (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)Ba3 (sf)
Cl. 2B-1X, Assigned (P)Ba3 (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
0.95%, in a baseline scenario-median is 0.75% and reaches 4.53% 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 July 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.
CROWN CITY IV: S&P Assigns Prelim BB- (sf) Rating on Class D Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Crown City
CLO IV's floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Western Asset Management Co. LLC.
The preliminary ratings are based on information as of Sept. 16,
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 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.
Preliminary Ratings Assigned
Crown City CLO IV/Crown City CLO IV LLC
Class A-1, $216.00 million: AAA (sf)
Class A-2, $57.50 million: AA (sf)
Class B (deferrable), $19.00 million: A (sf)
Class C (deferrable), $20.50 million: BBB- (sf)
Class D (deferrable), $14.00 million: BB- (sf)
Subordinated notes, $32.30 million: Not rated
CSAIL 2016-C7: Fitch Affirms CCCsf Rating on 2 Tranches
-------------------------------------------------------
Fitch Ratings has affirmed 13 classes of Credit Suisse CSAIL
2016-C7 Commercial Mortgage Trust Mortgage Pass Through
Certificates. The Rating Outlooks on six classes were revised to
Stable from Negative.
Debt Rating Prior
---- ------ -----
CSAIL 2016-C7
A-4 12637UAV1 LT AAAsf Affirmed AAAsf
A-5 12637UAW9 LT AAAsf Affirmed AAAsf
A-S 12637UBA6 LT AAAsf Affirmed AAAsf
A-SB 12637UAX7 LT AAAsf Affirmed AAAsf
B 12637UBB4 LT AA-sf Affirmed AA-sf
C 12637UBC2 LT A-sf Affirmed A-sf
D 12637UAG4 LT BBsf Affirmed BBsf
E 12637UAJ8 LT CCCsf Affirmed CCCsf
F 12637UAL3 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Improved Loss Expectations: Overall pool performance is stable and
Fitch's base case loss expectations have improved since the prior
rating action. The Outlook revisions to Stable from Negative on
classes A-S, B, C, D, X-A and X-B reflect performance stabilization
of properties impacted by the pandemic. Seven loans (32.6% of the
pool), including two (2.8%) in special servicing, were identified
as Fitch Loans of Concern (FLOCs). Fitch's current ratings
incorporate a base case loss of 7.5%.
Regional Malls/Largest Contributors to Loss: The largest
contributor to Fitch's overall base case loss expectations is the
Gurnee Mills loan (10.3% of the pool), which is secured by a 1.7
million-sf portion of a 1.9 million-sf regional mall located in
Gurnee, IL, approximately 45 miles north of Chicago. Non-collateral
anchors include Burlington Coat Factory, Marcus Cinema and Value
City Furniture. Collateral anchors include Macy's, Bass Pro Shops,
Kohl's and a vacant anchor box previously occupied by Sears. The
loan previously transferred to the special servicer in June 2020
for imminent monetary default, returning to the master servicer in
May 2021 after receiving a forbearance.
Per the servicer's June 2022 reporting, the property was 80%
occupied, compared to 77% at YE 2021, 86.7% at YE 2020 and 93% at
issuance. The property faces near-term rollover, with leases
totaling 13.6% of the NRA scheduled to expire in 2023, including
Bed Bath & Beyond (3.3% of NRA; January 2023 lease expiration), Lee
Wrangler (1.3%; January 2023), Off Broadway Shoes (1.2%; January
2023) and Rainforest Cafe (1.1%; December 2023). Fitch's base case
loss expectation of 30% is based on a 12% cap rate and 5% stress to
the YE 2021 NOI, and factors in an increased loss recognition to
account for the likelihood of maturity default.
The second largest contributor to overall base case loss
expectations and the largest improvement in loss since the prior
rating action is the Coconut Point loan (13.7%), which is secured
by a 836,531-sf portion of a 1.2 million-sf open-air, anchored
retail property in Estero, FL, approximately 20 miles from Fort
Meyers. The loan, which is sponsored by a joint venture between
Simon Property Group and Dillard's, Inc., was designated a FLOC due
to occupancy declines and near-term rollover concerns.
The property is anchored by a non-collateral Super Target and a
non-collateral Dillard's. The largest collateral tenant is Regal
Cinemas, which leases 9.5% of the NRA through April 2024.
Collateral occupancy was 79% as of March 2022, down from 82% at YE
2020 and 90% at YE 2019. Bed Bath & Beyond, which leased 4.2% of
the NRA through January 2022, closed this location in February
2021. Servicer-reported NOI debt service coverage ratio (DSCR) was
1.54x as of YE 2021, 1.67x as of YE 2020, 1.71x at YE 2019, and
1.54x at issuance. The loan began amortizing in November 2018.
Near-term rollover includes 9.1% in 2022 and 7.1% in 2023. Fitch's
base case loss expectation of 7.5% is based on a 10% cap rate and
10% stress to the YE 2021 NOI.
The third largest contributor to overall base case loss
expectations is the Peachtree Mall loan (3.1%), which is secured by
a 621,367-sf portion of an 822,443-sf regional mall located in
Columbus, GA and sponsored by Brookfield Properties Retail Group.
The mall is anchored by a non-collateral Dillard's and collateral
tenants that include JCPenney, At Home and Macy's. Per the March
2022 rent roll, the collateral was 96% occupied, which is up from
91% in 2021 and 93% in 2020. Servicer-reported NOI DSCR for this
amortizing loan was 1.65x as of the YTD March 2022, compared with
1.58x at YE 2021 and 1.56x at YE 2020.
Comparable in-line tenant sales were $444 psf for YE 2021, up from
$331 psf at YE 2020, $383 psf at YE 2019 and $409 psf at issuance.
Tenants comprising approximately 10.3% of the NRA have leases
scheduled to expire by YE 2022, with another 22.8% scheduled to
expire in 2023, including At Home (13.8% NRA). Fitch's base case
loss expectation of 22% is based on a 20% cap rate and 5% stress to
the YE 2021 NOI.
Increased Credit Enhancement (CE)/Amortization: As of the August
2022 distribution date, the pool's aggregate principal balance has
been paid down by 11.3% to $680.7 million from $767.6 million at
issuance. The pool is scheduled to amortize by 16.2% of the initial
pool balance through maturity. Of the current pool, only one loan
(7.4%) is full-term IO, and all loans with a partial-term IO period
are now amortizing. The pool has experienced no realized losses
since issuance. Nine loans (13.7%) have been defeased, up from one
loan (0.4%) at the prior rating action.
Nine loans are scheduled to mature in 2025 (13.7% of pool), while
the majority of the pool (86.3%) is scheduled to mature in 2026.
Retail Concentration: There are 13 retail loans (41.7%), followed
by 10 office loans (25.6%) and 16 multifamily loans (19%).
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Sensitivity factors that lead to downgrades include an increase in
pool-level losses from underperforming or specially serviced
loans/assets. Downgrades to the 'AA-sf' and 'AAAsf' categories are
unlikely due to increasing CE and expected continued amortization,
but may occur should interest shortfalls affect these classes.
Downgrades to the 'BBsf' and 'A-sf' categories would likely occur
if a high proportion of the pool defaults and/or transfers to
special servicing and expected losses for the pool increase
sizably. Downgrades to classes E and F would occur with greater
certainty of losses and/or as losses are realized.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Sensitivity factors that lead to upgrades would include stable to
improved asset performance coupled with paydown and/or defeasance.
Upgrades to the 'A-sf' and 'AA-sf' categories could occur with
large improvement in CE and/or defeasance, and with the
stabilization of performance amongst the FLOCs. Upgrades to the
'BBsf' category would also consider these factors, but would be
limited based on sensitivity to concentrations or the potential for
future concentrations. Classes would not be upgraded above 'Asf' if
there is a likelihood of interest shortfalls. Upgrades to classes E
and F are not likely until the later years in a transaction and
only if the performance of the remaining pool is stable and there
is sufficient CE to the class.
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.
CXP TRUST 2022-CXP1: Moody's Assigns B3 Rating to Cl. F Certs
-------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to two
classes of CMBS securities, issued by CXP Trust 2022-CXP1,
Commercial Mortgage Pass Through Certificates, Series 2022-CXP1:
Cl. E, Definitive Rating Assigned Ba3 (sf)
Cl. F, Definitive Rating Assigned B3 (sf)
RATINGS RATIONALE
The transaction represents the first securitization backed by a
portion of a floating-rate, interest-only whole mortgage loan
collateralized by the borrower's fee simple or leasehold interests
in a portfolio of seven office properties located in New York City,
San Francisco, Jersey City, and Boston. Moody's ratings are based
on the credit quality of the loan and the strength of the
securitization structure.
The whole mortgage loan is comprised of 21 promissory notes, in the
aggregate initial principal amount of $1,717,842,628: three
pari-passu senior A-A notes with an aggregate principal balance of
$681,400,000, three pari-passu A-B Notes with an aggregate
principal balance of $135,600,000, three pari-passu A-C Notes with
an aggregate principal balance of $119,900,000, three pari-passu
A-D Notes with an aggregate principal balance of $136,200,000,
three pari-passu A-E Notes with an aggregate principal balance of
$212,800,000, three pari-passu A-F Notes with an aggregate
principal balance of $271,942,628, three pari-passu junior B Notes
with a principal balance of $160,000,000. Only the A-E Notes and
the A-F Notes (collectively, the "Trust Notes" or the "Trust Loan",
with an aggregate principal balance of $484,742,628) will be an
asset of the fund.
The A-A Notes, A-B Notes, A-C Notes, A-D Notes, A-E Notes and A-F
Notes are collectively referred to as the "A Notes" or the "Senior
Loan", with an aggregate principal balance of $1,557,842,628. The
A-A Notes are generally senior in right of payment to the A-B
Notes, A-C Notes, A-D Notes, A-E Notes, A-F Notes and B Note; the
A-B Notes are generally senior in right of payment to the A-C
Notes, A-D Notes, A-E Notes, A-F Notes and B Note; the A-C Notes
are generally senior in right of payment to the A-D Notes, A-E
Notes, A-F Notes and B Note; the A-D Notes are generally senior in
right of payment to the A-E Notes, A-F Notes and B Note; the A-E
Notes are generally senior in right of payment to the A-F Notes and
B Note; and the A-F Notes are generally senior in right of payment
to the B Note. The A-A Notes, A-B Notes, A-C Notes, A-D Notes and
the B Note will not be part of the trust fund, but may be
securitized in one or more future securitizations.
The whole loan is being serviced and administered pursuant to the
trust and servicing agreement of this securitization.
Moody's approach to rating this transaction involved the
application of Moody's Large Loan and Single Asset/Single Borrower
CMBS methodology. The rating approach for securities backed by a
single loan compares the credit risk inherent in the underlying
collateral with the credit protection offered by the structure. The
structure's credit enhancement is quantified by the maximum
deterioration in property value that the securities are able to
withstand under various stress scenarios without causing an
increase in the expected loss for various rating levels. In
assigning single borrower ratings, Moody's also consider a range of
qualitative issues as well as the transaction's structural and
legal aspects.
The whole mortgage loan is secured by the borrower's fee simple or
leasehold interests in seven cross-collateralized office properties
totaling 2,749,316 SF across four markets in New York, NY (three
properties, 1,094,567 SF), San Francisco, CA (two properties,
729,493SF), Jersey City, NJ (one property, 652,329 SF) and Boston,
MA (one property, 272,876 SF). Construction dates range between
1902 and 1991, with a weighted average year built of 1952. Property
sizes range between 258,000 SF to 652,329 SF, with an average size
of 392,752 SF. As of May 2022, the portfolio was approximately
84.5% leased to 116 tenants.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this
transaction, Moody's make various adjustments to the MLTV. Moody's
adjust the MLTV for each loan using a value that reflects
capitalization (cap) rates that are between Moody's sustainable cap
rates and market cap rates. Moody's also use an adjusted loan
balance that reflects each loan's amortization profile.
The Moody's Senior Loan DSCR is 1.28x and Moody's first mortgage
DSCR is 1.24x. Moody's Senior Loan stressed DSCR at a 9.25%
constant is 0.67x and Moody's first mortgage stressed DSCR is
0.61x. Moody's DSCR is based on Moody's stabilized net cash flow.
Moody's LTV ratio for the Senior Loan balance is 138.0% and Moody's
LTV ratio for the first mortgage balance is 152.1%, based on
Moody's Value. Adjusted Moody's LTV ratio for the Senior Loan
balance is 119.9% and adjusted Moody's LTV ratio for the first
mortgage balance is 132.2%, compared to 119.8% and 132.1% issued
at Moody's provisional ratings, based on Moody's Value using a cap
rate adjusted for the current interest rate environment.
Moody's also grades properties on a scale of 0 to 5 (best to worst)
and considers those grades when assessing the likelihood of debt
payment. The factors considered include property age, quality of
construction, location, market, and tenancy. The portfolio's
weighted average quality grade is 1.05.
Notable strengths of the transaction include locations, tenant
quality, limited rollover, experienced sponsorship, and multiple
property pooling.
Notable concerns of the transaction include high Moody's LTV,
floating-rate and interest-only mortgage loan profile, recent
occupancy and NOI decline, and other credit-negative legal
features.
The principal methodology used in these ratings was " Large Loan
and Single Asset/Single Borrower Commercial Mortgage-Backed
Securitizations Methodology " published in July 2022.
Moody's approach for single borrower and large loan multi-borrower
transactions evaluates credit enhancement levels based on an
aggregation of adjusted loan level proceeds derived from Moody's
loan level LTV ratios. Major adjustments to determining proceeds
include leverage, loan structure, and property type. These
aggregated proceeds are then further adjusted for any pooling
benefits associated with loan level diversity, other concentrations
and correlations.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan pay downs or
amortization, an increase in the pool's share of defeasance or
overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall
performance of the pool, loan concentration, increased expected
losses from specially serviced and troubled loans or interest
shortfalls.
DBGS 2018-C1: Fitch Lowers Rating on 2 Tranches to B-sf
-------------------------------------------------------
Fitch Ratings has downgrade two and affirmed 13 classes of DBGS
2018-C1 Commercial Mortgage Pass-Through Certificates. The Rating
Outlooks for classes E, F, X-D and X-F remain Negative.
Debt Rating Prior
---- ------ -----
DBGS 2018-C1
A-1 23307DAW3 LT AAAsf Affirmed AAAsf
A-2 23307DAX1 LT AAAsf Affirmed AAAsf
A-3 23307DAZ6 LT AAAsf Affirmed AAAsf
A-4 23307DBA0 LT AAAsf Affirmed AAAsf
A-M 23307DBC6 LT AAAsf Affirmed AAAsf
A-SB 23307DAY9 LT AAAsf Affirmed AAAsf
B 23307DBD4 LT AA-sf Affirmed AA-sf
C 23307DBE2 LT A-sf Affirmed A-sf
D 23307DAG8 LT BBBsf Affirmed BBBsf
E 23307DAJ2 LT BBB-sf Affirmed BBB-sf
F 23307DAL7 LT B-sf Downgrade BB-sf
G-RR 23307DAN3 LT CCCsf Affirmed CCCsf
X-A 23307DBB8 LT AAAsf Affirmed AAAsf
X-D 23307DAC7 LT BBB-sf Affirmed BBB-sf
X-F 23307DAE3 LT B-sf Downgrade BB-sf
KEY RATING DRIVERS
Greater Certainty of Loss; Office Performance Declines: The
downgrades to classes F and X-F reflects an increased certainty of
loss and further performance declines for loans secured by office
properties since Fitch's last rating action. Fitch's current
ratings reflect a base case loss of 5.0%, which is in line with the
prior rating action and remains above issuance expectations.
Fitch has identified 13 loans (34.2% of the pool) as Fitch Loans of
Concern (FLOCs), including two loans (3.5%) in special servicing.
Office loans account for the largest concentration in the pool (13
loans; 38% of the pool balance), of which eight loans (23%) are
considered FLOCs. The Negative Outlooks, which reflects losses that
could reach 5.2%, factor in a potential outsized loss on the GSK
North American HQ loan due to upcoming refinance concerns and
possible downgrades should the performance of the FLOCs further
deteriorate and/or additional loans transfer to special servicing.
Since Fitch's prior rating action, loss expectations have improved
for several loans due to positive new leasing and subleasing
activity, including the specially serviced 9039 Sunset loan (1.9%
of the pool; retail; West Hollywood, CA; 2.5% loss), and performing
loans Pier 70 (7.6%; mixed use; San Francisco, CA; 7.6% loss), and
TripAdvisors HQ (7.1%; office; Needham, MA; 6.7% loss). In
addition, Fitch's base case loss declined for the Outlet Shoppes at
El Passo (3.5%; retail outlet center; Canutillo, TX; 11.6% loss),
which recently transferred back to the master servicer as a
modified loan after the sponsor (CBL) re-emerged from bankruptcy.
These loss improvements were offset by increased loss expectations
for several larger office and mixed-use FLOCs that have experienced
occupancy declines, including Time Square Office Renton (5.3%;
office; Renton, WA; 8.3% loss), 90-100 John Street (4.0%;
mixed-use; Manhattan, NY; 11.8% loss) and Summit Office Park (2.6%;
office; Independence, OH; 9.1% loss).
The largest increase to loss expectations since Fitch's prior
rating is the 90-100 John Street loan (4.0% of the pool), which is
secured by a 224-unit mixed-use (retail, office and multifamily)
property located in the Financial District of Manhattan. The
subject consists of lower level retail and a multifamily component.
The commercial component totals 126,950 sf. The residential
component of the property is now known as The Renaissance
Apartments. The loan is sponsored by The Monian Group.
The multifamily portion at the collateral continues to perform,
with occupancy reported at 97.8% as of March 2022. The commercial
portion has experienced an occupancy decline to 51.4% as of March
2022 and YE 2021 from 68% at YE 2020 and 69% at YE 2019. As a
result, the servicer-reported NOI DSCR has declined to 0.10x as of
YTD March 2022 from 1.37x at YE 2021, 2.23x at YE 2020 and 2.77x at
YE 2019.
In July 2022, the servicer had reported borrower plans to convert
over 50% of the existing commercial space to additional apartment
units. According to servicer documents, no material disruptions to
current operations are expected by the borrower.
Fitch's base case loss of 12% is based off the YE 2021 NOI and an
8% cap rate, and gives credit for the property's prime Manhattan
location, strong sponsorship and the loan remaining current. Fitch
had assigned a credit opinion of 'BBB-sf' for this loan at issuance
on a stand-alone basis; however, the loan is no longer considered a
credit opinion loan given the performance declines.
Alternative Loss Considerations: Fitch applied an additional
sensitivity analysis on the GSK North American HQ loan (0.95% of
the pool) due to upcoming refinance concerns with the loan maturing
in June 2023 and the sole tenant, GlaxoSmithKline (GSK), vacating
the collateral during the first half of 2022. Fitch's base case
analysis assumes no loss on the loan given GSK's commitment to
continue paying rent; however, the sensitivity scenario applied an
outsized loss of 20% on the maturity balance, which considered a
dark value with assumptions for market rent, downtime between
leases, carrying costs and re-tenanting costs. The current ratings
and Negative Outlooks reflect this analysis. Fitch may increase the
base case loss based on the sensitivity analysis should the loan
face refinancing risks and/or fail to repay at the loan's maturity
date.
Minimal Change to Credit Enhancement (CE): As of the August 2022
remittance report, the pool's aggregate balance has been paid down
by 1.14% to $1.054 billion from $1.066 billion at issuance. There
are 18 loans (62.5% of the pool) that are full-term, interest only
(IO); 15 loans that are partial-term IO (27.4%); and five loans
(10.1%) that are currently amortizing. One loan, the SL4 El Paso
Industrial (3.5%) has fully defeased.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Sensitivity factors that lead to downgrades include an increase
in pool level losses from underperforming or specially serviced
loans. Downgrades to the 'AA-sf' and 'AAAsf' rated categories are
not likely due to the position in the capital structure and
expected continued paydown, but may happen should interest
shortfalls affect these classes;
- Downgrades to the 'BBB-sf', 'BBBsf' and 'A-sf' rated categories
may occur should overall pool loss expectations increase
significantly from further performance deterioration of the FLOCs
and/or one or more larger loans, including GSK North American HQ,
have a substantial outsized loss, which would erode CE;
- Further downgrades to the 'B-sf' and 'CCCsf' rated classes would
occur as losses are realized and/or become more certain.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment-grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Upgrades would occur with stable to improved asset performance
coupled with additional paydown and/or defeasance;
- Upgrades of the 'Asf' and 'AAsf' categories would likely occur
with significant improvement in CE and/or defeasance; however,
adverse selection, increased concentrations and further
underperformance of the FLOCs and/or loans considered to be
negatively impacted by the coronavirus pandemic could cause this
trend to reverse;
- An upgrade to the 'BBBsf' category is considered unlikely and
would be limited based on sensitivity to concentrations or the
potential for future concentration. Classes would not be upgraded
above 'Asf' if there is likelihood for interest shortfalls.;
- Upgrades to the 'CCCsf' and 'Bsf' categories are not likely until
the later years in a transaction and only if the performance of the
remaining pool is stable and/or properties vulnerable to the
coronavirus return to pre-pandemic levels, and there is sufficient
CE to the classes.
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.
EFMT 2022-4: Fitch Assigns 'B(EXP)sf' Rating to Class B-2 Debt
--------------------------------------------------------------
Fitch Ratings has assigned expected ratings to EFMT 2022-4.
Debt Rating
---- ------
EFMT 2022-4
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA (EXP)sf Expected Rating
A-3 LT A (EXP)sf Expected Rating
M-1 LT BBB(EXP)sf Expected Rating
B-1 LT BB (EXP)sf Expected Rating
B-2 LT B (EXP)sf Expected Rating
B-3 LT NR (EXP)sf Expected Rating
A-IO-S LT NR (EXP)sf Expected Rating
XS LT NR (EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch expects to rate the residential mortgage-backed certificates
to be issued by EFMT 2022-4, Mortgage Pass-Through Certificates,
Series 2022-4 (EFMT 2022-4), as indicated above. The certificates
are supported by 909 loans with a balance of $372.26 million as of
the cutoff date. This will be the seventh EFMT transaction rated by
Fitch and the fourth EFMT transaction in 2022.
The certificates are secured mainly by nonqualified mortgages
(non-QM) as defined by the Ability to Repay (ATR) rule (the Rule).
Approximately 60.2% of the loans were originated by LendSure
Mortgage Corporation, a joint venture between LendSure Financial
Services, Inc. and Ellington Financial, Inc.. Approximately 13.0%
of the loans were originated by American Heritage Lending, and
12.0% of the loans were originated by HomeXpress Mortgage Corp. The
remaining 14.7% of the loans were originated by various other
third-party originators.
Of the pool, 50% of the loans are designated as non-QM, and the
remaining 50% are investment properties not subject to ATR.
Rushmore Loan Management Services LLC will be the servicer and
Nationstar Mortgage LLC will be the master servicer for the
transaction.
There is no Libor exposure in this transaction. While the majority
of the loans in the collateral pool comprise fixed-rate mortgages,
0.14% of the pool comprises loans with an adjustable rate. These
two ARM loans are based on SOFR. The offered certificates have the
following coupon rates: classes A-1, A-2, and A-3 are fixed rate
with a step-up coupon at year four and capped at the net weighted
average coupon (WAC), while classes M-1, B-1, B-2 and B-3 pay the
net WAC.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 11.4% above a long-term sustainable level (vs. 11%
on a national level as of August 2022, up 1.8% since last quarter).
Underlying fundamentals are not keeping pace with the growth in
prices, resulting from a supply/demand imbalance driven by low
inventory, favorable mortgage rates, and new buyers entering the
market. These trends have led to significant home price increases
over the past year, with home prices rising 19.8% yoy nationally as
of May 2022.
Nonprime Credit Quality (Mixed): Collateral consists mainly of
30-year fully amortizing loans, either fixed rate or adjustable
rate, and 25% of the loans have an interest-only period. The pool
is seasoned at about five months in aggregate, as determined by
Fitch. The borrowers in this pool have relatively strong credit
profiles with a 735 WA FICO score (745 WA FICO per the transaction
documents) and a 45.6% debt-to-income ratio, both as determined by
Fitch, as well as moderate leverage, with an original combined
loan-to-value ratio (CLTV) of 71.2%, translating to a
Fitch-calculated sustainable LTV of 79.6%.
Fitch considered 43.0% of the pool to consist of loans where the
borrower maintains a primary residence, while 49.9% comprises
investor property and 7.1% represents second homes.
There were five loans made to foreign nationals in the pool. If the
co-borrower is a U.S. citizen or permanent resident, Fitch does not
count those loans as loans to foreign nationals. Fitch does not
make adjustments for loans to non-permanent residents since
historical performance has shown they perform the same or better
than those to U.S. citizens. Fitch treated foreign nationals as
investor occupied, made no documentation for income and employment.
If a FICO was not provided for the foreign national, a FICO of 650
was assumed.
In total, 99% of the loans were originated through a nonretail
channel. Additionally, 50% of the loans are designated as non-QM,
while the remaining 50% are exempt from QM status. The pool
contains 51 loans over $1.0 million, with the largest loan at $2.85
million.
Fitch determined that self-employed, non-debt service coverage
ratio (DSCR) borrowers make up 43.0% of the pool; salaried non-DSCR
borrowers make up 17.6%; and 39.4% comprises investor cash flow
DSCR loans. About 49.9% of the pool comprises loans for investor
properties (10.5% underwritten to borrowers' credit profiles and
39.4% comprising investor cash flow loans). There are no second
liens in the pool, and three loans have subordinate financing.
Around 30% of the pool is concentrated in California with
relatively low MSA concentration. The largest MSA concentration is
in the Los Angeles MSA (10.2%), followed by the Miami MSA (6.4%)
and the San Diego MSA (4.8%). The top three MSAs account for 21.4%
of the pool. As a result, there was no adjustment for geographic
concentration.
All loans are current as of Sept. 1, 2022. Overall, the pool
characteristics resemble nonprime collateral; therefore, the pool
was analyzed using Fitch's nonprime model.
Loan Documentation: Bank Statement, Asset Depletion, DSCR Loans
(Negative): Fitch determined that about 79.4% of the pool was
underwritten to less than full documentation and 35.9% was
underwritten to a 12- or 24-month bank statement program for
verifying income, which is not consistent with Appendix Q standards
and Fitch's view of a full documentation program. A key distinction
between this pool and legacy Alt-A loans is these loans adhere to
underwriting and documentation standards required under the
Consumer Financial Protection Bureau's ATR Rule.
This reduces the risk of borrower default arising from lack of
affordability, misrepresentation or other operational quality risks
due to the rigor of the Rule's mandates with respect to
underwriting and documentation of the borrower's ATR. Additionally,
4.0% comprises an asset depletion product, 0.0% is a CPA or P&L
product and 39.4% is a DSCR product.
Limited Advancing (Mixed): The deal is structured to six months of
servicer advances for delinquent P&I. The limited advancing reduces
loss severities, as a lower amount is repaid to the servicer when a
loan liquidates, and liquidation proceeds are prioritized to cover
principal repayment over accrued but unpaid interest. The downside
is additional stress on the structure, as liquidity is limited in
the event of large and extended delinquencies.
Modified Sequential Payment Structure (Neutral): The structure
distributes collected principal pro rata among the class A notes
while excluding subordinate bonds from principal until classes A-1,
A-2 and A-3 are reduced to zero. To the extent that either a
cumulative loss trigger event or delinquency trigger event occurs
in a given period, principal will be distributed sequentially to
classes A-1, A-2 and A-3 until they are reduced to zero.
The transaction has excess spread that will be available to
reimburse the certificates for losses or interest shortfalls. The
excess spread may be reduced on and after October 2026, since
classes A-1, A-2 and A-3 have a step-up coupon feature that goes
into effect after that date. To mitigate the impact of the step-up
feature, interest payments are redirected from class B-3 to pay any
cap carryover interest for the A-1, A-2 and A-3 classes on and
after October 2026.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
This defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model-projected 42.4% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC, Canopy, Clayton, Evolve, Infinity, Opus and
Selene. The third-party due diligence described in Form 15E focused
on three areas: compliance review, credit review and valuation
review. Fitch considered this information in its analysis. Based on
the results of the 100% due diligence performed on the pool, Fitch
reduced the overall 'AAAsf' expected loss by 0.47%.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria." AMC,
Canopy, Clayton, Evolve, Infinity, Opus, and Selene were engaged to
perform the review. Loans reviewed under this engagement were given
compliance, credit and valuation grades, and assigned initial
grades for each subcategory. Minimal exceptions and waivers were
noted in the due diligence reports. Refer to the Third-Party Due
Diligence section for more detail.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. Fitch received
loan-level information based on the American Securitization Forum's
(ASF) data layout format, and the data are considered to be
comprehensive. The ASF data tape layout was established with input
from various industry participants, including rating agencies,
issuers, originators, investors and others to produce an industry
standard for the pool-level data in support of the U.S. RMBS
securitization market. The data contained in the ASF layout data
tape were reviewed by the due diligence companies, and no material
discrepancies were noted.
ESG CONSIDERATIONS
EFMT 2022-4 has an ESG Relevance Score of '4' [+] for Transaction
Parties & Operational Risk. Operational risk is well controlled for
in EFMT 2022-4, including strong transaction due diligence as well
as 'RPS1-' Fitch-rated servicer, which resulted in a reduction in
expected losses. This has a positive impact on the credit profile
and is relevant to the ratings in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
ELMWOOD CLO 19: S&P Assigned Prelim B- (sf) Rating on Cl. F Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Elmwood CLO
19 Ltd.'s fixed- and floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Elmwood Asset Management LLC.
The preliminary ratings are based on information as of Sept. 19,
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 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.
Preliminary Ratings Assigned
Elmwood CLO 19 Ltd. /Elmwood CLO 19 LLC
Class A, $248.00 million: AAA (sf)
Class B-1, $41.00 million: AA (sf)
Class B-2, $15.00 million: AA (sf)
Class C (deferrable), $20.00 million: A (sf)
Class D (deferrable), $22.20 million: BBB- (sf)
Class E (deferrable), $13.00 million: BB- (sf)
Class F (deferrable), $8.00 million: B- (sf)
Subordinated notes, $33.00 million: Not rated
FREDDIE MAC 2022-DNA6: S&P Assigns BB- (sf) Rating on M-2B Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Freddie Mac STACR REMIC
Trust 2022-DNA6's notes.
The note issuance is an RMBS securitization backed by residential
mortgage loans, deeds of trust, or similar security instruments
encumbering mortgaged properties acquired by Freddie Mac.
The ratings reflect S&P's view of:
-- The credit enhancement provided by the subordinated reference
tranches, as well as the associated structural deal mechanics;
-- The REMIC structure that reduces the counterparty exposure to
Freddie Mac for periodic principal and interest payments, but, at
the same time, pledges the support of Freddie Mac (a highly rated
counterparty) to cover shortfalls, if any, on interest payments and
to make up for any investment losses;
-- The issuer's aggregation experience and the alignment of
interests between the issuer and noteholders in the transaction's
performance, which, in our view, enhances the notes' strength;
-- The enhanced credit risk management and quality control
processes Freddie Mac uses in conjunction with the underlying R&W
framework; 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 the COVID-19 pandemic may have
on the overall credit quality of collateralized pools. While
COVID-19 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%."
Ratings Assigned
Freddie Mac STACR REMIC Trust 2022-DNA6
Class A-H(i), $33,892,952,126: NR
Class M-1A, $388,000,000: A- (sf)
Class M-1AH(i), $21,206,246: NR
Class M-1B, $473,000,000: BBB- (sf)
Class M-1BH(i), $25,164,125: NR
Class M-2, $304,000,000: BB- (sf)
Class M-2A, $152,000,000: BB+ (sf)
Class M-2AH(i), $8,124,183: NR
Class M-2B, $152,000,000: BB- (sf)
Class M-2BH(i), $8,124,183: NR
Class M-2R, $304,000,000: BB- (sf)
Class M-2S, $304,000,000: BB- (sf)
Class M-2T, $304,000,000: BB- (sf)
Class M-2U, $304,000,000: BB- (sf)
Class M-2I, $304,000,000: BB- (sf)
Class M-2AR, $152,000,000: BB+ (sf)
Class M-2AS, $152,000,000: BB+ (sf)
Class M-2AT, $152,000,000: BB+ (sf)
Class M-2AU, $152,000,000: BB+ (sf)
Class M-2AI, $152,000,000: BB+ (sf)
Class M-2BR, $152,000,000: BB- (sf)
Class M-2BS, $152,000,000: BB- (sf)
Class M-2BT, $152,000,000: BB- (sf)
Class M-2BU, $152,000,000: BB- (sf)
Class M-2BI, $152,000,000: BB- (sf)
Class M-2RB, $152,000,000: BB- (sf)
Class M-2SB, $152,000,000: BB- (sf)
Class M-2TB, $152,000,000: BB- (sf)
Class M-2UB, $152,000,000: BB- (sf)
Class B-1H(i), $195,707,335: NR
Class B-2H(i), $177,915,759: NR
Class B-3H(i), $88,957,882: NR
(i)Reference tranche only and will not have corresponding notes.
Freddie Mac retains the risk of these tranches.
NR--Not rated.
GLS AUTO 2022-3: S&P Assigns BB- (sf) Rating on Class E Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to GLS Auto Receivables
Issuer Trust 2022-3's automobile receivables-backed notes series
2022-3.
The note issuance is an ABS securitization backed by subprime auto
loan receivables.
The ratings reflect S&P's view of:
-- The availability of approximately 54.86%, 47.05%, 37.15%,
27.77%, and 23.02% of credit support for the class A, B, C, D, and
E notes, respectively, based on stressed cash flow scenarios
(including excess spread). These credit support levels provide
coverage of approximately 3.25x, 2.75x, 2.15x, 1.55x, and 1.27x
S&P's 16.25%-17.25% expected cumulative net loss for the class A,
B, C, D, and E notes, respectively.
-- The expectation that under a moderate ('BBB') stress scenario
(1.60x S&P's expected loss level), all else being equal, its rating
movements are within the limits specified by our credit stability
criteria.
-- The notes' underlying credit enhancement in the form of
subordination, overcollateralization, a reserve account, and excess
spread for the class A, B, C, D, and E notes.
-- The transaction's sequential pay structure, which provides
non-amortizing credit enhancement for the senior classes of notes.
-- S&P's analysis of more than eight years of origination static
pool and securitization performance data on Global Lending Services
LLC's 18 Rule 144A securitizations.
-- The collateral characteristics of the subprime automobile loans
securitized in this transaction, including the representation in
the transaction documents that all contracts in the pool have made
a least one payment.
-- The timely interest and principal payments made to the notes
under S&P's stressed cash flow modeling scenarios, which its
believe are appropriate for the assigned ratings.
Ratings Assigned
GLS Auto Receivables Issuer Trust 2022-3
Class A-1, $34.75 million: A-1+ (sf)
Class A-2, $128.38 million: AAA (sf)
Class B, $41.17 million: AA (sf)
Class C, $40.99 million: A (sf)
Class D, $45.07 million: BBB- (sf)
Class E, $26.76 million: BB- (sf)
GS MORTGAGE 2022-PJ6: Moody's Assigns (P)B3 Rating to Cl. B-5 Debt
------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 43
classes of residential mortgage-backed securities (RMBS) issued by
GS Mortgage-Backed Securities 2022-PJ6, and sponsored by Goldman
Sachs Mortgage Company (GSMC).
The securities are backed by a pool of prime jumbo (99.8% by
balance) and GSE-eligible (0.2% by balance) residential mortgages
acquired by GSMC (98.7% by balance), MCLP Asset Company, Inc.
(MCLP) (0.7% by balance), and MTGLQ Investors, L.P. (MTGLQ) (0.6%
by balance), the mortgage loan sellers, from certain originators or
the aggregator, MAXEX Clearing LLC and serviced by NewRez LLC d/b/a
Shellpoint Mortgage Servicing and United Wholesale Mortgage, LLC.
The complete rating actions are as follows:
Issuer: GS Mortgage-Backed Securities Trust 2022-PJ6
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-1-X*, Assigned (P)Aa1 (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-3-X*, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aaa (sf)
Cl. A-4A, Assigned (P)Aaa (sf)
Cl. A-5, Assigned (P)Aaa (sf)
Cl. A-5-X*, Assigned (P)Aaa (sf)
Cl. A-6, Assigned (P)Aaa (sf)
Cl. A-7, Assigned (P)Aaa (sf)
Cl. A-7-X*, Assigned (P)Aaa (sf)
Cl. A-8, Assigned (P)Aaa (sf)
Cl. A-9, Assigned (P)Aaa (sf)
Cl. A-9-X*, Assigned (P)Aaa (sf)
Cl. A-10, Assigned (P)Aaa (sf)
Cl. A-11, Assigned (P)Aaa (sf)
Cl. A-11-X*, Assigned (P)Aaa (sf)
Cl. A-12, Assigned (P)Aaa (sf)
Cl. A-13, Assigned (P)Aaa (sf)
Cl. A-13-X*, Assigned (P)Aaa (sf)
Cl. A-14, Assigned (P)Aaa (sf)
Cl. A-15, Assigned (P)Aaa (sf)
Cl. A-15-X*, Assigned (P)Aaa (sf)
Cl. A-16, Assigned (P)Aaa (sf)
Cl. A-17, Assigned (P)Aaa (sf)
Cl. A-17-X*, Assigned (P)Aaa (sf)
Cl. A-18, Assigned (P)Aaa (sf)
Cl. A-19, Assigned (P)Aaa (sf)
Cl. A-19-X*, Assigned (P)Aaa (sf)
Cl. A-20, Assigned (P)Aaa (sf)
Cl. A-21, Assigned (P)Aaa (sf)
Cl. A-21-X*, Assigned (P)Aaa (sf)
Cl. A-22, Assigned (P)Aaa (sf)
Cl. A-23, Assigned (P)Aa1 (sf)
Cl. A-23-X*, Assigned (P)Aa1 (sf)
Cl. A-24, Assigned (P)Aa1 (sf)
Cl. A-X*, Assigned (P)Aa1 (sf)
Cl. B-1, Assigned (P)Aa3 (sf)
Cl. B-2, Assigned (P)A2 (sf)
Cl. B-3, Assigned (P)Baa3 (sf)
Cl. B-4, Assigned (P)Ba3 (sf)
Cl. B-5, Assigned (P)B3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
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
0.60%, in a baseline scenario-median is 0.39% and reaches 4.67% at
a stress level consistent with Moody's Aaa rating.
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 July 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.
JP MORGAN 2022-NXSS: Moody's Assigns (P)B2 Rating to 2 Tranches
---------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to nine
classes of CMBS securities, to be issued by J.P. Morgan Chase
Commercial Mortgage Securities Trust 2022-NXSS, Commercial Mortgage
Pass-Through Certificates, Series 2022-NXSS:
Cl. A, Assigned (P)Aaa (sf)
Cl. B, Assigned (P)Aa3 (sf)
Cl. C, Assigned (P)A3 (sf)
Cl. D, Assigned (P)Baa3 (sf)
Cl. E, Assigned (P)Ba3 (sf)
Cl. F, Assigned (P)B2 (sf)
Cl. HRR, Assigned (P)B2 (sf)
Cl. X-CP*, Assigned (P)A2 (sf)
Cl. X-EXT*, Assigned (P)A2 (sf)
* Reflects interest-only classes
RATINGS RATIONALE
The certificates are collateralized by the borrower's fee interests
in 29 self-storage properties located across 12 states. Moody's
ratings are based on the credit quality of the loans and the
strength of the securitization structure.
Moody's approach to rating this transaction involved the
application of both Moody's Large Loan and Single Asset/Single
Borrower Commercial Mortgage-Backed Securitization methodology and
Moody's IO Rating methodology. The rating approach for securities
backed by a single loan compares the credit risk inherent in the
underlying collateral with the credit protection offered by the
structure. The structure's credit enhancement is quantified by the
maximum deterioration in property value that the securities are
able to withstand under various stress scenarios without causing an
increase in the expected loss for various rating levels. In
assigning single borrower ratings, Moody's also consider a range of
qualitative issues as well as the transaction's structural and
legal aspects.
The portfolio contains 24,076 units offering 2,204,419 SF of
combined rentable area. The portfolio is geographically diverse as
the properties are located across 12 states and 16 markets. As of
July 31, 2022, the portfolio net rentable area was approximately
87.4% occupied. The top five states by TTM NOI are Florida (41.9%),
Georgia (15.4%), North Carolina (10.8%), New York (8.9%) and
Kentucky (4.5%). The top five market concentrations by TTM NOI are
Miami-Fort Lauderdale-Pompano Beach, FL (19.6%), Atlanta-Sandy
Springs-Alpharetta, GA (15.4%), Tampa-St. Petersburg-Clearwater, FL
(11.2%), New York-Newark-Jersey City, NY-NJ-PA (8.9%) and
Charlotte-Concord-Gastonia, NC-SC (8.1%). Trade areas for the
respective property markets are generally dense and affluent as the
weighted average population and median household income are
approximately 138,230 people and $70,700, respectively, within a
three-mile radius.
The portfolio is also granular at the property level, with no
individual property accounting for more than 5.8% of the TTM NOI or
5.3% of the mortgage ALA.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this
transaction, Moody's make various adjustments to the MLTV. Moody's
adjust the MLTV for each loan using a value that reflects
capitalization (cap) rates that are between Moody's sustainable cap
rates and market cap rates. Moody's also use an adjusted loan
balance that reflects each loan's amortization profile.
The Moody's first mortgage DSCR is 1.22x and Moody's first mortgage
stressed DSCR at a 9.25% constant is 0.73x. Moody's DSCR is based
on Moody's stabilized net cash flow.
Moody's LTV ratio for the first mortgage balance is 125.1% based on
Moody's Value. Adjusted Moody's LTV ratio for the first mortgage
balance is 108.7% based on Moody's Value using a cap rate adjusted
for the current interest rate environment.
Moody's also grades properties on a scale of 0 to 5 (best to worst)
and considers those grades when assessing the likelihood of debt
payment. The factors considered include asset quality, property
age, location, market, and historical performance. The pool's
weighted average property quality grade is 1.50.
Notable strengths of the transaction include: the asset quality,
historical operating performance, geographic diversity, demographic
profile, and experienced sponsorship and property management.
Notable concerns of the transaction include: the high Moody's
loan-to value (MLTV) ratio, floating-rate/interest-only mortgage
loan profile, cash-out refinancing, and certain credit negative
legal features.
Moody's rating approach considers sequential pay in connection with
a collateral release as a credit neutral benchmark. Although the
loans' release premium mitigates the risk of a ratings downgrade
due to adverse selection, the pro rata payment structure limits
ratings upgrade potential as mezzanine classes are prevented from
building enhancement. The benefit received from pooling through
cross-collateralization is also reduced.
The principal methodology used in rating all classes except
interest-only classes was "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-Backed Securitizations Methodology"
published in July 2022.
Moody's approach for single borrower and large loan multi-borrower
transactions evaluates credit enhancement levels based on an
aggregation of adjusted loan level proceeds derived from Moody's
loan level LTV ratios. Major adjustments to determining proceeds
include leverage, loan structure, and property type. These
aggregated proceeds are then further adjusted for any pooling
benefits associated with loan level diversity, other concentrations
and correlations.
Moody's analysis considers the following inputs to calculate the
proposed IO rating based on the published methodology: original and
current bond ratings and credit estimates; original and current
bond balances grossed up for losses for all bonds the IO(s)
reference(s) within the transaction; and IO type corresponding to
an IO type as defined in the published methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan pay downs or
amortization, an increase in the pool's share of defeasance or
overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall
performance of the pool, loan concentration, increased expected
losses from specially serviced and troubled loans or interest
shortfalls.
JPMCC MORTGAGE 2019-BROOK: Fitch Affirms B- Rating on Cl. F Certs
-----------------------------------------------------------------
Fitch Ratings has affirmed eight classes of JPMCC Mortgage
Securities Trust 2019-BROOK Commercial Mortgage Pass-Through
Certificates.
Debt Rating Prior
---- ------ -----
JPMCC 2019-BROOK
A 46591JAA4 LT AAAsf Affirmed AAAsf
B 46591JAG1 LT AA-sf Affirmed AA-sf
C 46591JAJ5 LT A-sf Affirmed A-sf
D 46591JAL0 LT BBB-sf Affirmed BBB-sf
E 46591JAN6 LT BB-sf Affirmed BB-sf
F 46591JAQ9 LT B-sf Affirmed B-sf
X-CP 46591JAC0 LT BBB-sf Affirmed BBB-sf
X-EXT 46591JAE6 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Property Release: Since Fitch's last rating action, one property,
300 Jubilee Drive, has been released from the portfolio resulting
in $24.8 million (6.5%) in paydown. The property is a 163,800-sf
industrial property located in Peabody, MA. Fitch's net cash flow
reflects in-place leases per the June 2022 rent roll, adjusted for
the released property. Fitch's sustainable net cash flow (NCF) for
the 26 properties remaining in the portfolio is $27.2 million and
Fitch's value of $319.7 million is based on an issuance cap rate of
8.50%.
Decline in Cash Flow and Occupancy: As of June 30, 2022, the
portfolio's occupancy declined to 74.2% from 78.4% at the last
review and 81.3% at issuance. The decline in occupancy is due to
several tenants vacating at lease expiration, in addition to
increased operating expenses primarily repairs & maintenance and
payroll & benefits. Given the granularity of the rent roll, the
decline in occupancy is not attributed to any one tenant, but from
several expiring leases. As a result of the declining occupancy,
the servicer reported NCF declined to $26.3 million as of the TTM
period ended June 2022 from $30.6 million as of YE 2021 and $32.6
million as of YE 2020.
Diverse Portfolio: The loan is secured by 25 office properties and
one industrial property located in six states. The three states
with the largest concentrations are Pennsylvania (13 properties;
30.3%), Texas (five properties; 27.3%) and Florida (three
properties; 15.9%). The portfolio consists of more than 400 unique
tenants. The largest portfolio tenant is 2.3% of NRA and the top
five tenants represent approximately 7.9% of NRA.
Fitch Leverage: The $357.7 million mortgage loan and non-trust
$14.0 million future advance loan have a Fitch debt service
coverage ratio (DSCR) and loan-to-value (LTV) of 0.77x and 116.3%,
respectively, and debt of $89 psf. The capital stack also includes
a $46.5 million mezzanine loan. The total debt Fitch DSCR and LTV
are 0.69x and 129.9%, respectively, and the total debt of $100
psf.
Sponsorship: The sponsors, Brookwood, acquired the portfolio
between 2007 and 2016 for a total purchase price of $430 million.
The sponsors have invested approximately $35 million since
purchasing the properties.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A significant and sustained decline in asset performance
and/or market occupancy;
-- A significant and sustained deterioration in property cash
flow.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Rating Outlook changes. However, for
some transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- A significant increase in asset occupancy and property cash
flow.
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.
LCM 39: Fitch to Rate Class E Debt 'BB-'
----------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
LCM 39 Ltd.
RATING ACTIONS
ENTITY / DEBT RATING
LCM 39 Ltd.
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
B LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D LT BBB-(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
F LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
LCM 39 Ltd. (the issuer) is an arbitrage cash flow collateralized
loan obligation (CLO) that will be managed by LCM EURO II LLC. Net
proceeds from the issuance of the secured and subordinated notes
will provide financing on a portfolio of approximately $500 million
of primarily first lien senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. Issuers rated in the 'B' rating category denote a
highly speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard U.S. CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
100.0% first-lien senior secured loans and has a weighted average
recovery assumption of 76.43%. Fitch Ratings stressed the
indicative portfolio by assuming a higher portfolio concentration
of assets with lower recovery prospects and further reduced
recovery assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 37.0% of the portfolio balance in aggregate while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
U.S. CLOs.
Portfolio Management (Neutral): The transaction has a 5.0-year
reinvestment period and reinvestment criteria similar to other U.S.
CLOs. Fitch's analysis was based on a stressed portfolio created by
making adjustments to the indicative portfolio to reflect
permissible concentration limits and collateral quality test
levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the notes were able to
withstand respective default rates and recovery assumptions
appropriate for their assigned ratings.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics. The results under these sensitivity scenarios are between
'BBB+sf' and 'AAAsf' for class A-1, between 'BBB+sf' and 'AAAsf'
for class A-2, between 'BB+sf' and 'AA+sf' for class B, between
'Bsf' and 'Asf' for class C, between less than 'B-sf' and 'BBB-sf'
for class D, and between less than 'B-sf' and 'B+sf' for class E.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrade scenarios are not applicable to the class A-1 and A-2
notes, as these notes are in the highest rating category of
'AAAsf'.
At other rating levels, variability in key model assumptions, such
as increases in recovery rates and decreases in default rates,
could result in an upgrade. Fitch evaluated the notes' sensitivity
to potential changes in such metrics. Results under these
sensitivity scenarios are 'AAAsf' for class B notes, between 'A+sf'
and 'AAsf' for class C notes, 'A+sf' for class D notes, and 'A-sf'
for class E notes.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
Securities and Markets Authority registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for the agency's rating analysis according to its applicable
rating methodologies indicates that it is adequately reliable.
MADISON PARK LIV: S&P Assigns Prelim BB-(sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Madison Park
Funding LIV Ltd.'s fixed- and floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Credit Suisse Asset Management LLC.
The preliminary ratings are based on information as of Sept. 20,
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 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.
Preliminary Ratings Assigned
Madison Park Funding LIV Ltd./Madison Park Funding LIV LLC
Class A-1, $240.00 million: AAA (sf)
Class A-2, $10.00 million: NR
Class B-1, $44.00 million: AA (sf)
Class B-2, $8.00 million: AA (sf)
Class C (deferrable), $20.00 million: A (sf)
Class D (deferrable), $24.00 million: BBB- (sf)
Class E (deferrable), $13.00 million: BB- (sf)
Subordinated notes, $38.10 million: NR
NR--Not rated.
MELLO WAREHOUSE 2021-1: Moody's Cuts Rating on Cl. G Bonds to Caa1
------------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of two bonds
from two US warehouse RMBS transactions issued by Mello Warehouse
Securitization Trust 2021. The transactions are securitizations
backed by revolving pools of newly originated first-lien, fixed
rate and adjustable rate, residential mortgage loans which are
eligible for purchase by Fannie Mae, Freddie Mac, or in accordance
with the criteria of Ginnie Mae for the guarantee of securities
backed by mortgage loans to be pooled in connection with the
issuance of Ginnie Mae securities.
Complete rating actions are as follows:
Issuer: Mello Warehouse Securitization Trust 2021-1
Cl. G, Downgraded to Caa1 (sf); previously on Jun 10, 2022
Downgraded to B3 (sf)
Issuer: Mello Warehouse Securitization Trust 2021-2
Cl. F, Downgraded to Caa1 (sf); previously on Jun 10, 2022
Downgraded to B3 (sf)
RATINGS RATIONALE
This action is driven by Moody's announcement on September 15,
2022, that it has downgraded the backed senior unsecured bond
rating of LD Holdings Group, LLC ("LD Holdings") to Caa1 from B3.
LD Holdings is the repo-guarantor in these transactions. The
ratings on the notes are the higher of (i) the repo guarantor's (LD
Holdings Group, LLC) rating and (ii) the rating of the notes based
on the credit quality of the mortgage loans backing the notes
(i.e., absent consideration of the repo guarantor). If the repo
guarantor does not satisfy its obligations under the guaranty, then
the ratings on the notes will only reflect the credit quality of
the mortgage loans backing the notes.
Each transaction is backed by a revolving warehouse facility
sponsored by loanDepot.com, LLC (loanDepot, the repo seller,
unrated). LD Holdings Group, LLC (LD Holdings, the repo guarantor,
senior unsecured rating Caa1) guarantees loanDepot.com's payment
obligations under the securitizations' master repurchase agreements
(MRA) during the three-year revolving periods, thus the pay-off of
the notes at the end of revolving periods. The transactions are
sponsored by loanDepot where loanDepot's obligations under the MRA
are guaranteed by LD Holdings.
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. Transaction performance also depends on the US
macro economy and housing market. An upgrade of LD Holdings Group,
LLC's rating could result in an upgrade of certain securities.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Expected losses rising above Moody's original
expectations as a result of a weaker collateral composition than
that in the adverse pool or financial distress of any of the
counterparties could also drive the ratings down. Transaction
performance also depends on the US macro economy and housing
market. Other reasons for worse-than-expected performance include
error on the part of transaction parties, inadequate transaction
governance and fraud. A downgrade of LD Holdings Group, LLC's
rating could result in a downgrade of certain securities.
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.
The methodologies used in these ratings were "Moody's Approach to
Rating US RMBS Using the MILAN Framework" published in July 2022.
MORGAN STANLEY 2016-BNK2: Fitch Affirms CCC Rating on 2 Tranches
----------------------------------------------------------------
Fitch Ratings has affirmed 15 classes of Morgan Stanley Capital I
Trust, commercial mortgage pass-through certificates, series
2016-BNK2 (MSC 2016-BNK2). Fitch has also revised the Rating
Outlooks on seven classes to Stable from Negative. The Outlooks
remain Negative on two classes.
Debt Rating
---- ------
MSC 2016-BNK2
A-3 61690YBT8 LT AAAsf Affirmed AAAsf
A-4 61690YBU5 LT AAAsf Affirmed AAAsf
A-S 61690YBX9 LT AAAsf Affirmed AAAsf
A-SB 61690YBS0 LT AAAsf Affirmed AAAsf
B 61690YBY7 LT AA-sf Affirmed AA-sf
C 61690YBZ4 LT A-sf Affirmed A-sf
D 61690YAC6 LT BBB-sf Affirmed BBB-sf
E 61690YAL6 LT B-sf Affirmed B-sf
E-1 61690YAE2 LT BB+sf Affirmed BB+sf
E-2 61690YAG7 LT B-sf Affirmed B-sf
EF 61690YAU6 LT CCCsf Affirmed CCCsf
F 61690YAS1 LT CCCsf Affirmed CCCsf
X-A 61690YBV3 LT AAAsf Affirmed AAAsf
X-B 61690YBW1 LT AA-sf Affirmed AA-sf
X-D 61690YAA0 LTB BB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Stable Performance and Loss Expectations: Fitch's base case loss
expectations have remained relatively stable since the prior rating
action. Fitch's current ratings incorporate a base case loss of
6.10%. The Outlook revisions to Stable from Negative on classes
A-S, B, X-B, C, D, X-D and E-1 reflect the overall stable to
improving performance of the pool since the pandemic, including
improving performance and servicer provided valuations for Marriott
Albany (6.4% of pool) and Conrad Indianapolis (3.4%).
The Negative Outlooks on classes E-2 and E reflect the performance
deterioration of Briarwood Mall (4.7%). Fitch increased the loss
recognition in the base case for this loan to account for the
likelihood of maturity default.
Five loans (25.6%), including two (9.8%) in special servicing, were
designated Fitch Loans of Concern (FLOCs).
Fitch Loans of Concern: The largest contributor to loss
expectations, Briarwood Mall (4.7%), is secured by 369,916 of a
978,034 sf super regional mall in Ann Arbor, MI, approximately 2.5
miles from the University of Michigan. The loan, which is sponsored
in a 50/50 joint venture (JV) between Simon Property Group and
General Motors Pension Trust, was designated a FLOC due to
performance concerns, including continued occupancy declines and
increasing refinance risks.
Net operating income (NOI) has continued to decline, with YE 2021
NOI 19% below YE 2020, 32% below YE 2019 and 41% below the issuer's
underwritten NOI. Servicer-reported NOI DSCR for this interest-only
loan was 2.06x at YE 2021, down from 2.54x at YE 2020, 3.03x at YE
2019 and 3.51x at issuance. The NOI declines are primarily due to
tenant departures, with collateral occupancy at 67% per the
December 2021 rent roll, down from 76% at YE 2020, 87% at YE 2019
and 95% at issuance. The remaining non-collateral anchors are
Macy's, JCPenney, and Von Maur after Sears closed in the fourth
quarter of 2018. In-line sales have also declined, reporting at
$482 psf ($387 psf excluding Apple) for the TTM ended March 2022
compared with $543 psf ($358) for the TTM ended July 2020.
Fitch's base case loss expectation of approximately 42% is based on
a 15% cap rate and 5% total haircut to YE 2021 NOI.
The second largest contributor to loss expectations, Harlem USA
(10.7%), is secured by a 245,849 sf multi-tenant anchored retail
property located in the Harlem neighborhood of Upper Manhattan. The
loan, which is sponsored by the Gotham Organization, was designated
a FLOC due to tenant vacancies and performance concerns.
Occupancy declined to 74% as of March 2022 from 80% at YE 2020 and
95% at YE 2019. Tenant vacancies include Modell's (previously 7.7%
NRA) and Chuck E. Cheese (previously 7.9% NRA) in 2020, plus
Buffalo Wild Wings (previously 4.3% NRA) in 2021. Cash flow was
also impacted in 2020 by a loan modification permitting the largest
tenant, AMC (27.7% NRA) to defer/reduce rent payments in 2020/2021
with repayment commencing in 2021. As a result, the YE 2020
servicer-reported NOI DSCR for this interest-only (IO) loan
declined to 1.43x at YE 2020 from 2.60x at YE 2019 and 2.97x at
issuance. NOI DSCR has rebounded slightly to 1.65x at YE 2021.
Fitch's base case loss expectation of approximately 13% is based on
an 8.75% cap rate and 25% total haircut to YE 2019 NOI. Fitch's
analysis gives credit for the strong property location and loan
remaining current since issuance.
Increasing Credit Enhancement (CE): As of the August 2022
distribution date, the pool's aggregate balance has been reduced by
12.3% to $636.4 million from $725.6 million at issuance. Seven
loans (34.5%) are full-term, IO, and nine loans (25.0%) had a
partial-term, IO component. All nine are in their amortization
periods. Three loans (1.9%) are fully defeased. Cumulative interest
shortfalls of $233,676 are currently affecting the non-rated
classes H-2 and RRI.
Pool Concentration: The top 10 loans comprise 62.2% of the pool.
Loan maturities are concentrated in 2026 (99.1%). Based on property
type, the largest concentrations are retail at 37.2%, office at
30.9% and hotel at 14.9%.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Downgrades of classes in the 'AAAsf' and 'AAsf' categories are not
likely due to sufficient CE and expected continued amortization but
could occur if interest shortfalls affect these classes. Classes in
the 'Asf' and 'BBBsf' categories would be downgraded should overall
pool losses increase significantly and/or one or more of the larger
FLOCs have an outsized loss, which would erode CE. Classes E-1,
E-2, E, F and EF would be downgraded with a greater certainty of
loss, or if loss expectations increase from further performance
deterioration on the FLOCs or additional loans become FLOCs and/or
transfer to special servicing.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrades of classes B, X-B, C, D and X-D may occur with significant
improvement in CE and/or defeasance but would be limited based on
sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'Asf' if there
is a likelihood for interest shortfalls. Upgrades of classes E-1,
E-2, E, F and EF are not likely until the later years of the
transaction but could occur if performance of the FLOCs improves
significantly and there is sufficient CE.
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.
MSBAM 2016-C32: Fitch Lowers Rating on Class F Debt to CCC
----------------------------------------------------------
Fitch Ratings has downgraded one class and affirmed 11 classes of
Morgan Stanley Bank of America Merrill Lynch Trust Series 2016-C32.
The Outlooks on classes D, E and X-D have been revised to Stable
from Negative.
RATING ACTIONS
ENTITY / DEBT RATING PRIOR
------------- ------ -----
MSBAM 2016-C32
A-3 61691GAR1 LT AAAsf Affirmed AAAsf
A-4 61691GAS9 LT AAAsf Affirmed AAAsf
A-S 61691GAV2 LT AAAsf Affirmed AAAsf
A-SB 61691GAQ3 LT AAAsf Affirmed AAAsf
B 61691GAW0 LT AA-sf Affirmed AA-sf
C 61691GAX8 LT A-sf Affirmed A-sf
D 61691GAC4 LT BBB-sf Affirmed BBB-sf
E 61691GAE0 LT BB-sf Affirmed BB-sf
F 61691GAG5 LT CCCsf Downgrade B-sf
KEY RATING DRIVERS
Improved Loss Expectations: The downgrade of class F reflects the
continued underperformance of the Wolfchase Galleria (6.1%) and
greater certainty of losses on this loan. Overall pool performance
and loss expectations have slightly improved since Fitch's last
rating action. The Outlook revisions reflect performance
stabilization of properties affected by the pandemic and generally
stable overall pool performance. There are three Fitch loans of
Concern (FLOCs). No loans are in special servicing.
Fitch's current ratings incorporate a base case loss of 5.3%.
Largest Contributor to Loss: The largest contributor to loss is the
Wolfchase Galleria loan (6.1%), which is secured by a 391,862-sf
interest in a regional mall located in Memphis, TN. The subject is
anchored by Macy's (non-collateral), Dillard's (non-collateral),
J.C. Penney (non-collateral) and Malco Theatres. The loan
transferred to special servicing in June 2020 due to a monetary
default, but was subsequently returned to the master servicer in
May 2021.
Collateral occupancy has remained in the high 70s for several years
after declining from 81% at YE 2019: 79% (March 2022), 78% (YE
2021) and 79% (YE 2020). Leases represented 22% of the NRA roll in
2022, followed by 13% in 2023 and 13% in 2024. The servicer
reported NOI DSCR was 1.24x at YE 2021 compared to 1.17x at YE
2020, 1.29x at YE 2019 and 1.35x at YE 2018. While the subject is
the dominant mall in its trade area, it is also located in a
secondary market with fewer demand drivers. Fitch requested a
recent sales report from the servicer, but has not received one to
date. Fitch's base case loss of 38% was based on a 15% cap rate
applied to the YE 2021 NOI.
The next largest contributor to loss is the Capitol Hill Apartment
Portfolio loan (1.7%), which is secured by a portfolio of
multifamily apartment buildings located in Seattle, WA. The
property tenants are a mix of students and non-students.
Performance declined in 2020 as colleges chose remote instruction
due to the pandemic. The servicer reported TTM June 2022 NOI DSCR
was 1.10x, which is the same as the YE 2020, down from 1.50x at YE
2019. Occupancy has improved to 93% as of June 2022 compared with
71% at YE 2020.
Slight Increase in Credit Enhancement: As of the July 2022
distribution date, the pool's aggregate balance has been paid down
by 6.7% to $846.6 million from $907 million at issuance. There have
been no realized losses to date and interest shortfalls are
currently affecting the non-rated class G. Nine loans (41%) are
full-term IO, and loans with partial interest-only periods are now
amortizing.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downgrades to classes A-1 through B are not likely due to
their position in the capital structure and the high CE;
however, downgrades to these classes may occur should interest
shortfalls occur;
-- Downgrades to class C would occur if loss expectations
increase significantly and/or if CE is eroded due to realized
losses;
-- Downgrades to the classes D and E would occur if the
performance of the FLOCs continue to decline and/or fail to
stabilize;
-- Further downgrades to class F would occur if the performance
of the Wolfchase Galleria continues to deteriorate or if
additional loans transfer to special servicing.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war, whereby growth is sharply lower amid higher
inflation and interest rates. Even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment-grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upgrades to classes B and C would likely occur with
significant improvement in credit enhancement (CE) and/or
defeasance; however, adverse selection and increased
concentrations, or the underperformance of the FLOCs, could
reverse this trend;
-- An upgrade to class D is considered unlikely and would be
limited based on sensitivity to concentrations or the
potential for future concentration. Classes would not be
upgraded above 'Asf' if there were likelihood for interest
shortfalls;
-- An upgrade to class E is not likely until the later years in a
transaction and only if the performance of the remaining pool
is stable and there is sufficient CE to the classes;
-- An upgrade to the distressed class F is not likely until the
later years in the transaction when there is greater certainty
whether Wolfchase Galleria will be able to refinance.
NEUBERGER BERMAN 51: Fitch Assigns BB+(EXP) Rating to Class E Debt
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Ratings Outlooks to
Neuberger Berman Loan Advisers CLO 51, Ltd.
RATING ACTIONS
ENTITY / DEBT RATING
------------- ------
Neuberger Berman Loan Advisers CLO 51, Ltd.
A-1 LT NR(EXP)sf Expected Rating
A-2 LT NR(EXP)sf Expected Rating
B LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D LT BBB-(EXP)sf Expected Rating
E LT BB+(EXP)sf Expected Rating
F LT NR(EXP)sf Expected Rating
Subordinated Notes LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Neuberger Berman Loan Advisers CLO 51, Ltd. is an arbitrage cash
flow collateralized loan obligation (CLO) that will be managed by
Neuberger Berman Loan Advisers II LLC. Net proceeds from the
issuance of secured and subordinated notes will provide financing
on a portfolio of approximately $570 million of primarily first
lien senior secured loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. Issuers rated in the 'B' rating category denote a
highly speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard U.S. CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
96.3% first-lien senior secured loans and has a weighted average
recovery assumption of 74.2%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39.0% of the portfolio balance in aggregate while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
U.S. CLOs.
Portfolio Management (Neutral): The transaction has a 5.1-year
reinvestment period and reinvestment criteria similar to other U.S.
CLOs. Fitch's analysis was based on a stressed portfolio created by
making adjustments to the indicative portfolio to reflect
permissible concentration limits and collateral quality test
levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the class B, C, D and E
notes can withstand default rates of up to 54.3%, 48.6%, 38.6% and
37.0%, respectfully, assuming portfolio recovery rates of 45.3%,
54.7%, 64.1% and 69.3% in Fitch's 'AAsf', 'Asf', 'BBB-sf' and
'BB+sf' scenarios, respectively.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are between
'BB+sf' and 'AA+sf' for class B, between 'Bsf' and 'A+sf' for class
C, between less than 'B-sf' and 'BBB-sf' for class D, and between
less than 'B-sf' and 'BBsf' for class E.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; results under these sensitivity scenarios are 'AAAsf' for
class B notes, between 'A+sf' and 'AAsf' for class C notes, between
'Asf' and 'A+sf' for class D notes, and 'BBB+sf' for class E
notes.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
NEUBERGER CLO 15: Fitch Assigns BB+ Rating to Class E Debt
----------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Neuberger Berman Loan Advisers CLO 51, Ltd.
RATING ACTIONS
ENTITY / DEBT RATING PRIOR
------------- ------ -----
Neuberger Berman Loan Advisers CLO 51, Ltd.
A-1 LT NRsf New Rating NR(EXP)sf
A-2 LT NRsf New Rating NR(EXP)sf
B LT AAsf New Rating AA(EXP)sf
C LT Asf New Rating A(EXP)sf
D LT BBB-sf New Rating BBB-(EXP)sf
E LT BB+sf New Rating BB+(EXP)sf
F LT NRsf New Rating NR(EXP)sf
Subordinated Notes LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Neuberger Berman Loan Advisers CLO 51, Ltd. is an arbitrage cash
flow collateralized loan obligation (CLO) that will be managed by
Neuberger Berman Loan Advisers II LLC. Net proceeds from the
issuance of secured and subordinated notes will provide financing
on a portfolio of approximately $570 million of primarily first
lien senior secured loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. Issuers rated in the 'B' rating category denote a
highly speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard U.S. CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
96.3% first-lien senior secured loans and has a weighted average
recovery assumption of 74.2%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39.0% of the portfolio balance in aggregate while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
U.S. CLOs.
Portfolio Management (Neutral): The transaction has a 5.1-year
reinvestment period and reinvestment criteria similar to other U.S.
CLOs. Fitch's analysis was based on a stressed portfolio created by
making adjustments to the indicative portfolio to reflect
permissible concentration limits and collateral quality test
levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the class B, C, D and E
notes can withstand default rates of up to 54.3%, 48.6%, 38.6% and
37.0%, respectfully, assuming portfolio recovery rates of 45.3%,
54.7%, 64.1% and 69.3% in Fitch's 'AAsf', 'Asf', 'BBB-sf' and
'BB+sf' scenarios, respectively.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are between
'BB+sf' and 'AA+sf' for class B, between 'Bsf' and 'A+sf' for class
C, between less than 'B-sf' and 'BBB-sf' for class D, and between
less than 'B-sf' and 'BBsf' for class E.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; results under these sensitivity scenarios are 'AAAsf' for
class B notes, between 'A+sf' and 'AAsf' for class C notes, between
'Asf' and 'A+sf' for class D notes, and 'BBB+sf' for class E
notes.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
PALMER SQUARE 2022-5: S&P Assigns Prelim BB-(sf) Rating on E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Palmer
Square CLO 2022-5 Ltd./Palmer Square CLO 2022-5 LLC 's floating-
and fixed-rate notes.
The note issuance is a CLO securitization backed primarily by
broadly syndicated speculative-grade (rated 'BB+' or lower) senior
secured term loans. The transaction is managed by Palmer Square
Europe Capital Management LLC, a subsidiary of Palmer Square
Capital Management LLC.
The preliminary ratings are based on information as of Sept. 16,
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 diversification of the collateral pool, which consists
primarily of broadly syndicated speculative-grade (rated 'BB+' and
lower) senior secured term loans.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Palmer Square CLO 2022-5 Ltd./Palmer Square CLO 2022-5 LLC
Class A, $315.00 million: AAA (sf)
Class B-1, $56.00 million: AA (sf)
Class B-2, $9.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $15.00 million: BB- (sf)
Subordinated notes, $40.50 million: Not rated
PRKCM 2022-AFC2: S&P Assigns B (sf) Rating on Class B-2 Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to PRKCM 2022-AFC2 Trust's
mortgage pass-through notes.
The note issuance is an RMBS transaction backed by first-lien,
fixed- and adjustable-rate, fully amortizing residential mortgage
loans to both prime and nonprime borrowers (some with interest-only
periods). The loans are secured by single-family residential
properties, planned-unit developments, condominiums, and two- to
four-family residential properties. The pool consists of 684
non-qualified mortgage (non-QM/ability-to-repay [ATR] compliant)
and ATR-exempt loans.
The ratings reflect S&P's view of:
-- The pool's collateral composition;
-- The transaction's credit enhancement, associated structural
mechanics, representation and warranty framework, and geographic
concentration;
-- The mortgage originator, AmWest Funding Corp.; 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%."
Ratings Assigned
PRKCM 2022-AFC2 Trust(i)
Class A-1, $204,824,000: AAA (sf)
Class A-2 $31,149,000: AA (sf)
Class A-3, $34,924,000: A (sf)
Class M-1, $15,098,000: BBB (sf)
Class B-1, $11,174,000: BB (sf)
Class B-2, $8,652,000: B (sf)
Class B-3, $8,810,148: Not rated
Class A-IO-S, Notional(ii): Not rated
Class XS, Notional(ii): Not rated
Class R, N/A: Not rated
(i)The ratings address the ultimate payment of interest and
principal.
(ii)The notional amount will equal the aggregate stated principal
balance of the mortgage loans as of the first day of the related
due period and is initially $314,631,148.
N/A--Not applicable.
RADNOR RE 2022-1: Moody's Assigns B1 Rating to Cl. M-1B Notes
-------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 2
classes of mortgage insurance-linked notes issued by Radnor Re
2022-1 Ltd.
The securities reference a pool of mortgage insurance policies
issued by Essent Guaranty, Inc., 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: Radnor Re 2022-1 Ltd.
CI. M-1A, Assigned Ba2 (sf)
CI. M-1B, Assigned B1 (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 3.51%, in a baseline
scenario-median is 3.10% and reaches 20.11% 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
July 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.
SANTANDER BANK 2022-B: Moody's Assigns (P)B2 Rating to Cl. F Notes
------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to the
Santander Bank Auto Credit-Linked Notes, Series 2022-B (SBCLN
2022-B) notes to be issued by Santander Bank, N.A. (SBNA).
SBCLN 2022-B is the second credit linked notes transaction issued
by SBNA in 2022 to transfer credit risk to noteholders through a
hypothetical tranched financial guaranty on a reference pool of
auto loans and first rated by Moody's.
The complete rating actions are as follows:
Issuer/Deal: Santander Bank, N.A./Santander Bank Auto Credit-Linked
Notes, Series 2022-B
Class A-2 Notes, Assigned (P)Aaa (sf)
Class B Notes, Assigned (P)Aa2 (sf)
Class C Notes, Assigned (P)A2 (sf)
Class D Notes, Assigned (P)Baa2 (sf)
Class E Notes, Assigned (P)Ba2 (sf)
Class F Notes, Assigned (P)B2 (sf)
RATINGS RATIONALE
The rated notes are fixed-rate obligations secured by a cash
collateral account. There is also a letter of credit in place to
cover up to five months of interest in case of a failure to pay by
Santander Bank, N.A. or as a result of a FDIC conservator or
receivership. This deal is unique in that the source of principal
payments for the notes will be a cash collateral account held by a
financial depository with a rating of A2 or P-1 by Moody's,
initially Citibank, N.A.. SBNA will pay principal in the unlikely
event that the cash collateral account does not have enough funds.
The transaction also benefits from a Letter of Credit provided by
a financial depository with a rating of A2 or P-1 by Moody's,
initially JPMorgan Chase Bank, N.A. As a result, the rated notes
are not capped by the issuer rating of Santander Bank, N.A.
(Baa1).
The credit risk exposure of the notes depends on the actual
realized losses incurred by the reference pool. This transaction
has a pro-rata structure, which is more beneficial to the
subordinate bondholders than the typical sequential-pay structure
for US auto loan transactions. However, the subordinate bondholders
will not receive any principal unless performance tests are
satisfied.
The ratings are based on the quality of the underlying collateral
and its expected performance, the strength of the capital
structure, and the experience and expertise of Santander Consumer
USA Inc. as the servicer.
Moody's median cumulative net loss expectation for the 2022-B
reference pool is 2.00% and a loss at a Aaa stress of 8.00%.
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
Santander Consumer USA Inc. to perform the servicing functions; and
current expectations for the macroeconomic environment during the
life of the transaction.
At closing, the Class A-2, B notes, Class C notes, Class D notes,
Class E notes and Class F notes benefit 12.00%, 8.50%, 6.50%,
4.80%, 4.05%, and 2.65% of hard credit enhancement, respectively.
Hard credit enhancement for the notes consists of subordination.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Auto Loan- and Lease-Backed ABS" published in
July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the Class B, Class C, Class D, Class E, and
Class F 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 realized losses
reduce available subordination. 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.
SLM STUDENT 2008-5: S&P Lowers Class B Notes Rating to B (sf)
-------------------------------------------------------------
S&P Global Ratings lowered its ratings to 'B-(sf)' on four classes
from SLM Student Loan Trust series 2008-8 and 2008-9. At the same
time, S&P affirmed its 'B (sf)' ratings on four classes from SLM
Student Loan Trust series 2008-2 and 2008-5.
Each series is a student loan ABS transaction backed by a pool of
student loans originated through the U.S. Department of Education's
(ED) Federal Family Education Loan Program (FFELP).
S&P said, "Our review considered the transactions' collateral
performance and liquidity position, credit enhancement, and capital
and payment structures. We also considered secondary credit
factors, such as credit stability, peer comparisons, and
issuer-specific analyses."
Rationale
S&P believes the collateral amortization's current pace is not
adequate to repay the senior notes by their respective legal final
maturity date, which could trigger an event of default under the
transactions' documents. The collateral pool factors range from
11.15% to 20.08% as of the transactions' most recent servicer
reports. The transactions have features that allow the servicer to
purchase up to an additional 2.00% or 10.00% of the initial
collateral pool (the additional collateral purchase), which can be
used to provide liquidity and lower the pool factor to below
10.00%. When the pool factor is below 10.00%, the collateral may be
sold to the servicer or through an auction (the clean-up call),
with the proceeds used to repay the notes.
The affirmations of the 'B' ratings on the senior classes for
series 2008-2 and 2008-5 reflect our expectation that the optional
clean-up call will be executed after the pool factors fall below
10.00% through collateral amortization (based on the average pace
over the last year) and the use of the optional additional
collateral purchase.
S&P said, "For the series 2008-8 and 2008-9, we downgraded the
senior class ratings to 'B-' to reflect that the classes cannot
withstand scenarios that are more stressful than the current
conditions to reach their call date. These classes depend on the
use of the optional additional collateral purchase, as well as
increases in the collateral amortization levels due to higher
levels of 30-plus-day delinquencies and guaranty payments.
Guarantee payments are increasing and there has been a large
increase in the portion of loans in 30-plus-day delinquencies,
which we believe may result in higher guarantee payments over the
remaining time to maturity of the class A notes. As an example, for
the 2008-8 transaction, the 30-plus-day delinquency percentage has
risen to 20.40% as of the July 2022 distribution date compared to
10.72% as of the July 2021 distribution date.
S&P has taken the same rating actions on the class B notes because
a default on the senior class at legal final raises uncertainty as
to the impact on the payments to the subordinate classes. The
occurrence of the event of default allows the noteholders and
trustees to have additional rights, which could allow for
prioritized uncapped fees or may impact the priority of payments to
the noteholders.
Over the past year, the ED has made changes to the federal student
loan programs that have positively impacted loans to borrowers in
public service and income-based repayment plans, which have led to
increases in prepayments as borrowers consolidate into the direct
loan program to take advantage of these options. These transactions
may benefit to the extent that they have borrowers that are
eligible for these programs.
In determining the ratings, S&P considered its criteria for
assigning 'CCC' and 'CC' ratings. The criteria states that:
-- For a security to be assigned a rating above 'B-', it must have
sufficient credit enhancement to withstand scenarios that are more
stressful than the current conditions.
-- To achieve a rating of 'B-', securities must have sufficient
credit enhancement to withstand a steady-state scenario where the
current level of stress shows little to no increase and collateral
performance remains steady.
Payment Structure And Credit Enhancement
Each transaction consists of one senior note and one subordinate
note, with coupons based on a spread above a LIBOR index. The
transactions utilize a payment mechanism that defines a principal
distribution amount to be distributed to the noteholders.
Generally, once the principal distribution amount is paid,
available funds can be used to pay subordinated amounts and
replenish the reserve account (if necessary and required), before
they are released out of the trust. The principal payment amount is
allocated sequentially between the class A and B notes. Credit
enhancement includes overcollateralization (parity), subordination
(for certain classes), a reserve account, and excess spread.
Parity is at or exceeds 100.00% for all classes. The reserve
account, which is measured as greater of 0.25% of the pool balance
and a nonamortizing fixed amount, grows as the notes amortize and
may be used to make payment on a note's legal final maturity date.
Collateral
The transactions primarily comprise seasoned Stafford loans that
are supported by an ED guarantee of at least 97.00% of a defaulted
loan's principal and interest. Loans that have been serviced
according to the FFELP guidelines are supported by this guarantee
and, therefore, net losses are expected to be minimal. As mentioned
above, 30-plus-day delinquencies have risen, which S&P believes
will result in higher principal payments to the notes over the life
of the transactions.
Liquidity
S&P said, "Our ratings address the receipt of timely interest and
principal payments by the legal final maturity dates. Over the past
two years, the note principal pay-down continued to decline. We
calculated a principal payment haircut using the average note
principal payment over the past 12 months, which indicates the
percentage decline a note can immediately withstand and still be
repaid by its legal final maturity date." A lower haircut indicates
that a note can withstand a smaller decline in its principal
payment amount than a higher haircut. A negative haircut implies
that a note will need to experience a sustained increase in
principal payments. This increase could occur due to higher loan
prepayments or defaults (which act as a prepayment due to the
government guarantee), or from a decrease in loans in income-based
repayment plans or other nonpaying statuses, such as in-school or
in-grace, deferment, and forbearance.
As of the transactions' most recent servicer reports, the principal
payment haircut calculations for the senior classes were negative.
The calculated haircuts for the subordinate classes are stronger
than those for the senior classes because the subordinated classes
have later maturity dates that allow the borrower to make more loan
payments before the each class' legal final maturity date. Because
the haircut to the senior class is negative, at the current rating
levels, the senior classes are reliant upon reaching and executing
the clean-up call.
S&P will continue to monitor the transactions' performance,
including the student loan receivables, the available credit
enhancement, and liquidity, and take ratings actions as we deem
appropriate.
Ratings Lowered
SLM Student Loan Trust 2008-8
Class A-4 to 'B-(sf)' from 'B(sf')
Class B to 'B-(sf)' from 'B(sf)'
SLM Student Loan Trust 2008-9
Class A to 'B-(sf)' from 'B(sf)'
Class B to 'B-(sf)' from 'B(sf)'
Ratings Affirmed
SLM Student Loan Trust 2008-2
Class A-3: B (sf)
Class B: B (sf)
SLM Student Loan Trust 2008-5
Class A-4: B (sf)
Class B: B (sf)
STRUCTURED ASSET 2007-AR1: Moody's Upgrades 2 Tranches to Caa1
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of two bonds
from one US residential mortgage backed transaction (RMBS), backed
by option ARM loans, issued by Structured Asset Mortgage
Investments II Trust 2007-AR1.
Complete rating actions are as follows:
Issuer: Structured Asset Mortgage Investments II Trust 2007-AR1
Cl. I-A-1, Upgraded to Caa1 (sf); previously on Dec 14, 2010
Downgraded to Caa3 (sf)
Cl. II-A-1, Upgraded to Caa1 (sf); previously on Dec 14, 2010
Downgraded to Caa2 (sf)
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's updated loss expectations on the underlying pools. The
rating upgrades are a result of the improving performance of the
related pools and/or an increase in credit enhancement available to
the bonds.
In light of the current macroeconomic environment, Moody's revised
loss expectations based on forecast uncertainties with regard to
the COVID-19 pandemic. Specifically, Moody's have observed an
increase in delinquencies, payment forbearance, and payment
deferrals since the start of pandemic, which could result in higher
realized losses. Moody's rating actions also take into
consideration the buildup in credit enhancement of the bonds,
especially in an environment of elevated prepayment rates, which
has helped offset the impact of the increase in expected losses
spurred by the pandemic.
Moody's estimated the proportion of loans granted payment relief in
a pool based on a review of loan level cashflows. In Moody's
analysis, Moody's considered a loan to be enrolled in a payment
relief program if (1) the loan was not liquidated but took a loss
in the reporting period (to account for loans with monthly
deferrals that were reported as current), or (2) the actual balance
of the loan increased in the reporting period, or (3) the actual
balance of the loan remained unchanged in the last and current
reporting period, excluding interest-only loans and pay ahead
loans. Based on Moody's analysis, the proportion of borrowers that
are currently enrolled in payment relief plans varied greatly,
ranging between approximately 2% and 11% among RMBS transactions
issued before 2009. In Moody's analysis, Moody's assume these loans
to experience lifetime default rates that are 50% higher than
default rates on the performing loans.
In addition, for borrowers unable to make up missed payments
through a short-term repayment plan, servicers will generally defer
the forborne amount as a non-interest-bearing balance, due at
maturity of the loan as a balloon payment. Moody's analysis
considered the impact of six months of scheduled principal payments
on the loans enrolled in payment relief programs being passed to
the trust as a loss. The magnitude of this loss will depend on the
proportion of the borrowers in the pool subject to principal
deferral and the number of months of such deferral. The treatment
of deferred principal as a loss is credit negative for junior
bonds, which could incur write-downs on bonds when missed payments
are deferred.
Principal Methodologies
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in July 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 of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
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 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.
TOWD POINT 2022-4: Fitch Assigns 'B-(EXP)' Rating on Class B2 Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to Towd Point Mortgage
Trust 2022-4 (TPMT 2022-4).
Debt Rating
---- ------
TPMT 2022-4
A1 LT AAA(EXP)sf Expected Rating
A2 LT AA-(EXP)sf Expected Rating
M1 LT A-(EXP)sf Expected Rating
M2 LT BBB-(EXP)sf Expected Rating
B1 LT BB-(EXP)sf Expected Rating
B2 LT B-(EXP)sf Expected Rating
B3 LT NR(EXP)sf Expected Rating
B4 LT NR(EXP)sf Expected Rating
B5 LT NR(EXP)sf Expected Rating
A1A LT AAA(EXP)sf Expected Rating
A1AX LT AAA(EXP)sf Expected Rating
A1B LT AAA(EXP)sf Expected Rating
A1BX LT AAA(EXP)sf Expected Rating
A2A LT AA-(EXP)sf Expected Rating
A2AX LT AA-(EXP)sf Expected Rating
A2B LT AA-(EXP)sf Expected Rating
A2BX LT AA-(EXP)sf Expected Rating
A2C LT AA-(EXP)sf Expected Rating
A2CX LT AA-(EXP)sf Expected Rating
M1A LT A-(EXP)sf Expected Rating
M1AX LT A-(EXP)sf Expected Rating
M1B LT A-(EXP)sf Expected Rating
M1BX LT A-(EXP)sf Expected Rating
M1C LT A-(EXP)sf Expected Rating
M1CX LT A-(EXP)sf Expected Rating
M2A LT BBB-(EXP)sf Expected Rating
M2AX LT BBB-(EXP)sf Expected Rating
M2B LT BBB-(EXP)sf Expected Rating
M2BX LT BBB-(EXP)sf Expected Rating
M2C LT BBB-(EXP)sf Expected Rating
M2CX LT BBB-(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch expects to rate the residential mortgage-backed notes to be
issued by Towd Point Mortgage Trust 2022-4 (TPMT 2022-4) as
indicated above. The transaction is expected to close on Sept. 27,
2022. The notes are supported by one collateral group that consists
of 6,129 seasoned performing loans (SPLs) and re-performing loans
(RPLs) with a total balance of approximately $1.03 billion,
including $15.18 million, or 1.5%, of the aggregate pool balance in
non-interest-bearing deferred principal amounts, as of the
statistical calculation date.
Distributions of principal and interest (P&I) and loss allocations
are based on a traditional senior-subordinate sequential structure.
The sequential-pay structure locks out principal to the
subordinated notes until the most senior notes outstanding are paid
in full. The servicers will not advance delinquent (DQ) monthly
payments of P&I.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 11.5% above a long-term sustainable level (versus
11.0% on a national level as of August 2022, up 1.8% since last
quarter). Underlying fundamentals are not keeping pace with the
growth in prices, which is the result of a supply/demand imbalance
driven by low inventory, low mortgage rates and new buyers entering
the market. These trends have led to significant home price
increases over the past year, with home prices rising 19.8% yoy
nationally as of May 2022.
SPL and RPL Collateral (Mixed): The collateral pool consists
primarily of peak-vintage SPLs and RPLs, as defined by Fitch. Of
the pool, approximately 2.1% were DQ as of the statistical
calculation date. Approximately 81.6% have had clean pay histories
for 24 months or more (defined by Fitch as "clean current"), 0.8%
are newly originated loans with clean pay histories of at least 12
months, and the remaining 15.5% of the loans are current but have
had recent delinquencies or incomplete 24-month pay strings. Fitch
applied a probability of default (PD) credit to account for the
pool's large concentration of clean current loans. Roughly 57.5%
have been modified.
Low Leverage (Positive): The pool consists of loans with a weighted
average (WA) original combined loan to value (CLTV) ratio of 82.5%.
All loans received updated property values, translating to a WA
current MtM CLTV ratio of 49.1% and sustainable LTV (sLTV) of 55.7%
at the base case. This reflects low leverage borrowers and is
stronger than in recently rated SPL/RPL transactions.
Sequential-Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure, whereby the subordinate
classes do not receive principal until the senior classes are
repaid in full. Losses are allocated in reverse-sequential order.
Furthermore, the provision to re-allocate principal to pay interest
on the 'AAAsf' and 'AA-sf' rated notes prior to other principal
distributions is highly supportive of timely interest payments to
that class in the absence of servicer advancing.
No Servicer P&I Advances (Mixed): The servicers will not advance DQ
monthly payments of P&I, which reduces liquidity to the trust. P&I
advances made on behalf of loans that become DQ and eventually
liquidate reduce liquidation proceeds to the trust. Due to the lack
of P&I advancing, the loan-level loss severity (LS) is less for
this transaction than for those where the servicer is obligated to
advance P&I. Structural provisions and cash flow priorities,
together with increased subordination, provide for timely payments
of interest to the 'AAAsf' and 'AA-sf' rated classes.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
This defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model-projected 42.5% at 'AAAsf'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
CRITERIA VARIATION
Fitch's analysis incorporated four criteria variations from the
"U.S. RMBS Rating Criteria."
The first variation is that a tax and title review was not
completed on 100% of seasoned first lien loans. Approximately 0.4%
by loan count (22 loans) did not receive an updated tax and title
search. This was viewed as an immaterial amount relative to the
overall pool. FirstKey confirmed that the servicers are monitoring
the tax and title status as part of standard practice and that the
servicer will advance where deemed necessary to keep the first lien
position. Additionally, for all loans, FirstKey confirmed it will
complete a clear chain of assignment within 18 months of the
transaction or will repurchase the loan. Given this, the variation
had no rating impact.
The second variation is that a due diligence compliance and data
integrity review was not completed on 100% of RPLs and SPLs from
unknown originators. Approximately 50.3% by loan count (44.1% by
UPB) did not receive a due diligence compliance and data integrity
review. The transferring trusts and securitization trust seller
originally acquired the mortgage loans from various unrelated
third-party sellers. The due diligence results from the loans
reviewed were extrapolated to the loans that did not receive a due
diligence review based on the expected losses of the loans that did
receive a due diligence review. The loss expectations were
increased by approximately 18bps at 'AAAsf' to account for this.
This variation had no rating impact.
The third variation relates to the pay history review. Fitch
expects a pay history review to be completed on 100% of RPLs and
expects the review to reflect the past 24 months. The pay history
sample completed on SPLs meets Fitch's criteria. A pay history
review either was not completed, was outdated or a pay string was
not received from the servicer for approximately 35.0% of the RPLs
by loan count (29.2% by UPB). Of the RPLs, 859 loans received a
review. For the loans where a pay history review was conducted, the
results verified what was provided on the loan tape. Additionally,
the pay strings on the loan tape were provided to FirstKey by the
current servicer. This variation had no rating impact.
The fourth variation is that a full new origination due diligence
review, including credit, compliance and property valuation, was
not completed on loans seasoned at less than 24 months.
Approximately 2.1% by UPB (67 loans) are seasoned at less than 24
months as of the statistical calculation date and are considered
newly originated. These loans received only a compliance review.
While a full credit review was not completed, the ATR status was
confirmed and updated values were provided in lieu of a valuation
review. Additionally, although these loans did not receive credit
and valuation grades, credit exceptions and property exceptions
were noted and provided by AMC Diligence, LLC (AMC). This variation
had no rating impact.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC, Clayton and Westcor. A third party due diligence
was performed on approximately 49.7% (by loan count) of the pool by
AMC and Clayton, both of which are assessed as 'Acceptable'
third-party review (TPR) firms by Fitch. The scope primarily
focused on regulatory compliance review to ensure loans were
originated in accordance with predatory lending regulations. The
results of the review indicated low operational risk with an 5.5%
portion of the pool assigned final compliance grades of 'C' or
'D'.
Of the loans graded 'C' or 'D', 1.9% by loan count (117 loans)
reflected missing final HUD-1 or estimated final HUD-1 documents
that are subject to testing for compliance with predatory lending
regulations. Fitch adjusted its loss expectation at the 'AAAsf'
stress by approximately 25 bps to reflect missing final HUD-1
files, modification agreements or assignment/endorsement and title
issues, as well as to address outstanding liens and taxes that
could take priority over the subject mortgage. Additionally, loss
multiples were extrapolated from the portion of loans provided due
diligence and applied at each rating category to estimate full
diligence review findings and adjustment.
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.
US CAPITAL II: Moody's Hikes Rating on 2 Tranches to 'Ba2'
----------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by US Capital Funding II LTD:
US$33,500,000 Class A-2 Floating Rate Senior Notes Due 2034
(current balance of $7,220,330), Upgraded to Aaa (sf); previously
on February 28, 2020 Upgraded to Aa2 (sf)
US$70,000,000 Class B-1 Floating Rate Senior Subordinate Notes Due
2034, Upgraded to Ba2 (sf); previously on July 6, 2017 Upgraded to
B1 (sf)
US$40,000,000 Class B-2 Fixed/Floating Rate Senior Subordinate
Notes Due 2034, Upgraded to Ba2 (sf); previously on July 6, 2017
Upgraded to B1 (sf)
US Capital Funding II LTD, issued in June 2004, is a collateralized
debt obligation (CDO) backed mainly by a portfolio of bank trust
preferred securities (TruPS).
RATINGS RATIONALE
The rating actions are primarily a result of the deleveraging of
the Class A-2 notes, an increase in the transaction's
over-collateralization (OC) ratios, and the improvement in the
credit quality of the underlying portfolio since September 2021.
The Class A-2 notes have paid down by approximately 74.1%% or $20.7
million since September 2021, using principal proceeds from the
redemption of the underlying assets and the diversion of excess
interest proceeds. Based on Moody's calculations, the OC ratios for
the Class A-2 and Class B notes have improved to 1828.2% and
112.6%, respectively, from September 2021 levels of 544.3% and
110.2%, respectively. The Class A-2 notes will continue to benefit
from the diversion of excess interest and the use of proceeds from
redemptions of any assets in the collateral pool.
The deal has also benefited from improvement in the credit quality
of the underlying portfolio. According to Moody's calculations, the
weighted average rating factor (WARF) improved to 546 from 573 in
September 2021.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, and weighted average recovery rate,
are based on its methodology and could differ from the trustee's
reported numbers. In its base case, Moody's analyzed the underlying
collateral pool as having a performing par (after treating
deferring securities as performing if they meet certain criteria)
of $132.0 million, defaulted/deferring par of $18.0 million, a
weighted average default probability of 4.72% (implying a WARF of
546), and a weighted average recovery rate upon default of 10%.
In addition to base case analysis, Moody's considered additional
scenarios where outcomes could diverge from the base case. The
additional scenario includes deteriorating credit quality of the
portfolio.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's
Approach to Rating TruPS CDOs" published in July 2021.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The portfolio consists primarily
of unrated assets whose default probability Moody's assesses
through credit scores derived using RiskCalc(TM) or credit
estimates. Because these are not public ratings, they are subject
to additional estimation uncertainty.
WELLS FARGO 2015-C31: Fitch Affirms CCCsf Rating on Class F Certs
-----------------------------------------------------------------
Fitch Ratings has affirmed 13 classes of Wells Fargo Commercial
Mortgage Trust, series 2015-C31, commercial mortgage pass-through
certificates. In addition, the Rating Outlooks for three classes
were revised to Stable from Negative.
Debt Rating Prior
---- ------ -----
WFCM 2015-C31
A-3 94989WAR8 LT AAAsf Affirmed AAAsf
A-4 94989WAS6 LT AAAsf Affirmed AAAsf
A-S 94989WAU1 LT AAAsf Affirmed AAAsf
A-SB 94989WAT4 LT AAAsf Affirmed AAAsf
B 94989WAY3 LT AA-sf Affirmed AA-sf
C 94989WAZ0 LT A-sf Affirmed A-sf
D 94989WBB2 LT BBB-sf Affirmed BBB-sf
E 94989WAD9 LT B-sf Affirmed B-sf
F 94989WAF4 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Improved Loss Expectations: The Outlook revisions to Stable from
Negative reflect improved loss expectations for the pool since the
prior rating action, primarily due to the defeasance of the 745
Atlantic Avenue loan, which had been the largest contributor to
overall pool expected losses; better than expected recoveries from
two previously specially serviced loans; and stabilizing
performance of loans impacted by the pandemic. Fitch's current
ratings incorporate a base case loss of 6.0%. Seventeen loans
(31.2% of the pool) are Fitch Loans of Concern (FLOCs), including
the second largest loan (6.9%), which is specially serviced, due to
declines in performance related to the pandemic, lower occupancy
and/or upcoming rollover concerns.
The largest contributor to overall loss expectations and largest
increase in loss since the prior rating action is the specially
serviced Sheraton Lincoln Harbor Hotel loan (6.9%), which is
secured by a 358-key full-service hotel in Weehawken NJ about 1/2
mile south of the Lincoln Tunnel. The property was built in 1991
and is the oldest hotel in its competitive set. The loan was
transferred to special servicing in January 2021 for imminent
default. The sponsor cooperated with a consensual foreclosure
action in March 2021, and a receiver was appointed in April 2021.
The 2021 tax appeal is pending response from the City of Weehawken,
and the 2022 tax appeal is in process. Per the special servicer,
the receiver has listed the property for sale, with marketing
commencing in June 2022 and expected offers to be received in
August. Fitch requested an update from the special servicer but did
not receive a response.
As of June 2021, the servicer-reported occupancy, ADR and RevPAR
were 58%, $130 and $80, respectively. Per the latest April 2021 STR
report provided to Fitch, property occupancy, ADR and RevPAR were
25.6%, $112 and $31, respectively, compared with 33.6%, $123 and
$41 for its competitive set. A more updated STR report was
requested but not received. Fitch's base case loss of 33% reflects
a stressed value per key of $183,101.
The second largest contributor to losses and next largest change in
loss since the prior rating action is the Patrick Henry Mall loan
(2.7%) ,which is secured by a 432,401-sf portion of a 716,558-sf
regional mall located in Newport News, VA. The largest collateral
tenant is JCPenney (19.7% of NRA), which renewed in 2020 for five
years through October 2025 with four renewal options remaining.
Other major tenants include Dick's Sporting Goods (11.6% NRA) and
Forever 21 (4.9% NRA). Macy's and Dillard's are non-collateral
anchors. The mall was 96.7% occupied and inline occupancy was 91.3%
as of June 2022. In-line sales for tenants occupying under 10,000
sf were $406 psf as of June 2020, compared with $426 psf as of YE
2019 and $405 psf at issuance. Recent sales were requested from the
master servicer but were not provided. Fitch's base case loss of
18% reflects a 15% cap rate and 5% stress to the YE 2021 NOI and
factors in a higher loss recognition on this loan to account for
refinancing concerns at its July 2025 maturity.
Improved Credit Enhancement; Increased Defeasance: As of August
2022, the pool has been reduced by 12.7% since issuance. Fourteen
loans (16.6%) are defeased, of which eight loans (12.9%) were
defeased since the prior rating action, including the largest loan,
745 Atlantic Avenue (8.1%). Eight loans (23.2%) are full-term,
interest only and 40 loans (48.2%) are partial-term interest-only.
Eighty-eight loans (99.6%) mature between July and November 2025
and one loan (0.4%) matures in 2026.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
S
Downgrades would be triggered by an increase in pool-level losses
from underperforming or specially serviced loans. Downgrades to the
classes rated 'AAAsf' and 'AA-sf' are not likely due to the
increasing CE and improving performance of the pool but may occur
should interest shortfalls affect these classes. Downgrades to the
classes rated 'A-sf' and 'BBB-sf' would occur should performance of
the FLOCs continue to decline and/or further loans transfer to
special servicing. Classes E and F could be downgraded should
losses become more certain or be realized.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrades would occur with stable to improved asset performance,
coupled with additional paydown and/or defeasance. Upgrades to the
'AA-sf' and 'A-sf' rated classes could occur with significant
improvement in CE and/or defeasance and with the stabilization of
properties impacted from the pandemic.
An upgrade of the 'BBB-sf' rated classes would be limited based on
the sensitivity to concentrations or the potential for future
concentrations. Classes would not be upgraded above 'Asf' if there
were a likelihood of interest shortfalls.
Upgrades to the 'B-sf' and 'CCCsf' rated classes are not likely
until the later years in the transaction and only if the
performance of the remaining pool is stable and/or properties
vulnerable to the pandemic stabilize, and there is sufficient
credit enhancement.
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.
WELLS FARGO 2017-RC1: S&P Lowers Class E Certs Rating to 'B (sf)'
-----------------------------------------------------------------
S&P Global Ratings lowered its ratings on four classes of
commercial mortgage pass-through certificates from Wells Fargo
Commercial Mortgage Trust 2017-RC1, a U.S. CMBS transaction. At the
same time, S&P affirmed its ratings on 10 other classes from the
same transaction.
Rating Actions
S&P said, "The downgrades on classes E and F reflect credit support
erosion that we anticipate will occur upon the eventual resolution
of the Hyatt Place Hotel Portfolio loan ($52.3 million, 10.3% of
the pool trust balance), the largest loan in the pool and sole loan
with the special servicer. The downgrade of class F to 'CCC (sf)'
further reflects our view that the risk of default and loss on the
class is elevated upon the eventual resolution of the specially
serviced loan due to current market conditions.
"The affirmations on classes A-3, A-4, A-SB, A-S, and D reflect our
view that the current ratings are in line with the model-indicated
ratings. For classes B and C, while the model-indicated ratings
were higher than the classes' respective current rating levels, we
affirmed the ratings primarily in consideration of the pool's
exposure to the specially serviced Hyatt Place Hotel Portfolio
loan.
"We will continue to monitor the transaction's performance,
specifically any developments around the watchlist loans and the
resolution of the specially serviced loan. To the extent future
developments differ meaningfully from our underlying assumptions,
we will take further rating actions as we deem necessary.
"We affirmed our ratings on the class X-A, X-B, and X-D
interest-only (IO) certificates and lowered our ratings on the
class X-E and X-F IO certificates based on our criteria for rating
IO securities, which states that the ratings on the IO securities
would not be higher than that of the lowest-rated reference class.
The notional amount on class X-A references classes A-1, A-2, A-3,
A-4, and A-SB, while class X-B references classes A-S, B, and C,
class X-D references class D, class X-E references class E, and
class X-F references class F."
Transaction Summary
As of the Aug. 17, 2022, trustee remittance report, the collateral
pool balance was $507.9 million, which is 81.3% of the pool balance
at issuance. The pool currently includes 55 loans, down from 60
loans at issuance. As of the August 2022 remittance report, one
loan ($52.3 million, 10.3%) is with the special servicer, six
($60.4 million, 11.9%) are defeased, and 12 ($70.3 million, 13.8%)
are on the master servicer's watchlist.
S&P said, "Excluding the five defeased loans and using adjusted
servicer-reported numbers, we calculated a 2.11x S&P Global Ratings
weighted average debt service coverage (DSC) and 80.1% S&P Global
Ratings weighted average loan-to-value (LTV) ratio using a 7.80%
S&P Global Ratings weighted average capitalization rate. The top 10
nondefeased loans have an aggregate outstanding pool trust balance
of $261.5 million (51.5%). Using adjusted servicer-reported
numbers, we calculated an S&P Global Ratings weighted average DSC
and LTV ratio of 1.79x and 89.2%, respectively, for the top 10
nondefeased loans."
Loan Details
Hyatt Place Portfolio loan (10.3% of the pooled trust balance)
This is the largest loan in the pool. The loan has a current
balance of $52.3 million and a total reported exposure of $63.3
million. The loan, which has a reported foreclosure in progress
payment status, is IO for the initial 24 months and then amortizes
on a 30-year schedule, pays fixed interest rate of 5.44% per annum,
and matures on Feb. 6, 2027. The loan is secured by the borrower's
fee simple interest in six limited-service hotels totaling 754
guestrooms built between 1995 and 1997 in six U.S. cities:
Greenville, S.C.; Roanoke, Va.; Topeka, Kan.; Alpharetta, Ga.;
Charlotte, N.C.; and Dallas.
The loan transferred to special servicing in June 2020 due to
payment default. According to the special servicer's commentary, a
receiver, which was appointed in early 2022, began marketing the
lodging portfolio for sale in March 2022. The special servicer
indicated that the portfolio is under contract for $55.0 million
and is expected to close by the end of September 2022. The
portfolio was last appraised for $58.1 million in September 2021.
Using gross proceeds of $51.6 million, S&P expects a loss severity
of 32.1% on the current trust balance upon the eventual resolution
of the loan.
The reported DSC and occupancy as of March 31, 2022, were 0.35x and
54.0%, respectively. The reported occupancy and NCF have fluctuated
and declined over time: 80.0% and $7.0 million, respectively, in
2017, 82.0% and $6.0 million in 2018, 72.0% and $3.5 million in
2019, 53.0% and no reported financials for full-year 2020, and
54.0% and $1.3 million for the 12-months ended March 31, 2022.
S&P will continue to monitor the eventual resolution of the loan
and adjust its analysis as future developments may warrant.
Losses
To date, the transaction has not experienced any principal losses.
S&P expects losses to reach approximately 2.7% of the original pool
trust balance in the near term upon the eventual resolution of the
Hyatt Place Portfolio specially serviced loan.
Ratings Lowered
Wells Fargo Commercial Mortgage Trust 2017-RC1
Class E: to 'B (sf)' from 'B+ (sf)'
Class F: to 'CCC (sf)' from 'B- (sf)'
Class X-E: to 'B (sf)' from 'B+ (sf)'
Class X-F: to 'CCC (sf)' from 'B- (sf)'
Ratings Affirmed
Wells Fargo Commercial Mortgage Trust 2017-RC1
Class A-3: AAA (sf)
Class A-4: AAA (sf)
Class A-SB: AAA (sf)
Class A-S: AAA (sf)
Class B: AA (sf)
Class C: A (sf)
Class D: BBB- (sf)
Class X-A: AAA (sf)
Class X-B: A (sf)
Class X-D: BBB- (sf)
[*] Moody's Takes Action on $162MM of US RMBS Issued 2003-2007
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 11 bonds and
downgraded the ratings of 4 bonds from 6 US residential mortgage
backed transactions (RMBS), backed by Alt-A, subprime, and prime
jumbo mortgages issued by multiple issuers.
Complete rating actions are as follows:
Issuer: CWABS Asset-Backed Certificates Trust 2006-19
Cl. 1-A, Upgraded to A1 (sf); previously on Jan 15, 2019 Upgraded
to A3 (sf)
Cl. 2-A-3, Upgraded to Ba3 (sf); previously on Jun 4, 2018 Upgraded
to B2 (sf)
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2004-22CB
Cl. 1-A-1, Upgraded to Baa2 (sf); previously on Sep 11, 2019
Upgraded to Ba1 (sf)
Issuer: Global Mortgage Securitization 2005-A Ltd
Cl. A1, Downgraded to Ba1 (sf); previously on Jun 10, 2019 Upgraded
to Baa3 (sf)
Cl. A2, Downgraded to Ba1 (sf); previously on Jun 10, 2019 Upgraded
to Baa3 (sf)
Cl. A3, Downgraded to Ba1 (sf); previously on Jun 10, 2019 Upgraded
to Baa3 (sf)
Cl. X-A1*, Downgraded to Ba1 (sf); previously on Jun 10, 2019
Upgraded to Baa3 (sf)
Issuer: Impac Secured Assets Corp. Mortgage Pass-Through
Certificates, Series 2003-3
Cl. A-1, Upgraded to A3 (sf); previously on Aug 25, 2014 Downgraded
to Baa2 (sf)
Cl. B, Upgraded to Caa2 (sf); previously on Mar 30, 2011 Downgraded
to Ca (sf)
Cl. M-1, Upgraded to Ba2 (sf); previously on Aug 25, 2014
Downgraded to B1 (sf)
Cl. M-2, Upgraded to B3 (sf); previously on Jul 12, 2012 Downgraded
to Caa2 (sf)
Issuer: Soundview Home Loan Trust 2007-OPT3
Cl. II-A-3, Upgraded to Ba2 (sf); previously on May 9, 2017
Upgraded to B1 (sf)
Cl. II-A-4, Upgraded to Ba2 (sf); previously on May 9, 2017
Upgraded to B1 (sf)
Issuer: Thornburg Mortgage Securities Trust 2003-4
Cl. A-1, Upgraded to A2 (sf); previously on Nov 22, 2019 Upgraded
to Baa1 (sf)
Cl. A-2, Upgraded to Baa3 (sf); previously on Nov 22, 2019 Upgraded
to Ba2 (sf)
*Reflects Interest Only Classes
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's updated loss expectations on the underlying pools. The
rating upgrades are a result of the improving performance of the
related pools and/or an increase in credit enhancement available to
the bonds. The rating downgrades are primarily due to a
deterioration in collateral performance and/or decline in credit
enhancement available to the bonds.
In light of the current macroeconomic environment, Moody's revised
loss expectations based on forecast uncertainties with regard to
the COVID-19 pandemic. Specifically, Moody's have observed an
increase in delinquencies, payment forbearance, and payment
deferrals since the start of pandemic, which could result in higher
realized losses. Moody's rating actions also take into
consideration the buildup in credit enhancement of the bonds,
especially in an environment of elevated prepayment rates, which
has helped offset the impact of the increase in expected losses
spurred by the pandemic.
Moody's estimated the proportion of loans granted payment relief in
a pool based on a review of loan level cashflows. In Moody's
analysis, Moody's considered a loan to be enrolled in a payment
relief program if (1) the loan was not liquidated but took a loss
in the reporting period (to account for loans with monthly
deferrals that were reported as current), or (2) the actual balance
of the loan increased in the reporting period, or (3) the actual
balance of the loan remained unchanged in the last and current
reporting period, excluding interest-only loans and pay ahead
loans. Based on Moody's analysis, the proportion of borrowers that
are currently enrolled in payment relief plans varied greatly,
ranging between approximately 2% and 11% among RMBS transactions
issued before 2009. In Moody's analysis, Moody's assume these loans
to experience lifetime default rates that are 50% higher than
default rates on the performing loans.
In addition, for borrowers unable to make up missed payments
through a short-term repayment plan, servicers will generally defer
the forborne amount as a non-interest-bearing balance, due at
maturity of the loan as a balloon payment. Moody's analysis
considered the impact of six months of scheduled principal payments
on the loans enrolled in payment relief programs being passed to
the trust as a loss. The magnitude of this loss will depend on the
proportion of the borrowers in the pool subject to principal
deferral and the number of months of such deferral. The treatment
of deferred principal as a loss is credit negative for junior
bonds, which could incur write-downs on bonds when missed payments
are deferred.
Principal Methodologies
The principal methodology used in rating all deals except
interest-only classes was "US RMBS Surveillance Methodology"
published in July 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 of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
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 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.
*********
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