/raid1/www/Hosts/bankrupt/TCR_Public/230205.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, February 5, 2023, Vol. 27, No. 35
Headlines
ACM AUTO 2023-1: S&P Assigns BB (sf) Rating on Class D Notes
ANTARES CLO 2023-1: S&P Assigns Prelim BB- (sf) Rating on E Notes
BENCHMARK 2020-B16: Fitch Affirms 'B-sf' Rating on Two Tranches
BRAVO RESIDENTIAL 2023-NQM1: Fitch Gives 'Bsf' Rating on B-2 Notes
COMM 2012-CCRE4: Moody's Lowers Rating on 2 Tranches to Caa2
COMM 2014-FL5: S&P Lowers Class KH2 Certs Rating to 'D'
CPT ASSET-BACKED 2004-EC1: S&P Cuts M-1 Certs Rating to 'B(sf)'
FANNIE MAE 2023-R02: S&P Assigns Prelim 'B-' Rating on 1B-2 Notes
FORTRESS CREDIT XXI: S&P Assigns Prelim 'BB-' Rating on Cl. E Debt
GCAT 2023-NQM2: S&P Assigns Prelim B+ (sf) Rating on Cl. B-2 Certs
GS MORTGAGE 2016-GS2: Fitch Hikes Rating on Class F Notes to 'Bsf'
GUGGENHEIM CLO 2022-2: Fitch Assigns 'BB-sf' Rating on Cl. E Notes
JP MORGAN 2012-CIBX: Moody's Lowers Rating on Cl. X-B Certs to C
JPMCC COMMERCIAL 2017-JP5: Fitch Affirms CCCsf Rating on E-RR Notes
OCTANE RECEIVABLES 2023-1: S&P Assigns Prelim BB Rating on E Notes
RBS COMMERCIAL 2013-SMV: S&P Lowers Cl. D Certs Rating to 'B (sf)'
SEQUOIA MORTGAGE 2023-1: Fitch Gives 'BBsf' Rating on Cl. B4 Certs
SILVER POINT 1: Fitch Assigns 'BB+sf' Rating on Class E Notes
SILVER POINT 1: Moody's Assigns B3 Rating to $250,000 Cl. F Notes
STACR 2019-HQA3: Fitch Assigns 'BB+sf' Rating on Two Tranches
TELOS CLO 2013-3: Moody's Cuts Rating on $24.1MM E-R Notes to Caa1
UBS-BARCLAYS 2012-C3: Moody's Cuts Rating on Cl. X-B Certs to Caa1
UNITED AUTO 2023-1: S&P Assigns BB (sf) Rating on Class E Notes
VERTICAL BRIDGE 2022-1: Fitch Affirms 'BB-sf' Rating on Cl. F Notes
WFRBS COMMERCIAL 2013-C12: Fitch Hikes Rating on Cl. F Certs to Bsf
[*] S&P Takes Various Actions on 33 Classes From Eight US RMBS Deal
[*] S&P Takes Various Actions on 68 Classes From 10 U.S. RMBS Deals
[*] S&P Takes Various Actions on 765 Classes From 19 US RMBS Deals
*********
ACM AUTO 2023-1: S&P Assigns BB (sf) Rating on Class D Notes
------------------------------------------------------------
S&P Global Ratings assigned its ratings to ACM Auto Trust 2023-1's
automobile receivables-backed notes.
The note issuance is an ABS securitization backed by subprime auto
loan receivables.
The ratings reflect S&P's view of:
-- The availability of approximately 62.63%, 54.36%, 43.40%, and
38.11% credit support (hard credit enhancement and haircut to
excess spread) for the class A, B, C, and D notes, respectively,
based on stressed cash flow scenarios. These credit support levels
provide at least 1.70x, 1.58x, 1.35x, and 1.25x coverage of S&P's
expected cumulative net loss of 30.00% for the class A, B, C, and D
notes, respectively.
-- The expectation that under a moderate ('BBB') stress scenario
(1.35x S&P's expected loss level), all else being equal, its 'A
(sf)', 'A- (sf)', 'BBB (sf)', and 'BB (sf)' ratings on the class A,
B, C, and D notes, respectively, are within its credit stability
limits.
-- The timely payment of interest and principal by the designated
legal final maturity dates under S&P's stressed cash flow modeling
scenarios, which it believes are appropriate for the assigned
ratings.
-- The collateral characteristics of the subprime automobile
loans, S&P's view of the credit risk of the collateral, and its
updated macroeconomic forecast and forward-looking view of the auto
finance sector.
-- S&P's operational risk assessment of America's Car Mart Inc. as
servicer, and our view of the company's underwriting and backup
servicing arrangement with Wilmington Trust N.A. The operational
risk assessment constrains the rating at 'A (sf)'.
-- The series' bank accounts at Wilmington Trust N.A., which do
not constrain the ratings.
-- S&P's assessment of the transaction's potential exposure to
environmental, social, and governance credit factors that are in
line with our sector benchmark.
-- The transaction's payment and legal structures.
Ratings Assigned
ACM Auto Trust 2023-1
Class A, $230.39 million: A (sf)
Class B, $46.80 million: A- (sf)
Class C, $74.10 million: BBB (sf)
Class D, $48.90 million: BB (sf)
ANTARES CLO 2023-1: S&P Assigns Prelim BB- (sf) Rating on E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Antares CLO
2023-1 Ltd./Antares CLO 2023-1 LLC's floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by middle market speculative-grade
(rated 'BB+' or lower) senior secured term loans. The transaction
is managed by managed by Antares Capital Advisers LLC, a wholly
owned subsidiary of Antares Capital L.P.
The preliminary ratings are based on information as of Jan. 27,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Antares CLO 2023-1 Ltd./Antares CLO 2023-1 LLC
Class A-1, $290.00 million: AAA (sf)
Class A-2, $15.00 million: AAA (sf)
Class B, $42.50 million: AA (sf)
Class C (deferrable), $32.50 million: A (sf)
Class D (deferrable), $27.50 million: BBB- (sf)
Class E (deferrable), $27.50 million: BB- (sf)
Subordinated notes, $57.86 million: Not rated
BENCHMARK 2020-B16: Fitch Affirms 'B-sf' Rating on Two Tranches
---------------------------------------------------------------
Fitch Ratings has affirmed 18 classes of BENCHMARK 2020-B16
Mortgage Trust commercial mortgage pass-through certificates,
series 2020-B16 (BMARK 2020-B16).
Entity/Debt Rating Prior
----------- ------ -----
BMARK 2020-B16
A-1 08161NAA5 LT AAAsf Affirmed AAAsf
A-2 08161NAB3 LT AAAsf Affirmed AAAsf
A-3 08161NAC1 LT AAAsf Affirmed AAAsf
A-4 08161NAE7 LT AAAsf Affirmed AAAsf
A-5 08161NAF4 LT AAAsf Affirmed AAAsf
A-M 08161NAH0 LT AAAsf Affirmed AAAsf
A-SB 08161NAD9 LT AAAsf Affirmed AAAsf
B 08161NAJ6 LT AA-sf Affirmed AA-sf
C 08161NAK3 LT A-sf Affirmed A-sf
D 08161NAW7 LT BBBsf Affirmed BBBsf
E 08161NAY3 LT BBB-sf Affirmed BBB-sf
F 08161NBA4 LT BB-sf Affirmed BB-sf
G 08161NBC0 LT B-sf Affirmed B-sf
X-A 08161NAG2 LT AAAsf Affirmed AAAsf
X-B 08161NAL1 LT A-sf Affirmed A-sf
X-D 08161NAN7 LT BBB-sf Affirmed BBB-sf
X-F 08161NAQ0 LT BB-sf Affirmed BB-sf
X-G 08161NAS6 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Stable Loss Expectations: The majority of the pool's performance
remains in line with issuance expectations. Fitch flagged two loans
(8.5% of the pool) as Fitch Loans of Concern (FLOC), which includes
one loan (4.8%) in special servicing. Fitch's current ratings are
based on a base case loss of 3.5%. Fitch also considered a
sensitivity analysis whereby pool-level losses could reach 4.2% if
the 1019 Market loan fails to stabilize and transfers to special
servicing.
Fitch Loans of Concern: The 181 West Madison loan (4.8%) is secured
by a 946,099-sf class A office building located in Chicago's
Central Business District (CBD) with good proximity to the
financial district, public transportation, and highways. The loan
transferred to special servicing in November 2021 after the loan's
borrower, which is controlled by the HNA Group, filed for
bankruptcy in October 2021. The company is working through a
restructuring process, which included bankruptcy plans that have
been contested by non-borrower HNA entities.
As of the September 2022 rent roll, the property was 86.2%
occupied, down from 89% at YE 2020. The Marmon Group (2.5% of the
current NRA, LXP December 2037), formerly the third largest tenant
downsized 2.3% of their space at the lease expiration in December
2022. The reported NOI DSCR declined to 1.01x as of September 2022,
compared to 2.01x at YE 2020, 4.57x at YE 2019 and 5.16x at
issuance.
Fitch modeled a minimal loss to account for special servicing fees
and expenses.
The 1019 Market loan (3.7%) is secured by a 75,523-sf mixed-used
property (97% office by NRA & 3% retail) located in San Francisco,
CA. Occupancy declined from 100% in 2020 to 3% as a result of
Zendesk, Inc. (96.6% of the NRA) terminating their lease prior to
the August 2022 lease expiration. The tenant paid a termination fee
of $4.91 million which was deposited into the TI/LC reserve
account. Costar reported a vacancy of 14.9% with market rents of
$57.71 as of year-to-date 2023 for the MidMarket office market,
which compares with vacancy of 4% and market rents of $73.74 in
2019.
Fitch modeled an approximately 13% loss in the base case to account
for the decline in occupancy and elevated submarket vacancy.
Additionally, an outsized loss of 30% was considered in a
sensitivity scenario should the vacant space fail to be leased and
the loan transfers to special servicing.
Minimal Change in Credit Enhancement (CE): As of the January 2023
distribution date, the pool's aggregate balance has been paid down
by 0.2% to $897.4 million from $899.1 million at issuance.
Twenty-five loans (88.8%) are full-term IO and six are partial-term
IO (7.6%). Interest shortfalls of $3,310 are currently affecting
the non-rated class H. There have been no realized losses to date.
Credit Opinion Loans: Eight loans representing 40.9% of the pool
received investment-grade credit opinions at issuance including
Bellagio Hotel (6.7%, credit opinions of BBB-sf*), 1633 Broadway
(5.0%, credit opinions of 'BBB-sf*'), 650 Madison Avenue (5.0%,
credit opinions of BBB-sf*), Starwood Industrial Portfolio (5.0%,
credit opinions of 'BBB-sf*'), 181 West Madison Street (4.8%,
credit opinions of BBB-sf*), 510 East 14th Street (3.9%, credit
opinions of BBB-sf*), Kings Plaza (5.6%, credit opinions of BBBsf*)
and 560 Mission Street (5.0%, AA-sf*). Fitch no longer considers
181 West Madison to be a credit opinion loan due to sponsor
concerns, transfer to special servicing and the elevated risk
associated with this asset.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Downgrades of 'AAAsf' and 'AA-sf' rated classes are not likely
given their sufficient CE relative to expected losses and continued
amortization, but may occur should interest shortfalls affect these
classes or loss expectations increase considerably. Downgrades of
'A-sf', 'BBBsf', and 'BBB-sf' rated classes would occur should
expected losses for the pool increase significantly and/or if FLOCs
experience further performance declines, which would erode CE.
- Downgrades of 'BB-sf' and 'B-' rated classes would occur with
increased certainty of losses on specially serviced loans,
continued underperformance of the FLOCs, and/or 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 of 'AA-sf' and 'A-sf' rated classes may occur with
significant improvement in CE and/or defeasance, and with the
stabilization of performance on the FLOCs; however, adverse
selection and increased concentrations could cause this trend to
reverse. Classes would not be upgraded above 'Asf' if there were
any likelihood of interest shortfalls.
- Upgrades of classes 'BBBsf' and 'BBB-sf' rated classes may occur
as the number of FLOCs are reduced, and/or loss expectations for
specially-serviced loans improve. Upgrades of classes 'BB-sf' and
'B-sf' 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 there is sufficient CE to the bonds.
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.
BRAVO RESIDENTIAL 2023-NQM1: Fitch Gives 'Bsf' Rating on B-2 Notes
------------------------------------------------------------------
Fitch Ratings assigns ratings to the residential mortgage-backed
notes issued by BRAVO Residential Funding Trust 2023-NQM1 (BRAVO
2023-NQM1).
Entity/Debt Rating Prior
----------- ------ -----
BRAVO 2023-NQM1
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAsf New Rating AA(EXP)sf
A-3 LT Asf New Rating A(EXP)sf
M-1 LT BBBsf New Rating BBB(EXP)sf
B-1 LT BBsf New Rating BB(EXP)sf
B-2 LT Bsf New Rating B(EXP)sf
B-3 LT NRsf New Rating NR(EXP)sf
AIOS LT NRsf New Rating NR(EXP)sf
FB LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
SA LT NRsf New Rating NR(EXP)sf
XS LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Following the publication of the presale, the issuer realized there
was an extra 80k of UPB not accounted for in the loan tape. This
increase was immaterial to the loss analysis. The issuer accounted
for it on the structure side by increasing the size of the NR
tranche.
There was no impact on the ratings.
The notes are supported by 788 loans with a total interest-bearing
balance of approximately $365 million as of the cutoff date. There
is also roughly 80,393 of non-interest-bearing deferred amounts
whose payments or losses will be used solely to pay down or write
off the class FB notes.
Loans in the pool were originated primarily by Acra Lending (Acra)
and LoanStream Mortgage with the remainder coming from multiple
originators. The loans are serviced by Acra and Rushmore Loan
Management Services LLC.
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 7.6% above a long-term sustainable level (versus
10.5% on a national level as of January 2023, down 1.7% since last
quarter). The rapid gain in home prices through the pandemic has
shown signs of moderating with a decline in 3Q22. Home prices rose
9.2% YoY nationally as of October 2022 due to the strong gains in
1H22.
Non-Qualified Mortgage (QM) Credit Quality (Negative): The
collateral consists of 788 loans totaling $365 million and seasoned
approximately 11 months in aggregate, calculated as the difference
between the origination date and the cutoff date. The borrowers
have a moderate credit profile — a 725 model FICO and a 47%
debt-to-income ratio, which includes mapping for debt service
coverage ratio (DSCR) loans — and leverage, as evidenced by a 74%
sustainable loan-to-value ratio. The pool comprises 53% of loans
treated as owner-occupied, while 47% were treated as an investor
property or second home, which includes loans to foreign nationals
or loans where the residency status was not provided (five foreign
nationals and 35 loans where residency was not available).
Of the loans, 57.3% are designated as a non-QM loan, while the
Ability to Repay Rule (ATR) does not apply for 42%. Lastly, 1.6% of
the loans are 30 days' delinquent as of the cutoff date, while 3.7%
are current but have experienced a delinquency or had missing pay
string data within the past 24 months.
Loan Documentation (Negative): Approximately 91% of the pool loans
were underwritten to less than full documentation, and 49% were
underwritten to a 12-month or 24-month bank statement program for
verifying income, which is not consistent with Appendix Q standards
and Fitch's view of a full documentation program.
A key distinction between this pool and legacy Alt-A loans is that
these loans adhere to underwriting and documentation standards
required under the Consumer Financial Protections Bureau's ATR,
which reduces the risk of borrower default arising from lack of
affordability, misrepresentation or other operational quality risks
due to rigors of the ATR mandates regarding the underwriting and
documentation of the borrower's ability to repay.
Additionally, 33% of loans comprise a DSCR or property cash
flow-focused product, 3.2% are a CPA or profit and loss product and
the remaining is a mix of other alternative documentation products.
Separately, five loans were originated to foreign nationals and 35
were unable to confirm residency.
Modified Sequential-Payment Structure (Mixed): The structure
distributes principal pro rata among the senior notes while
shutting out the subordinate bonds from principal until all senior
classes are reduced to zero. If a cumulative loss trigger event or
delinquency trigger event occurs in a given period, principal will
be distributed sequentially to the class A-1, A-2 and A-3 notes
until they are reduced to zero.
No P&I Advancing (Mixed): The deal is structured without servicer
advances for delinquent P&I. The lack of advancing reduces loss
severities, as there is a lower amount repaid to the servicer when
a loan liquidates and liquidation proceeds are prioritized to cover
principal repayment over accrued but unpaid interest. The downside
is the additional stress on the structure side, as there is limited
liquidity in the event of large and extended delinquencies.
Excess Cash Flow (Positive): The transaction benefits from excess
cash flow to the rated notes before being paid out to class XS
notes, although to a much smaller extent than in prior vintages.
The excess is available to pay timely interest and protect against
realized losses. While the excess cash flow is a positive
structural feature, the impact on the bonds is minimal given its
magnitude and is expected to be reduced to zero after the 48th
payment date if A1 through A3 notes are still outstanding.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper market value declines (MVDs) at
the national level. The analysis assumes MVDs of 10.0%, 20.0% and
30.0% in addition to the model projected 39.9% 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:
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
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.
COMM 2012-CCRE4: Moody's Lowers Rating on 2 Tranches to Caa2
------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on three classes
and downgraded the ratings on four classes in COMM 2012-CCRE4
Mortgage Trust, Commercial Pass-Through Certificates, Series
2012-CCRE4, as follows:
Cl. A-3, Affirmed Aaa (sf); previously on Jul 25, 2022 Affirmed Aaa
(sf)
Cl. A-M, Downgraded to Baa2 (sf); previously on Jul 25, 2022
Downgraded to A3 (sf)
Cl. B, Downgraded to Caa2 (sf); previously on Jul 25, 2022
Downgraded to B3 (sf)
Cl. C, Affirmed Caa3 (sf); previously on Jul 25, 2022 Affirmed Caa3
(sf)
Cl. D, Affirmed C (sf); previously on Jul 25, 2022 Affirmed C (sf)
Cl. X-A*, Downgraded to Baa1 (sf); previously on Jul 25, 2022
Downgraded to Aa3 (sf)
Cl. X-B*, Downgraded to Caa2 (sf); previously on Jul 25, 2022
Affirmed Caa1 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The rating on Cl. A-3 was affirmed due to the significant credit
support and expected principal recovery from the remaining loans in
the pool. The ratings on two P&I classes, Cl. C and Cl. D, were
affirmed because the ratings are consistent with Moody's expected
loss plus realized losses. Class D has already experienced a 69%
loss from previously liquidated loans.
The ratings on two P&I classes, Cl. A-M and Cl. B, were downgraded
due to higher anticipated losses and increased interest shortfall
concerns from the significant exposure to specially serviced loans.
The three remaining loans (100% of the pool) are all in special
servicing and have passed their original maturity dates.
Furthermore, one specially serviced loan, Eastview Mall and Commons
(45% of the pool), is secured by a regional mall that has
experienced significant declines in net operating income (NOI)
since 2018.
The rating on one interest only (IO) class, Cl. X-A, was downgraded
due to both principal paydowns of higher quality reference classes
and the decline in credit quality of its referenced classes. The
rating on Cl. X-B was downgraded based on the decline in credit
quality of its referenced classes.
Moody's regard e-commerce competition as a social risk under
Moody's ESG framework. The rise in e-commerce and changing consumer
behavior presents challenges to brick-and-mortar discretionary
retailers.
Moody's rating action reflects a base expected loss of 30% of the
current pooled balance, compared to 12.8% at Moody's last review.
Moody's base expected loss plus realized losses is now 16.5% of the
original pooled balance, compared to 15.4% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected. 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 a significant improvement in
pool performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, an increase in realized and
expected losses from specially serviced and troubled loans or
interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except the
interest-only classes was "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-Backed Securitizations Methodology"
published in July 2022.
Moody's analysis also incorporated a loss and recovery approach in
rating the P&I classes in this deal since 100% of the pool is in
special servicing. In this approach, Moody's determines a
probability of default for each specially serviced and troubled
loan that it expects will generate a loss and estimates a loss
given default based on a review of broker's opinions of value (if
available), other information from the special servicer, available
market data and Moody's internal data. The loss given default for
each loan also takes into consideration repayment of servicer
advances to date, estimated future advances and closing costs.
Translating the probability of default and loss given default into
an expected loss estimate, Moody's then applies the aggregate loss
from specially serviced to the most junior classes and the recovery
as a pay down of principal to the most senior classes.
DEAL PERFORMANCE
As of the January 17, 2023 distribution date, the transaction's
aggregate certificate balance has decreased by 76% to $264.9
million from $1.1 billion at securitization. The certificates are
collateralized by only three remaining mortgage loans, all of which
are currently in special servicing.
Five loans have been liquidated from the pool, resulting in an
aggregate realized loss of $104 million (for an average loss
severity of 86.3%).
The largest specially serviced loan is the Prince Building loan
($125 million – 47.2% of the pool), which represents a pari passu
portion of a $200 million whole loan. The loan is secured by a
354,600 square foot (SF) mixed-use property located in the SoHo
neighborhood of New York City. The ground floor portion is leased
to retail tenants including Equinox, Forever 21 and Hugo Boss. The
office portion is leased by tenants including Group 9 Media and
ZocDoc, who combined, represent 49.9% of the property net rentable
area (NRA). As of September 2022, the property was 93% occupied,
with an average occupancy of 96% since securitization. The property
faces near-term lease rollover risk from the Group 9 Media tenant
(28% of the NRA), which has a lease expiration in September 2023.
The property's net operating income (NOI) peaked in 2016, and then
fell sharply in 2018 before gradually recovering through 2021. The
2021 NOI remained below underwritten level, however, the annualized
2022 NOI was above the NOI at securitization. The loan transferred
to the special servicer in September 2022 due to the loan not being
able to refinance at its original maturity date in October 2022.
The most recent appraisal value in 2022 was 11% below the value at
securitization but well above the outstanding loan balance. The
loan is fully interest only and was recently extended with a new
maturity date in October 2023. The loan was current as of the
January 2023 remittance date.
The second largest specially serviced loan is the Eastview Mall and
Commons loan ($120 million – 45.3% of the pool), which represents
a pari passu portion of a $210 million whole loan. The loan is
secured by a 725,300 SF portion of a 1.4 million SF regional mall
(Eastview Mall) and an adjacent 86,300 SF power center (Eastview
Commons), totaling 811,600 SF of retail located in Victor, NY.
Eastview Mall is anchored by non-collateral Macy's, JC Penny, Von
Maur and Dick's Sports stores, and the collateral is anchored by
Regal Cinemas and Raymour & Flanigan furniture. Eastview Commons
includes non-collateral Home Depot and Target stores, and
collateral tenants Best Buy, Staples and Old Navy. As of September
2022, the property was 89% leased. The property's NOI has declined
since 2018 and the 2021 NOI was 29% lower than in 2013.
Furthermore, the annualized September 2022 NOI was similar to the
year-end levels in 2020 and 2021. The loan transferred to the
special servicer in June 2022 ahead of its September 2022 maturity
date and has made interest only payments through its January 2023
payment date. An updated appraisal value from October 2022 valued
the property 76% below the value at securitization and 52% below
the outstanding loan balance. Servicer commentary indicates a loan
extension is currently being negotiated. Due to decline in
performance since securitization and current market conditions,
Moody's expects a significant loss on this loan.
The remaining specially serviced loan is the Mall of Georgia
Crossing loan ($19.9 million – 7.5% of the pool), which is
secured by a 317,500 SF shopping center located in Buford GA,
adjacent to the Georgia Crossings mall. The property includes a
non-collateral Target and the collateral includes a Hobby Lobby, TJ
Maxx and Best Buy. As of June 2022, the property was 99% occupied,
which is the average occupancy since securitization. The property's
NOI has generally increased since securitization. The loan
transferred to the special servicer in August 2022 due to the loan
not being able to refinance at its original maturity date in
October 2022. The loan was recently extended with a new maturity
date in October 2023.
Moody's estimates an aggregate $79.5 million loss for the specially
serviced loans.
As of the January 2023 remittance statement cumulative interest
shortfalls were $8.1 million and currently impact up to Cl. D.
Moody's anticipates interest shortfalls will continue because of
the exposure to specially serviced loans and/or modified loans.
Interest shortfalls are caused by special servicing fees, including
workout and liquidation fees, appraisal entitlement reductions
(ASERs), loan modifications and extraordinary trust expenses.
COMM 2014-FL5: S&P Lowers Class KH2 Certs Rating to 'D'
-------------------------------------------------------
S&P Global Ratings lowered its rating on the class KH2 commercial
mortgage pass-through certificates from COMM 2014-FL5 Mortgage
Trust, a U.S. CMBS transaction, to 'D (sf)' from 'CCC (sf)'. S&P
subsequently withdrew its rating on class KH2. In addition, S&P
discontinued its ratings on three other classes from the same
transaction.
According to the Jan. 18, 2023, trustee remittance report,
$100,000 was withheld by the master servicer, Wells Fargo Bank N.A.
Due to the payment withholding, class KH2 received $3.1 million of
its $3.2 million beginning balance, and the difference of $100,000
was reported as realized losses.
According to Wells Fargo, while it is not aware of any outstanding
expenses at this time, due to multiple loan modifications and
property releases, it held back a portion of the K Hospitality
Portfolio loan's repayment proceeds to cover any trailing legal
expenses that may arise. Wells Fargo stated that it currently
expects to hold the funds for at least six months. As a result, S&P
lowered its rating to 'D (sf)' and then withdrew it.
S&P said, "In addition, we discontinued our ratings on classes D
and KH1 because, following the repayment of the sole remaining loan
in the pool, the K Hospitality Portfolio, these classes received
full principal and interest payments, according to the January 2023
trustee remittance report.
"We also discontinued our rating on the class X-EXT interest-only
(IO) certificates because the IO class's notional balance was
reduced to $0 following the full principal repayment of class D and
it received its full interest payments, according to the January
2023 trustee remittance report."
Rating Lowered And Subsequently Withdrawn
COMM 2014-FL5 Mortgage Trust
Class KH2 to 'D (sf)' and then not rated from 'CCC (sf)'
Ratings Discontinued
COMM 2014-FL5 Mortgage Trust
Class D to not rated from 'BB (sf)'
Class X-EXT to not rated from 'BB (sf)'
Class KH1 to not rated from 'B- (sf)'
CPT ASSET-BACKED 2004-EC1: S&P Cuts M-1 Certs Rating to 'B(sf)'
---------------------------------------------------------------
S&P Global Ratings lowered its rating on the class M-1 certificates
from CPT Asset-Backed Certificates Trust 2004-EC1 to 'B (sf)' from
'BBB- (sf)'. At the same time, S&P removed the rating from
CreditWatch, where S&P had placed it with negative implications on
Aug. 25, 2022, and maintained on Nov. 1, 2022.
CPT 2004-EC1 is a U.S. RMBS transaction issued in 2004.
S&P said, "The downgrade reflects our view of the observed interest
shortfalls on the certificates. Our analysis is consistent with
"S&P Global Ratings Definitions," published Nov. 10, 2021, which
impose a maximum rating threshold on classes that have incurred
missed interest payments due to credit or liquidity erosion. In
applying our ratings definitions, we looked to see if the
applicable class received additional compensation beyond the
imputed interest due as direct economic compensation for the delay
in interest payment (e.g., interest on interest), and whether the
missed interest payments will be repaid by the maturity date."
Class M-1 does not receive additional compensation for outstanding
interest shortfalls. As of the January 2023 remittance period, the
certificates had unpaid interest shortfalls for 10 consecutive
months. Our analysis considered the longest consecutive duration
the shortfall has been outstanding. In November 2022, we lowered
our rating on the certificates and maintained the rating on
CreditWatch negative.
S&P will continue to monitor the transaction and adjust its rating
on the certificates as it considers appropriate.
FANNIE MAE 2023-R02: S&P Assigns Prelim 'B-' Rating on 1B-2 Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Fannie Mae
Connecticut Avenue Securities Trust 2023-R02's notes.
The note issuance is an RMBS transaction backed by fully
amortizing, first-lien, fixed-rate residential mortgage loans
secured by one- to four-family residences, planned-unit
developments, condominiums, cooperatives, and manufactured housing
to primarily prime borrowers.
The preliminary ratings are based on information as of Feb. 2,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The credit enhancement provided by the subordinated reference
tranches and the associated structural deal mechanics;
-- The REMIC structure, which reduces the counterparty exposure to
Fannie Mae for periodic principal and interest payments but also
pledges the support of Fannie Mae (as a highly rated counterparty)
to cover any shortfalls on interest payments and 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 we believe enhances the notes' strength;
-- The enhanced credit risk management and quality control (QC)
processes Fannie Mae uses in conjunction with the underlying R&W
framework; and
-- The potential impact that 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, we continue to
maintain our updated 'B' FF for the archetypal pool at 3.25%, given
our current outlook for the U.S. economy. With rising interest
rates and inflation, the Russia-Ukraine conflict ongoing, tensions
over Taiwan escalating, and the China slowdown exacerbating
supply-chain and pricing pressures, the U.S. economy appears to be
teetering toward recession."
Preliminary Ratings Assigned
Fannie Mae Connecticut Avenue Securities Trust 2023-R02
Class 1A-H, $19,298,723,365: Not rated
Class 1M-1, $375,337,000: BBB+ (sf)
Class 1M-1H(i), $19,754,974: Not rated
Class 1M-2A(ii), $51,328,000: BBB (sf)
Class 1M-AH(i), $2,701,672: Not rated
Class 1M-2B(ii), $51,328,000: BBB (sf)
Class 1M-BH(i), $2,701,672: Not rated
Class 1M-2C(ii), $51,328,000: BBB- (sf)
Class 1M-CH(i), $2,701,672: Not rated
Class 1M-2(ii), $153,984,000: BBB- (sf)
Class 1B-1A(ii), $56,984,000: BB+ (sf)
Class 1B-AH(i), $18,995,226: Not rated
Class 1B-1B(ii), $56,984,000: BB- (sf)
Class 1B-BH(i), $18,995,226: Not rated
Class 1B-1(ii), $113,968,000: BB- (sf)
Class 1B-2(ii), $65,848,000: B- (sf)
Class 1B-2H(i), $65,849,325: Not rated
Class 1B-3H(i), $121,566,761: Not rated
(i)Reference tranche only and will not have corresponding notes.
Fannie Mae retains the risk of these tranches.
(ii)The holders of the class 1M-2 notes may exchange all or part of
that class for proportionate interests in the class 1M-2A, 1M-2B,
and 1M-2C notes and vice versa. The holders of the class 1B-1 notes
may exchange all or part of that class for proportionate interests
in the class 1B-1A and 1B-1B notes and vice versa. The holders of
the class 1M-2A, 1M-2B, 1M-2C, 1B-1A, 1B-1B, and 1B-2 notes may
exchange all or part of those classes for proportionate interests
in the classes of RCR notes as specified in the offering
documents.
Related combinable and recombinable notes exchangeable
classes(iii)
Class 1E-A1, $51,328,000: BBB (sf)
Class 1A-I1, $51,328,000(iv): BBB (sf)
Class 1E-A2, $51,328,000: BBB (sf)
Class 1A-I2, $51,328,000(iv): BBB (sf)
Class 1E-A3, $51,328,000: BBB (sf)
Class 1A-I3, $51,328,000(iv): BBB (sf)
Class 1E-A4, $51,328,000: BBB (sf)
Class 1A-I4, $51,328,000(iv): BBB (sf)
Class 1E-B1, $51,328,000: BBB (sf)
Class 1B-I1, $51,328,000(iv): BBB (sf)
Class 1E-B2, $51,328,000: BBB (sf)
Class 1B-I2, $51,328,000(iv): BBB (sf)
Class 1E-B3, $51,328,000: BBB (sf)
Class 1B-I3, $51,328,000(iv): BBB (sf)
Class 1E-B4, $51,328,000: BBB (sf)
Class 1B-I4, $51,328,000(iv): BBB (sf)
Class 1E-C1, $51,328,000: BBB- (sf)
Class 1C-I1, $51,328,000(iv): BBB- (sf)
Class 1E-C2, $51,328,000: BBB- (sf)
Class 1C-I2, $51,328,000(iv): BBB- (sf)
Class 1E-C3, $51,328,000: BBB- (sf)
Class 1C-I3, $51,328,000(iv): BBB- (sf)
Class 1E-C4, $51,328,000: BBB-(sf)
Class 1C-I4, $51,328,000(iv): BBB- (sf)
Class 1E-D1, $102,656,000: BBB (sf)
Class 1E-D2, $102,656,000: BBB (sf)
Class 1E-D3, $102,656,000: BBB (sf)
Class 1E-D4, $102,656,000: BBB (sf)
Class 1E-D5, $102,656,000: BBB (sf)
Class 1E-F1, $102,656,000: BBB- (sf)
Class 1E-F2, $102,656,000: BBB- (sf)
Class 1E-F3, $102,656,000: BBB- (sf)
Class 1E-F4, $102,656,000: BBB- (sf)
Class 1E-F5, $102,656,000: BBB- (sf)
Class 1-X1, $102,656,000(iv): BBB (sf)
Class 1-X2, $102,656,000(iv): BBB (sf)
Class 1-X3, $102,656,000(iv): BBB (sf)
Class 1-X4, $102,656,000(iv): BBB (sf)
Class 1-Y1, $102,656,000(iv): BBB- (sf)
Class 1-Y2, $102,656,000(iv): BBB- (sf)
Class 1-Y3, $102,656,000(iv): BBB- (sf)
Class 1-Y4, $102,656,000(iv): BBB- (sf)
Class 1-J1, $51,328,000: BBB- (sf)
Class 1-J2, $51,328,000: BBB- (sf)
Class 1-J3, $51,328,000: BBB- (sf)
Class 1-J4, $51,328,000: BBB- (sf)
Class 1-K1, $102,656,000: BBB- (sf)
Class 1-K2, $102,656,000: BBB- (sf)
Class 1-K3, $102,656,000: BBB- (sf)
Class 1-K4, $102,656,000: BBB- (sf)
Class 1M-2Y, $153,984,000: BBB- (sf)
Class 1M-2X, $153,984,000(iv): BBB- (sf)
Class 1B-1Y, $113,968,000: BB- (sf)
Class 1B-1X, $113,968,000(iv): BB- (sf)
Class 1B-2Y, $65,848,000(iv): B- (sf)
Class 1B-2X, $65,848,000(iv): B- (sf)
(iii)See the offering documents for more detail on possible
combinations.
(iv)Notional amount.
FORTRESS CREDIT XXI: S&P Assigns Prelim 'BB-' Rating on Cl. E Debt
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Fortress
Credit Opportunities XXI CLO LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by middle market speculative-grade
(rated 'BB+' or lower) senior secured term loans. The transaction
is managed by FCOD CLO Management LLC.
The preliminary ratings are based on information as of Jan. 26,
2023. 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 middle market 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 debt through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Relevant features of the transaction and S&P's ratings that differ
from a typical CLO include the following:
-- The preliminary rating on the class A-R loans addresses only
the full and timely payment of principal and the base interest
amount, which includes the stated interest rate on the funded
amounts and any commitment fee due on the undrawn commitment. It
does not include any capped amounts.
-- The preliminary ratings do not reflect the payment of any class
A-R loan increased costs, which are additional payments based on
changed in law made to the lender. The costs may not be predictable
or quantifiable. Increased cost payments are subordinate to
principal and interest distributions on the rated notes in the
payment waterfall and, therefore, do not affect scheduled
distributions to the rated notes.
-- Class A-R is a variable-funding note (VFN) that can be drawn on
to fund revolver or delayed draw obligations and to purchase new
collateral obligations during the reinvestment period. It can also
be repaid. If S&P's short-term issuer credit rating on the holder
of the class A-R loans falls below 'A-1', the loan holder must
fully fund its unfunded commitment for the CLO's benefit. S&P
modeled the revolver as both fully funded and fully unfunded.
-- There is no concentration limit on 'CCC' rated assets, but a
haircut is taken in the overcollateralization (O/C) test if they
exceed 30% of the pool. The transaction structure passed S&P's cash
flow analysis, assuming a sensitivity of 92.5% exposure to 'CCC'
rated assets.
Preliminary Ratings Assigned
Fortress Credit Opportunities XXI CLO LLC
Class A-R loans(i)(ii), $54.00 million: AAA (sf)
Class A-T, $162.00 million: AAA (sf)
Class B, $28.00 million: AA (sf)
Class C (deferrable), $32.00 million: A (sf)
Class D (deferrable), $32.00 million: BBB- (sf)
Class E (deferrable), $24.00 million: BB- (sf)
Subordinated notes, $64.00 million: Not rated
(i)Revolving loan tranche.
(ii)The preliminary rating on the class A-R loans addresses only
the full and timely payment of principal and the base interest
amount, and it does not consider any capped amounts.
GCAT 2023-NQM2: S&P Assigns Prelim B+ (sf) Rating on Cl. B-2 Certs
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to GCAT
2023-NQM2 Trust's mortgage pass-through certificates.
The certificate issuance is an RMBS securitization backed by
first-lien, fixed-, and adjustable-rate residential mortgage loans,
including mortgage loans with initial interest-only periods, to
prime and nonprime borrowers. The loans are secured by
single-family residential properties, planned-unit developments,
townhouses, condominiums, cooperatives, and two- to four-family
residential properties. The pool has 714 loans, which are either
non-QM (non-QM/ATR compliant), ATR-exempt mortgage loans, QM/HPML,
or QM/safe harbor.
The preliminary ratings are based on information as of Jan. 27,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The pool's collateral composition (see the Collateral Summary
section);
-- The transaction's credit enhancement, associated structural
mechanics, geographic concentration, and representation and
warranty (R&W) framework;
-- The mortgage aggregator, Blue River Mortgage IV LLC (BRM IV)
and the mortgage originators; 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, "Per our latest macroeconomic update, we
continue to expect the U.S. will fall into recession in 2023.
Recent indicators support our view, as rising prices and interest
rates eat away at private-sector purchasing power. Indeed, of the
leading indicators we track in our Business Cycle Barometer, only
one of the nine indicators was in positive territory through
October: seven were negative, and one was neutral. Although our
10-year/three-month term spread indicator remained neutral in
September, daily readings have been inverted since Oct. 25.
Moreover, both the 10-year/one-year and 10-year/two-year indicators
have been inverted for, on average, three straight months, which
signals a recession. The average 10-year/three-month indicator is
headed for an inversion in November, with the average through Nov.
22 at -0.35%. If it's inverted for the second straight month, that
would also be a recession signal. While economic momentum has
protected the U.S. economy this year, what's around the bend in
2023 is the bigger worry. Extremely high prices and aggressive rate
hikes will weigh on affordability and aggregate demand. With the
Russia-Ukraine conflict ongoing, tensions over Taiwan escalating,
and the China slowdown exacerbating supply-chain and pricing
pressures, the U.S. economy appears to be teetering toward
recession. As a result, we continue to maintain the revised outlook
per the April 2020 update to the guidance to our RMBS criteria
(which increased the archetypal 'B' projected foreclosure frequency
to 3.25% from 2.50%)."
Preliminary Ratings Assigned
GCAT 2023-NQM2 Trust(i)
Class A-1, $268,281,000: AAA (sf)
Class A-2, $32,747,000: AA (sf)
Class A-3, $42,306,000: A (sf)
Class M-1, $22,781,000: BBB (sf)
Class B-1, $15,458,000: BB (sf)
Class B-2, $6,102,000: B+ (sf)
Class B-3, $19,119,609: Not rated
Class A-IO-S, Notional(ii): Not rated
Class X, Notional(ii): Not rated
Class R, N/A: Not rated
(i)The preliminary ratings address our expectation for the ultimate
payment of interest and principal.
(ii)The notional amount equals the aggregate stated principal
balance of the loans.
N/A--Not applicable.
GS MORTGAGE 2016-GS2: Fitch Hikes Rating on Class F Notes to 'Bsf'
------------------------------------------------------------------
Fitch Ratings has upgraded two and affirmed 11 classes of GS
Mortgage Securities Trust 2016-GS2 Commercial Mortgage Pass-Through
Certificates. The Rating Outlooks on classes B and X-B have been
revised to Positive from Stable. Additionally, the Outlook on class
E is Stable following the upgrade and class F has been assigned a
Stable Outlook following the upgrade.
Entity/Debt Rating Prior
----------- ------ -----
GSMS 2016-GS2
A-3 36252TAQ8 LT AAAsf Affirmed AAAsf
A-4 36252TAR6 LT AAAsf Affirmed AAAsf
A-AB 36252TAS4 LT AAAsf Affirmed AAAsf
A-S 36252TAV7 LT AAAsf Affirmed AAAsf
B 36252TAW5 LT AA-sf Affirmed AA-sf
C 36252TAY1 LT A-sf Affirmed A-sf
D 36252TAA3 LT BBB-sf Affirmed BBB-sf
E 36252TAE5 LT BB-sf Upgrade B-sf
F 36252TAG0 LT Bsf Upgrade CCCsf
PEZ 36252TAX3 LT A-sf Affirmed A-sf
X-A 36252TAT2 LT AAAsf Affirmed AAAsf
X-B 36252TAU9 LT AA-sf Affirmed AA-sf
X-D 36252TAC9 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Lower Loss Expectations: The upgrades and Outlooks on classes E and
F reflect better than expected performance of loans affected by the
pandemic, primarily one student housing loan (Cove at Coastal
Carolina; 2.3% of pool) and three top-15 loans secured by hotels
(12.9%) and better than expected recoveries on one REO asset,
Shoppes at Parker Commons ($4.6 million), which was disposed with
no loss. In addition, the Outlooks on classes B and X-B have been
revised to Positive from Stable and reflect increasing credit
enhancement (CE) and the stable to improving performance of the
overall pool.
Fitch's current ratings reflect a base case loss of 4.70%. Three
loans (3.9%), including one (1.6%) in special servicing, were
designated Fitch Loans of Concern (FLOCs).
The largest decrease in loss expectations since Fitch's prior
rating action is Cove at Coastal Carolina (2.3%), which is secured
by a 396-unit garden apartment, student housing complex located in
Conway, SC. The loan is no longer considered a FLOC due to improved
performance in 2022. Occupancy has improved to 98% as of September
2022 compared with 81% at YE 2020 and 74% at YE 2019. As a result,
NOI DSCR increased to 1.31x as of TTM September 2022 NOI from 0.81x
for YE 2020.
Fitch's current analysis is based off an 8.25% cap rate and the TTM
September 2022 NOI, which resulted in zero loss being modeled for
the loan compared to 40% modeled loss at Fitch's prior rating
action.
Specially Serviced Loan: One loan, Iliff Commons Shopping Center
(1.6%), secured by a 72,991-sf retail property in Aurora, CO, is in
special servicing. The loan transferred to special servicing in
October 2019 for payment default and became REO in February 2021.
Per servicer updates, occupancy is 92% and a sale is expected in
2023. Servicer-reported NOI DSCR was 1.00x as of the YTD June 2022.
Fitch's base case loss of 49% reflects a discount to the recent
servicer provided valuation and accounts for the REO status.
Increasing Credit Enhancement: As of the January 2023 distribution
date, the pool's aggregate balance has been paid down by 21.5% to
$589.2 million from $750.6 million at issuance. Since Fitch's prior
rating action, one REO asset with a balance of $4.6 million paid in
full with yield maintenance. Fourteen loans (56.6%) are full-term
IO, and 13 (27.5%) that were structured with a partial-term IO
component at issuance are in their amortization periods. Two loans
(3.9%) are fully defeased. Cumulative interest shortfalls of
$249,256 are currently affecting the non-rated class G.
Alternative Loss Consideration: Due to increasing CE and the stable
to improving performance of the overall pool, Fitch's analysis
included a scenario to test for positive rating actions on classes
B and X-B. This included higher cap rates and NOI stresses for the
entire pool. The affirmations at 'AA-sf' and Outlooks of these
classes reflect this analysis. The Positive Outlook indicates the
potential for future upgrades with continued increasing CE and
continued stable to improving pool performance of the pool.
Pool Concentration: The top 10 loans comprise 62.3% of the pool.
Loan maturities are concentrated in 2026 (93.2%), with two loans
(6.8%) maturing in 2025. Based on property type, the largest
concentrations are retail at 53.4%, hotel at 15.3% and office at
12.6%.
Seven retail loans (16.5%) are sponsored by ICS Portfolio Holdings
and located in Brooklyn/Queens. One of these loans (1.7%) was
designated a FLOC due to the Walgreens being dark; however, the
Walgreens has a long-term lease and continues to pay rent in
accordance with the lease terms. Performance of the other six loans
(14.8%) remains stable and in-line with issuance expectations.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Downgrades of classes rated in the 'AAAsf' and 'AAsf' categories
are not likely due to sufficient CE and the expected receipt of
continued amortization but could occur if interest shortfalls
affect the class. Classes C, PEZ, D, X-D, E and F would be
downgraded if additional loans become FLOCs.
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 X-B would occur with continued
improvement in CE and/or defeasance and continued stable to
improving performance of the overall pool. Upgrades of classes C,
PEZ, D, X-D, E and F 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.
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.
GUGGENHEIM CLO 2022-2: Fitch Assigns 'BB-sf' Rating on Cl. E Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to
Guggenheim CLO 2022-2, Ltd.
Entity/Debt Rating
----------- ------
Guggenheim CLO
2022-2, Ltd.
A-1 LT NRsf New Rating
A-2 LT AAAsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB-sf New Rating
E LT BB-sf New Rating
Subordinated Notes LT NRsf New Rating
TRANSACTION SUMMARY
Guggenheim CLO 2022-2, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by
Guggenheim Partners Investment Management, LLC. Net proceeds from
the issuance of the secured and subordinated notes will provide
financing on a portfolio of approximately $400.00 million of
primarily first lien senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 25.25 versus a maximum covenant, in
accordance with the initial expected matrix point of 25.25. 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
97.0% first lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 72.87% versus a
minimum covenant, in accordance with the initial expected matrix
point of 72.83%.
Portfolio Composition (Positive): The largest three industries may
constitute up to 36.3% 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 4.0-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 at the initial expected
matrix point, the rated notes can withstand default rates and
recovery assumptions consistent with other recent Fitch-rated CLO
notes. 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
'BBB+sf' and 'AAAsf' for class A-2, between 'BB+sf' and 'AA+sf' for
class B, between 'B+sf' and 'A-sf' for class C, between less than
'B-sf' and 'BBB-sf' for class D, and between less than 'B-sf' and
'BB-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-2 notes, as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; results under these sensitivity scenarios are 'AAAsf' for
class B notes, 'A+sf' for class C notes, between 'A-sf' 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.
JP MORGAN 2012-CIBX: Moody's Lowers Rating on Cl. X-B Certs to C
----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on three classes
and downgraded the ratings on one class in J.P. Morgan Chase
Commercial Mortgage Securities Trust 2012-CIBX, Commercial
Pass-Through Certificates, Series 2012-CIBX as follows:
Cl. E, Affirmed Caa3 (sf); previously on Feb 15, 2022 Downgraded to
Caa3 (sf)
Cl. F, Affirmed C (sf); previously on Feb 15, 2022 Downgraded to C
(sf)
Cl. G, Affirmed C (sf); previously on Feb 15, 2022 Affirmed C (sf)
Cl. X-B*, Downgraded to C (sf); previously on Feb 15, 2022
Downgraded to Caa3 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on three P&I class were affirmed because the ratings
are consistent with Moody's expected loss plus realized losses.
Class NR, which is not rated by Moody's, has already experienced a
41% loss from previously liquidated loans.
The rating on the IO Class, Cl. X-B, was downgraded due to the
decline in the credit quality of its reference classes resulting
from principal paydowns of higher quality reference classes.
Moody's rating action reflects a base expected loss of 60.6% of the
current pooled balance, compared to 23.0% at Moody's last review.
Moody's base expected loss plus realized losses is now 6.6% of the
original pooled balance, compared to 9.2% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization or a
significant improvement in pool performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, an increase in realized and
expected losses from specially serviced loans or interest
shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except the
interest-only classes was "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-Backed Securitizations Methodology"
published in July 2022.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 100% of the pool is in
special servicing. In this approach, Moody's determines a
probability of default for each specially serviced and troubled
loan that it expects will generate a loss and estimates a loss
given default based on a review of broker's opinions of value (if
available), other information from the special servicer, available
market data and Moody's internal data. The loss given default for
each loan also takes into consideration repayment of servicer
advances to date, estimated future advances and closing costs.
Translating the probability of default and loss given default into
an expected loss estimate, Moody's then applies the aggregate loss
from specially serviced loans to the most junior class(es) and the
recovery as a pay down of principal to the most senior classes.
DEAL PERFORMANCE
As of the January 17, 2023 distribution date, the transaction's
aggregate certificate balance has decreased by 91.5% to $109.5
million from $1.3 billion at securitization. The certificates are
collateralized by two remaining mortgage loans that are both
currently in special servicing.
Four loans have been liquidated from the pool, resulting in an
aggregate realized loss of $18.3 million (for an average loss
severity of 21%).
The largest specially serviced loan is the Jefferson Mall ($55.6
million – 50.8% of the pool), which is secured by a 281,000
square foot (SF) portion of a 783,600 SF regional mall located in
Louisville, KY, approximately 9 miles southeast of downtown
Louisville. There are five non-collateral anchor spaces. The former
Macy's and Sears stores have each been partially backfilled by
Round1 Entertainment and Overstock Furniture, respectively, and the
former Toys R Us was backfilled by Bob's Discount Furniture. The
remaining anchors are occupied by JC Penny and Dillard's. The
collateral portion is anchored by H&M and Ross Dress for Less. As
of year end 2021 the property was 99% occupied, however, the NOI
was 19% lower than in 2012 primarily due to drops in rental
revenue. The loan has been in special servicing two separate times
since 2020, and most recently has been in special servicing since
February 2021. The special servicer has approved a maturity
extension with a new maturity date in June 2026 and the loan is
pending return to the master servicer. The loan has amortized
nearly 22% since securitization, however, the most recent appraisal
in 2021 valued the property 66% below the securitization value and
38% below the current outstanding balance. The loan was current as
of the January 2023 remittance statement, however, due to the
decline in cash flow since securitization and accounting for the
higher cash flow volatility and loss severity associated with Class
B malls, Moody's anticipates a potentially significant loss on this
loan.
The second largest specially serviced loan is the Southpark Mall
($53.9 million – 49.2% of the pool), which is secured by a
397,600 SF portion of a 675,600 SF regional mall located in
Colonial Heights, VA, approximately 22 miles southeast of Richmond,
VA. There are three non-collateral anchors, occupied by JC Penny,
Macy's and Dicks Sports. The collateral is anchored by a Regal
Cinemas, H&M and Planet Fitness. The collateral also includes a
vacant 113,500 SF anchor space, which was previously occupied by
Sears and closed in 2018. This space has been rented out
periodically to temporary tenants, such as Spirit Halloween. The
loan has amortized by nearly 20% since securitization, however, the
property's 2021 NOI was 11% lower than in 2012 primarily due
revenues. The most recent appraised value from February 2021 was
61% lower than at securitization and 26% below the outstanding loan
balance. The loan has been in special servicing two separate times
since 2020, and most recently has been in special servicing since
February 2021. The special servicer has approved a maturity
extension with a new maturity date in June 2026 and the loan is
pending return to the master servicer. The loan was current as of
the January 2023 remittance statement, however, due to the decline
in cash flow since securitization and accounting for the higher
cash flow volatility and loss severity associated with Class B
malls, Moody's anticipates a potentially significant loss on this
loan.
JPMCC COMMERCIAL 2017-JP5: Fitch Affirms CCCsf Rating on E-RR Notes
-------------------------------------------------------------------
Fitch Ratings has affirmed 12 classes of JPMCC Commercial Mortgage
Securities Trust 2017-JP5. The Rating Outlook of class D-RR remains
Negative. Fitch has revised the Outlook for class D to Negative
from Stable.
Entity/Debt Rating Prior
----------- ------ -----
JPMCC 2017-JP5
A-4 46647TAR9 LT AAAsf Affirmed AAAsf
A-5 46647TAS7 LT AAAsf Affirmed AAAsf
A-S 46647TAX6 LT AAAsf Affirmed AAAsf
A-SB 46647TAT5 LT AAAsf Affirmed AAAsf
B 46647TAY4 LT AA-sf Affirmed AA-sf
C 46647TAZ1 LT A-sf Affirmed A-sf
D 46647TAA6 LT BBBsf Affirmed BBBsf
D-RR 46647TAC2 LT BBB-sf Affirmed BBB-sf
E-RR 46647TAE8 LT CCCsf Affirmed CCCsf
X-A 46647TAU2 LT AAAsf Affirmed AAAsf
X-B 46647TAV0 LT AA-sf Affirmed AA-sf
X-C 46647TAW8 LT A-sf Affirmed A-sf
KEY RATING DRIVERS
Increased Loss Expectations: Overall loss expectations have
increased slightly due to occupancy declines for several office
properties within the pool offset by better than expected
recoveries of disposed assets. Fitch has identified 12 loans
(31.9%) as Fitch Loans of Concern (FLOCs), including seven loans
(27.3%) in the top 15 and three loans (2.5%) in special servicing.
Fitch's current ratings incorporate a base case loss of 7.30%. The
Negative Outlooks on classes D and D-RR reflect the potential for
downgrade should performance of the office properties fail to
stabilize and deteriorate further.
Since the prior rating action, two REO assets were disposed with
losses. The Marriott Galleria, a 301-key full-service hotel located
in Houston, TX and the TownePlace Suites Dallas Las Colinas, a
135-key extended stay hotel located in Irving, TX were disposed
with realized losses of $12.98 million (44% loss severity) and
$2.70 million (25% loss severity) respectively.
Fitch Loans of Concern: The Riverway loan (6.8%), which is secured
by a four-building property totaling 869,120-sf suburban office
located in Rosemont, IL (1.5 miles from O'Hare International
Airport). The property consists of three office buildings and one
10,409 sf daycare center. Largest tenants include U.S. Foods, Inc.
(33.7% of NRA; 14.9% expiring in Sept. 2023 and 18.9% in February
2029), Culligan International Company (6.1% of NRA; December 2026),
Appleton GRP LLC (4.4%; Dec. 2026) and First Union Rail Corporation
(3.8%; January 2024).
As of June 2022, the property was 59% occupied with NOI DSCR of
0.79x down from occupancy of 65% and NOI DSCR of 0.82x at YE 2021.
Occupancy has struggled to recover after the departure of Central
States Pension Fund which vacated 22% of the NRA in 2019. The
sponsor noted that upgrades to the lobby areas for all three
buildings have been completed and the auditorium is in the process
of renovation. Fitch's analysis reflects a 10% cap rate on YE 2021
NOI resulting in an approximate 31% expected loss.
Fresno Fashion Fair loan (8.0% of the pool), which is secured by
the 536,093-sf portion of an 835,416-sf regional mall located in
Fresno, CA. Collateral tenants include JCPenney (28.7% of NRA,
lease expiry in March 2023), Macy's Men & Children's (14.3%, April
2026), X Lanes (5.3%, December 2035), H&M (3.4%, January 2027),
Victoria's Secret (2.6%, January 2027), Cheesecake Factory (1.8%,
January 2026) and ULTA Beauty (1.8%, August 2027). Non-collateral
anchors include Macy's Women & Home and Forever 21.
The mall is demonstrating a strong recovery from the effects of the
pandemic with occupancy climbing to 98% as of the 2Q21 from 91% at
YE 2020. Additionally, sales have exceeded pre-pandemic levels with
inline sales of $1,024 psf ($837 psf excluding Apple) as of the TTM
June 2022. This compares to inline sales of $689 psf ($607 psf
excluding Apple) as of TTM June 2021, $590 psf ($472 psf excluding
Apple) as of TTM September 2020, $765 psf ($617 psf excluding
Apple) as of TTM March 2019, and $737 psf ($613 psf excluding
Apple) as of TTM June 2018.
Fitch's loss expectation of 14% reflects an 11.0% cap rate applied
to YE 2021 NOI.
Landmark Square loan (5.5%), which is secured by a 757,917-sf mixed
use office and retail property located in the Stamford, CT CBD. YE
2021 NOI has declined 27.7% compared to YE 2020, driven mainly by a
12% decline in base rents. Per the September 2022 rent roll, the
average in-place rent for the subject property of $27.75 psf
reflects a sizable discount to the submarket average asking rent of
$38.68 psf per CoStar.
The property was 72.4% occupied as of September 2022, compared with
71.9% in September 2021, 73.8% in December 2020 and 77% in December
2019. Per CoStar, the vacancy rate for the Stamford submarket is
approximately 20.7% as of January 2023. Upcoming lease rollover
includes 4.9% of the NRA in 2023 and 7.7% in 2024. The rollover is
granular, with no tenant scheduled to roll through YE 2024
representing greater than 1.9% of NRA.
Fitch's loss expectation of 13.5% reflects a 5% stress to the YE
2021 NOI to account for month-to-month tenancy.
Change in Credit Enhancement (CE): As of the January 2023
remittance reporting, the pool's aggregate principal balance was
reduced by 23.8% to $833.2 million from $1.09 billion at issuance.
The pool has incurred $15.56 million in realized losses to date
from the disposition of the Marriott Galleria, Towneplace Suites
Dallas Las Colinas, Rite Aid Sugar Hill, Partridge Inn Augusta, and
St. Albans & Camino Commons loans. Three loans (2.2%) are fully
defeased. Seven loans (35.7%) are full-term IO, and the remaining
27 loans (64.3%) are amortizing.
Credit Opinion Loan: At issuance, the two largest loans in the
pool, Hilton Hawaiian Village (8.2% of the pool) and Moffett
Gateway (8.2% of the pool), had investment-grade credit opinions of
'BBB-sf' on a standalone basis. Based on collateral quality and
continued stable performance, the loans remain consistent with a
credit opinion loan.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Downgrades would occur with an increase in pool level losses from
underperforming or specially serviced loans. Downgrades to the
'AAsf' and 'AAAsf' categories are not likely due to the position in
the capital structure but may occur should interest shortfalls
affect the classes.
Downgrades to the 'BBBsf' and Asf' categories would occur should
overall pool losses increase significantly and/or one or more large
loans have an outsized loss, which would erode CE. Downgrades to
the 'CCCsf' and 'BBsf' categories would occur should loss
expectations increase and if performance of the FLOCs fail to
stabilize or additional loans default and/or transfer to the
special servicer.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Factors that could lead to upgrades would include stable to
improved asset performance coupled with pay down and/or defeasance.
Upgrades of the 'A-sf' and 'AA-sf' categories would likely occur
with significant improvement in CE and/or defeasance; however,
adverse selection, increased concentrations and further
underperformance of the FLOCs could cause this trend to reverse.
Upgrades to the 'BBBsf' category 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
'BBsf' categories are not likely until the later years in a
transaction and only if the performance of the remaining pool is
stable and there is sufficient CE to the classes.
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.
OCTANE RECEIVABLES 2023-1: S&P Assigns Prelim BB Rating on E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Octane
Receivables Trust 2023-1's asset-backed notes.
The note issuance is an ABS transaction backed by consumer
powersport receivables.
The preliminary ratings are based on information as of Feb. 2,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The availability of approximately 33.46%, 25.95%, 18.41%,
12.19%, and 9.40% in credit support, including excess spread, for
the class A, B, C, D, and E notes, respectively, based on stressed
cash flow scenarios. These credit support levels provide at least
5.00x, 4.00x, 3.00x, 2.00x, and 1.60x coverage of S&P's stressed
net loss levels for the class A, B, C, D, and E notes,
respectively.
-- The timely payment of interest and principal by the designated
legal final maturity dates under our stressed cash flow modeling
scenarios, which S&P believes are appropriate for the assigned
preliminary ratings.
-- The expectation that under a moderate ('BBB') stress scenario
(2.00x S&P's expected loss level), all else being equal, its
ratings will be within the credit stability limits specified by
section A.4 of the Appendix contained in "S&P Global Ratings
Definitions," published Nov. 10, 2021.
-- The collateral characteristics of the consumer powersport
amortizing receivables securitized, including a weighted average
nonzero FICO score of approximately 705 and an average monthly
payment of approximately $301.
-- The transaction's credit enhancement in the form of
subordination, overcollateralization that builds to a target level
of 3.50% of the initial receivables balance, a nonamortizing
reserve account, and excess spread.
-- The transaction's sequential-pay structure, which builds credit
enhancement (on a percentage-of-receivables basis) as the pool
amortizes.
-- The transaction's payment and legal structure.
Preliminary Ratings Assigned
Octane Receivables Trust 2023-1
Class A, $218.77 million: AAA (sf)
Class B, $25.78 million: AA (sf)
Class C, $25.63 million: A (sf)
Class D, $23.13 million: BBB (sf)
Class E, $11.88 million: BB (sf)
RBS COMMERCIAL 2013-SMV: S&P Lowers Cl. D Certs Rating to 'B (sf)'
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on eight classes of
commercial mortgage pass-through certificates from RBS Commercial
Funding Inc. 2013-SMV Trust, a U.S. CMBS transaction.
This U.S. stand-alone (single-borrower) CMBS transaction is backed
by a 10-year, fixed-rate, interest-only (IO) mortgage loan secured
by the borrower's fee simple interest in The Shops at Mission
Viejo, a 1.15 million-sq.-ft. regional mall (931,054 sq. ft. of
which serves as collateral) in Mission Viejo, Calif.
Rating Actions
S&P said, "The downgrades of classes A, B, C, D, E, and F reflect
our reevaluation of The Shops at Mission Viejo that secures the
sole loan in the transaction. Our analysis included a review of the
servicer-provided financial performance data for the nine months
ended Sept. 30, 2022, and year ended Dec. 31, 2021, and 2020, and
our assessment of the sponsor's (Simon Property Group L.P.'s)
inability to refinance the loan by its Feb. 1, 2023, maturity date.
According to the master servicer, Wells Fargo Bank N.A., the loan
is in the progress of transferring to special servicing because the
sponsor is facing difficulty obtaining refinancing proceeds to pay
off the loan due to current market conditions. The borrower is
currently seeking a maturity extension.
"In our last review in October 2020, we revised and lowered our
long-term sustainable net cash flow (NCF) to $27.5 million, which
generally aligned to the 2020 servicer-reported figures. Using an
8.0% S&P Global Ratings' capitalization rate, we arrived at an
expected-case valuation of $344.0 million (see "RBS Commercial
Funding Inc. 2013-SMV Trust Ratings Lowered On Eight Classes,"
published Oct. 21, 2020). Our current analysis considers the
further decline in servicer-reported NCF from $31.3 million in 2019
and $27.7 million in 2020 to $24.2 million in 2021. The servicer
reported a $17.2 million NCF for the nine months ended Sept. 30,
2022. We attributed the decreasing NCF mainly to lower base rent
and expense reimbursement income reflecting the continued
challenges that the retail mall sector faces. As a result, we
revised and lowered our long-term sustainable NCF by 21.1% to $21.7
million, which is 10.5% lower than the servicer-reported 2021
figures. Using an 8.0% S&P Global Ratings' capitalization rate, we
arrived at an expected-case valuation of $271.3 million--a decline
of 21.1% from our last review value and 50.0% from the issuance
appraisal value of $543.0 million. This yielded an S&P Global
Ratings' loan-to-value (LTV) ratio of 108.8% on the loan balance."
Although the model-indicated ratings on classes A, B, C, D, and E
were lower than their revised rating levels, S&P tempered its
downgrades on these classes because it weighed certain qualitative
considerations, including:
-- The potential that the property's operating performance could
improve above our revised expectations;
-- The significant market value decline that would be needed
before these classes experience principal losses;
-- The liquidity support provided in the form of servicer
advancing; and
-- The relative position of the classes in the payment waterfall.
S&P said, "We will continue to monitor the loan's workout and the
borrower's refinancing efforts, and, if we receive information that
differs materially from our expectations, we may revisit our
analysis and take further rating actions.
"In addition, the downgrade on class F to 'CCC (sf)' reflects our
view that, based on S&P Global Ratings' LTV ratio of over 100% and
its most subordinate position in the payment waterfall, this class
exhibits an elevated risk of default and loss due to current market
conditions.
"The downgrades on the class X-A and X-B IO certificates reflect
our criteria for rating IO securities, in which the ratings on the
IO securities would not be higher than that of the lowest-rated
reference class. Class X-A's notional amount references class A,
while class X-B's references classes B and C."
Property-Level Analysis
The Shops at Mission Viejo is a 1.15 million-sq.-ft. enclosed,
two-level, super-regional mall (of which 931,054 sq. ft. is owned
collateral) in Mission Viejo. The property, built in 1979 and
renovated and expanded in 1999, also includes 5,799 parking spaces.
The mall is situated along Crown Valley Parkway in South Orange
County, approximately a quarter-mile east of Interstate 5 and 14
miles southeast of John Wayne Airport. It is anchored by Macy's
Women's & Home (224,315 sq. ft., noncollateral), Macy's Mens'
(193,500 sq. ft., ground leased from the borrower on a lease that
expires in February 2030), and Nordstrom (165,000 sq. ft., ground
leased until February 2030). The property faces numerous
competitors in its trade area, including three (within 15 miles)
that have higher Green Street's quality ratings: Irvine Spectrum
Center, Fashion Island, and South Coast Plaza.
As previously discussed, S&P's property-level analysis considered
the mall's declining performance since the COVID-19 pandemic.
According to the June 30, 2022, tenant sales report, the inline
tenant sales (excluding Apple and Tesla) and occupancy cost at the
subject property were $452 per sq. ft. and 17.7%, respectively, as
calculated by S&P Global Ratings. This compares with $464 per sq.
ft. and 18.9%, respectively, that we calculated in our last review
using the year ended Dec. 31, 2019, tenant sales report. The
servicer reported an occupancy rate of 94.4% in 2019, 84.8% in
2020, and 90.3% in 2021. According to the Sept. 30, 2022, rent
roll, the collateral property was 84.4% occupied. The five largest
tenants made up 52.6% of the collateral net rentable area (NRA) and
include:
-- Macy's (21.9% of NRA, 0.2% of gross rent, as calculated by S&P
Global Ratings, February 2030 lease expiration);
-- Nordstrom (18.0%, 0.0%, February 2030);
-- Dick's Sporting Goods (9.0%, 6.8%, January 2032. Tenant took
over the former Forever 21 space);
-- Old Navy (2.3%, 2.0%, January 2026); and
-- Forever 21 (1.4%, 1.0%, January 2027).
The mall faces elevated tenant rollover risk in 2023 (12.3% of in
place gross rent, as calculated by S&P Global Ratings), 2024
(12.3%), 2025 (14.7%), and 2026 (19.7%).
In addition, the current tax bill payable by the borrower, which
was reported as $1.8 million for the nine months ended Sept. 30,
2022, and $2.4 million as of year-end 2021, may be lower than the
amount that would have to be paid by a potential purchaser of the
property if it was sold or transferred. This is due to California's
method of taxation (Proposition 13). Similarly to S&P's last
review, it considered the potential valuation impact in our
underlying capitalization rate assumption.
Transaction Summary
The IO mortgage loan had an initial and current balance of $295.0
million (according to the Jan. 13, 2023, trustee remittance
report), pays an annual fixed interest rate of 3.61%, and matures
on Feb. 1, 2023. To date, the trust has not experienced any
principal losses. The loan, which has a reported current payment
status, is currently on the master servicer's watchlist due to its
impending maturity. Wells Fargo reported a debt service coverage of
2.12x for the nine months ended Sept. 30, 2022, 2.25x as of
year-end 2021, and 2.56x as of year-end 2020.
Ratings Lowered
RBS Commercial Funding Inc. 2013-SMV Trust
Class A to 'A (sf)' from 'AA (sf)'
Class B to 'BBB (sf)' from 'A (sf)'
Class C to 'BB- (sf)' from 'BBB- (sf)'
Class D to 'B (sf)' from 'BB (sf)'
Class E to 'B- (sf)' from 'BB- (sf)'
Class F to 'CCC (sf)' from 'B+ (sf)'
Class X-A to 'A (sf)' from 'AA (sf)'
Class X-B to 'BB- (sf)' from 'BBB- (sf)'
SEQUOIA MORTGAGE 2023-1: Fitch Gives 'BBsf' Rating on Cl. B4 Certs
------------------------------------------------------------------
Fitch Ratings has assigned ratings to the residential
mortgage-backed certificates issued by Sequoia Mortgage Trust
2023-1 (SEMT 2023-1).
Entity/Debt Rating Prior
----------- ------ -----
SEMT 2023-1
A1 LT AAAsf New Rating AAA(EXP)sf
A10 LT AAAsf New Rating AAA(EXP)sf
A11 LT AAAsf New Rating AAA(EXP)sf
A12 LT AAAsf New Rating AAA(EXP)sf
A13 LT AAAsf New Rating AAA(EXP)sf
A14 LT AAAsf New Rating AAA(EXP)sf
A15 LT AAAsf New Rating AAA(EXP)sf
A16 LT AAAsf New Rating AAA(EXP)sf
A17 LT AAAsf New Rating AAA(EXP)sf
A18 LT AAAsf New Rating AAA(EXP)sf
A19 LT AAAsf New Rating AAA(EXP)sf
A2 LT AAAsf New Rating AAA(EXP)sf
A20 LT AAAsf New Rating AAA(EXP)sf
A21 LT AAAsf New Rating AAA(EXP)sf
A22 LT AAAsf New Rating AAA(EXP)sf
A23 LT AAAsf New Rating AAA(EXP)sf
A24 LT AAAsf New Rating AAA(EXP)sf
A25 LT AAAsf New Rating AAA(EXP)sf
A3 LT AAAsf New Rating AAA(EXP)sf
A4 LT AAAsf New Rating AAA(EXP)sf
A5 LT AAAsf New Rating AAA(EXP)sf
A6 LT AAAsf New Rating AAA(EXP)sf
A7 LT AAAsf New Rating AAA(EXP)sf
A8 LT AAAsf New Rating AAA(EXP)sf
A9 LT AAAsf New Rating AAA(EXP)sf
AIO1 LT AAAsf New Rating AAA(EXP)sf
AIO10 LT AAAsf New Rating AAA(EXP)sf
AIO11 LT AAAsf New Rating AAA(EXP)sf
AIO12 LT AAAsf New Rating AAA(EXP)sf
AIO13 LT AAAsf New Rating AAA(EXP)sf
AIO14 LT AAAsf New Rating AAA(EXP)sf
AIO15 LT AAAsf New Rating AAA(EXP)sf
AIO16 LT AAAsf New Rating AAA(EXP)sf
AIO17 LT AAAsf New Rating AAA(EXP)sf
AIO18 LT AAAsf New Rating AAA(EXP)sf
AIO19 LT AAAsf New Rating AAA(EXP)sf
AIO2 LT AAAsf New Rating AAA(EXP)sf
AIO20 LT AAAsf New Rating AAA(EXP)sf
AIO21 LT AAAsf New Rating AAA(EXP)sf
AIO22 LT AAAsf New Rating AAA(EXP)sf
AIO23 LT AAAsf New Rating AAA(EXP)sf
AIO24 LT AAAsf New Rating AAA(EXP)sf
AIO25 LT AAAsf New Rating AAA(EXP)sf
AIO26 LT AAAsf New Rating AAA(EXP)sf
AIO3 LT AAAsf New Rating AAA(EXP)sf
AIO4 LT AAAsf New Rating AAA(EXP)sf
AIO5 LT AAAsf New Rating AAA(EXP)sf
AIO6 LT AAAsf New Rating AAA(EXP)sf
AIO7 LT AAAsf New Rating AAA(EXP)sf
AIO8 LT AAAsf New Rating AAA(EXP)sf
AIO9 LT AAAsf New Rating AAA(EXP)sf
AIOS LT NRsf New Rating NR(EXP)sf
B1 LT AA-sf New Rating AA-(EXP)sf
B2 LT A-sf New Rating A-(EXP)sf
B3 LT BBB-sf New Rating BBB-(EXP)sf
B4 LT BBsf New Rating BB(EXP)sf
B5 LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch rates the residential mortgage-backed certificates issued by
Sequoia Mortgage Trust 2023-1 (SEMT 2023-1) as indicated. The
certificates are supported by 355 loans with a total balance of
approximately $333 million as of the cutoff date. The pool consists
of prime jumbo fixed-rate mortgages acquired by Redwood Residential
Acquisition Corp. (Redwood) from various mortgage originators.
Distributions of P&I and loss allocations are based on a
senior-subordinate, shifting-interest structure.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The collateral consists of
355 loans totaling $333 million and seasoned approximately six
months in aggregate. The borrowers have a strong credit profile
(765 FICO and 36.8% debt-to-income ratio [DTI]) and moderate
leverage (79% sustainable loan-to-value ratio [sLTV] and 70%
mark-to-market combined LTV ratio [cLTV]). The pool consists of
87.1% of loans where the borrower maintains a primary residence,
while 12.9% are of a second home; 75.6% of the loans were
originated through a retail channel. Additionally, 96.8% are
designated as qualified mortgage (QM) loans, while 3.2% are
designated as QM rebuttable assumption.
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 10.5% above a long-term sustainable level (versus
10.5% on a national level as of January 2023, down 1.7% since last
quarter). Underlying fundamentals are not keeping pace with the
growth in prices. These trends have led to significant home price
increases over the past year, with home prices rising 9.2% YOY
nationally as of October 2022.
Shifting-Interest Structure (Negative): The mortgage cash flow and
loss allocation are based on a senior-subordinate,
shifting-interest structure, whereby the subordinate classes
receive only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years. The lockout
feature helps to maintain subordination for a longer period should
losses occur later in the life of the deal. The applicable credit
support percentage feature redirects subordinate principal to
classes of higher seniority if specified credit enhancement (CE)
levels are not maintained.
Interest Reduction Risk (Negative): The transaction incorporates a
structural feature most commonly used by Redwood's program for
loans more than 120 days delinquent (a stop-advance loan). Unpaid
interest on stop-advance loans reduces the amount of interest that
is contractually due to bondholders in reverse-sequential order.
While this feature helps to limit cash flow leakage to subordinate
bonds, it can result in interest reductions to rated bonds in high
stress scenarios.
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 41.8% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
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.
DATA ADEQUACY
Fitch relied in its analysis on an independent third-party due
diligence review performed on about 91.5% of the pool. The
third-party due diligence was consistent with Fitch's "U.S. RMBS
Rating Criteria." AMC, Clayton and Canopy 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 of the presale report for further details.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5-designated website. Fitch received
loan-level information based on the American Securitization Forum's
(ASF) data layout format, and the data are considered
comprehensive. The ASF data tape layout was established with input
from various industry participants, including rating agencies,
issuers, originators, investors and others, to produce an industry
standard for the pool-level data in support of the U.S. RMBS
securitization market. The data contained in the ASF layout data
tape were reviewed by the due diligence companies, and no material
discrepancies were noted.
ESG CONSIDERATIONS
SEMT 2023-1 has an ESG Relevance Score of '4' [+] for Transaction
Parties & Operational Risk. Operational risk is well controlled for
in SEMT 2023-1 and includes strong R&W and transaction due
diligence as well as a strong aggregator, 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.
SILVER POINT 1: Fitch Assigns 'BB+sf' Rating on Class E Notes
-------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Silver
Point CLO 1, Ltd.
Entity/Debt Rating
----------- ------
Silver Point
CLO 1, Ltd.
A-1 LT NRsf New Rating
A-2 LT AAAsf New Rating
B LT AAsf New Rating
C-1 LT Asf New Rating
C-2 LT Asf New Rating
D LT BBB-sf New Rating
E LT BB+sf New Rating
F LT NRsf New Rating
Subordinated Notes LT NRsf New Rating
TRANSACTION SUMMARY
Silver Point CLO 1, Ltd., is an arbitrage cash flow collateralized
loan obligation (CLO) that will be managed by Silver Point RR
Manager, L.P. Net proceeds from the issuance of the secured and
subordinated notes will provide financing on a portfolio of
approximately $400 million of primarily first lien senior secured
loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is '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 CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
99.23% first-lien senior secured loans and has a weighted average
recovery assumption of 76.69%. 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 40.0% of the portfolio balance in aggregate while
the top five obligors can represent up to 11.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
CLOs.
Portfolio Management (Neutral): The transaction has a five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting 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 rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings. The WAL used for the transaction stress portfolio
is 12 months less than the WAL covenant to account for structural
and reinvestment conditions after the reinvestment period. In
Fitch's opinion, these conditions would reduce the effective risk
horizon of the portfolio during stress periods.
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 as
severe as between 'BBBsf' and 'AA+sf' for class A-2, between
'BB+sf' and 'A+sf' for class B, between 'B-sf' and 'BBB+sf' for
class C, between less than 'B-sf' and 'BB+sf' for class D, and
between less than 'B-sf' and 'BB-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-2 notes; and as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'A+sf' for class C, 'A+sf' for
class D, and 'BBB+sf' for class E.
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.
SILVER POINT 1: Moody's Assigns B3 Rating to $250,000 Cl. F Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to two classes of
notes issued by Silver Point CLO 1, Ltd. (the "Issuer" or "Silver
Point 1").
Moody's rating action is as follows:
US$240,000,000 Class A-1 Secured Floating Rate Notes due 2036,
Assigned Aaa (sf)
US$250,000 Class F Secured Deferrable Floating Rate Notes due 2036,
Assigned B3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
Silver Point 1 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 92.5% of the portfolio must consist of
senior secured loans and eligible investments, and up to 7.5% of
the portfolio may consist of second lien loans and unsecured loans
provided that 5.0% are permitted non-loan assets. Moody's expect
the portfolio to be approximately 90% ramped as of the closing
date.
Silver Point RR Manager, L.P. (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer issued six classes of
secured notes and one class subordinated notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 60
Weighted Average Rating Factor (WARF): 2993
Weighted Average Spread (WAS): 3.60%
Weighted Average Coupon (WAC): 7.0%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 8.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
STACR 2019-HQA3: Fitch Assigns 'BB+sf' Rating on Two Tranches
-------------------------------------------------------------
Fitch Ratings has assigned the following ratings and Outlooks to
five previously unrated classes from Freddie Mac STACR Trust
2019-HQA3 (STACR 2019-HQA3).
Entity/Debt Rating
----------- ------
STACR 2019-HQA3
B-1 35564XBD2 LT BB+sf New Rating
B-1A 35564XAD3 LT A-sf New Rating
B-1AI 35564XBG5 LT A-sf New Rating
B-1AR 35564XBF7 LT A-sf New Rating
B-1B 35564XAE1 LT BB+sf New Rating
TRANSACTION SUMMARY
Fitch has rated other classes within this transaction since deal
close. The classes with ratings assigned today are subordinate
classes in the transactions and were unrated at deal close. All of
the transactions have performed well since closing with many of the
previously rated bonds upgraded or assigned a Positive Rating
Outlook.
KEY RATING DRIVERS
Higher Achievable Ratings than at Issuance
Since Fitch initially assigned ratings at issuance to this
transaction, the subordinate bonds have materially better credit
protection. This is driven by the increase in credit enhancement
(CE) and lower losses. Since issuance, the subordinate bonds have
de-levered (increased in CE) significantly due to senior bonds
paying down resulting from fast prepayments. Additionally, due to
modelling changes, and significant home price appreciation, Fitch's
model losses are down from issuance. Further, the M1 bond has paid
off and the bonds being assigned ratings are now in the second pay
position. (Subordinate to the M2 and related exchangeable)
Structural Performance
Material Paydown But Slowing Prepayments: Due to very fast
prepayments throughout the pandemic, GSE-CRT front pay bonds have
been paying off allowing subordinate bonds to de-lever. (the M1
bond in this transaction has already paid in full.) The transaction
has a lifetime CPR of 39%, 12-month CPR of 18% but a three-month
CPR of only 7%.
Credit Enhancement Increase: The fast paydown of first pay bonds
has resulted in significant deleveraging and CE build-up for the
subordinated bonds. The original CE for these bonds at close was
1.05% and 0.60% for the B1A and B1B, respectively, and is 6.03% and
3.44% as of January 2023 resulting in more than 5x increase in CE.
Collateral Performance
Delinquency: As of January 2023, average 30 days or more
delinquency (30+ DQ) for this deal is 5.5%. This is reflective of
potential adverse selection of the remaining borrowers as they were
unable to prepay during the supportive environment of the past few
years but down materially from the 9.89% in February 2021. The
decline has been driven by cures as the total realized loss is less
than 1bps.
Home Price Appreciation
Overall, home price value appreciation has slowed and is expected
to decline modestly considering the increased interest rate
environment. While home prices are likely to continue moderating,
the substantial build up in equity since the onset of the pandemic
is a positive for the projected losses of the remaining collateral.
Fitch currently views the U.S as 10.5% overvalued on a population
weighted basis as of the end of 3Q22
STACR 2019-HQA3 has an ESG credit relevance score of '4'[+].
Certain drivers of these ratings include exposure to accessibility
to affordable housing and exposure to compliance risks including
fair lending practices, mis-selling, repossession/foreclosure
practices, consumer data protection (data security).
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 stress sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0%, in addition to the
model projected decline at the base case. This analysis indicates
that there is some potential rating migration with higher MVDs
compared with the model projection.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth with no
assumed overvaluation. The analysis assumes positive home price
growth of 10.0%. Excluding the senior classes already rated 'AAAsf'
as well as classes that are constrained due to qualitative rating
caps, the analysis indicates there is potential positive rating
migration for all of the other rated classes.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modelling process uses the modification
of these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance. For enhanced disclosure of Fitch's
stresses and sensitivities, please refer to U.S. RMBS Loss
Metrics.
ESG CONSIDERATIONS
STACR 2019-HQA3 has an ESG Relevance Score of '4' [+] for Customer
Welfare - Fair Messaging, Privacy & Data Security due to STACR
being a GSE program that addresses access and affordability while
driving strong performance, which has a positive impact on the
credit profile, and is relevant to the ratings in conjunction with
other factors.
STACR 2019-HQA3 has an ESG Relevance Score of '4' [+] for Human
Rights, Community Relations, Access & Affordability due to STACR
being a GSE program that addresses access and affordability while
driving strong performance, which has a positive impact on the
credit profile, and is relevant to the ratings in conjunction with
other factors.
Certain drivers of these ratings include exposure to accessibility
to affordable housing and exposure to compliance risks including
fair lending practices, mis-selling, repossession/foreclosure
practices, consumer data protection (data security).
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.
TELOS CLO 2013-3: Moody's Cuts Rating on $24.1MM E-R Notes to Caa1
------------------------------------------------------------------
Moody's Investors Service has downgraded the rating on the
following notes issued by Telos CLO 2013-3, Ltd.:
US$24,100,000 Class E-R Mezzanine Secured Deferrable Floating Rate
Notes due 2026, Downgraded to Caa1 (sf); previously on November 12,
2021 Upgraded to B2 (sf)
Telos CLO 2013-3, Ltd., originally issued in February 2013 and
refinanced in August 2017, is a managed cashflow CLO. The notes are
collateralized primarily by a portfolio of broadly syndicated
senior secured corporate loans. The transaction's reinvestment
period ended in July 2019.
RATINGS RATIONALE
The downgrade rating action on the Class E-R notes reflects the
specific risks to the junior notes posed by par loss and credit
deterioration observed in the underlying CLO portfolio. Based on
the trustee's January 2023 report[1], the OC ratio for the Class
E-R notes is reported at 93.55% versus the April 2022[2] level of
106.23%. Furthermore, Moody's calculated weighted average rating
factor (WARF) has been deteriorating and the current level is 3715
compared to 3624, in April 2022. WARF is also presently failing the
trigger of 2917.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $77,460,327
Defaulted par: $2,602,117
Diversity Score: 19
Weighted Average Rating Factor (WARF): 3715
Weighted Average Spread (WAS): (before accounting for reference
rate floors): 4.15%
Weighted Average Recovery Rate (WARR): 47.82%
Weighted Average Life (WAL): 2.46 years
Par haircut in OC tests: 11.34%
In addition to base case analysis, Moody's considered additional
scenarios where outcomes could diverge from the base case. These
additional scenarios include, among others, near term defaults by
distressed issuers, deterioration in credit quality of the
underlying portfolio, decrease in overall WAS, and lower recoveries
on defaulted assets.
Methodology Used for the Rating Action
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors that Would Lead to an Upgrade or Downgrade of the Rating:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
UBS-BARCLAYS 2012-C3: Moody's Cuts Rating on Cl. X-B Certs to Caa1
------------------------------------------------------------------
Moody's Investors Service has downgraded the rating on one IO class
in UBS-Barclays Commercial Mortgage Trust 2012-C3 as follows:
Cl. X-B, Downgraded to Caa1 (sf); previously on Mar 8, 2022
Affirmed B2 (sf)
RATINGS RATIONALE
The rating on the IO class X-B was downgraded due to the decline in
the credit quality of its reference classes resulting from
principal paydowns of higher quality reference classes. The IO
class is the only outstanding Moody's-rated class in this
transaction. The IO Class X-B references Class G, which is not
rated by Moody's. Class G has realized a 0.2 % loss as of the
January 2023 remittance report.
Moody's rating action reflects a base expected loss of 19.6% of the
current pooled balance, compared to 2.6% at Moody's last review.
Moody's base expected loss plus realized losses is now 0.4% of the
original pooled balance, compared to 1.7% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
An IO class may be subject to ratings upgrades if there is an
improvement in the credit quality of its referenced classes,
subject to the limits and provisions of the updated IO
methodology.
An IO class may be subject to ratings downgrades if there is (i) a
decline in the credit quality of the reference classes and/or (ii)
paydowns of higher quality reference classes, subject to the limits
and provisions of the updated IO methodology.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in this rating were "Large Loan and Single
Asset/Single Borrower Commercial Mortgage-Backed Securitizations
Methodology" published in July 2022. Moody's analysis incorporated
a loss and recovery approach in rating the P&I classes in this deal
since 100% of the pool is in special servicing. In this approach,
Moody's determines a probability of default for particular
specially serviced loans that it expects will generate a loss and
estimates a loss given default based on a review of broker's
opinions of value (if available), other information from the
special servicer, available market data and Moody's internal data.
The loss given default for each loan also takes into consideration
repayment of servicer advances to date, estimated future advances
and closing costs. Translating the probability of default and loss
given default into an expected loss estimate, Moody's then applies
the aggregate loss from specially serviced to the most junior
classes and the recovery as a pay down of principal to the most
senior classes.
DEAL PERFORMANCE
As of the January 12, 2023 distribution date, the transaction's
aggregate certificate balance has decreased by 98.2% to $18.9
million from $1.08 billion at securitization. The certificates are
collateralized by two remaining mortgage loans, which are
delinquent and in special servicing.
No loan has been liquidated from the pool since securitization;
however, the transaction has experienced a small loss of $88,241 (a
loss severity of 0.2%) applied to the lowest P&I Class G.
The largest specially serviced loan is the Hamptons Mixed Use
Portfolio Loan ($15.6 million – 82.2% of the pool), which is
secured by a portfolio of seven retail, restaurant and mixed-use
properties located on the east end of Long Island, NY. The loan
was transferred to special servicing for imminent monetary default
in July 2022 and is paid through August 2022. The borrower did not
pay off the loan at its maturity in September 2022. Per the
servicer commentary, the co-borrowers are in litigation amongst
themselves. A payoff had been provided, but the co-Borrowers could
not agree amongst themselves on how to resolve the debt. The
special servicer is preparing to dual track litigation efforts in
the event the borrower parties cannot reach a quick resolution and
the loan is currently reported being in foreclosure.
The second specially serviced loan is the Southridge Square Loan
($3.4 million – 17.8% of the pool), which is secured by a 144,182
square feet (SF) retail center located in Des Moines, IA. The loan
was transferred to special servicing for imminent monetary default
in July 2020 and is paid through July 2022. The borrower did not
pay off the loan at its maturity in September 2022. A foreclosure
sale occurred in August 2022 and the property is now in REO.
UNITED AUTO 2023-1: S&P Assigns BB (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to United Auto Credit
Securitization Trust 2023-1's automobile receivables-backed notes.
The note issuance is an ABS transaction backed by subprime auto
loan receivables.
The ratings reflect:
-- The availability of approximately 63.40%, 51.63%, 41.89%,
32.02%, and 28.55% credit support for the class A, B, C, D, and E
notes, respectively, based on stressed cash flow scenarios. These
credit support levels provide at least 2.80x, 2.27x, 1.83x, 1.42x,
and 1.25x coverage of S&P's expected cumulative net loss of 22.25%
for the class A, B, C, D, and E notes, respectively.
-- The expectation that under a moderate ('BBB') stress scenario
(1.50x S&P's expected loss level), all else being equal, its 'AAA
(sf)', 'AA- (sf)', 'A- (sf)', 'BBB- (sf)', and 'BB (sf)' ratings on
the class A, B, C, D, and E notes, respectively, are within its
credit stability limits.
-- The timely payment of interest and principal by the designated
legal final maturity dates under S&P's stressed cash flow modeling
scenarios, which it believes are appropriate for the assigned
ratings.
-- The collateral characteristics of the series' subprime
automobile loans, S&P's view of the credit risk of the collateral,
and S&P's updated macroeconomic forecast and forward-looking view
of the auto finance sector.
-- The series' bank accounts at Wells Fargo Bank N.A., which do
not constrain the ratings.
-- S&P's operational risk assessment of United Auto Credit Corp.
as servicer, and S&P's view of the company's underwriting and
backup servicing arrangement with Computershare Trust Co. N.A.
-- S&P's assessment of the transaction's potential exposure to
environmental, social, and governance credit factors, which are in
line with its sector benchmarks.
-- The transaction's payment and legal structures.
Ratings Assigned
United Auto Credit Securitization Trust 2023-1
Class A, $124.84 million: AAA (sf)
Class B, $53.85 million: AA- (sf)
Class C, $35.08 million: A- (sf)
Class D, $37.53 million: BBB- (sf)
Class E, $22.48 million: BB (sf)
VERTICAL BRIDGE 2022-1: Fitch Affirms 'BB-sf' Rating on Cl. F Notes
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Fitch Ratings has affirmed Vertical Bridge Holdings, LLC, series
2022-1, issued by VB-S1 Issuer, LLC.
Entity/Debt Rating Prior
----------- ------ -----
Vertical Bridge
2022-1
C-1 LT Asf Affirmed Asf
C-2-I 91823AAU5 LT Asf Affirmed Asf
C-2-II 91823AAW1 LT Asf Affirmed Asf
D 91823AAY7 LT BBB-sf Affirmed BBB-sf
F 91823ABA8 LT BB-sf Affirmed BB-sf
TRANSACTION SUMMARY
The transaction is an issuance of notes backed by mortgages
representing 90.0% of the annualized run rate net cash flow
(ARRNCF) on the tower sites and guaranteed by the direct parent of
the borrower issuer. This guarantee is secured by a pledge and
first-priority-perfected security interest in 100% of the equity
interest of the issuer, direct subsidiaries of which own or lease
3,535 wireless communication sites, including 3,737 towers and
other structures.
KEY RATING DRIVERS
Net Cash Flow and Trust Leverage: Issuer net cash flow (NCF) on the
pool is $116.0 million - 1.1% up since issuance. The debt multiple
relative to NCF on the rated classes is 12.5x compared to 12.8x at
issuance. Fitch has not redetermined NCF or maximum potential
leverage (MPL) given there have not been material migrations in the
performance, cash flow or collateral asset characteristics.
Credit Risk Factors: The major factors impacting Fitch's
determination of cash flow and MPL include: the large and diverse
collateral pool, creditworthy customer base with limited historical
churn, market position of the operator, capability of the operator,
limited operational requirements, high barriers to entry and strong
transaction structure.
Technology-Dependent Credit: Due to the specialized nature of the
collateral and potential for changes in technology to affect
long-term demand for tower space, similar to most wireless tower
transactions, the senior classes of this transaction do not achieve
ratings above 'Asf'. The securities have a rated final payment date
over 30 years after closing, and the long-term tenor of the
securities increases the risk that an alternative technology —
rendering obsolete the current transmission of wireless signals
through cellular sites — will be developed. Wireless service
providers (WSPs) currently depend on towers to transmit their
signals and continue to invest in this technology.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Sustained cash flow declines -- as a result of higher site expenses
and/or lease churn, or the development of an alternative technology
for the transmission of wireless signal -- could lead to
downgrades.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Increasing cash flow without an increase in corresponding debt,
from contractual lease escalators, new tenant leases, or lease
amendments could lead to upgrades.
However, upgrades are unlikely for this transaction given the
ability to issue additional notes, which rank pari passu or
subordinate to existing notes, without the benefit of additional
collateral. Upgrades are further constrained by the variable
funding notes, which will likely offset any improvements in cash
flow with a corresponding increase in debt, keeping leverage levels
relatively flat.
In addition, the transaction is capped in the 'Asf' category, given
the risk of technological obsolescence.
ESG CONSIDERATIONS
Vertical Bridge 2022-1 has an ESG Relevance Score of '4' for
Transaction & Collateral Structure due to several factors including
the issuer's ability to issue additional notes, which has a
negative impact on the credit profile, and is relevant to the
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.
WFRBS COMMERCIAL 2013-C12: Fitch Hikes Rating on Cl. F Certs to Bsf
-------------------------------------------------------------------
Fitch Ratings has upgraded five classes and affirmed three classes
of WFRBS Commercial Mortgage Trust (WFRBS) commercial mortgage
pass-through certificates series 2013-C12. In addition, a Stable
Outlook has been assigned to class F.
Entity/Debt Rating Prior
----------- ------ -----
WFRBS 2013-C12
A-S 92937FAF8 LT AAAsf Affirmed AAAsf
B 92937FAG6 LT AAAsf Affirmed AAAsf
C 92937FAH4 LT AAsf Upgrade Asf
D 92937FAU5 LT Asf Upgrade BBB-sf
E 92937FAW1 LT BBBsf Upgrade BBsf
F 92937FAY7 LT Bsf Upgrade CCCsf
X-A 92937FAJ0 LT AAAsf Affirmed AAAsf
X-B 92937FAL5 LT AAsf Upgrade Asf
KEY RATING DRIVERS
Increasing Credit Enhancement (CE); Expected Paydown: The upgrades
to classes C, D, E, F and interest-only class X-B reflect
increasing credit enhancement since the prior rating action
combined with upcoming paydown from maturing loans. The upgrades
also reflect a better than expected outcome from the Victoria Mall
loan, which paid in full ahead of its January 2023 maturity. Fitch
had expected significant losses on the loan given the regional mall
asset type in a tertiary location. The 27 remaining loans mature by
March 2023, and the majority exhibit metrics sufficient for
refinancing.
As of the January 2023 distribution date, the pool's aggregate
principal balance has paid down by 80.9% to $252.3 million from
$1.2 billion at issuance. Since Fitch's prior rating action, 19
loans totaling $236 million were repaid during their respective
open periods. Defeased collateral accounts for 15.8% of the pool.
The pool has experienced $5.8 million (0.4 of original pool
balance) in realized losses to date, mostly from the liquidation of
a specially serviced asset in 2018. The majority of the pool (94.2%
of pool) is currently amortizing. Two loans (5.8%) are full-term
interest only.
Minimal Loss Expectations: Loss expectations are minimal as the
majority of loans are performing and there is only one loan (1.9%)
in special servicing. There has been continued performance
stabilization of loans that had been affected by the pandemic.
The largest loan in the pool is Grand Beach Hotel loan (42.5%),
which is secured by a 424-key full service, oceanfront hotel
located in Miami Beach, FL. After transferring to special servicing
in May 2020 for imminent monetary default, a forbearance agreement
was executed in December 2020 and the loan returned to the master
servicer. The servicer-reported September 2022 DSCR was 1.24x.
According to the TTM October 2022 STR report, occupancy, ADR and
RevPar were reported to be 40%, $423.09 and $168.15, respectively.
The subject's resulting penetration rates during this period were
53%, 156% and 89%, respectively. While ADR has recovered, RevPar
and occupancy remain below pre-pandemic levels. The loan matures in
March 2023. According to the servicer, the borrower is in the
process of arranging replacement financing.
There are two loans that have been designated as Fitch Loans of
Concern (FLOCs). The largest FLOC is the Crane Building (3.65),
which is secured by a mixed-use property (30 apartment units and
ground floor retail/office) located in Portland, OR. The full-term
IO loan is scheduled to mature in March 2023, and there is
uncertainty with the upcoming maturity. The servicer reports that
the borrower is working toward obtaining refinancing but has
expressed concern and may request a forbearance. As of YE 2021, the
DSCR and occupancy were reported to be 1.50x and 88%,
respectively.
The second FLOC is the loan in special servicing, Kings Mall
(1.9%), which is secured by a 61,864sf retail property located in
Deerfield Township, OH. The loan transferred to special servicing
in June 2020 for payment default. The servicer continues to dual
track negotiations with the borrower with foreclosure litigation.
As of June 2022, subject occupancy was reported to be 100%. Fitch's
loss expectations of 27% reflect a value of approximately $72/sf.
Alternative Loss Considerations: Due to the concentrated nature of
the pool and the upcoming maturities (100% of the pool matures by
March 2023), Fitch performed a sensitivity and liquidation
analysis, which grouped the remaining loans based on their current
status and collateral quality and ranked them by their perceived
likelihood of repayment and/or loss expectation. This analysis
contributed to the upgrades.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Downgrades to classes A-S through C and the interest-only class X-B
are not likely due to the position in the capital structure and the
expected paydown from maturing loans but may occur should interest
shortfalls occur.
Downgrades to classes D, E and F are possible should overall loss
expectations for the pool increase significantly, performance of
the FLOCs further decline and loans fail to repay at their
respective maturity dates and transfer to special servicing.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Further upgrades to classes C and D are considered unlikely and
would be limited based on the sensitivity to concentrations or the
potential for future concentrations.
Further upgrades to classes E and F are also considered unlikely
due to pool concentrations but would be possible if there is
greater certainty from loan payoffs; the classes would not be
upgraded above 'Asf' if there is a likelihood of interest
shortfalls.
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.
[*] S&P Takes Various Actions on 33 Classes From Eight US RMBS Deal
-------------------------------------------------------------------
S&P Global Ratings completed its review of 33 classes from eight
U.S. RMBS re-securitized real estate mortgage investment conduit
(re-REMIC) transactions issued between 2004 and 2010. The review
yielded three upgrades, 14 affirmations, eight downgrades, and
eight withdrawals.
A list of Affected Rating can be viewed at:
https://bit.ly/3DsGypa
Analytical Considerations
S&P incorporate various considerations into its decisions to raise,
lower, or affirm ratings when reviewing the indicative ratings
suggested by our projected cash flows. These considerations are
based on transaction-specific performance or structural
characteristics (or both) and their potential effects on certain
classes. Some of these considerations may include:
-- Underlying collateral performance or delinquency trends,
-- Available subordination and/or overcollateralization,
-- An expected short duration,
-- A small loan count, and
-- Reduced interest payments due to loan modifications.
Rating Actions
S&P said, "The rating changes reflect our view of the associated
transaction-specific collateral performance, structural
characteristics, and/or applicable criteria. See the ratings list
for the specific rationales associated with the classes with rating
transitions.
"The affirmations reflect our view that our projected credit
support and collateral performance on these classes have remained
relatively consistent with our prior projections."
[*] S&P Takes Various Actions on 68 Classes From 10 U.S. RMBS Deals
-------------------------------------------------------------------
S&P Global Ratings completed its review on the ratings of 68
classes from 10 U.S. RMBS transactions issued between 2003 and
2007. These transactions are backed by alternative-A, closed-end
second lien, negative amortization, and prime jumbo collateral. The
review yielded seven downgrades, 58 affirmations, and three
withdrawals.
A list of Affected Ratings can be viewed at:
https://bit.ly/3HGbTHm
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by our projected cash flows. These considerations
are based on transaction-specific performance and/or structural
characteristics and their potential effects on certain classes.
Some of these considerations may include:
-- Collateral performance or delinquency trends;
-- Available subordination and/or overcollateralization;
-- Erosion of credit support;
-- Interest-only criteria;
-- Principal-only criteria; and
-- Small loan count.
Rating Actions
S&P said, "The rating changes reflect our opinion regarding the
associated transaction-specific collateral performance and/or
structural characteristics, as well as the application of specific
criteria applicable to these classes. See the ratings list below
for the specific rationales associated with each of the classes
with rating transitions.
"The rating affirmations reflect our opinion that our projected
credit support, collateral performance, and credit-related
reductions in interest on these classes has remained relatively
consistent with our prior projections."
Most of the downgrades are due to the payment allocation triggers
passing, which allows principal payments to be made to more
subordinate classes and thereby erodes projected credit support for
the affected classes.
[*] S&P Takes Various Actions on 765 Classes From 19 US RMBS Deals
------------------------------------------------------------------
S&P Global Ratings completed its review of 765 classes from 19 U.S.
RMBS credit risk transfer transactions issued in 2021 and 2022 by
both Fannie Mae and Freddie Mac. The transactions are primarily
backed by prime conforming collateral. The review yielded 148
upgrades and 617 affirmations.
A list of Affected Ratings can be viewed at;
https://bit.ly/3Yc5vgD
S&P said, "For each mortgage reference pool, we performed credit
analysis using updated loan-level information from which we
determined foreclosure frequency, loss severity, and loss coverage
amounts commensurate for each rating level.
"We used a mortgage operational assessment factor of 0.80x for both
Fannie Mae and Freddie Mac. In addition, we used the same
representation and warranty, due diligence, and self-employment
assumption factors that were applied at issuance."
The upgrades primarily reflect deleveraging as the transactions
season and lower default expectations for the remaining collateral
as combined loan-to-value ratios decrease. The transactions benefit
from low delinquencies, low accumulated losses to date, sequential
payment to the rated classes, and a growing percentage of credit
support to the rated classes. Of the 148 upgraded classes, 124 were
related modifiable and combinable real estate mortgage investment
conduit (MACR) certificates. Excluding the MACRs, the upgrades
reflect an average rating movement of 1.5 notches.
The affirmations reflect S&P's view that the projected collateral
performance relative to its projected credit support on these
classes remain relatively consistent with our prior projections.
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by the application of our criteria. These
considerations are based on transaction-specific performance or
structural characteristics (or both) and their potential effects on
certain classes. Some of these considerations include:
-- Collateral performance or delinquency trends;
-- Priority of principal payments;
-- Priority of loss allocation;
-- Expected short duration; and
-- Available subordination and credit enhancement floors.
*********
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