/raid1/www/Hosts/bankrupt/TCR_Public/230326.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, March 26, 2023, Vol. 27, No. 84
Headlines
1211 AVENUE 2015-1211: Fitch Affirms 'BBsf' Rating on Class E Certs
1988 CLO 2: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
720 EAST 2023-I: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
ABPCI DIRECT XII: S&P Assigns Prelim BB (sf) Rating on Cl. E Notes
ANCHORAGE CREDIT 5: Moody's Hikes Rating on $20MM E Notes From Ba1
AVIS BUDGET 2018-2: Moody's Hikes Rating on Class D Notes to Ba1
BANK5 2023-5YR1: Fitch Assigns 'B-(EXP)sf' Rating on Two Tranches
BARROW HANLEY I: Fitch Assigns 'BB-' Final Rating on Cl. E Notes
BARROW HANLEY I: Moody's Assigns B3 Rating to $950,000 Cl. F Notes
BIRCH GROVE 5: Fitch Assigns 'BB-sf' Rating on Class E Notes
BX TRUST 2019-MMP: Moody's Lowers Rating on Cl. F Certs to Caa1
BX TRUST 2019-RP: Fitch Affirms 'B-' Rating on Class F Certificates
CITIGROUP COMMERCIAL 2016-P4: Fitch Cuts Rating on F Debts to CCsf
COMM 2013-CCRE9: Fitch Affirms C Rating on Class F Debt
COMM 2015-CCE24: Fitch Affirms CCC Rating on Class F Debt
COMM 2019-521F: S&P Lowers Class F Certs Rating to 'CCC- (sf)'
CROWN CITY V: S&P Assigns Prelim BB- (sf) Rating on Class D Notes
ELMWOOD CLO 22: S&P Assigns Prelim B- (sf) Rating on Class F Notes
FORTRESS CREDIT XVIII: Fitch Assigns 'BB+sf' Rating on Cl. E Notes
FORTRESS CREDIT XVIII: Moody's Assigns B3 Rating to $3MM F Notes
HPS LOAN 2023-17: S&P Assigns Prelim BB-(sf) Rating on Cl. E Notes
INVESCO US 2023-2: Fitch Assigns 'BB+(EXP)' Rating on Cl. E Notes
J.P. MORGAN 2018-AON: S&P Lowers Class E Certs Rating to 'B+ (sf)'
JP MORGAN 2014-C25: Fitch Lowers Rating on Two Tranches to 'Csf'
JPMBB COMMERCIAL 2013-C12: Moody's Cuts Rating Class F Debt to Caa3
KKR CLO 46: Fitch Assigns 'BB-sf' Final Rating on Class E Notes
LAQ 2023-LAQ: S&P Assigns B- (sf) Rating on $71.76MM Class E Notes
MCF CLO 10: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
METRONET INFRA 2023-1: Fitch Gives BB-(EXP) Rating on C Notes
MOSAIC SOLAR 2023-2: Fitch Gives 'BB-(EXP)sf' Rating on Cl. D Notes
OAKTREE CLO 2023-1: S&P Assigns Prelim BB- (sf) Rating on E Notes
OCEAN TRAILS XIV: Fitch Assigns 'BBsf' Rating on Class E Notes
OCEAN TRAILS XIV: Moody's Assigns B3 Rating to $1MM Class F Notes
OCP CLO 2023-26: S&P Assigns BB- (sf) Rating on Class E Notes
OCTAGON 67: Fitch Assigns 'BB-(EXP)' Rating on Class E Notes
POST CLO 2023-1: S&P Assigns Prelim BB-(sf) Rating on Cl. E Notes
PRESTIGE AUTO 2021-1: S&P Affirms BB- (sf) Rating on Class E Notes
RR 26: S&P Assigns BB- (sf) Rating on $16.5MM Class D Notes
SAXON ASSET 2004-3: S&P Lowers Class M-1 Notes Rating to BB- (sf)
SEQUOIA MORTGAGE 2023-2: Fitch Gives BB- Final Rating on B4 Certs
SIXTH STREET XXII: S&P Assigns BB- (sf) Rating on Class E Notes
SLM STUDENT 2014-1: Fitch Affirms 'Bsf' Rating on Two Tranches
STANIFORD STREET: S&P Lowers Class E Notes Rating to 'D (sf)'
SYMPHONY CLO 38: S&P Assigns BB- (sf) Rating on Class E Notes
UBS COMMERCIAL 2012-C1: Fitch Lowers Rating on Cl. E Certs to 'Csf'
VENTURE 47: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
WFRBS COMMERCIAL 2012-C9: Fitch Affirms B-sf Rating on Cl. F Certs
WHITEBOX CLO IV: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
[*] Moody's Lowers $71.2MM of US RMBS Issued 2007-2008
[*] S&P Discontinues 'D' Ratings on 17 Classes From 6 US CMBS Deals
[*] S&P Takes Various Actions on 40 Classes From 15 U.S. RMBS Deals
[*] S&P Takes Various Actions on 52 Classes From 20 U.S. RMBS Deals
[*] S&P Takes Various Actions on 79 Classes From 11 U.S. RMBS Deals
*********
1211 AVENUE 2015-1211: Fitch Affirms 'BBsf' Rating on Class E Certs
-------------------------------------------------------------------
Fitch Ratings has affirmed eight classes of 1211 Avenue of the
Americas Trust 2015-1211 commercial mortgage pass-through
certificates.
The certificates represent the beneficial interests in the mortgage
loan securing the borrower's fee simple interest in a 45-story
office building totaling approximately two million sf of office and
retail space, located at 1211 Avenue of the Americas in New York,
NY. The 10-year, fixed-rate, interest-only loan matures in August
2025.
Entity/Debt Rating Prior
----------- ------ -----
1211 Avenue of
the Americas
Trust 2015-1211
A-1A1 90117PAA3 LT AAAsf Affirmed AAAsf
A-1A2 90117PAC9 LT AAAsf Affirmed AAAsf
B 90117PAJ4 LT AA-sf Affirmed AA-sf
C 90117PAL9 LT A-sf Affirmed A-sf
D 90117PAN5 LT BBB-sf Affirmed BBB-sf
E 90117PAQ8 LT BBsf Affirmed BBsf
X-A 90117PAE5 LT AAAsf Affirmed AAAsf
X-B 90117PAG0 LT AA-sf Affirmed AA-sf
KEY RATING DRIVERS
Overall Stable Performance Since Issuance: The property continues
to maintain a high occupancy, with servicer-reported occupancy of
95% as of December 2022, up from 91.5% at issuance. The most recent
servicer-reported year-end (YE) 2022 net cash flow (NCF) debt
service coverage ratio (DSCR) was 2.34x compared to 2.31x at YE
2021 and 2.38x at YE 2020.
Fitch's current NCF has increased to $92.1 million compared to $86
million at the last rating action, largely due to higher expense
reimbursements which are in line with historical levels and lower
tenant improvement and leasing commission assumptions stemming from
the recent lease renewal of two investment-grade credit tenants,
Fox Corporation and New Corporation. Based on publicly available
information, these two tenants both recently renewed for 20 years
through 2042. Fitch requested additional details of the terms of
the lease renewals, but were not provided. Fitch's issuance NCF was
$95.5 million.
Above Average Property Quality in Strong Location: 1211 Avenue of
the Americas consists of a 45-story, class A− office building
located in Midtown Manhattan. The property is adjacent to
Rockefeller Center and in close proximity to subway lines and major
transportation hubs.
High-Quality Tenancy: The top five tenants account for
approximately 92.1% of the NRA and include Fox Corporation (39.3%
of NRA; rated 'A-'; lease expiry in 2042), News Corporation (24.5%
of NRA; rated 'BBB-'; lease expiry in 2042), Ropes & Gray (16.7% of
NRA; lease expiry in March 2027), Axis Reinsurance (6.2% of NRA;
lease expiry in August 2023), RBC (3.2% of NRA; rated 'AA-'; lease
expiry in December 2026) and Nordea (2.2% of NRA; rated 'AA-';
lease expiry in April 2031). Tenants with investment-grade credit
ratings account for approximately 69.2% of the NRA. Less than 8% of
the NRA expires before loan maturity, including Axis Reinsurance
where Fitch requested a leasing update, but was not provided.
Fitch Leverage: The $1.035 billion mortgage loan has a Fitch DSCR
and loan-to-value (LTV) of 1.05x and 84.3%, respectively, and debt
of $514 psf. Fitch applied a stressed cap rate of 7.50% in its
analysis.
Sponsorship and Property Manager: The loan sponsor is Ivanhoé
Cambridge Inc. The property is sub-managed by IC US Capital
Properties LLC.
Single Asset Office: The transaction is secured by a single office
property and is, therefore, more susceptible to single-event risks
related to the secular shifts in market demand for office space,
sponsor, or the largest tenants occupying the property.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
A significant and sustained decline or expected decline in
occupancy and/or property cash flow.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrades to classes B through E are possible with stable to
improved occupancy, sustained cash flow improvement and further
clarity on the reason behind the volatility with respect to other
income, increased operating expenses and terms of the recent lease
renewals. Fitch rates classes A-1A1 and A-1A2 at 'AAAsf';
therefore, upgrades are not possible.
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.
1988 CLO 2: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to 1988 CLO 2
Ltd./1988 CLO 2 LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by 1988 Asset Management LLC, a
subsidiary of Muzinich & Co. Inc.
The preliminary ratings are based on information as of March 22,
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 broadly syndicated speculative-grade (rated 'BB+' and
lower) senior secured term loans.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
1988 CLO 2 Ltd./1988 CLO 2 LLC
Class A notes, $181.00 million: AAA (sf)
Class A loans, $75.00 million: AAA (sf)
Class B, $48.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D (deferrable), $24.00 million: BBB- (sf)
Class E (deferrable), $12.00 million: BB- (sf)
Subordinated notes, $49.00 million: Not rated
720 EAST 2023-I: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to 720 East CLO
2023-I Ltd./720 East CLO 2023-I LLC's floating-rate notes. The
transaction is managed by Northwestern Mutual Investment Management
Co. LLC.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term
loans.
The preliminary ratings are based on information as of March 17,
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 collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
720 East CLO 2023-I Ltd./720 East CLO 2023-I LLC
Class A-1, $320.00 million: AAA (sf)
Class A-2, $20.00 million: AAA (sf)
Class B, $40.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $15.00 million: BB- (sf)
Subordinated notes, $47.55 million: Not rated
ABPCI DIRECT XII: S&P Assigns Prelim BB (sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to ABPCI Direct
Lending Fund CLO XII Ltd./ABPCI Direct Lending Fund CLO XII 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 AB Private Credit Investors LLC, a subsidiary of
AllianceBernstein.
The preliminary ratings are based on information as of March 22,
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 collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
ABPCI Direct Lending Fund CLO XII Ltd./ABPCI Direct Lending Fund
CLO XII LLC
Class A, $99.45 million: AAA (sf)
Class A-L, $200.00 million: AAA (sf)
Class B, $60.95 million: AA (sf)
Class C (deferrable), $42.40 million: A (sf)
Class D (deferrable), $26.50 million: BBB (sf)
Class E (deferrable), $21.20 million: BB (sf)
Subordinated notes, $78.29 million: Not rated
ANCHORAGE CREDIT 5: Moody's Hikes Rating on $20MM E Notes From Ba1
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Anchorage Credit Funding 5, Ltd.:
US$63,000,000 Class B-R2 Senior Secured Fixed Rate Notes due 2036
(the "Class B-R2 Notes"), Upgraded to Aaa (sf); previously on
August 25, 2021 Assigned Aa1 (sf)
US$27,500,000 Class C-R2 Mezzanine Secured Deferrable Fixed Rate
Notes due 2036 (the "Class C-R2 Notes"), Upgraded to Aa1 (sf);
previously on August 25, 2021 Assigned A1 (sf)
US$25,000,000 Class D-R2 Mezzanine Secured Deferrable Fixed Rate
Notes due 2036 (the "Class D-R2 Notes"), Upgraded to A1 (sf);
previously on August 25, 2021 Assigned Baa1 (sf)
US$20,000,000 Class E Junior Secured Deferrable Fixed Rate Notes
due 2036 (the "Class E Notes"), Upgraded to Baa2 (sf); previously
on August 25, 2021 Upgraded to Ba1 (sf)
Anchorage Credit Funding 5, Ltd., originally issued in March 2018
and partially refinanced in August 2021 and in October 2020 is a
managed cashflow CBO. The notes are collateralized primarily by a
portfolio of corporate bonds and loans. The transaction's
reinvestment period will end in April 2023.
RATINGS RATIONALE
These rating actions reflect the benefit of the end of the deal's
reinvestment period in April 2023. In light of the reinvestment
restrictions during the amortization period which limit the ability
of the manager to effect significant changes to the current
collateral pool, Moody's analyzed the deal assuming a higher
likelihood that the collateral pool characteristics will be
maintained and continue to satisfy certain covenant requirements.
In particular, Moody's assumed that the deal will benefit from
lower weighted average rating factor (WARF). Moody's modeled a WARF
of 3307 compared to its current covenant level of 3396.
Additionally, Moody's noted that the deal currently benefits from
interest income on portfolio assets that significantly exceeds the
fixed rate of interest payable on the rated notes, due to the
deal's exposure to approximately 39% in floating-rate loans.
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
coupon, 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: $511,650,186
Defaulted par: $1,760,000
Diversity Score: 62
Weighted Average Rating Factor (WARF): 3307
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 4.81%
Weighted Average Coupon (WAC): 5.99%
Weighted Average Recovery Rate (WARR): 34.19%
Weighted Average Life (WAL): 5.1 years
In addition to the base case analysis, Moody's ran additional
scenarios where outcomes could diverge from the base case. The
additional scenarios consider one or more factors individually or
in combination, and include: defaults by obligors whose low ratings
or debt prices suggest distress, defaults by obligors with
potential refinancing risk, deterioration in the credit quality of
the underlying portfolio, decrease in overall WAS or net interest
income, and lower recoveries on defaulted assets.
Methodology Used for 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.
AVIS BUDGET 2018-2: Moody's Hikes Rating on Class D Notes to Ba1
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on eight
tranches of rental car asset-backed securities (ABS) issued by Avis
Budget Rental Car Funding (AESOP) LLC (AESOP or the issuer). The
issuer is an indirect subsidiary of the transaction sponsor and
single lessee, Avis Budget Car Rental, LLC (ABCR, Ba3 stable).
ABCR, a subsidiary of Avis Budget Group, Inc., is the owner and
operator of Avis Rent A Car System, LLC (Avis), Budget Rent A Car
System, Inc. (Budget), Zipcar, Inc. and Payless Car Rental, Inc.
(Payless). AESOP is ABCR's rental car securitization platform in
the U.S. The collateral backing the notes is a fleet of vehicles
and a single lease of the fleet to ABCR for use in its rental car
business.
Moody's actions on the rental car ABS are prompted by the
improvement in the credit profile of ABCR, as evidenced by the
upgrade of the company's corporate family ratings (CFR) to Ba3 from
B1 on March 22, 2023.
COMPLETE RATING ACTIONS
Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2018-2
Series 2018-2 Fixed Rate Rental Car Asset Backed Notes, Class D,
Upgraded to Ba1 (sf); previously on Jun 18, 2021 Definitive Rating
Assigned Ba2 (sf)
Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2019-2
Series 2019-2 Rental Car Asset Backed Notes, Class D, Upgraded to
Ba1 (sf); previously on Jun 18, 2021 Definitive Rating Assigned Ba2
(sf)
Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2020-1
Series 2020-1 Rental Car Asset Backed Notes, Class D, Upgraded to
Ba1 (sf); previously on Jun 18, 2021 Definitive Rating Assigned Ba2
(sf)
Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2021-1
Series 2021-1 Rental Car Asset Backed Notes, Class D, Upgraded to
Ba1 (sf); previously on May 18, 2021 Definitive Rating Assigned Ba2
(sf)
Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2021-2
Series 2021-2 Rental Car Asset Backed Notes, Class D, Upgraded to
Ba1 (sf); previously on Nov 17, 2021 Definitive Rating Assigned Ba2
(sf)
Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2022-1
Series 2022-1 Rental Car Asset Backed Notes, Class D, Upgraded to
Ba1 (sf); previously on Apr 14, 2022 Definitive Rating Assigned Ba2
(sf)
Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2022-3
Series 2022-3 Rental Car Asset Backed Notes, Class D, Upgraded to
Ba1 (sf); previously on Jul 21, 2022 Definitive Rating Assigned Ba2
(sf)
Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2022-4
Series 2022-4 Rental Car Asset Backed Notes, Class D, Upgraded to
Ba1 (sf); previously on Jul 21, 2022 Definitive Rating Assigned Ba2
(sf)
RATINGS RATIONALE
The rating actions were prompted by the improvement of the credit
profile of ABCR (the lessee) as evidenced by the upgrade of the
company's CFR to Ba3 from B1 on March 22, 2023. The upgrade on
ABCR's CFR reflects Moody's expectation that Avis will continue to
show good financial performance as the recovery in rental car
demand takes further hold, with earnings boosted in the near-term
by an industry fleet size that lags the recovery in demand.
Rental car ABS transactions securitize a single lease, making
performance partly dependent on the financial health of the rental
car company lessee.
The assumptions Moody's applied in its analysis of this
transaction:
Risk of sponsor default: Moody's assumed a 60% decrease in the
probability of default (from Moody's idealized default probability
tables) implied by the Ba3 rating of the sponsor. This decrease
reflects Moody's view that, in the event of a bankruptcy, ABCR
would be more likely to reorganize under a Chapter 11 bankruptcy
filing, as it would likely realize more value as an ongoing
business concern than it would if it were to liquidate its assets
under a Chapter 7 filing. Furthermore, given the sponsor's
competitive position within the industry and the size of its
securitized fleet relative to its overall fleet, the sponsor is
likely to affirm its lease payment obligations in order to retain
the use of the fleet and stay in business. Moody's arrived at the
60% decrease assuming an 80% probability that Avis would reorganize
under a Chapter 11 bankruptcy and a 75% probability (90% assumed
previously) that Avis would affirm its lease payment obligations in
the event of a Chapter 11 bankruptcy.
Disposal value of the fleet: Moody's assumed the following haircuts
to the net book value (NBV) of the vehicle fleet:
Non-Program Haircut upon Sponsor Default (Car): Mean: 19%
Non-Program Haircut upon Sponsor Default (Car): Standard Deviation:
6%
Non-Program Haircut upon Sponsor Default (Truck): Mean: 35%
Non-Program Haircut upon Sponsor Default (Truck): Standard
Deviation: 8%
Non-Program Haircut upon Sponsor Default (Tesla and electric
vehicles (EVs)): Mean: 29%
Non-Program Haircut upon Sponsor Default (Tesla & EVs): Standard
Deviation: 10%
Fixed Program Haircut upon Sponsor Default: 10%
Additional Fixed Non-Program Haircut upon Manufacturer Default
(Car): 20%
Additional Fixed Non-Program Haircut upon Manufacturer Default
(Truck): 10%
Additional Fixed Non-Program Haircut upon Manufacturer Default
(Tesla & EVs): 50%
Fleet composition -- Moody's assumed the following fleet
composition for the series 2021-2, 2022-1, 2022-3, and 2022-4
transactions (based on NBV of vehicle fleet):
Non-program Vehicles (Car, Tesla and EVs): 92.625%
Non-program Vehicles (Trucks): 5%
Program Vehicles (Car, Tesla and EVs): 2.375%
Non-program Manufacturer Concentration (percentage, number of
manufacturers, assumed rating):
Aa/A Profile: 25%, 2, A3
Baa Profile: 50%, 3, Baa3
Ba/B Profile: 25%, 1, Ba3
Program Manufacturer Concentration (percentage, number of
manufacturers, assumed rating):
Aa/A Profile: 0%, 0, A3
Baa Profile: 50%, 1, Baa3
Ba/B Profile: 50%, 1, Ba3
Fleet composition -- Moody's assumed the following fleet
composition for the series 2018-2, 2019-2, 2020-1, and 2021-1
transactions (based on NBV of vehicle fleet):
Non-program Vehicles: 97.5%
Program Vehicles: 2.5%
Non-program Manufacturer Concentration (percentage, number of
manufacturers, assumed rating):
Aa/A Profile: 25%, 2, A3
Baa Profile: 55%, 3, Baa3
Ba/B Profile: 20%, 1, Ba3
Program Manufacturer Concentration (percentage, number of
manufacturers, assumed rating):
Aa/A Profile: 0%, 0, A3
Baa Profile: 50%, 1, Baa3
Ba/B Profile: 50%, 1, Ba3
Manufacturer Receivables: 0%; receivables distributed in the same
proportion as the program fleet (Program Manufacturer Concentration
and Manufacturer Receivables together should add up to 100%)
Correlation: Moody's applied the following correlation
assumptions:
Correlation among the sponsor and the vehicle manufacturers: 10%
Correlation among all vehicle manufacturers: 25%
Default risk horizon -- Moody's assumed the following default risk
horizon:
Sponsor: 5 years
Manufacturers: 1 year
Moody's uses a fixed set of time horizon assumptions, regardless of
the remaining term of the transaction, when considering sponsor and
manufacturer default probabilities and the expected loss of the
related liabilities, which simplifies Moody's modeling approach
using a standard set of benchmark horizons.
Detailed application of the assumptions are provided in the
methodology.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Rental Vehicle
Securitizations Methodology" published in October 2021.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the ratings of the notes, as applicable if,
among other things, (1) the credit quality of the lessee improves,
(2) the likelihood of the transaction's sponsor defaulting on its
lease payments were to decrease, and (3) assumptions of the credit
quality of the pool of vehicles collateralizing the transaction
were to strengthen, as reflected by a stronger mix of program and
non-program vehicles and stronger credit quality of vehicle
manufacturers.
Down
Moody's could downgrade the ratings of the notes if, among other
things, (1) the credit quality of the lessee weakens, (2) the
likelihood of the transaction's sponsor defaulting on its lease
payments were to increase, (3) the likelihood of the sponsor
accepting its lease payment obligation in its entirety in the event
of a Chapter 11 were to decrease and (4) assumptions of the credit
quality of the pool of vehicles collateralizing the transaction
were to weaken, as reflected by a weaker mix of program and
non-program vehicles and weaker credit quality of vehicle
manufacturers.
BANK5 2023-5YR1: Fitch Assigns 'B-(EXP)sf' Rating on Two Tranches
-----------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
BANK5 2023-5YR1 commercial mortgage pass-through certificates,
series 2023-5YR1, as follows:
Entity/Debt Rating
----------- ------
BANK5 2023-5YR1
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
A-2-1 LT AAA(EXP)sf Expected Rating
A-2-2 LT AAA(EXP)sf Expected Rating
A-2-X1 LT AAA(EXP)sf Expected Rating
A-2-X2 LT AAA(EXP)sf Expected Rating
A-3 LT AAA(EXP)sf Expected Rating
A-3-1 LT AAA(EXP)sf Expected Rating
A-3-2 LT AAA(EXP)sf Expected Rating
A-3-X1 LT AAA(EXP)sf Expected Rating
A-3-X2 LT AAA(EXP)sf Expected Rating
A-S LT AAA(EXP)sf Expected Rating
A-S-1 LT AAA(EXP)sf Expected Rating
A-S-2 LT AAA(EXP)sf Expected Rating
A-S-X1 LT AAA(EXP)sf Expected Rating
A-S-X2 LT AAA(EXP)sf Expected Rating
B LT AA-(EXP)sf Expected Rating
B-1 LT AA-(EXP)sf Expected Rating
B-2 LT AA-(EXP)sf Expected Rating
B-X1 LT AA-(EXP)sf Expected Rating
B-X2 LT AA-(EXP)sf Expected Rating
C LT A-(EXP)sf Expected Rating
C-1 LT A-(EXP)sf Expected Rating
C-2 LT A-(EXP)sf Expected Rating
C-X1 LT A-(EXP)sf Expected Rating
C-X2 LT A-(EXP)sf Expected Rating
D LT BBB(EXP)sf Expected Rating
E LT BBB-(EXP)sf Expected Rating
F LT BB-(EXP)sf Expected Rating
G LT B-(EXP)sf Expected Rating
H LT NR(EXP)sf Expected Rating
RR Interest LT NR(EXP)sf Expected Rating
X-A LT AAA(E XP)sf Expected Rating
X-B LT AA-(EXP)sf Expected Rating
X-D LT BBB-(EXP)sf Expected Rating
X-F LT BB-(EXP)sf Expected Rating
X-G LT B-(EXP)sf Expected Rating
X-H LT NR(EXP)sf Expected Rating
- $8,265,000 class A-1 'AAAsf'; Outlook Stable;
- $150,000,000ab class A-2 'AAAsf'; Outlook Stable;
- $0b class A-2-1 'AAAsf'; Outlook Stable;
- $0bc class A-2-X1 'AAAsf'; Outlook Stable;
- $0b class A-2-2 'AAAsf'; Outlook Stable;
- $0bc class A-2-X2 'AAAsf'; Outlook Stable;
- $523,985,000ab class A-3 'AAAsf'; Outlook Stable;
- $0b class A-3-1 'AAAsf'; Outlook Stable;
- $0bc class A-3-X1 'AAAsf'; Outlook Stable;
- $0b class A-3-2 'AAAsf'; Outlook Stable;
- $0bc class A-3-X2 'AAAsf'; Outlook Stable;
- $682,250,000c class X-A 'AAAsf'; Outlook Stable;
- $112,084,000b class A-S 'AAAsf'; Outlook Stable;
- $0b class A-S-1 'AAAsf'; Outlook Stable;
- $0bc class A-S-X1 'AAAsf'; Outlook Stable;
- $0b class A-S-2 'AAAsf'; Outlook Stable;
- $0bc class A-S-X2 'AAAsf'; Outlook Stable;
- $43,859,000b class B 'AA-sf'; Outlook Stable;
- $0b class B-1 'AA-sf'; Outlook Stable;
- $0bc class B-X1 'AA-sf'; Outlook Stable;
- $0b class B-2 'AA-sf'; Outlook Stable;
- $0bc class B-X2 'AA-sf'; Outlook Stable;
- $155,943,000c class X-B 'AA-sf; Outlook Stable;
- $40,204,000b class C 'A-sf'; Outlook Stable;
- $0b class C-1 'A-sf'; Outlook Stable;
- $0bc class C-X1 'A-sf'; Outlook Stable;
--$0b class C-2 'A-sf'; Outlook Stable;
--$0bc class C-X2 'A-sf'; Outlook Stable;
--$23,148,000d class D 'BBBsf'; Outlook Stable;
- $9,747,000d class E 'BBB-sf'; Outlook Stable;
- $32,895,000cd class X-D 'BBB-sf'; Outlook Stable;
- $18,274,000d class F 'BB-sf'; Outlook Stable;
- $18,274,000cd class X-F 'BB-sf'; Outlook Stable;
- $12,183,000d class G 'B-sf'; Outlook Stable;
- $12,183,000cd class X-G 'B-sf'; Outlook Stable.
The following classes are not expected to be rated by Fitch:
- $32,894,967d class H;
- $32,894,967cd class X-H;
- $51,297,051de RR Interest.
(a) The initial certificate balances of classes A-2 and A-3 are
unknown and expected to be $673,974,000 in aggregate, subject to a
5% variance. The certificate balances will be determined based on
the final pricing of those classes of certificates. The expected
class A-2 balance range is $0 to $300,000,000, and the expected
class A-3 balance range is $373,974,000 to $673,974,000. Fitch's
certificate balances for classes A-2 and A-3 are assumed at the
midpoint of each range.
(b) Exchangeable Certificates. The class A-2, class A-3, class A-S,
class B and class C are exchangeable certificates. Each class of
exchangeable certificates may be exchanged for the corresponding
classes of exchangeable certificates, and vice versa. The dollar
denomination of each of the received classes of certificates must
be equal to the dollar denomination of each of the surrendered
classes of certificates. The class A-2 may be surrendered (or
received) for the received (or surrendered) classes A-2-1, A-2-X1,
A-2-2 and A-2-X2. The class A-3 may be surrendered (or received)
for the received (or surrendered) classes A-3-1, A-3-X1, A-3-2 and
A-3-X2. The class A-S may be surrendered (or received) for the
received (or surrendered) classes A-S-1, A-S-X1, A-S-2 and A-S-X2.
The class B may be surrendered (or received) for the received (or
surrendered) classes B-1, B-X1, B-2 and B-X2. The class C may be
surrendered (or received) for the received (or surrendered) classes
C-1, C-X1, C-2 and C-X2. The ratings of the exchangeable classes
would reference the ratings of the associate referenced or original
classes.
(c) Notional amount and interest only.
(d) Privately placed and pursuant to Rule 144A.
(e) Represents the "eligible vertical interest" comprising 5.0% of
the pool.
The expected ratings are based on information provided by the
issuer as of March 20, 2023.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 24 loans secured by 134
commercial properties having an aggregate principal balance of
$1,025,941,018 as of the cut-off date. The loans were contributed
to the trust by Wells Fargo Bank, National Association, Morgan
Stanley Mortgage Capital Holdings LLC, Citi Real Estate Funding
Inc. and Bank of America, National Association. The Master Servicer
is expected to be Wells Fargo Bank, N.A. and the Special Servicer
is expected to be CWCapital Asset Management LLC.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 45.6% of the loans by
balance, cash flow analysis of 95.4% of the pool and asset summary
reviews on 100% of the pool.
KEY RATING DRIVERS
Lower Leverage Compared with Recent Transactions. The pool has
lower leverage compared with recent multiborrower transactions
rated by Fitch Ratings. The pool's Fitch loan-to value ratio (LTV)
of 91.1% is lower than both the YTD 2023 and 2022 averages of 95.2%
and 106.1%, respectively. The pool's Fitch NCF debt yield (DY) of
10.6% is higher than the YTD 2023 and 2022 averages of 10.3% and
9.9%, respectively. Excluding credit opinion loans, the pool's
Fitch LTV and DY are 96.6% and 9.8%, respectively, compared with
the equivalent conduit YTD 2023 LTV and DY averages of 95.2% and
10.1%, respectively.
Higher Pool Concentration: The pool is more concentrated than
recently rated Fitch transactions. The top 10 loans in the pool
make up 68.7% of the pool, higher than the 2023 YTD and 2022 levels
of 60.2% and 55.2%, respectively. Fitch measures loan concentration
risk with an effective loan count, which accounts for both the
number and size of loans in the pool. The pool's effective loan
count is 19.4.
Shorter-Duration Loans: The pool is 100% composed of loans with
five-year terms, whereas standard conduit transactions have
historically included mostly loans with 10-year terms. The shorter
the remaining term of a loan, the lower the term PD, all else
equal.
Investment-Grade Credit Opinion Loans: Three loans representing
20.3% of the pool received an investment-grade credit opinion. Oak
Street NLP Fund Portfolio (9.5%) received a standalone credit
opinion of 'A-sf*', Brandywine Strategic Office Portfolio (7.9%)
received a standalone credit opinion of 'BBB-sf*', and 1201 3rd
Ave. (2.9%) received a standalone credit opinion of 'BBB+sf*'. The
pool's total credit opinion percentage of 20.35% is above the 2023
YTD and 2022 averages of 15.81% and 14.38%, respectively.
Below-Average Amortization: Based on the scheduled balances at
maturity, the pool will pay down by 0.9%, which is below the 2023
YTD average of 2.3% and below the 2022 average of 3.3%. The pool
has 19 interest-only loans (83.3% of pool by balance), which is
higher than the 2023 YTD average of 71.0% and 2022 average of
77.5%. Two loans (11.8% of pool by balance) are partial interest
only, which is below the 2023 YTD average of 12.4%, but above the
2022 average of 10.2%.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Declining cash flow decreases property value and capacity to meet
its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes in one variable, Fitch
NCF:
- Original Rating: 'AAAsf' / AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' /
'BBB-sf' / 'BB-sf' / 'B-sf';
- 10% NCF Decline: 'AAAsf' / 'AAsf' / 'Asf' / 'BBBsf' / 'BB+sf' /
'BBsf' / 'B-sf' / '
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes to in one variable,
Fitch NCF:
- Original Rating: 'AAAsf' / AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' /
'BBB-sf' / 'BB-sf' / 'B-sf';
- 10% NCF Increase: 'AAAsf' / 'AAAsf' / 'AA+sf' / 'A+sf' / 'BBB+sf'
/ 'BBBsf' / 'BBsf' / 'B+sf'.
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.
BARROW HANLEY I: Fitch Assigns 'BB-' Final Rating on Cl. E Notes
----------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Barrow Hanley CLO I, Ltd.
Entity/Debt Rating
----------- ------
Barrow Hanley
CLO I, Ltd.
A-1 068751AA4 LT NRsf New Rating
A-2 068751AC0 LT NRsf New Rating
B 068751AE6 LT AAsf New Rating
C 068751AG1 LT Asf New Rating
D 068751AJ5 LT BBB-sf New Rating
E 06875PAA1 LT BB-sf New Rating
F 06875PAC7 LT NRsf New Rating
Subordinated
Notes 06875PAE3 LT NRsf New Rating
TRANSACTION SUMMARY
Barrow Hanley CLO I, Ltd. (the issuer) is the inaugural arbitrage
cash flow collateralized loan obligation (CLO) being managed by BH
Credit Management LLC. Net proceeds from the issuance of the
secured and subordinated notes will provide financing on a
portfolio of approximately $385.0 million of primarily first lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B+'/'B', which is in line with that of
recent CLOs. Issuers rated in the 'B' rating category denote a
highly speculative credit quality; however, the notes benefit from
appropriate credit enhancement (CE) and standard U.S. CLO
structural features.
Asset Security (Positive): The indicative portfolio consists of
99.8% first lien senior secured loans and has a weighted average
recovery assumption of 77.0%. 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
constitute up to 40.0% of the portfolio balance in aggregate, while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
U.S. CLOs.
Portfolio Management (Neutral): The transaction has a 3.1-year
reinvestment period and reinvestment criteria similar to other U.S.
CLOs. Fitch's analysis was based on a stressed portfolio created by
making adjustments to the indicative portfolio to reflect
permissible concentration limits and collateral quality test
levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings. The weighted average life (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
metrics; the results under these sensitivity scenarios are as
severe as between 'BB+sf' and 'A+sf' for class B notes, between
'Bsf' and 'BBB+sf' for class C notes, between less than 'B-sf' and
'BB+sf' for class D notes and between less than 'B-sf' and 'B+sf'
for class E notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
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 notes, 'A+sf' for class C notes,
'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, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
BARROW HANLEY I: Moody's Assigns B3 Rating to $950,000 Cl. F Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to three classes of
notes issued by Barrow Hanley CLO I, Ltd. (the "Issuer" or "Barrow
Hanley CLO I").
Moody's rating action is as follows:
US$231,000,000 Class A-1 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$23,100,000 Class A-2 Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$950,000 Class F Secured Deferrable Floating Rate Notes due 2035,
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.
Barrow Hanley CLO I is a managed cash flow CLO. The issued notes
will be collateralized primarily by broadly syndicated senior
secured corporate loans. At least 90% of the portfolio must consist
of first lien senior secured loans and eligible investments, and up
to 10% of the portfolio may consist of second lien loans, senior
unsecured loans and bonds. The portfolio is approximately 90%
ramped as of the closing date.
BH Credit Management LLC (the "Manager") will direct the selection,
acquisition and disposition of the assets on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's three year reinvestment period.
Thereafter, unless an optional redemption of the secured notes in
full has occurred, the manager may not reinvest and all proceeds
received will be used to amortize the notes in sequential order.
This is the Manager's first CLO.
In addition to the Rated Notes, the Issuer issued four other
classes of secured notes and one class of subordinated notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $385,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 2739
Weighted Average Spread (WAS): SOFR + 3.50%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 7.1 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.
BIRCH GROVE 5: Fitch Assigns 'BB-sf' Rating on Class E Notes
------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Birch
Grove CLO 5, Ltd.
Entity/Debt Rating
----------- ------
Birch Grove
CLO 5 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
Birch Grove CLO 5, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by Birch
Grove Capital LP. Net proceeds from the issuance of the secured and
subordinated notes will provide financing on a portfolio of
approximately $400 million of primarily first lien senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 25.2, versus a maximum covenant, in
accordance with the initial expected matrix point of 26.2. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
100% first lien senior secured loans. The weighted average recovery
rate (WARR) of the indicative portfolio is 75.5% versus a minimum
covenant, in accordance with the initial expected matrix point of
74.2%.
Portfolio Composition (Positive): The largest three industries may
constitute up to 39% 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 3.1-year
reinvestment period and reinvestment criteria similar to other U.S.
CLOs. Fitch's analysis was based on a stressed portfolio created by
making adjustments to the indicative portfolio to reflect
permissible concentration limits and collateral quality test
levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios 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. The WAL
used for the transaction stress portfolio and matrices analysis 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 'BBB+sf' 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 'B+sf' for class E.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrade scenarios are not applicable to the class A-2 notes, as
these notes are in the highest rating category of 'AAAsf'. At other
rating levels, variability in key model assumptions, such as
increases in recovery rates and decreases in default rates, could
result in an upgrade. Fitch evaluated the notes' sensitivity to
potential changes in such metrics; the minimum rating results under
these sensitivity scenarios are 'AAAsf' for class B, 'A+sf' for
class C, 'Asf' 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, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
BX TRUST 2019-MMP: Moody's Lowers Rating on Cl. F Certs to Caa1
---------------------------------------------------------------
Moody's Investors Service has affirmed one rating and downgraded
the ratings on five classes of CMBS securities, issued by BX Trust
2019-MMP, Commercial Mortgage Pass-Through Certificates, Series
2019-MMP as follows:
Cl. A, Affirmed Aaa (sf); previously on Aug 29, 2019 Definitive
Rating Assigned Aaa (sf)
Cl. B, Downgraded to A1 (sf); previously on Aug 29, 2019 Definitive
Rating Assigned Aa3 (sf)
Cl. C, Downgraded to Baa1 (sf); previously on Aug 29, 2019
Definitive Rating Assigned A3 (sf)
Cl. D, Downgraded to Ba1 (sf); previously on Aug 29, 2019
Definitive Rating Assigned Baa3 (sf)
Cl. E, Downgraded to B1 (sf); previously on Aug 29, 2019 Definitive
Rating Assigned Ba3 (sf)
Cl. F, Downgraded to Caa1 (sf); previously on Aug 29, 2019
Definitive Rating Assigned B3 (sf)
RATINGS RATIONALE
The rating on one P&I class, Cl. A, was affirmed because Moody's
loan-to-value (LTV) ratio was within acceptable range.
The ratings on the five P&I classes were downgraded due to an
increase in Moody's LTV as a result of decline in performance. The
loan transferred to special servicing in January 2023 and has a
maturity date in August 2023, with an additional option to extend
till August 2024. The net cash flow (NCF) for the NYC multifamily
portfolio was significantly impacted with coronavirus outbreak and
remains below securitization levels. Furthermore, actual trust NCF
DSCR based on the trailing 12-month period ending September 2022
was 0.87X based on the in-place strike rate of 3.5% from the
interest rate cap agreement that expires in August 2023. Including
the mezzanine debt, the total debt actual NCF DSCR (at the 3.5%
strike rate) would be 0.58X.
In this credit rating action Moody's considered qualitative and
quantitative factors in relation to the senior-sequential structure
and location and quality of the assets. Moody's analyzed multiple
scenarios to reflect various levels of stress in property values
could impact loan proceeds at each rating level.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization or a
significant improvement in the loan's performance.
Factors that could lead to a downgrade of the ratings include a
further decline in actual or expected performance of the loan or
interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Large Loan and
Single Asset/Single Borrower Commercial Mortgage-Backed
Securitizations Methodology" published in July 2022.
DEAL PERFORMANCE
As of the March 15, 2023 distribution date, the transaction's
aggregate certificate balance is approximately $270.3 million
compared to $271.7 million at securitization due to paydown on pro
rata basis (approximately $1.35 million) stemming from partial
release of air appurtenant to the 434 West 19th Street property.
The securitization is backed by one floating rate loan secured by a
fee simple interests in 11 multifamily properties located across
three Manhattan neighborhoods totaling 637 apartment units. There
is mezzanine debt of approximately $92.8 million held outside the
trust.
The sponsors are Blackstone Real Estate Partners VIII and Fairstead
Capital, who acquired the portfolio in 2015 and have since invested
approximately $34.7 million ($54,500 per unit) to renovate and
reposition the assets. At securitization, the sponsor contributed
approximately $47.7 million in fresh equity and inclusive of the
new equity, the sponsors' cost basis was approximately $224.7
million.
The buildings were developed between 1900 and 1987, with an average
year built of 1958. They are generally of Class A/B+ quality and
range from 4 stories to 19 stories. Property sizes range from 9 to
200 units, with an average complex size of 58 units. The largest
property (200 units; 250 West 19th Street) accounts for 31% of the
portfolio's total units. Based on the September 2022 rent roll,
occupancies at the properties range from 79% to 100%, with an
average occupancy for the portfolio of 93%. The portfolio's average
historical occupancy was 89% in 2016, 86% in 2017, 95% in 2018 and
96% at securitization.
The portfolio's net operating income (NOI) had been on an upward
trajectory since the 2015 acquisition and renovation, and peaking
at $14.5 million for full year 2019. With the coronavirus outbreak
the properties were not able to generate enough cash to fully cover
debt service for the trust mortgage debt and the mezzanine debt.
The portfolio's NCF for the trailing twelve month period ending
September 2022 was $12.0 million up from $7.5 million in full year
2021. The loan remains current, paid through March 2023 with no
outstanding P&I advances. However, the properties are currently
not generating enough cash flow to cover all debt service
obligations.
Moody's has adjusted the NCF to $13.8 million and increased the
capitalization rate to 7.5% from $15.3 million in NCF and 7.15%
capitalization rate at securitization, respectively. Moody's LTV
ratio for the first mortgage balance is 147% based on Moody's
Value. Adjusted Moody's LTV ratio for the first mortgage balance is
129% based on Moody's Value using a cap rate adjusted for the
current interest rate environment. There are outstanding interest
shortfalls totaling $3,106 affecting Cl. F and Cl. RRI and no
losses have been realized as of the current distribution date.
BX TRUST 2019-RP: Fitch Affirms 'B-' Rating on Class F Certificates
-------------------------------------------------------------------
Fitch Ratings has upgraded three classes and affirmed three classes
of the BX Trust 2019-RP, Commercial Mortgage Pass-Through
Certificates, Series 2019-RP (BX Trust 2019-RP). The Rating Outlook
for class B is Stable following the upgrade and the Rating Outlook
for class C is Positive.
Entity/Debt Rating Prior
----------- ------ -----
BX 2019-RP
A 05607VAA5 LT AAAsf Affirmed AAAsf
B 05607VAC1 LT AAAsf Upgrade AAsf
C 05607VAE7 LT AAsf Upgrade Asf
D 05607VAG2 LT Asf Upgrade BBB-sf
E 05607VAJ6 LT BB-sf Affirmed BB-sf
F 05607VAL1 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Increased Credit Enhancement; Paydown from Releases: As of the
March 2023 remittance reporting, the pool's aggregate principal
balance has been paid down by 56.5% to $100 million from $230
million at issuance. Since Fitch's prior rating action, two
properties in the pool have been released resulting in
approximately $84.3 million in paydown to the transaction; In
total, six of the original properties in the pool has been
released. Any future paydown from releases will follow a
sequential-pay structure to the certificates after prepayments
accounting for the first 20% of loan were applied to the
certificates on a pro-rata basis.
The upgrades reflect the transaction paydown and resulting
increased credit enhancement combined with overall stable portfolio
performance. The Positive Outlook for class C reflects the
potential for upgrade with continued stable/improving portfolio
performance, additional property releases and/or clarity on
upcoming maturity.
The floating rate, interest-only loan had an initial two-year term
and is scheduled to mature in June 2023; there is one, one-year
extension option remaining.
Stable Performance and Cash Flow: As of YE 2022, the
servicer-reported net cash flow debt service coverage ratio was
1.77x. Occupancy at five of the remaining six properties has been
stable or improved since issuance. Occupancy at one property (Giant
Eagle; 5.1% of outstanding balance) has declined to 0% due to the
single-tenant grocer vacating upon lease expiration in 2021.
Despite this vacancy, portfolio occupancy was reported to be 83.7%
according to the September 2022 rent rolls, in line with 84%
reported at issuance.
The largest property by percentage of outstanding balance is
Cornerstar (54.9% of outstanding balance). The collateral is a
430,503 square foot retail property located in Aurora, CO, a
southeast suburb of Denver. The subject is shadow anchored by a
128,000-sf Super Target store, while the largest collateral tenants
include a large (88,125-sf) 24 Hour Fitness as well as Urban Air
Trampoline, Marshalls, HomeGoods, Ross Dress for Less and Ulta
Beauty. According to the September 2022 rent roll, occupancy has
improved to 88.9% (when excluding seasonal tenant Spirit Halloween)
from 75.7% at issuance. In addition, performance at the property
has improved after several tenants received pandemic related rent
relief in the form of rent abatements in 2020.
Experienced Sponsorship and Property Management: The loan is
sponsored by Blackstone Real Estate Partners VII L.P. and SITE
Centers Corp. (SITE; fka DDR Corp.). SITE (BBB/Stable) owned and
operated 119 shopping centers (including 18 via unconsolidated
joint ventures) as of Dec. 31, 2022. Blackstone reported
approximately $975 billion in assets under management as of
December 2022.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Downgrades to classes A and B are not likely due to the position in
the capital structure but may occur should interest shortfalls
occur. A downgrade to classes C through F is possible if there is a
material and sustained decline in the portfolio's occupancy and/or
cash flow.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrades to classes C, D, E, and F would include improved portfolio
performance over a sustained period and/or additional releases and
subsequent paydown without adverse selection.
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.
CITIGROUP COMMERCIAL 2016-P4: Fitch Cuts Rating on F Debts to CCsf
------------------------------------------------------------------
Fitch Ratings has downgraded two and affirmed 11 classes of
Citigroup Commercial Mortgage Trust 2016-P4. Additionally, classes
D and X-C were assigned Negative Rating Outlooks.
Entity/Debt Rating Prior
----------- ------ -----
CGCMT 2016-P4
A-2 29429EAB7 LT AAAsf Affirmed AAAsf
A-3 29429EAC5 LT AAAsf Affirmed AAAsf
A-4 29429EAD3 LT AAAsf Affirmed AAAsf
A-AB 29429EAE1 LT AAAsf Affirmed AAAsf
A-S 29429EAH4 LT AAAsf Affirmed AAAsf
B 29429EAJ0 LT AA-sf Affirmed AA-sf
C 29429EAK7 LT A-sf Affirmed A-sf
D 29429EAL5 LT BBB-sf Affirmed BBB-sf
E 29429EAN1 LT CCCsf Downgrade B-sf
F 29429EAQ4 LT CCsf Downgrade CCCsf
X-A 29429EAF8 LT AAAsf Affirmed AAAsf
X-B 29429EAG6 LT AA-sf Affirmed AA-sf
X-C 29429EAW1 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Increased Loss Expectations: Loss expectations have increased since
Fitch's last review, primarily driven by one specially serviced
loan, 401 South State Street (4.5% of pool), which is secured by a
vacant office property located in the CBD of Chicago, IL. Six loans
(32.0% of the pool) are considered Fitch Loans of Concerns (FLOCs),
including the one specially serviced loan (4.5% of the pool).
Fitch's ratings are based on base case loss expectations of 7.9%.
The largest contributor to loss expectations is the 401 South State
Street loan (4.5% of pool) which is secured by a 487,000-sf of
office space located in the CBD of Chicago, IL. The collateral
consists of the 401 South State Street building (479,522-sf) and
the 418 South Wabash Avenue building (7,500-sf). The properties are
100% vacant after the former single tenant, Robert Morris College
(previously 75% of the NRA), vacated prior to its June 2024 lease
expiration and stopped paying rent in April 2020. The loan
transferred to the special servicer in June 2020 for payment
default. A receiver was placed in September 2020, per the watchlist
commentary, a foreclosure sale is reported to have occurred in
March 2023 and is in the process of being confirmed. Exposure has
increased significantly to $39.5 million compared to $38.0 million
at the last rating action. Fitch's base case loss of 90% is based
on the most recent appraisal with additional stresses which
reflects a value psf of $42.
The next largest contributor to loss expectations is the Opry Mills
loan (10.9% of the pool) which is secured by a 1.2 million-sf super
regional mall located in Nashville, TN. The property is located
adjacent to Gaylord Opryland Resort and Convention Center, the
nation's largest non-gaming hotel and convention facility. The
Grand Old Opry, considered the home of country music, is also
located across the street. Property occupancy as of September 2022
was 89.1%, down slightly from YE 2021 occupancy at 92.1%, YE 2020
at 96.6%, 97.7% at YE 2019 and 98% at YE 2018. NOI DSCR as of
September 2022 declined to 2.65x from 2.70x at YE 2021, 2.66x at YE
2020.
The property's major tenants include; Bass Pro Shops (11.0% of NRA;
4/2025); Regal Cinemas (8.5% of NRA; 5/2025); Dave & Busters (4.8%
of NRA; 5/2026); Forever 21 (4.5% of NRA; 1/2026) and Off-Broadway
Shoes (2.5% of NRA; 1/2026). Near term lease rollover includes
13.5% of NRA in 2023 and 7.5% of NRA in 2024. Tenant sales were
requested but not received, per the loan documents the tenant sales
reports are not a requirement.
Fitch's base case loss of 8% is based on a 12% cap rate and 10%
stress to the YE 2021 NOI to account for upcoming lease rollover.
The third largest contributor to loss expectations is the Esplanade
I loan (5.7% of the pool) which is secured by a 609,251-sf
suburban, office property located in Downers Grover, IL. The
property is located approximately 20 miles west of Chicago. The
property's occupancy as of September 2022 was 77%, 76% at YE 2021
from 85% at YE 2020. Occupancy declines were due to tenants
vacating ahead of lease expiration after falling behind on rental
payments.
In addition, the property's top tenant Hillshire Farms (12.1% of
NRA) is vacating its space at the property upon lease expiry in May
2023. According to the servicer, there is a tenant specific TI/LC
reserve account for the Hillshire Farms space that currently has
$1.1 million and a general TI/LC account that has $1 million. As of
February 2023, there was a reported $725,000 in the excess cash
flow account.
The property's major tenants include, IRS (12.3% of NRA; 7/2026);
Hillshire Brands (12.1% of NRA; 5/2023); DG Hotels Conference
Center (5.1% of NRA; MTM); JMG Financial Group (3.8% of NRA;
11/2027); New York Life Insurance (3.8% of NRA; 5/2028).
Fitch's base case loss of 10% is based on a 20% stress to the YE
2021 NOI to reflect the potential significant upcoming lease
rollover.
Increased Credit Enhancement: As of February 2023, remittance, the
pool's aggregate balance has been reduced by 11.3% to $641 million
from $721 million at issuance. Since Fitch's last rating action,
one loan, McMinnville Town Center ($3.8MM) was prepaid ahead of the
scheduled maturity date and five loans (9.9% of the pool) have been
defeased. Seven loans (26.0% of pool) have full term, interest only
payments. Twenty-four loans (50.8%) had partial interest only
payments, but are now all amortizing
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Sensitivity factors that lead to downgrades include an increase
in pool-level losses from specially serviced loans and larger
FLOCs. Downgrades to the senior classes (A-1 through A-S) are less
likely due to high credit enhancement (CE) but may occur if losses
increase substantially or if there is likelihood for interest
shortfalls. A downgrade to classes B, C, D and interest-only
classes X-B and X-C would likely occur should additional loans
transfer to special servicing and/or the performance of the larger
FLOCs fail to stabilize. Classes E and F could be downgraded if
realized losses on the specially serviced loan upon liquidation are
higher than expected.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Sensitivity factors that lead to upgrades would include stable to
improved asset performance coupled with paydown and/or defeasance.
Classes would not be upgraded above 'Asf' if there is a likelihood
of interest shortfalls. Upgrades to classes B, C and associated
interest only classes X-B and X-C would likely occur with
significant improvement in CE and with improved performance of the
larger FLOCs.
An upgrade to class D is not likely until the later years of the
transaction and only if the performance of the remaining pool is
stable, as the FLOCs and other properties stabilize and if there is
sufficiently high CE to the class. Upgrades to classes E and F are
unlikely but could occur with substantial improvement in
performance amongst the FLOCs and specially serviced loan or if the
specially serviced loan is disposed of with better than expected
recoveries.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
COMM 2013-CCRE9: Fitch Affirms C Rating on Class F Debt
-------------------------------------------------------
Fitch Ratings has upgraded three and affirmed six classes of COMM
2013-CCRE9 Mortgage Trust. The Rating Outlook for classes C and D
is Stable following the upgrade, and the Outlook for class B is
Positive following the upgrade.
Entity/Debt Rating Prior
----------- ------ -----
COMM 2013-CCRE9
A-4 12625UBF9 LT AAAsf Affirmed AAAsf
A-M 12625UAC7 LT AAAsf Affirmed AAAsf
A-SB 12625UBA0 LT AAAsf Affirmed AAAsf
B 12625UAE3 LT AAsf Upgrade Asf
C 12625UAG8 LT Asf Upgrade BBBsf
D 12625UAJ2 LT BBsf Upgrade B-sf
E 12625UAL7 LT CCsf Affirmed CCsf
F 12625UAN3 LT Csf Affirmed Csf
X-A 12625UBC6 LT AAAsf Affirmed AAAsf
KEY RATING DRIVERS
Increasing Credit Enhancement (CE); Expected Paydown: The upgrades
to classes B, C and D and Outlook Positive on class B reflect
increasing CE since Fitch's prior rating action, combined with the
expectation of further upcoming paydown from maturing loans. The
upgrades also reflect a better than expected outcome from the
Northridge Mall loan, which was paid in full, and the real estate
owned (REO) North Oaks asset, which was liquidated without
incurring losses; these were the second and third largest
contributor to pool loss expectations at the prior rating action.
The 49 remaining loans in the pool will mature by July 2023, and
the majority exhibit performance metrics that are supportive for
refinancing.
As of the March 2023 distribution date, the pool's aggregate
principal balance has been reduced by 63.7% to $506.3 million from
$1.4 billion at issuance. Since Fitch's prior rating action, four
loans totaling $197 million were repaid during their respective
open periods, and the REO North Oaks asset was liquidated for $36.8
million. Defeased collateral accounts for 42.1% of the pool, up
from 37.2% at the prior rating action. The pool has experienced
$10.1 million (0.7% of original pool balance) in realized losses to
date. The majority of the pool (95.2% of pool) is currently
amortizing. Three loans (4.8%) are full-term interest only.
Improved Loss Expectations: Loss expectations have improved
compared to the prior rating action with the bulk of the losses
stemming from the two specially serviced loans. Performance of
loans affected by the pandemic continues to stabilize.
The largest loan in the pool and largest contributor to expected
losses is the specially serviced Valley Hills Mall loan (10.6%),
which is secured by a 325,166-sf portion of a 936,682-sf regional
mall located in Hickory, NC. Non-collateral anchors include Belk,
JCPenney and Dillard's. A former anchor tenant Sears closed in
2020. Occupancy declined to 74% at YE 2017 from 90% at YE 2016
following the loss of multiple large tenants. Occupancy has since
remained in the low 80s since 2018. As of the December 2022 rent
roll, collateral occupancy was 80%.
The loan transferred to special servicing in September 2020 due to
payment default and a receiver was appointed in March 2021. The
loan is currently 60+ days delinquent. According to the servicer,
there have been discussions with a potential buyer for the property
and a loan assumption is being contemplated. Fitch's loss
expectation of 68% reflects an implied cap rate of 24% on the YE
2021 NOI. The high expected loss incorporates the sustained
underperforming nature of the regional mall and uncertainty
surrounding the ultimate execution of the loan assumption.
The other asset in special servicing is Winn Dixie-New Orleans, a
59,000-sf former grocery store. Winn-Dixie vacated in 2017, prior
to lease expiration. The asset became REO in October 2019. The
servicer has been successful in leasing up a portion of the
property to AutoZone (64% of NRA) and is working to finalize a
lease for the remaining vacant space. Fitch's loss expectations of
33% reflect a value of approximately $68/sf.
Alternative Loss Consideration: Due to the concentrated nature of
the pool and the upcoming maturities (100% of the pool matures by
July 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-4 through C and the interest-only class X-B
are not likely due to the increasing CE and the expected paydown
from maturing loans, but may occur should interest shortfalls
affect these classes.
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 additional 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:
A further upgrade to class B is possible with continued paydown
and/or better than expected outcomes for Valley Hills Mall and Winn
Dixie-New Orleans. An upgrade of classes C and D would be possible
if there was greater certainty from loan payoffs, but
would be limited based on the sensitivity to concentrations or the
potential for future concentrations. The classes would not be
upgraded above 'Asf' if there is a likelihood of interest
shortfalls.
Upgrades to classes E and F are unlikely given their reliance on
the specially serviced Valley Hills Mall loan and REO Winn Dixie -
New Orleans asset, but may occur should recoveries be significantly
better than expected.
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 2015-CCE24: Fitch Affirms CCC Rating on Class F Debt
---------------------------------------------------------
Fitch Ratings has affirmed 11 classes of Deutsche Bank Securities,
Inc.'s COMM 2015-CCRE24 Mortgage Trust (COMM 2015-CCRE24). Fitch
has also maintained the Negative Outlook on class E.
Entity/Debt Rating Prior
----------- ------ -----
COMM 2015-CCRE24
A-4 12593JBE5 LT AAAsf Affirmed AAAsf
A-5 12593JBF2 LT AAAsf Affirmed AAAsf
A-M 12593JBH8 LT AAAsf Affirmed AAAsf
A-SB 12593JBC9 LT AAAsf Affirmed AAAsf
B 12593JBJ4 LT AA-sf Affirmed AA-sf
C 12593JBK1 LT A-sf Affirmed A-sf
D 12593JBL9 LT BBB-sf Affirmed BBB-sf
E 12593JAL0 LT B-sf Affirmed B-sf
F 12593JAN6 LT CCCsf Affirmed CCCsf
X-A 12593JBG0 LT AAAsf Affirmed AAAsf
X-C 12593JAC0 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Stable Loss Expectations: Overall loss expectations for the pool
have remained relatively stable since Fitch's last rating action.
Despite stabilizing performance of the larger hotel and retail
Fitch Loans of Concern (FLOCs) previously impacted by the pandemic,
several larger office loans are now considered FLOCs and have
higher expected losses compared to the last rating action. Ten
loans (23.6% of the pool) are considered FLOCs, including one REO
asset (0.7%) and two office loans in the top 15 (9%).
Fitch's current ratings incorporate a base case loss of 6.50%. The
Negative Outlook on class E reflects the potential for downgrade
given the performance and refinance concerns associated with the
larger office and hotel FLOCs, primarily Two Chatham Center &
Garage, Westin Portland, 40 Wall Street and McMullen Portfolio
loans.
Fitch Loans of Concerns: The largest FLOC and largest increase in
loss since the last rating action is the Two Chatham Center &
Garage loan (4.8% of the pool), which is secured by a 290,501-sf
office building and a 2,284-car parking garage located in
Pittsburgh, PA. This FLOC was flagged for a significant drop in
parking revenues and declining occupancy since issuance that has
contributed to lower base rents and expense reimbursements.
Per the master servicer, cash management has been implemented due
to the low debt service coverage ratio (DSCR). The YTD September
2022 NOI DSCR was 1.02x compared to YE 2021 DSCR of 0.96x. The
property was 45.2% occupied as September 2022, down from 47.2% at
YE 2021, 56% in 2020, 59% in 2019 and 60% at issuance.
Fitch's base case loss expected loss of 39% reflects an 11% cap
rate and 5% stress to the annualized September 2022 NOI. In
addition, the analysis included an increased recognition of loss to
100%, reflecting the higher potential for a term or maturity
default due the decline in performance and deteriorating outlook
for the office sector.
The second largest contributor to overall pool loss expectations is
the Westin Portland loan (4.6% of the pool), which is secured by a
205-unit full service hotel located in downtown Portland, OR. The
loan was modified and returned to the master servicer as a
corrected loan in December 2022. The loan was previously specially
serviced since June 2020 due to delinquent payments as a result of
the pandemic. The hotel, which no longer operates under the Westin
flag, underwent an eight-month renovation and re-opened in August
2017 under a new boutique name, The Dossier Hotel.
Occupancy declined as rooms were taken offline during construction,
but still has not recovered to pre-renovation levels. This loan was
already flagged as a FLOC prior to the pandemic due to market
conditions in Portland remaining soft from new supply; the reduced
foot traffic as a result of the pandemic further contributed to the
property's performance challenges. Per the January 2023 STR report,
the property is lagging its competitive set with occupancy, ADR,
and RevPAR of 37.8%, $142 and $54, respectively, compared to 55.7%,
$161 and $90.
Fitch's base case expected loss of 27% reflects an 11.25% cap rate
to the YE 2018 NOI, reflecting a stressed value per key of
approximately $163,000.
The third largest contributor to overall pool loss expectations is
The McMullen Portfolio (2.7% of the pool), which is secured by a
portfolio of eight suburban office buildings totaling 274,919-sf;
these buildings are situated across three business parks located in
Ann Arbor, MI. This FLOC was flagged for the decline in portfolio
occupancy to 67.6% as of June 2022 from 86% in 2020. Three of the
eight properties, comprising approximately 24% of the portfolio's
NRA, are currently 100% vacant due to the tenant, Nexient, vacating
at lease expiration in July 2020. One property is 94% occupied and
the remaining four are all 100% occupied. Upcoming rollover
includes 16.1% in 2023 and 18.2% in 2024.
Fitch's base case expected loss of 18% reflects a 11.00% cap rate
and 15% stress to the annualized June 2022 NOI to account for
upcoming rollover and refinance risk.
The fourth largest contributor to overall pool loss expectations is
the 40 Wall Street loan (4.2% of the pool), which is secured by a
1.16 million-sf office property with approximately 45,000-sf of
ground floor retail located in the Financial District of Manhattan.
The largest tenants include Green Ivy (7.7% of NRA, expiry in
11/2061), Country-Wide Insurance (7.3%, 8/2036), Duane Reade (4.6%,
3/2023 and 2.0%, 1/2033), Thornton Tomasetti Inc. (5.2%, 1/2033),
Hadassah-The Women's Zionist (3.9%, 9/2025) and Jay Suites
(co-working space; 3.9%, 11/2032).
Occupancy declined to 82.9% in December 2022 from 86% at YE 2021,
89% at YE 2019 and 94% at YE 2018. According to CoStar, the
Financial District office submarket reported a 20% vacancy with
average asking rents of $55 psf. As of December 2022, the
property's in-place rent was below market, averaging $37.34 psf.
The declining performance of this FLOC was largely attributed to
pandemic-related concessions that were offered with a long-term
goal of retaining tenants.
Additionally, other tenants delayed their move in dates, affecting
rent collections. As of September 2022, the NOI DSCR declined to
1.10x from 1.30x at YE 2021, 1.43x at YE 2020, 1.85x at YE 2019 and
2.18x at YE 2018. Property-level NOI in 2021 declined by 9% from
2020. and is 44% below issuance. Per the master servicer, upcoming
rollover includes approximately 54,500 sf (4.6% of NRA) scheduled
to roll within 30 days; the master servicer has reached out to the
borrower for updates on plans to improve property performance.
Fitch's base case expected loss of 9% reflects a 9.25% cap rate and
5% stress to the annualized September 2022 NOI to account for
performance and refinance concerns due to the increasing vacancy
and upcoming lease rollover. At issuance, the loan was given an
investment grade credit opinion; however, given the decline in
performance, the loan is no longer considered to have
characteristics consistent with a credit opinion loan.
The specially serviced REO Cypress Pointe Shopping Center asset
(0.7% of the pool) is a 11,907-sf neighborhood retail center,
formerly anchored by Farm Fresh, located in Virginia Beach, VA. The
loan transferred to special servicing in September 2020 due to Farm
Fresh vacating at the end of its lease expiration in April 2020,
and the space remains vacant. Per the special servicer, a leasing
agent was hired; the asset is not currently listed for sale.
Major tenants include Dollar Tree (9.4% of NRA; expiry 1/2025),
Surf Rider Restaurant (4.4%; expiry 12/2023) and A Child's Dream
Daycare (4.4%; expiry 10/2025). The property was 39% occupied as of
the January 2023 rent roll. An update on leasing activity has been
requested. Fitch's base case loss of 48% reflects a stressed value
psf of $42.
Increased Credit Enhancement: As of the March 2023 distribution
date, the pool's aggregate principal balance was reduced by 19.5%
to $1.12 billion from $1.39 billion at issuance. Fourteen loans
(13.3%) are fully defeased, up from nine loans (6.4%) at the last
rating action. Since Fitch's last rating action, three loans ($87.3
million) were repaid in full.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Sensitivity factors that could lead to downgrades include an
increase in pool-level losses from larger FLOCs or specially
serviced loans/assets. Downgrades to classes rated 'AAAsf' and
'AA-sf' are not likely, but may occur should interest shortfalls
affect these classes.
Downgrades to classes rated 'A-sf' and 'BBB-sf' are possible should
expected losses for the pool increase significantly from further
performance decline on the FLOCs. Downgrades to classes E and F may
occur with a greater certainty of losses and/or should additional
loans transfer to special servicing or performance of the FLOCs,
primarily Two Chatham Center & Garage, Westin Portland, 40 Wall
Street and the McMullen Portfolio, fail to stabilize.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment-grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Sensitivity factors that could lead to upgrades include stable to
improved asset performance, particularly on the larger FLOCs,
coupled with additional paydown and/or defeasance. Upgrades to
classes B and C would only occur with significant improvement in
credit enhancement and/or defeasance and with the stabilization of
performance on the FLOCs.
An upgrade of class D is not likely until the later years in the
transaction and only if performance of the FLOCs has stabilized and
the performance of the remaining pool is stable. Classes would not
be upgraded above 'Asf' if there is a likelihood of interest
shortfalls. Classes E and F are unlikely to be upgraded absent
significant performance improvement for the FLOCs and higher
recoveries than expected on the specially serviced loan.
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 2019-521F: S&P Lowers Class F Certs Rating to 'CCC- (sf)'
--------------------------------------------------------------
S&P Global Ratings lowered its ratings on four classes of
commercial mortgage pass-through certificates from COMM 2019-521F
Mortgage Trust, a U.S. CMBS transaction. At the same time, S&P
affirmed its ratings on two classes from the transaction.
This U.S. stand-alone (single-borrower) CMBS transaction is backed
by a floating-rate interest-only (IO) mortgage loan secured by the
borrower's fee simple interest in a 39-story, class A- office
building located at 521 Fifth Avenue in Manhattan's Grand Central
office submarket.
Rating Actions
S&P said, "The downgrades of classes C, D, E, and F, and the
affirmations of classes A and B reflect our reevaluation of the
office property that secures the sole loan in the transaction.
Specifically, the downgrades on classes C, D, E, and F reflect our
revised net cash flow (NCF), which is lower than the NCF we derived
in our last review in April 2022 and at issuance due primarily to
our higher vacancy assumptions. According to the Sept. 30, 2022,
rent roll, the property was 71.0% leased, compared with 78.4% in
our last review and 92.8% at issuance. Our current analysis does,
however, account for recent leasing activities at the property and
is reflected in our assumed occupancy rate of 75.5%. While the loan
is not on the master servicer's watchlist, our current rating
actions consider that the loan matures on June 9, 2023, and has one
extension option remaining.
"We noted in our last review in April 2022 that the property
experienced declining occupancy rates following the COVID-19
pandemic and that the sponsor was not able to increase the
property's occupancy rate to historical or market occupancy levels.
According to CoStar and various media reports, four tenants may
have signed or are interested in signing leases comprising
approximately 9.5% of the net rentable area (NRA) at the property.
However, three tenants--Berkadia Commercial Mortgage (2.4% of NRA;
November 2022 lease expiration), Tegna Inc. (1.3%; October 2022),
and Novus Partners Inc. (1.2%, November 2022)--representing
approximately 5.0% of NRA have leases that expired in
fourth-quarter 2022, and three tenants totaling 5.6% of NRA have
leases that expire in 2023. The sponsor did not provide a leasing
update of the property; however, we included in our current
analysis the potential new leases at gross rents of $72 to $75 per
sq. ft., as calculated by S&P Global Ratings, and excluded the
expired 2022 leases.
"Our property-level analysis also reflects the weakened office
submarket fundamentals from lower demand and longer re-leasing
timeframes as companies continue to embrace hybrid or remote work
arrangements. Reflecting these factors, we revised and lowered our
sustainable NCF to $12.3 million (down 9.8% from our last review
NCF of $13.6 million and 25.5% from our issuance NCF of $16.5
million) using a 75.5% occupancy rate, which reflects the above
leasing assumptions, a $73.85 per sq. ft. gross rent, as calculated
by S&P Global Ratings, and a 49.2% operating expense ratio, which
is 9.6% higher than the 2022 servicer-reported NCF of $11.2 million
but 23.5% lower than the 2021 NCF of $16.1 million. We attributed
the lower year-end 2022 NCF primarily to lower occupancy at the
property. Using a 6.75% S&P Global Ratings capitalization rate (up
25 basis points from our last review and at issuance, reflecting
the challenging office submarket conditions), we arrived at an
expected-case valuation of $182.2 million, or $368 per sq. ft.,
13.2% lower than that of our last review value of $209.9 million,
or $423 per sq. ft., 28.3% lower than our issuance value of $254.0
million, and 53.9% lower than the issuance appraisal value of
$395.0 million. This yielded an S&P Global Ratings loan-to-value
(LTV) ratio of 132.8% on the mortgage loan balance, up from 115.3%
in our last review and 95.3% at issuance.
"Specifically, the downgrade on class F to 'CCC- (sf)' from 'CCC
(sf)' reflects our view that the susceptibility to liquidity
interruption and risk of default and loss remain elevated based on
our revised lower expected-case value and current market
conditions."
Although the model-indicated ratings were lower than the classes'
current or revised ratings, S&P affirmed its ratings on classes A
and B and tempered our downgrades on class C, D, and E because S&P
weighed certain qualitative considerations, including:
-- The property's desirable location in Midtown Manhattan's Grand
Central office submarket;
-- The potential that the office property's operating performance
could improve above our revised expectations;
-- The relatively high appraised land value of $250.0 million in
2019;
-- The significant market value decline that would be needed
before these classes experience principal losses;
-- The liquidity support provided in the form of servicer
advancing; and
-- The relative position of the classes in the payment waterfall.
If the property's performance does not improve or if there are
reported negative changes in the performance beyond what S&P has
already considered, it may revisit S&P's analysis and adjust its
ratings as necessary.
Property-Level Analysis
The property is a 39-story, 495,636-sq.-ft. class A- art
deco-designed, LEED gold certified office building located at 512
Fifth Avenue, on the northeast corner of Fifth Avenue and 43rd
Street in Midtown Manhattan's Grand Central office submarket. The
property, built in 1929, is one block from Grand Central Terminal,
Bryant Park, and the New York City Public Library and has easy
access to multiple subway lines. The property has outdoor terrace
space on the upper floors and was acquired by the sponsor, Savanna
Real Estate Fund IV L.P., from SL Green in May 2019 for $381.0
million, or $769 per sq. ft.
From 2013 through 2019, the property received $5.4 million ($10.90
per sq. ft.) in capital improvements. At issuance in 2019, S&P
noted that the sponsor planned to infuse $16.1 million into the
property to enhance its street presence and tenant experience. The
capital improvement plan would include a lobby renovation, facade
work, and signage and rebranding. The servicer did not provide an
update on the status of any recent renovations.
As previously discussed, the property's occupancy rate dropped to
89.6% at the onset of the pandemic in 2020 from 92.8% in 2019. The
occupancy rate further fell to 80.8% in 2021 and then to 74.3% in
2022.
According to the Sept. 30, 2022, rent roll, the five largest
tenants at the property comprised 22.8% of NRA and included:
-- Urban Outfitters Inc. (5.2% of NRA; 16.1% of gross rent, as
calculated by S&P Global Ratings; February 2026 lease expiration);
-- Equinox Inc. (5.1%; 2.8%; January 2035);
-- Major, Lindsey & Africa (4.2%; 4.0%; January 2024);
-- CTBC Bank Co. Ltd. New York Branch (4.2%, 3.9%, January 2029);
and
-- Laidlaw Holdings Ltd. (4.2%, 5.0%, February 2029).
The property's notable rollover risk is in 2024 (14.9% of NRA) and
2029 (18.8%). The rollover in 2024 is primarily attributable to
Major, Lindsey & Africa (4.2% of NRA, January 2024 expiry), Tilting
Point LLC (2.1%, December 2024), and 360 Trading Networks Inc.
(2.1%, November 2024).
According to CoStar, the Grand Central office submarket, in which
the property is situated, remains weak as office utilization in New
York continues to be below pre-pandemic levels. As of March 2023,
three- to five-star office properties in the submarket have a
market rent of $73.62 per sq. ft., vacancy rate of 14.6%, and
availability rate of 18.7%. This compares with a $78.18 per sq. ft.
market rent and 10.9% vacancy rate at issuance in 2019. CoStar
expects elevated submarket vacancy and modest market rent growth
despite minimal new construction volume and expected office
demolitions in the Grand Central submarket. CoStar anticipates
demand for office space to remain pressured as tenants continue to
reassess their office footprint needs. Notably, CoStar expects
negative absorption rates for three- to five-star properties in the
submarket until 2025.
S&P said, "As previously mentioned, we utilized a 75.5% occupancy
rate and in place gross rent in determining our sustainable NCF.
The property's assumed average rent of $73.85 per sq. ft., as
calculated by S&P Global Ratings, is on par with CoStar's submarket
gross rent for three- to five-star office properties."
Transaction Summary
The floating-rate, IO mortgage loan had an initial and current
balance of $242.0 million (according to the March 15, 2023, trustee
remittance report), pays an annual floating interest rate indexed
to one-month LIBOR plus 1.36%, and currently matures on June 9,
2023. The loan has an initial two-year term with three one-year
extension options. The borrower has already exercised two of its
extension options. There are no performance hurdles; however, the
borrower is required to obtain a replacement interest rate cap
agreement to exercise the remaining extension option, among other
factors. The loan has a fully extended maturity date of June 9,
2024. The borrower has been current on its debt service payments
through March 2023. The servicer reported a debt service coverage
of 2.66x as of year-end 2022. To date, the trust has not incurred
any principal losses.
Ratings Lowered
COMM 2019-521F Mortgage Trust
Class C to 'BBB+ (sf)' from 'A- (sf)'
Class D to 'BB (sf)' from 'BB+ (sf)'
Class E to 'B- (sf)' from 'B (sf)'
Class F to 'CCC- (sf)' from 'CCC (sf)'
Ratings Affirmed
COMM 2019-521F Mortgage Trust
Class A: AAA (sf)
Class B: AA- (sf)
CROWN CITY V: S&P Assigns Prelim BB- (sf) Rating on Class D Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Crown City
CLO V/Crown City CLO V LLC's floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Western Asset Management Co. LLC.
The preliminary ratings are based on information as of March 16,
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 collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Crown City CLO V/Crown City CLO V LLC
Class A-1, $217.00 million: AAA (sf)
Class A-2, $49.00 million: AA (sf)
Class B (deferrable), $21.00 million: A+ (sf)
Class C (deferrable), $17.50 million: BBB- (sf)
Class D (deferrable), $12.25 million: BB- (sf)
Subordinated notes, $31.70 million: Not rated
ELMWOOD CLO 22: S&P Assigns Prelim B- (sf) Rating on Class F Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Elmwood CLO
22 Ltd./Elmwood CLO 22 LLC's floating-rate notes. The transaction
is managed by Elmwood Asset Management LLC.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term
loans.
The preliminary ratings are based on information as of March 20,
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 collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Elmwood CLO 22 Ltd./Elmwood CLO 22 LLC
Class A, $256.0 million: Not rated
Class B, $48.0 million: AA (sf)
Class C (deferrable), $24.0 million: A (sf)
Class D (deferrable), $21.0 million: BBB- (sf)
Class E (deferrable), $13.0 million: BB- (sf)
Class F (deferrable), $7.0 million: B- (sf)
Subordinated notes, $32.8 million: Not rated
FORTRESS CREDIT XVIII: Fitch Assigns 'BB+sf' Rating on Cl. E Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Fortress
Credit BSL XVIII Limited.
Entity/Debt Rating
----------- ------
Fortress Credit
BSL XVIII
Limited
A-L LT NRsf New Rating
A-T LT NRsf New Rating
B-1 LT AAsf New Rating
B-2 LT AAsf New Rating
C LT A+sf New Rating
D-1 LT BBBsf New Rating
D-2-A LT BBB+sf New Rating
D-2-B LT BBBsf New Rating
E LT BB+sf New Rating
F LT NRsf New Rating
Subordinated LT NRsf New Rating
TRANSACTION SUMMARY
Fortress Credit BSL XVIII Limited (the issuer) is an arbitrage cash
flow collateralized loan obligation (CLO) that will be managed by
FC BSL CLO Manager II LLC. Net proceeds from the issuance of the
secured and subordinated notes will provide financing on a
portfolio of approximately $400 million of primarily first lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B/B-', which is in line with that of
recent CLOs. 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
100% first-lien senior secured loans and has a weighted average
recovery assumption of 75.5%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39% 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 resulting from the
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 weighted average life (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
metrics. The results under these sensitivity scenarios are as
severe as between 'BB+sf' and 'A+sf' for class B-1 and B-2; between
'B+sf' and 'BBB+sf' for class C; between less than 'B-sf' and
'BBB-sf' for class D-2-A; between less than 'B-sf' and 'BB+sf' for
classes D-1 and D-2-B; and between less than 'B-sf' and 'B+sf' for
class E.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
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-1 and B-2; 'A+sf' for class C;
'A+sf' for classes D-1, D-2-A and D-2-B; 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, Fitch's assessment of the asset pool information relied
upon for the agency's rating analysis according to its applicable
rating methodologies indicates that it is adequately reliable.
FORTRESS CREDIT XVIII: Moody's Assigns B3 Rating to $3MM F Notes
----------------------------------------------------------------
Moody's Investors Service has assigned ratings to two classes of
notes issued and one class of loans incurred by Fortress Credit BSL
XVIII Limited (the "Issuer" or "Fortress Credit BSL XVIII").
Moody's rating action is as follows:
Up to US$248,000,000 Class A-T Senior Secured Floating Rate Notes
due 2036, Definitive Rating Assigned Aaa (sf)
US$40,000,000 Class A-L Senior Secured Floating Rate Loans maturing
2036, Definitive Rating Assigned Aaa (sf)
US$3,000,000 Class F Deferrable Mezzanine Floating Rate Notes due
2036, Definitive Rating Assigned B3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Debt."
On the closing date, the Class A-T Notes and Class A-L Loans have a
principal balance of $208,000,000 and $40,000,000, respectively. At
any time, the Class A-L Loans may be converted in whole or in part
to Class A-T Notes, thereby decreasing the principal balance of the
Class A-L Loans and increasing, by the corresponding amount, the
principal balance of the Class A-T Notes. The aggregate principal
balance of the Class A-L Loans and Class A-T Notes will not exceed
$248,000,000, less the amount of any principal repayments. Neither
Class A-T Notes nor any other Notes may be converted into Class A-L
Loans.
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.
Fortress Credit BSL XVIII 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, cash and eligible investments, and
up to 7.5% of the portfolio may consist of second lien loans, first
lien last out loans, senior unsecured loans, senior secured bonds
and senior secured notes, provided that no more than 5.0% of the
portfolio may consist of senior secured bonds and senior secured
notes. Moody's expect the portfolio to be approximately 90% ramped
as of the closing date.
FC BSL CLO Manager II LLC (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Debt, the Issuer issued seven other
classes of secured notes and one class of subordinated notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 60
Weighted Average Rating Factor (WARF): 3094
Weighted Average Spread (WAS): SOFR + 4.00%
Weighted Average Coupon (WAC): 7.0%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 8.08 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Debt is subject to uncertainty. The
performance of the Rated Debt is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Debt.
HPS LOAN 2023-17: S&P Assigns Prelim BB-(sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to HPS Loan
Management 2023-17 Ltd./HPS Loan Management 2023-17 LLC's
floating-rate debt.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by HPS Investment Partners CLO (UK) LLP,
a subsidiary of HPS Investment Partners LLC.
The preliminary ratings are based on information as of March 22,
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 collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
HPS Loan Management 2023-17 Ltd./HPS Loan Management 2023-17 LLC
Class A, $127.50 million: Not rated
Class A-L loans, $124.50 million: Not rated
Class A-L notes, $0.00 million: Not rated
Class B-1, $39.00 million: AA (sf)
Class B-2, $13.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D (deferrable), $20.00 million: BBB- (sf)
Class E (deferrable), $15.00 million: BB- (sf)
Subordinated notes, $39.70 million: Not rated
INVESCO US 2023-2: Fitch Assigns 'BB+(EXP)' Rating on Cl. E Notes
-----------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Invesco U.S. CLO 2023-2, Ltd.
Entity/Debt Rating
----------- ------
Invesco CLO
2023-2, Ltd.
A LT NR(EXP)sf Expected Rating
B LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D LT BBB-(EXP)sf Expected Rating
E LT BB+(EXP)sf Expected Rating
F LT NR(EXP)sf Expected Rating
Subordinated Notes LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Invesco U.S. CLO 2023-2, Ltd. (the issuer) is an arbitrage cash
flow collateralized loan obligation (CLO) that will be managed by
Invesco CLO Equity Fund 3 L.P. Net proceeds from the issuance of
the secured and subordinated notes will provide financing on a
portfolio of approximately $500 million of primarily first lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', 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
98.3% first-lien senior secured loans and has a weighted average
recovery assumption of 76.4%. 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% 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 5.1-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 'BB+sf' and 'A+sf' for class B, between 'Bsf' and
'BBB+sf' for class C, between less than 'B-sf' and 'BB+sf' for
class D; and between less than 'B-sf' and 'BBsf' for class E.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
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, 'Asf' 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, Fitch's assessment of the asset pool information relied
upon for its rating analysis, according to its applicable rating
methodologies, indicates that it is adequately reliable.
J.P. MORGAN 2018-AON: S&P Lowers Class E Certs Rating to 'B+ (sf)'
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on three classes of
commercial mortgage pass-through certificates from J.P. Morgan
Chase Commercial Mortgage Securities Trust 2018-AON, a U.S. CMBS
transaction. At the same time, S&P affirmed its ratings on six
other classes from the transaction.
This U.S. stand-alone (single-borrower) CMBS transaction is backed
by a portion of a fixed-rate interest-only (IO) mortgage whole loan
secured by the borrower's fee simple interest in AON Center, a
class A office property located at 200 East Randolph Street in
Chicago's East Loop office submarket.
Rating Actions
The downgrades of classes E, F, and HRR and the affirmations of
classes A, B, C, and D reflect our reevaluation of the office
property that secures the sole loan in the transaction. S&P said,
"Specifically, the downgrades on classes E, F, and HRR reflect our
revised net cash flow (NCF), which is lower than the NCF we derived
at issuance due primarily to our higher vacancy and operating
expense assumptions. According to the Oct. 31, 2022, rent roll, the
property's occupancy rate was 76.0%, which is below the 88.1% rate
at issuance. Furthermore, the loan is currently with the special
servicer. While the transfer is unrelated to the loan's upcoming
maturity date, our current rating actions account for the potential
that the borrower may have difficulty obtaining refinancing
proceeds by the loan's July 2023 maturity date. Our current
analysis does, however, consider the recently completed and ongoing
renovations at the property as well as the sponsor successfully
executing new leases, lease renewals, or lease extensions
comprising approximately 439,244 sq. ft., or 15.8% of the net
rentable area (NRA), at the property in 2022. This includes the
recently signed 15-year lease (expiring in April 2039) with a
yet-to-be approved new tenant, Blue Cross Blue Shield, for 95,070
sq. ft. (3.4% of NRA)."
S&P said, "Our property-level analysis also reflects the weakened
office submarket fundamentals from lower demand and longer
re-leasing timeframes as companies continue to embrace hybrid or
remote work arrangements. Reflecting these factors, we revised and
lowered our long-term sustainable NCF to $33.4 million (down 17.5%
from our issuance NCF of $40.5 million), assuming an 80.0%
occupancy rate after including the new tenant (Blue Cross Blue
Shield), a $21.99 per sq. ft. base rent and a $40.08 per sq. ft.
gross rent, as calculated by S&P Global Ratings, and a 56.8%
operating expense ratio, which is 15.1% lower than the 2022
servicer-reported NCF of $39.4 million and 34.6% lower than the
2021 servicer-reported NCF of $51.1 million. We attributed the
lower year-end 2022 NCF primarily to lower occupancy at the
property and increases in operating expenses, predominantly real
estate taxes, that were not sufficiently offset by expense
reimbursement income. Using a 7.00% S&P Global Ratings'
capitalization rate (unchanged from issuance) and including $9.2
million for the present value of future rent steps for
investment-grade tenants, we arrived at an S&P Global Ratings'
expected-case value of $486.6 million, or $175 per sq. ft., 17.9%
lower than that of our issuance value of $592.7 million, or $213
per sq. ft. and 41.0% lower than the issuance appraisal value of
$824.0 million. This yielded an S&P Global Ratings' loan-to-value
(LTV) ratio of 110.2% on the whole loan balance, up from 90.4% at
issuance.
"Specifically, we lowered our rating on class HRR to 'CCC (sf)'
from 'B- (sf)' to reflect our view of the increased susceptibility
to liquidity interruption and elevated risk of default and loss
based on our revised lower expected-case value."
Although the model-indicated ratings were lower than the classes'
current or revised ratings, S&P affirmed its ratings on classes A,
B, C, and D and tempered its downgrades on classes E and F because
S&P weighed qualitative considerations, including:
-- The potential that the property's operating performance could
improve above our revised expectations. In particular, the sponsor
completed a $6.5 million project in 2021 and has planned a $185.0
million, multiple-year capital project to create an observation
deck and exterior glass elevator along the side of the building,
which it hopes will attract new tenants and drive incremental
revenue at the property upon completion. In addition, there is
currently $26.3 million in lender-controlled replacement, tenant,
seasonality, and other reserve accounts.
-- 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.
-- The relative position of the classes in the payment waterfall.
-- The whole loan, which has a reported current payment status
through its March 2023 payment date, was transferred to the special
servicer on Feb. 10, 2023, due to an event of default.
According to the servicer's comments, the borrower recently signed
a new lease with Blue Cross Blue Shield without satisfying all the
lender's conditions for approval. As previously noted, the loan
matures on July 1, 2023. It is our understanding from the servicer,
KeyBank Real Estate Capital (KeyBank), that the borrower is
currently working on refinancing the loan but may need additional
time, possibly up to six months beyond the maturity date, to pay
off the loan. S&P said, "We will continue to monitor for further
development on the loan, particularly the resolution outcome and
timing of the special servicing transfer as well as the borrower's
refinancing prospects and timing. We may take additional rating
actions if there are reported negative changes in the property's
performance beyond what we have already considered and/or we
receive new information that differs from our expectations."
The affirmations on the class X-A and X-B IO certificates reflect
our criteria for rating IO securities, in which the rating on the
IO securities would not be higher than that of the lowest-rated
reference class. The notional amount of the class X-A certificates
references class A, while class X-B references classes B and C.
Property-Level Analysis
AON Center is an 83-story, 2.78 million-sq.-ft. class A office
building built in 1974. The property consists of approximately 2.5
million sq. ft. of office space and 270,000 sq. ft. of retail,
storage, telecom, and amenity space. It is located along East
Randolph Street within Chicago's East Loop Submarket and is
adjacent to Millennium Park with views of the Chicago skyline and
access to multiple transportation hubs. The property was purchased
by the current sponsor, 601W Companies LLC, in 2015 for $712.0
million.
The prior owner spent approximately $187.8 million (approximately
$16.2 million annually, on average, from 2004 through 2014) in
capital expenditures. Since acquiring the property through 2018,
the current sponsor invested an additional $62.2 million in the
property. In 2019, the sponsor renovated the building's lobbies and
the 70th floor, creating a tenant amenity space, which features a
15,000-sq.-ft. gym, 14,000-sq.-ft. tenant lounge, and 7,000-sq.-ft.
conference facility for approximately $24.7 million. The sponsor
also renovated the building's southern plaza to improve access to
the building from East Randolph Street for $6.5 million in 2021.
Furthermore, the sponsor planned a $185.0 million construction
project, which includes building an observation deck and thrill
ride on the 82nd floor and an exterior elevator to provide access
to the top of the building from the ground. The observation deck
would include an event space, restaurant, and bar. Originally
planned in 2018, the project was delayed because of the COVID-19
pandemic in 2020 and was delayed again in 2021. S&P has not
received an update from the sponsor on the project; however,
according to various news articles, it was anticipated to
potentially start in 2022.
At issuance, the property was 88.1% leased. S&P assumed a 15.0%
vacancy rate based on submarket fundamentals at the time and an
average gross rent of $36.99 per sq. ft., as calculated by S&P
Global Ratings. The occupancy rate at the property declined during
the COVID-19 pandemic primarily because of tenants vacating,
downsizing, or executing their termination options, and the sponsor
was not able to backfill the vacant space in a timely manner;
therefore, the rate declined from 91.0% in 2019 and 89.6% in 2020
to 85.4% in 2021 and 76.0% as of the October 2022 rent roll. In
addition, five tenants--Health Care Service Corp. (126,785 sq. ft.,
4.6% of NRA), WEC Business Services (172,991 sq. ft., 6.2%), Jones
Lang LaSalle (200,830 sq. ft., 7.2%), Veolia Environmental (34,533
sq. ft., 1.2%), and SP Corporation Plus (40,893 sq. ft.,
1.5%)--totaling 575,932 sq. ft. (20.7% of NRA) are partially or
fully dark on approximately 255,051 sq. ft., or 9.2% of NRA, at the
property.
According to the October 2022 rent roll, the property's five
largest tenants included:
-- AON Corporation (14.1% of NRA; December 2028 lease expiration;
14.0% of base rent, as calculated by S&P Global Ratings).
-- According to KeyBank, the tenant recently signed a letter of
intent to waive the September 2023 termination option and extend
the lease term by two years to December 2030;
-- KPMG LLP (9.8%; August 2029, 14.4%). In April 2022, the tenant
extended its lease term by two years from August 2027 to August
2029 and waived its termination option in exchange for contracting
30,787 sq. ft. of its space on the 61st floor;
-- Jones Lang LaSalle (7.2%; May 2032, 8.5%). The tenant is dark
on 56,942 sq. ft. of its NRA and has a termination option effective
May 2029;
-- WEC Business Services (6.2%; April 2029, 7.4%). The tenant is
dark on 30,930 sq. ft. of its NRA and has a termination option
effective April 2026;
-- Kraft Heinz Foods Co (6.1%; July 2033, 8.6%). In April 2022,
the tenant signed a four-year lease extension to July 2033 from
June 2029 in exchange for using its tenant improvement allowance to
renovate its floors. The tenant has a termination option effective
December 2024.
The property's notable rollover risk is in 2029 (21.8% of NRA and
28.5% of in place rent, as calculated by S&P Global Ratings) and
2030 (14.9%, 17.5%). The rollover in 2029 and 2030 are mainly
attributable to three of the five largest tenants.
According to CoStar, the East Loop office submarket, in which the
property is situated, remains weak. As of March 2023, four- and
five-star office properties in the submarket have a market rent of
$39.80 per sq. ft., vacancy rate of 20.5%, and availability rate of
27.7%. This compares with a $37.29 per sq. ft. market rent and
14.8% vacancy rate at issuance in 2018. CoStar expects elevated
submarket vacancy and modest market rent growth despite minimal new
construction volume and expected office demolitions in the East
Loop office submarket. CoStar anticipates demand for office space
to remain pressured as tenants continue to reassess their office
footprint needs. Notably, CoStar expects negative absorption rates
for four- and five-star properties in the submarket until 2024.
S&P assumed a vacancy rate of 20.0% at the property, after
including Blue Cross Blue Shield's lease, which is in line with the
submarket vacancy rate and in-place base rent in determining our
sustainable NCF. The property's assumed average gross rent of
$40.08 per sq. ft., as calculated by S&P Global Ratings, is
generally in line with CoStar's submarket asking rent for four- and
five-star office properties.
Transaction Summary
The five-year IO mortgage whole loan had an initial and current
balance of $536.0 million, pays a per annum fixed interest rate of
4.63%, and matures on July 1, 2023.
The whole loan consists of four senior A notes totaling $350.0
million and a subordinate B note totaling $186.0 million. The trust
loan balance totaling $400.0 million (as of the March 7, 2023,
trustee remittance report) comprises the $214.0 million senior note
A-4 and $186.0 million subordinate B note. The senior notes A-1,
A-2, and A-3 are in Benchmark 2018-B4 Mortgage Trust ($50.0
million), Benchmark 2018-B5 Mortgage Trust ($43.0 million), and
Benchmark 2018-B7 Mortgage Trust ($43.0 million), all of which are
U.S. CMBS transactions. The senior A notes are pro rata and pari
passu to each other and senior in rights of payments to the
subordinate B note. In addition to the first mortgage whole loan,
there are two mezzanine loans totaling $141.5 million with a
weighted average interest rate of 6.9497% that are coterminous with
the mortgage whole loan. When considering the mezzanine loans, the
S&P Global Ratings' LTV ratio increases to 139.2%.
KeyBank Real Estate Capital reported a 1.29x debt service coverage
on the whole loan in 2022, down slightly from 1.37x in 2021 and
1.50x in 2020. To date, the trust has not incurred any principal
losses.
Ratings Lowered
J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-AON
Class E to 'B+ (sf)' from 'BB- (sf)'
Class F to 'B- (sf)' from 'B (sf)'
Class HRR to 'CCC (sf)' from 'B- (sf)'
Ratings Affirmed
J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-AON
Class A: AAA (sf)
Class B: AA- (sf)
Class C: A- (sf)
Class D: BBB- (sf)
Class X-A: AAA (sf)
Class X-B: A- (sf)
JP MORGAN 2014-C25: Fitch Lowers Rating on Two Tranches to 'Csf'
----------------------------------------------------------------
Fitch Ratings has affirmed 12 and downgraded four classes of J.P.
Morgan Chase Commercial Mortgage Securities Corp. (JPMBB)
Commercial Mortgage Pass-Through Certificates 2014-C25. In
addition, Fitch has revised the Rating Outlooks on classes C and EC
to Negative from Stable and maintained the Negative Outlooks on
classes D and X-D.
Entity/Debt Rating Prior
----------- ------ -----
JPMBB 2014-C25
A-4A1 46643PBD1 LT AAAsf Affirmed AAAsf
A-4A2 46643PAA8 LT AAAsf Affirmed AAAsf
A-5 46643PBE9 LT AAAsf Affirmed AAAsf
A-S 46643PBJ8 LT AAAsf Affirmed AAAsf
A-SB 46643PBF6 LT AAAsf Affirmed AAAsf
B 46643PBK5 LT AA-sf Affirmed AA-sf
C 46643PBL3 LT A-sf Affirmed A-sf
D 46643PAN0 LT B-sf Affirmed B-sf
E 46643PAQ3 LT CCsf Downgrade CCCsf
EC 46643PBM1 LT A-sf Affirmed A-sf
F 46643PAS9 LT Csf Downgrade CCsf
X-A 46643PBG4 LT AAAsf Affirmed AAAsf
X-B 46643PBH2 LT AA-sf Affirmed AA-sf
X-D 46643PAE0 LT B-sf Affirmed B-sf
X-E 46643PAG5 LT CCsf Downgrade CCCsf
X-F 46643PAJ9 LT Csf Downgrade CCsf
KEY RATING DRIVERS
Greater Certainty of Loss: While the overall pool loss expectation
is relatively in line with Fitch's prior rating action, the
downgrades and Negative Outlooks reflect an increased certainty of
loss for the Fitch Loans of Concern (FLOCs), including elevated
maturity default risks for the regional mall and office FLOCs.
Fitch's current ratings incorporates a base case loss of 9.0%.
Fitch identified 10 loans (36% of the pool) as Fitch Loans of
Concern, which includes three loans (8.4%) in special servicing.
The Stable Rating Outlooks reflect the increasing credit
enhancement (CE) and expected continued amortization. The Negative
Outlooks on classes C, D, X-D, and EC reflect the potential for
downgrades given the performance and refinance concerns for the
top-15 FLOCs, primarily City Place (11.6% of the pool), Mall at
Barnes Crossing and Market Center Tupelo loan (6.8%), 9525 West
Bryn Mawr Avenue (2.9%), and Park Place (2.3%).
Alternative Loss Consideration: Due to significant upcoming
maturity as all of the remaining loans in the pool mature by
November 2024, Fitch performed an additional paydown scenario that
considered the regional mall and office FLOCs as the last remaining
loans in the pool. A portion of class C and classes D, E, F, and NR
would be reliant on these loans for ultimate repayment; this
scenario supported the Negative Outlooks and downgrades to the
distressed classes. While the second largest loan in the pool,
Grapevine Mills (8.2%) secured by a regional mall in Grapevine, TX,
may face refinance challenges given the limited liquidity in the
current environment, Fitch's analysis assumed the ultimate recovery
of this loan.
Largest Contributors to Loss: The largest contributor to losses is
the Mall at Barnes Crossing and Market Center Tupelo (6.8% of the
pool), which is secured by a 608,533-sf collateral portion of a
709,487-sf regional mall and strip shopping center in Tupelo, MS.
The loan transferred to special servicing in December 2020 due to
payment default as a result of the pandemic, and transferred back
to the master servicer in July 2021 after the loan was brought
current with no modification of the loan.
The September 2022 rent roll showed occupancy remains lower at
78.6%, which compares to 83% at YE 2019 and 96% at YE 2018. The
total mall occupancy was 81.6% as of September 2022. Notable
declines in occupancy occurred in February 2019 when a collateral
Sear's (previously 13.1% of the NRA) vacated. The remaining tenants
include a non-collateral Belk (14.2% of the NRA: March 2030 Lease
expiration) and collateral Belk Home & Men's (12.5%; October 2025)
and JC Penney (12.1%; March 2025). Other major tenants include
Barnes and Noble (4.2%; January 2025), and an eight-screen Cinemark
Theatre (3.4%; January 2029), and Dick's Sporting Goods (7.0%;
January 2025), who extended their lease from January 2022.
Prior to the pandemic, inline sales for tenants occupying less than
10,000 sf had declined to $353 psf as of TTM ended March 2020 from
$398 psf as of TTM June 2019 and $379 psf at issuance. Updated
tenant sales were not provided by the servicer. The NOI DSCR
remains lower at 1.50x for the YTD September 2022 and 1.48x for the
YE 2021 reporting periods. The loan is amortizing and remains
current.
Fitch's loss expectations of 56% incorporate a 20% cap rate and a
20% haircut to the YE 2021 NOI to account for tertiary regional
mall location, declining occupancy and lack of updated sales
information. Additionally, Fitch's analysis reflects concerns about
the sponsor's commitment and recent payment default as well as
refinance concerns at its upcoming September 2024 maturity date.
The second largest contributor to losses is the specially serviced
Hilton Houston Post Oak (5.9%), which is secured by a leasehold
interest in a 15-story, 447-key full-service hotel located in
Houston, TX. The loan experienced performance declines prior to the
pandemic due Hurricane Harvey in 2019. The loan transferred to
special servicing in May 2020 at the borrower's request due to
economic hardship sustained from the pandemic. The borrower filed
for chapter 11 bankruptcy. Per the servicer's most recent watchlist
comments, the borrower agreed to transfer title back to the lender
and a Deed-in-Lieu was completed. The asset management is working
to stabilize the asset and is assessing sale options.
The servicer reported that performance rebounded slight in 2022
with the YTD June 2022 occupancy and NOI DSCR reported at 56.1% and
1.32x, respectively from 44.7% and 0.56x at YE 2021, 33% and 0.06x
at YE 2020, but remains below pre-pandemic levels of 74% and 1.39x.
Fitch's loss expectations, of 37.7% incorporates a 20% stress to
the November 2022 appraised value, which equates to $120,500 per
key and a 12.5% cap rate off YE 2019 NOI.
The next largest contributor to losses is the Park Place loan
(2.3%), which is secured by a 178,917-sf suburban office property
located in Greenwood Village, CO. The loan has been identified as a
FLOC due to sustained occupancy declines, near term rollover risks,
coupled with high submarket vacancy. Occupancy had declined
following the departure of Tsiovara Simmons Holdings (prev. 10.5%
of the NRA) in 2020, bringing occupancy to a low of 69% by YE 2020,
and has recently improved to 74% as of January 2023.
Per the January 2022 rent roll, leases for four tenants (10.4%) are
set to expire in 2023 and five tenants (10.6%) in 2024. Larger
tenant Breakaway Healthcare and Life Science (11.4%) vacated at
their December 2022 lease expiration, but the space was quickly
backfilled by Araphoe Motors, Inc (11.6%), who executed a lease
starting in January 2023 through December 2025.
The loan has remained current since issuance, with the YTD June
2022 NOI DSCR improving to 1.46x from 1.27x at YE 2021. Fitch's
base case loss of 22% reflects a 10% cap rate and a 5% stress to
the YE 2021 NOI.
Increasing Credit Enhancement: While credit enhancement (CE) for
classes A-3 through C have improved since the prior rating action
due to amortization and proceeds, the CE for class D through F has
been relatively unchanged since issuance due to incurred losses.
The pool has incurred losses from four loans (1.2% of the original
pool balance), which are impacted the non-rated NR class. Since
Fitch's prior rating action, two loans (1.6% of the original pool
balance) prepaid with yield maintenance.
As of the February 2023 distribution date, the pool's aggregate
balance has been reduced by 25.1% to $886.7 million from $1,184.3
million, including 1.2% in realized losses. Eleven loans (15.5%)
are fully defeased. Five loans (20.3% of the pool) are full-term,
interest only (IO) and all loans that had partial interest-only
period at issuance are currently amortizing. Loan maturities are
concentrated in 2024 (98.6%) and 2025 (1.9%).
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Sensitivity factors that could lead to downgrades include an
increase in pool level losses from underperforming or specially
serviced loans. Downgrades of classes A-4A1, A-4A2, A-5, A-SB, A-S
and X-A are not considered likely due to their position in the
capital structure, but may occur should interest shortfalls affect
these classes;
- Downgrades of the 'Asf' and 'AAsf' categories would occur should
expected losses for the pool increase substantially, or if the Mall
at Barnes Crossing and Market Center Tupelo incur outsized losses
and/or if interest shortfalls occur;
- A downgrade of the 'Bsf' category would occur should loss
expectations increase and if performance of the FLOCs continue to
decline or additional loans default and/or transfer to the special
servicer;
- Further downgrades of the 'CCsf' and 'Csf' rated classes would
occur with increased certainty of losses or as losses are
realized.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Sensitivity factors that lead to upgrades would include stable to
improved asset performance coupled with pay down and/or defeasance.
Upgrades of the 'Asf' and 'AAsf' categories would only occur with
significant improvement in CE and/or defeasance and with the
stabilization of performance on the FLOCs, particularly the Mall at
Barnes Crossing and Market Center Tupelo;
- An upgrade to the 'Bsf' category is not likely until the later
years in a transaction and only if the performance of the remaining
pool is stable, performance of the FLOCs stabilize and return to
pre-pandemic levels, and there is sufficient CE to the classes.
Classes would not be upgraded above 'Asf' if there is likelihood
for interest shortfalls;
- Upgrades to the 'Csf' and 'CCsf' categories are unlikely absent
significant performance improvement on the FLOCs and substantially
higher recoveries than expected on the specially serviced loans.
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.
JPMBB COMMERCIAL 2013-C12: Moody's Cuts Rating Class F Debt to Caa3
-------------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on four classes
and downgraded the ratings on four classes in JPMBB Commercial
Mortgage Securities Trust 2013-C12, Commercial Mortgage
Pass-Through Certificates, Series 2013-C12, as follows:
Cl. A-5, Affirmed Aaa (sf); previously on Jul 30, 2020 Affirmed Aaa
(sf)
Cl. A-S, Affirmed Aaa (sf); previously on Jul 30, 2020 Affirmed Aaa
(sf)
Cl. B, Affirmed Aa3 (sf); previously on Jul 30, 2020 Affirmed Aa3
(sf)
Cl. C, Downgraded to Baa1 (sf); previously on Jul 30, 2020 Affirmed
A3 (sf)
Cl. D, Downgraded to Ba3 (sf); previously on Apr 23, 2021
Downgraded to Ba1 (sf)
Cl. E, Downgraded to Caa1 (sf); previously on Apr 23, 2021
Downgraded to B2 (sf)
Cl. F, Downgraded to Caa3 (sf); previously on Apr 23, 2021
Downgraded to Caa2 (sf)
Cl. X-A*, Affirmed Aaa (sf); previously on Jul 30, 2020 Affirmed
Aaa (sf)
* Reflects interest-only classes
RATINGS RATIONALE
The ratings on three P&I classes were affirmed because of their
significant credit support and the transaction's key metrics,
including Moody's loan-to-value (LTV) ratio and Moody's stressed
debt service coverage ratio (DSCR) and the transaction's Herfindahl
Index (Herf), are within acceptable ranges. Furthermore, defeasance
makes up 19% of the outstanding pool balance.
The rating on four P&I classes were downgraded due to higher
anticipated losses and increased interest shortfall risk from the
exposure to specially serviced loans as well as potential refinance
challenges for certain poorly performing loans with upcoming
maturity dates. Two loans, representing 7.6% of the pool balance
are in special servicing, including one regional mall loan
(Southridge Mall – 6.2% of the pool balance) that has already
experienced a 45% appraisal reduction based on the outstanding loan
balance. Furthermore, two of the three largest loans (IDS Center
– 11.2% of the pool and 408-416 Fulton Street - 5.1%) may be at
heightened refinance risk due to lower occupancy, net operating
income (NOI) and/or upcoming lease rollover. Moody's has also
identified five loans, representing 6.3% of the pool, as troubled
loans due to declining NOI and/or occupancy in recent years. All
the remaining loans mature by June 2023 and if certain loans are
unable to pay off at their maturity date, the outstanding classes
may face increased interest shortfall risk.
The rating on the IO class, Cl. X-A, was affirmed based on the
credit quality of the referenced classes.
Moody's rating action reflects a base expected loss of 9.6% of the
current pooled balance, compared to 7.0% at Moody's last review.
Moody's base expected loss plus realized losses is now 5.3% of the
original pooled balance, compared to 4.8% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in rating all classes except interest-only
classes were "US and Canadian Conduit/Fusion Commercial
Mortgage-Backed Securitizations Methodology" published in July
2022.
DEAL PERFORMANCE
As of the February 17, 2023 distribution date, the transaction's
aggregate certificate balance has decreased by 49% to $683.9
million from $1.3 billion at securitization. The certificates are
collateralized by 54 mortgage loans ranging in size from less than
1% to 15.9% of the pool, with the top ten loans (excluding
defeasance) constituting 57.7% of the pool. Eighteen loans,
constituting 19.0% of the pool, have defeased and are secured by US
government securities.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 12.
As of the February 2023 remittance report, loans representing 92.3%
were current or within their grace period on their debt service
payments, 6.2% were 90+ days delinquent and 1.5% were reported in
REO.
Twenty loans, constituting 53.9% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
One loan has been liquidated from the pool, resulting in an
aggregate realized loss of $4.7 million (for a loss severity of
33%). Two loans, constituting 7.6% of the pool, are currently in
special servicing.
The largest specially serviced loan is the Southridge Mall loan
($42.3 million – 6.2% of the pool), which represents a pari-passu
portion of a $105.9 million mortgage loan. The loan is secured by a
554,000 SF portion of a 1.2 million SF regional mall in Greendale,
Wisconsin, a suburb of Milwaukee. At securitization, the mall was
anchored by non-collateral anchors Boston Store, Sears, J.C.
Penney, and collateral anchors, Macy's and Kohl's. Sears and Boston
Store vacated the property in 2017 and 2018, respectively.
Subsequently Kohl's moved their store to a new retail development
in late 2018. The former Sears space was partially backfilled by a
Dick's Sporting Goods/Golf Galaxy, Round1 Bowling and Amusement,
and T.J. Maxx, all of which opened for business between 2018 and
2019. The loan was transferred to special servicing in July 2020
for imminent monetary payment default. The property's performance
has significantly declined in recent years and the mall's full year
2022 NOI was 35% lower than in 2019 NOI primarily due to revenue
declines. The 2022 NOI DSCR was 0.98X, compared to 1.53X in 2020
and 1.50X in 2019. As of June 2022, the total mall was 89% leased
and the inline space was 87% leased (including 23% leased by
temporary tenants). The loan has amortized 15.3% since
securitization and is last paid through its October 2022 debt
service payment. A receiver was appointed in December 2020. An
updated appraised value in September 2022 was 60% lower than at
securitization and 32% below the outstanding loan amount. As a
result, an appraisal reduction of $19.2 million has been recognized
on this loan as of the February 2023 remittance statement. Moody's
anticipates a significant loss on this loan.
The second specially serviced loan is the Pipeline Village East &
West loan ($9.9 million – 1.5% of the pool), which is secured by
a 133,236 SF retail property located in Hurst, Texas within the
Dallas-Fort Worth-Arlington MSA. Performance has declined
significantly since securitization. The loan was transferred to
special servicing in August 2020 due to imminent default and the
property is currently reported as REO. Moody's anticipates a
significant loss on this loan.
Moody's has also assumed a high default probability for five poorly
performing loan, constituting 6.3% of the pool, and has estimated
an aggregate loss of $43.5 million (a 46% expected loss on average)
from the specially serviced and troubled loans. The largest
troubled loan is the Healthspring Operational Headquarters Loan
($19.0 million – 2.8% of the pooled balance), which is secured by
a 170,515 SF medical office building located in Nashville, TN. The
loan is in a cash trap period due to the single tenant,
Healthspring reducing their space from 100% to 42% of NRA at their
original lease expiration in May 2022. The renewed leases expire in
June 2027, but the property is only 42% occupied and the loan has a
maturity date in April 2023.
The remaining troubled loans include one limited-serviced hotel and
three retail properties. These troubled loans show declining NOI
and/or occupancy in recent years and all mature by June 2023.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this
transaction, Moody's make various adjustments to the MLTV. Moody's
adjust the MLTV for each loan using a value that reflects
capitalization (cap) rates that are between Moody's sustainable cap
rates and market cap rates. Moody's also use an adjusted loan
balance that reflects each loan's amortization profile. The MLTV
reported in this publication reflects the MLTV before the
adjustments described in the methodology.
Moody's received full year 2020 and 2021 operating results for 100%
of the pool, and full or partial year 2022 operating results for
50% of the pool (excluding specially serviced and defeased loans).
Moody's weighted average conduit LTV is 102%. Moody's conduit
component excludes loans with structured credit assessments,
defeased and CTL loans, and specially serviced and troubled loans.
Moody's net cash flow (NCF) reflects a weighted average haircut of
20% to the most recently available net operating income (NOI).
Moody's value reflects a weighted average capitalization rate of
9.5%.
Moody's actual and stressed conduit DSCRs are 1.46X and 1.07X,
respectively. Moody's actual DSCR is based on Moody's NCF and the
loan's actual debt service. Moody's stressed DSCR is based on
Moody's NCF and a 9.25% stress rate the agency applied to the loan
balance.
The top three conduit loans represent 32.2% of the pool balance.
The largest loan is the Legacy Place Loan ($108.8 million – 15.9%
of the pool), which represents a pari-passu portion of a $174.1
million mortgage loan. The loan is secured by a 484,000 SF
lifestyle retail center in Dedham, Massachusetts, a suburb of
Boston. The property was developed in 2009 and consists of six
buildings and parking for approximately 2,800 vehicles. At
securitization, the property was anchored by a Whole Foods,
Citizen's Bank, L.L. Bean and Kings Bowling Alley. Whole Food and
L.L. Bean extended their lease terms in January of 2020 for an
additional 10 years and 7 years, respectively. Another major
tenant, Citizen's Bank, reduced their leased space by 44,567 SF (9%
NRA) when they extended the lease in June 2020. The property was
78% leased as of March 2022, compared to 85% leased in December
2020 and 96% leased in December 2019. As of December 2022, reported
NOI DSCR was 1.41X, compared to 1.48X in 2020, 1.71X in 2019 and
1.50X at securitization. The loan has amortized 13% since
securitization and has an upcoming maturity in May 2023. Moody's
LTV and stressed DSCR are 101% and 0.88X, respectively.
The second largest loan is the IDS Center Loan ($76.4 million –
11.2% of the pool), which represents a pari-passu portion of a
$154.8 million mortgage loan. The loan is secured by a 1.4 million
SF mixed-use property located in downtown Minneapolis, Minnesota.
The collateral consists of a 57-story skyscraper office tower, an
eight-story annex building, a 100,000 SF retail center, and an
underground garage. As of September 2022, the property was 76%
leased, compared to 73% in December 2020, 80% in December 2019, and
89% at securitization. The loan is on the servicer's watch list due
to low DSCR and occupancy. The September 2022 NOI was 17% lower
than in 2013. The property also faces lease rollover risk with
approximately 28% of the NRA expiring in the next two years. The
loan has amortized 15% since securitization and has an upcoming
maturity in May 2023. Moody's LTV and stressed DSCR are 127% and
0.85X, respectively.
The third largest loan is the 408-416 Fulton Street Loan ($35.0
million – 5.1% of the pool), which is secured by a 55,287 SF
retail property located in Brooklyn, NY. The property's occupancy
declined to 35% in June 2019 due to largest tenant, Apogee (87% of
NRA), terminating their lease early. Shortly after, Zwanger Pesiri,
a radiology chain, leased 12,000 SF (22% of NRA) of the former
Apogee space. The loan is on the servicer's watch list due to low
occupancy, reported at 37% as of December 2022. The loan is
interest-only and has an upcoming maturity in May 2023. Moody's LTV
and stressed DSCR are 129% and 0.69X, respectively.
KKR CLO 46: Fitch Assigns 'BB-sf' Final Rating on Class E Notes
---------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to KKR
CLO 46 Ltd.
Entity/Debt Rating Prior
----------- ------ -----
KKR CLO 46 LTD
A-1A LT NRsf New Rating NR(EXP)sf
A-1B LT NRsf New Rating NR(EXP)sf
A-2 LT NRsf New Rating NR(EXP)sf
B LT AAsf New Rating AA(EXP)sf
C LT Asf New Rating A(EXP)sf
D LT BBB-sf New Rating BBB-(EXP)sf
E LT BB-sf New Rating BB-(EXP)sf
Subordinated LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
KKR CLO 46 Ltd (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by KKR
Financial Advisors II, LLC. Net proceeds from the issuance of the
secured and subordinated notes will provide financing on a
portfolio of approximately $400 million of primarily first-lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 25.18, versus a maximum covenant, in
accordance with the initial expected matrix point of 26.5. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from appropriate credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
99.9% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.21% versus a
minimum covenant, in accordance with the initial expected matrix
point of 73.6%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 40% 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 resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 3.1-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 weighted average life (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 '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 'B+sf' for class E.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
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.
LAQ 2023-LAQ: S&P Assigns B- (sf) Rating on $71.76MM Class E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to LAQ 2023-LAQ Mortgage
Trust's commercial mortgage pass-through certificates.
The certificates issuance is a U.S. CMBS securitization backed by a
commercial mortgage loan that is secured by a cross-collateralized
and cross-defaulted first lien mortgage on the borrowers' fee or
leasehold interests in 57 limited service La Quinta-flagged hotels
and one limited-service Wingate by Wyndham-flagged hotel, located
across 20 states.
The ratings reflect S&P's view of the collateral's historical and
projected performance, the sponsor's and manager's experience, the
trustee-provided liquidity, the mortgage loan terms, and the
transaction's structure.
Ratings Assigned
LAQ 2023-LAQ Mortgage Trust
Class A, $186,610,000: AAA (sf)
Class B, $59,400,000: AA- (sf)
Class C, $44,156,000: A- (sf)
Class D, $58,348,000: BBB- (sf)
Class E, $91,992,000: BB- (sf)
Class F, $81,477,000: B- (sf)
Class G, $71,760,000: Not rated
Class HRR(i), $31,257,000: Not rated
(i)Non-offered eligible horizontal residual interest.
MCF CLO 10: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to MCF CLO 10
Ltd./MCF CLO 10 LLC's floating-rate debt.
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 Apogem Capital LLC (formerly known as Madison Capital
Funding LLC), a wholly owned subsidiary of New York Life Insurance
Co.
The preliminary ratings are based on information as of March 20,
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 collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
MCF CLO 10 Ltd./MCF CLO 10 LLC
Class X, $3.40 million: AAA (sf)
Class A, $190.00 million: AAA (sf)
Class A-L, $50.00 million: AAA (sf)
Class B, $48.50 million: AA (sf)
Class C (deferrable), $31.50 million: A (sf)
Class D (deferrable), $25.20 million: BBB- (sf)
Class E (deferrable), $25.30 million: BB- (sf)
Subordinated notes, $47.19 million: Not rated
METRONET INFRA 2023-1: Fitch Gives BB-(EXP) Rating on C Notes
-------------------------------------------------------------
Fitch Ratings has issued a presale report for Metronet
Infrastructure Issuer LLC's Secured Fiber Network Revenue Notes,
Series 2023-1.
Entity/Debt Rating
----------- ------
Metronet
Infrastructure
Issuer LLC,
Secured Fiber
Network Revenue
Notes, Series
2023-1
Class A-2 LT A(EXP)sf Expected Rating
Class B LT BBB(EXP)sf Expected Rating
Class C LT BB-(EXP)sf Expected Rating
Fitch expects to rate the transaction and assign Rating Outlooks as
follows:
- $487,139,000 series 2023-1, class A-2, 'Asf'; Outlook Stable;
- $67,387,000 series 2023-1, class B, 'BBBsf'; Outlook Stable;
- $135,587,000 series 2023-1, class C, 'BB-sf'; Outlook Stable.
TRANSACTION SUMMARY
The transaction is a securitization of contract payments derived
from an existing fiber-to-the-premises (FTTP) network. The
collateral assets include: conduits, cables, network-level
equipment, access rights, customer contracts, transaction accounts
and a pledge of equity from the asset entities. Debt is secured by
net revenue from operations and benefits from a perfected security
interest in the securitized assets.
The collateral consists of high-quality fiber lines that support
the provision of internet, cable and telephone services to a
network of approximately 324,000 retail customers across 138
issuer-defined markets in nine states — these assets represent
approximately 77% of the sponsor's business based on the percentage
of revenue generated. For the markets contributed to the
transaction, the majority of the subscriber base, comprising 38.3%
of annualized run rate revenue (ARRR), is located in Indiana,
although the base is spread across a few distinct markets in the
state.
The ratings reflect a structured finance analysis of cash flows
from the ownership interest in the underlying fiber optic network,
rather than an assessment of the corporate default risk of the
ultimate parent, MetroNet Holdings, LLC.
KEY RATING DRIVERS
Net Cash Flow and Leverage: Fitch's net cash flow (NCF) on the pool
is $189.5 million, implying a 15.7% haircut to issuer NCF. The debt
multiple relative to Fitch's NCF on the rated classes is 10.1x,
versus the debt/issuer NCF leverage of 8.5x.
Credit Risk Factors: The major factors impacting Fitch's
determination of cash flow and maximum potential leverage (MPL)
include: the high quality of the underlying collateral networks,
scale and diversity of the customer base, market position and
penetration, capability of the operator and strength of the
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 digital infrastructure, the senior classes of
this transaction do not achieve ratings above 'Asf'. The securities
have a rated final payment date 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 data through fiber optic cables, will be developed. Fiber optic
cable networks are currently the fastest and most reliable means to
transmit information and data providers continue to invest in and
utilize this technology.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Declining cash flow as a result of higher expenses, contract churn,
or lower market penetration and the development of an alternative
technology for the transmission of wireless signal could lead to
downgrades.
Fitch's NCF was 15.7% below the issuer's underwritten cash flow. A
further 10% decline in Fitch's NCF indicates the following ratings
based on Fitch's determination of Maximum Potential Leverage: Class
A-2 from 'Asf' to 'BBBsf'; class B from 'BBBsf' to 'BB+sf'; class C
from 'BB-sf' to 'Bsf'.
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.
A 10% increase in Fitch's NCF indicates the following ratings based
on Fitch's determination of Maximum Potential Leverage: Class A-2
from 'Asf' to 'Asf'; class B from 'BBBsf' to 'A-sf'; class F from
'BB-sf' to 'BBsf'.
Upgrades are unlikely for these transactions given the provision
for the issuer to issue additional notes, which rank pari passu or
subordinate to existing notes, without the benefit of additional
collateral. In addition, the transaction is capped in the 'Asf'
category, given the risk of technological obsolescence.
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.
MOSAIC SOLAR 2023-2: Fitch Gives 'BB-(EXP)sf' Rating on Cl. D Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to notes issued by
Mosaic Solar Loan Trust 2023-2 (Mosaic 2023-2).
Entity/Debt Rating
----------- ------
Mosaic Solar Loan
Trust 2023-2
Class A LT AA-(EXP)sf Expected Rating
Class B LT A-(EXP)sf Expected Rating
Class C LT BBB-(EXP)sf Expected Rating
Class D LT BB-(EXP)sf Expected Rating
Class R LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch Ratings expects to rate the Mosaic Solar Loan Trust 2023-2
(Mosaic 2023-2) class A, B, C and D notes as listed above. This is
a securitization of consumer loans backed by residential solar
equipment. All the loans were originated by Solar Mosaic, LLC
(Mosaic), one of the oldest established solar lenders in the U.S.;
it has advanced solar loans since 2014.
KEY RATING DRIVERS
Limited History Determines 'AAsf' Cap: Residential solar loans in
the U.S. typically have long terms, many of which are 25 years (and
for a small portion, 30 years). For Mosaic, more than eight years
of performance data are available, which compares favorably with
the other solar ABS that Fitch currently rates, and the solar
industry at large. Additionally, Mosaic is adding for the first
time a small portion of deferral deferred loans, under tighter
underwriting guidelines but with no meaningful track record.
Extrapolated Asset Assumptions: Fitch considered both
originator-wide data and previous Mosaic transactions to set a
lifetime default expectation of 8.3%. Fitch has also assumed a 30%
base case recovery rate. Fitch's rating default rates (RDRs) for
'AA-sf', 'A-sf', 'BBB-sf' and 'BB-sf' are, respectively, 33.5%,
24.9%, 17.8% and 12.6%. Fitch's rating recovery rates (RRRs) are,
respectively, 19%, 21.8%, 24.0% and 26.0%.
Target OC and Amortization Trigger: Class A and B notes will
amortize based on target overcollateralization (OC) percentages.
The target OC is 100% of the outstanding adjusted balance for the
first 16 months, ensuring that there is no leakage of funds
initially, irrespective of the collateral performance; then it
falls to 15.5%. Should the escalating cumulative loss trigger be
breached, the payment waterfall will switch to turbo sequential,
deferring any interest payments for class C and D, and, thus,
accelerating the senior note deleveraging. The repayment timing of
classes C and D is highly sensitive to the timing of a trigger
breach.
Standard, Reputable Counterparties; No Swap: The transaction
account is with Wilmington Trust and the servicer's collection
account is with Wells Fargo Bank. Commingling risk is mitigated by
transfer of collections within two business days, the high initial
ACH share and Wells Fargo's ratings. As both assets and liabilities
pay a fixed coupon, there is no need for an interest rate hedge
and, thus, no exposure to swap counterparties.
Established Specialized Lender: Mosaic is one of the first-movers
among U.S. solar loan lenders, with the longest track record among
originators of the solar ABS that Fitch rates. Underwriting is
mostly automated and in line with those of other U.S. ABS
originators.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Asset performance that indicates an implied annualized default rate
(ADR) above 1.5% and a simultaneous fall in prepayments activity
may put pressure on the rating or lead to a Negative Rating
Outlook.
Material changes in policy support, the economics of purchasing and
financing PV panels and batteries, and/or ground-breaking
technological advances that make the existing equipment obsolete
may also negatively affect the rating.
Below, Fitch shows model-implied rating (MIR) sensitivities to
changes in default and/or recovery assumptions.
Increase of defaults (Class A / B / C / D):
+10%: 'A+sf' / 'Asf' / 'BBB+sf' / 'BB+sf';
+25%: 'Asf' / 'A-sf' / 'BBBsf' / 'BB+sf';
+50%: 'A-sf' / 'BBB+sf' / 'BB+sf' / 'BB-sf'.
Decrease of recoveries (Class A / B / C / D):
-10%: 'AA-sf' / 'Asf' / 'BBB+sf' / 'BBB-sf';
-25%: 'A+sf' / 'Asf' / 'BBB+sf' / 'BBB-sf';
-50%: 'A+sf' / 'Asf' / 'BBBsf' / 'BBBsf'.
Increase of defaults and decrease of recoveries (Class A / B / C /
D):
+10% / -10%: 'A+sf' / 'Asf' / 'BBBsf' / 'BB+sf';
+25% / -25%: 'Asf' / 'BBB+sf' / 'BBB-sf' / 'BBsf';
+50% / -50%: 'BBB+sf' / 'BBBsf' / 'BB+sf' / 'BB-sf'.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Fitch currently cap ratings in the 'AAsf' category due to limited
performance history, while the assigned rating of 'AA-sf' is
further constrained by the available credit enhancement (CE). As a
result, a positive rating action could result from an increase in
CE due to class A deleveraging, underpinned by good transaction
performance, for example, through high prepayments and ADR at
around 1% or below. The overall economic environment is also an
important consideration and Fitch's ABS outlook is generally
deteriorating in the short term.
Below Fitch shows MIR sensitivities, capped at 'AA+sf', to changes
in default and/or recovery assumptions.
Decrease of defaults (Class A / B / C / D):
-10%: 'AAsf' / 'A+sf' / 'A-sf' / 'BBBsf';
-25%: 'AA+sf' / 'AAsf' / 'Asf' / 'BBB+sf';
-50%: 'AA+sf' / 'AA+sf' / 'A+sf' / 'A+sf'.
Increase of recoveries (Class A / B / C / D):
+10%: 'AA-sf' / 'A+sf' / 'BBB+sf' / 'BBB-sf';
+25%: 'AA-sf' / 'A+sf' / 'A-sf' / 'BBB-sf';
+50%: 'AAsf' / 'A+sf' / 'A-sf' / 'BBBsf'.
Decrease of defaults and increase of recoveries (Class A / B / C /
D):
-10% / +10%: 'AAsf' / 'A+sf' / 'A-sf' / 'BBBsf';
-25% / +25%: 'AA+sf' / 'AAsf' / 'A+sf' / 'BBB+sf';
-50% / +50%: 'AA+sf' / 'AA+sf' / 'A+sf' / 'A+sf'.
CRITERIA VARIATION
This analysis includes a criteria variation due to MIR variations
in excess of the limit stated in the consumer ABS criteria report
for new ratings. According to the criteria, the committee can
decide to deviate from the MIRs, but, if the MIR variation is
greater than one notch, this will be a criteria variation. The MIR
variations for classes B to D are greater than one notch.
Given the sensitivity of ratings to model assumptions and
conventions, repayment timing, and tranche thickness, the ultimate
ratings were constrained by sensitivity analysis.
DATA ADEQUACY
The historical information available for this originator did not
cover the asset tenor of up to 30 years, as originations began in
2014. Fitch applied a rating cap at the 'AAsf' category to address
this limitation.
The amortizing nature of the assets, the data available from
previous Mosaic transactions and the application of an ADR to the
static portfolio allowed us to determine lifetime default
assumptions. Taking into account this analytical approach, the
rating committee considered the available data sufficient to
support a rating in the 'AAsf' category.
OAKTREE CLO 2023-1: S&P Assigns Prelim BB- (sf) Rating on E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Oaktree CLO
2023-1 Ltd./Oaktree CLO 2023-1 LLC's floating-rate notes. The
transaction is managed by Oaktree Capital Management L.P.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term
loans.
The preliminary ratings are based on information as of March 15,
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 collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Oaktree CLO 2023-1 Ltd./Oaktree CLO 2023-1 LLC
Class A-1, $252.00 million: Not rated
Class A-2, $8.00 million: Not rated
Class B, $44.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D (deferrable), $22.40 million: BBB- (sf)
Class E (deferrable), $11.60 million: BB- (sf)
Subordinated notes, $38.11 million: Not rated
OCEAN TRAILS XIV: Fitch Assigns 'BBsf' Rating on Class E Notes
--------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Ocean
Trails CLO XIV Ltd.
Entity/Debt Rating
----------- ------
Ocean Trails
CLO XIV Ltd
A-1 LT AAAsf New Rating
A-2 LT NRsf New Rating
B1 LT AAsf New Rating
B2 LT AAsf New Rating
C LT A+sf New Rating
D LT BBB-sf New Rating
E LT BBsf New Rating
F LT NRsf New Rating
Subordinated LT NRsf New Rating
TRANSACTION SUMMARY
Ocean Trails CLO XIV Ltd (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by Five
Arrows Managers North America LLC. Net proceeds from the issuance
of the secured and subordinated notes will provide financing on a
portfolio of approximately $400 million of primarily first lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 24.9, which is in line with that of recent
CLOs. Issuers rated in the 'B'/'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
96.0% first-lien senior secured loans and has a weighted average
recovery assumption of 75.3%. 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 41.0% 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 3.8-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 weighted average life (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
metrics. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-1 notes, between
'BB+sf' and 'A+sf' for class B notes, between 'Bsf' and 'BBB+sf'
for class C notes, between less than 'B-sf' and 'BB+sf' for class D
notes and between less than 'B-sf' and 'B+sf' for class E notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrade scenarios are not applicable to the class A-1 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; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B notes, 'A+sf' for class C notes,
'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, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
OCEAN TRAILS XIV: Moody's Assigns B3 Rating to $1MM Class F Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to three classes of
notes issued by Ocean Trails CLO XIV Ltd (the "Issuer" or "Ocean
Trails XIV").
Moody's rating action is as follows:
US$235,000,000 Class A-1 Floating Rate Notes due 2035, Assigned Aaa
(sf)
US$25,000,000 Class A-2 Floating Rate Notes due 2035, Assigned Aaa
(sf)
US$1,000,000 Class F Deferrable Floating Rate Notes due 2035,
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.
Ocean Trails XIV is a managed cash flow CLO. The issued notes will
be collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90% of the portfolio must consist of
first lien senior secured loans and eligible investments, and up to
10% of the portfolio may consist of non-senior secured loans, of
which 7.5% may consist of second-lien loans and unsecured loans and
5% may consist of senior unsecured bonds, senior secured bonds, or
senior secured floating rate notes. The portfolio is approximately
90% ramped as of the closing date.
Five Arrows Managers North America LLC (the "Manager") will direct
the selection, acquisition and disposition of the assets on behalf
of the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's four 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 five other
classes of secured notes and one class of subordinated notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2946
Weighted Average Spread (WAS): SOFR + 3.50%
Weighted Average Coupon (WAC): 5.00%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 7.0 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.
OCP CLO 2023-26: S&P Assigns BB- (sf) Rating on Class E Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to OCP CLO 2023-26 Ltd./OCP
CLO 2023-26 LLC's floating-rate notes.
The notes issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Onex Credit Partners LLC.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool, which consists
primarily of broadly syndicated speculative-grade senior secured
term loans.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
OCP CLO 2023-26 Ltd./OCP CLO 2023-26 LLC
Class A, $252.00 million: Not rated
Class B, $52.00 million: AA (sf)
Class C (deferrable), $22.00 million: A (sf)
Class D (deferrable), $24.00 million: BBB- (sf)
Class E (deferrable), $12.00 million: BB- (sf)
Preference shares, $18.60 million: Not rated
Subordinated notes, $17.00 million: Not rated
OCTAGON 67: Fitch Assigns 'BB-(EXP)' Rating on Class E Notes
------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Octagon 67, Ltd.
Entity/Debt Rating
----------- ------
Octagon 67, Ltd.
A-1 LT NR(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
B LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D LT BBB-(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
Subordinated Notes LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Octagon 67, Ltd., the issuer, is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by
Octagon Credit Investors, LLC. Net proceeds from the issuance of
the secured and subordinated notes will provide financing on a
portfolio of approximately $500.0 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 22.9, versus a maximum covenant, in
accordance with the initial expected matrix point, of 23.1. 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
99.2% first lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.8%, versus a
minimum covenant, in accordance with the initial expected matrix
point, of 70.2%.
Portfolio Composition (Positive): The largest three industries may
constitute up to 45.0% of the portfolio balance in aggregate, while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
U.S. CLOs.
Portfolio Management (Neutral): The transaction has a 5.1-year
reinvestment period and reinvestment criteria similar to other U.S.
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In its 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 the classes at the other permitted matrix points is
in line with other recent CLOs. The WAL used for the transaction
stress portfolio and matrices analysis 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
metrics. The results under these sensitivity scenarios are as
severe as between 'A-sf' 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 'B+sf' for class E.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrade scenarios are not applicable to the class A-2 notes, as
these notes are in the highest rating category of 'AAAsf'. At other
rating levels, variability in key model assumptions, such as
increases in recovery rates and decreases in default rates, could
result in an upgrade. Fitch evaluated the notes' sensitivity to
potential changes in such metrics; 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, Fitch's assessment of the asset pool information relied
upon for the agency's rating analysis according to its applicable
rating methodologies indicates that it is adequately reliable.
POST CLO 2023-1: S&P Assigns Prelim BB-(sf) Rating on Cl. E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Post CLO
2023-1 Ltd./Post CLO 2023-1 LLC's floating- and fixed-rate debt.
The transaction is managed by Post Advisory Group LLC.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term
loans.
The preliminary ratings are based on information as of March 22,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- S&P views of the collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Post CLO 2023-1 Ltd./Post CLO 2023-1 LLC
Class A, $201.2 million: AAA (sf)
Class A loans(i), $50.0 million: AAA (sf)
Class B-1, $42.8 million: AA (sf)
Class B-2, $10.0 million: AA (sf)
Class C (deferrable), $22.0 million: A (sf)
Class D (deferrable), $24.0 million: BBB- (sf)
Class E (deferrable), $12.0 million: BB- (sf)
Subordinated notes, $38.0 million: Not rated
(i)The class A loans are not convertible at any time into notes and
the class A notes are not convertible into class A loans.
PRESTIGE AUTO 2021-1: S&P Affirms BB- (sf) Rating on Class E Notes
------------------------------------------------------------------
S&P Global Ratings raised its ratings on eight classes of notes
from Prestige Auto Receivables Trust 2018-1, 2019-1, 2020-1, and
2021-1. At the same time, S&P affirmed its ratings on five classes
from the transactions.
The rating actions reflect the transactions':
-- Collateral performance to date and S&P's expectations regarding
future collateral performance;
-- Each transaction's structure and the respective credit
enhancement levels; and
-- Other credit factors, including credit stability, payment
priorities under various scenarios, and sector- and issuer-specific
analyses.
Considering all these factors, S&P believe each note's
creditworthiness is consistent with the raised or affirmed rating.
Table 1
Collateral Performance(i)
Pool Current 60-plus days Monthly
Series Mo. factor (%) CNL (%) delinquent (%) extension
rate (%)
2018-1 54 10.72 11.84 7.91 2.84
2019-1 44 17.58 10.94 7.99 3.58
2020-1 29 30.78 5.40 5.34 3.96
2021-1 16 60.43 5.81 5.69 4.19
(i)As of the March 2023 distribution date.
Mo.--Month.
CNL--Cumulative net loss.
S&P said, "The series 2018-1, 2019-1, and 2020-1 transactions are
all performing better than our initial and prior expectations. As a
result, we revised and lowered our expected cumulative net loss
(CNL) for these transactions. In contrast, the series 2021-1
transaction's performance is trending worse than our initial CNL
expectation. We believe the series 2021-1, which has only 16 months
of performance and a higher pool factor, is more exposed to
potential adverse economic headwinds and possibly weaker recovery
rates. As a result, we revised and raised our expected CNL range
for series 2021-1."
Table 2
CNL Expectations (%)(i)
Original Prior Revised
lifetime lifetime lifetime
Series CNL exp. CNL exp.(i) CNL exp.(ii)
2018-1 13.00-13.75 12.75-13.25 Up to 12.00
2019-1 13.25-14.40 13.50-14.50 12.50
2020-1 18.25-19.25 13.50-14.50 9.25
2021-1 14.50-15.50 N/A 15.75-18.00
(i)As of the March 2023 distribution date.
CNL exp.--Cumulative net loss expectations.
N/A--Not applicable.
Each transaction contains a sequential principal payment structure
in which the notes are paid principal by seniority. The sequential
payment structure increases subordination as a percentage of the
amortizing pool for all classes except the lowest-rated subordinate
class. Each transaction also has credit enhancement in the form of
a nonamortizing reserve account, overcollateralization, and excess
spread.
As of the March 2023 distribution date, the overcollateralization
levels for series 2019-1, 2020-1, and 2021-1 were at their targets
of 15.60% of current receivables, 18.50% of current receivables
plus 2.00% of initial receivables, and 8.15% of current receivables
plus 2.00% of initial receivables, respectively. Series 2018-1 is
at its target floor of 2.00% of the initial receivables. The
reserve account for each transaction is at its required level of
1.00% of initial collateral pool balance, which increases as a
percentage of the current pool balance as the pool amortizes.
S&P believes the total credit support as a percentage of the
outstanding pool's balance, compared with its current loss
expectations, is adequate for the raised and affirmed ratings.
Table 3
Hard Credit Support (%)(i)
Total hard Current total hard
credit support credit support
Series Class at issuance (% of current)
2018-1 D 12.00 67.67
2018-1 E 7.75 28.00
2019-1 C 20.25 92.37
2019-1 D 10.40 36.36
2019-1 E 7.75 21.29
2020-1 C 23.40 79.91
2020-1 D 16.40 57.17
2020-1 E 7.50 28.25
2021-1 A-3 47.35 81.54
2021-1 B 34.15 59.70
2021-1 C 19.75 35.87
2021-1 D 10.55 20.64
2021-1 E 6.00 13.11
(i)As of the March 2023 distribution date. Consists of
overcollateralization and a reserve account, as well as
subordination for the higher tranches; and excludes excess spread,
which can also provide additional enhancement.
S&P said, "We incorporated an analysis of the current hard credit
enhancement compared to the remaining expected CNLs for those
classes where hard credit enhancement alone without credit to the
stressed excess spread was sufficient, in our view, to upgrade or
affirm the notes. For the other classes, we incorporated a cash
flow analysis to assess the loss coverage level, giving credit to
excess spread.
"Our various cash flow scenarios included forward-looking
assumptions on recoveries, the timing of losses, and voluntary
absolute prepayment speeds that we believe are appropriate, given
each transaction's performance to date. Aside from our break-even
cash flow analysis, we also conducted a sensitivity analysis for
the series to determine the impact a moderate ('BBB') stress
scenario would have on our ratings if losses began trending higher
than our revised base-case loss expectations.
"In our view, the results demonstrated that the classes all have
adequate credit enhancement at the upgraded or affirmed rating
levels. We will continue to monitor the transactions' performance
to ensure that the credit enhancement remains sufficient to cover
our CNL expectations under our stress scenarios for each rated
class."
RATINGS RAISED
Prestige Auto Receivables Trust
Rating
Series Class To From
2018-1 E AAA (sf) A (sf)
2019-1 D AAA (sf) A (sf)
2019-1 E AA (sf) BBB (sf)
2020-1 C AAA (sf) AA (sf)
2020-1 D AAA (sf) A+ (sf)
2020-1 E AA- (sf) BBB (sf)
2021-1 B AA+ (sf) AA (sf)
2021-1 C A+ (sf) A (sf)
RATINGS AFFIRMED
Prestige Auto Receivables Trust
Series Class Rating
2018-1 D AAA (sf)
2019-1 C AAA (sf)
2021-1 A-3 AAA (sf)
2021-1 D BBB (sf)
2021-1 E BB- (sf)
RR 26: S&P Assigns BB- (sf) Rating on $16.5MM Class D Notes
-----------------------------------------------------------
S&P Global Ratings assigned its ratings to RR 26 Ltd./RR 26 LLC's
floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Redding Ridge Asset Management LLC.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
RR 26 Ltd./RR 26 LLC
Class A-1, $310.00 million: Not rated
Class A-2, $60.75 million: AA (sf)
Class B-1 (deferrable), $29.75 million: A+ (sf)
Class B-2 (deferrable), $5.00 million: A (sf)
Class C-1 (deferrable), $23.00 million: BBB (sf)
Class C-2 (deferrable), $6.25 million: BBB- (sf)
Class D (deferrable), $16.50 million: BB- (sf)
Subordinated notes, $50.00 million: Not rated
SAXON ASSET 2004-3: S&P Lowers Class M-1 Notes Rating to BB- (sf)
-----------------------------------------------------------------
S&P Global Ratings completed its review of 13 classes from 10 U.S.
RMBS transactions issued between 2001 and 2005. The review yielded
12 downgrades and one affirmation due to S&P's assessment of
observed interest shortfalls/missed interest payments on the
affected classes during recent remittance periods.
At the same time, the rating actions resolve the CreditWatch
placement made on Dec. 23, 2022. The CreditWatch placement with
negative implications reflected the risk that the class would
continue to incur missed interest payments and its ability to be
reimbursed under the class's current rating scenario of 'AAA
(sf)'.
S&P will continue to monitor its ratings on securities that
experience interest shortfalls/missed interest payments, and its
will further adjust its ratings as S&P considers appropriate.
Rating Action Rationale
S&P said, "The lowered ratings due to interest shortfalls are
consistent with our "S&P Global Ratings Definitions," published
Nov. 10, 2021, which imposes a maximum rating threshold on classes
that have incurred missed interest payments resulting from credit
or liquidity erosion. In applying our ratings definitions, we
looked to see if the applicable class received additional
compensation beyond the imputed interest due as direct economic
compensation for the delay in interest payments (e.g., interest on
interest) and if the missed interest payments will be repaid by the
maturity date.
"In instances where the class does receive additional compensation
for outstanding interest shortfalls, our analysis considers the
likelihood that the missed interest payments, including the
capitalized interest, would be reimbursed under our various rating
scenarios. Eight classes from seven transactions were affected in
this review.
"In instances where the class does not receive additional
compensation for outstanding interest shortfalls, our analysis
focuses on our expectations regarding the length of the interest
payment interruptions to assign the rating on the class. Four
classes from two transactions were affected in this review.
"The Dec. 23, 2022, CreditWatch negative placement on class A-1
from Home Equity Asset Trust 2004-4 reflected the risk that the
class would continue to incur missed interest payments and not be
reimbursed under the class's current rating scenario of 'AAA (sf)'.
As of the February 2023 remittance period, the missed interest
payments on class A-1 were fully reimbursed. Since the class also
receives additional compensation beyond the imputed interest due as
direct economic compensation for the delay in interest payments, we
affirmed the class's current rating."
Ratings List
ISSUER SERIES CLASS CUSIP TO FROM
Ace Securities Corp.
Home Equity
Loan Trust,
Series 2004-HE2 2004-HE2 M-1 004421GT4 B+ (sf) BB (sf)
-- Ultimate repayment of missed interest unlikely at higher
rating levels.
Alternative Loan
Trust 2004-J2 2004-J2 3-A-3 12667FEG6 AA- (sf) AA+ (sf)
-- Interest shortfalls.
Alternative Loan
Trust 2004-J2 2004-J2 3-A-5 12667FEJ0 AA- (sf) AA+ (sf)
-- Interest shortfalls.
Alternative Loan
Trust 2004-J2 2004-J2 3-A-7 12667FEL5 AA- (sf) AA+ (sf)
-- Interest shortfalls.
Alternative Loan
Trust 2004-J9 2004-J9 M-2 12667FUL7 D (sf) B (sf)
-- Interest shortfalls.
GSAA Home Equity
Trust 2005-6 2005-6 M-1 36242D3X9 B+ (sf) BB (sf)
-- Ultimate repayment of missed interest unlikely at higher
rating levels.
GSAA Home Equity
Trust 2005-6 2005-6 M-2 36242D3Y7 B- (sf) B (sf)
-- Ultimate repayment of missed interest unlikely at higher
rating levels.
GSAMP Trust
2005-SD2 2005-SD2 B-1 362341CG2 D (sf) CCC (sf)
-- Ultimate repayment of missed interest unlikely at higher
rating levels.
Home Equity AAA (sf)/
Asset Trust Watch
2004-4 2004-4 A-1 437084CS3 AAA (sf) Negative
-- Additional detail above.
HSI Asset
Securitization
Corporation
Trust 2005-NC1 2005-NC1 M-2 40430HAH1 CCC (sf) B- (sf)
-- Ultimate repayment of missed interest unlikely at higher
rating levels.
Option One
Mortgage Loan
Trust 2005-3 2005-3 M-3 68389FHU1 B+ (sf) BB+ (sf)
-- Ultimate repayment of missed interest unlikely at higher
rating levels.
Salomon Mortgage
Loan Trust,
Series 2001-CB4 2001-CB4 IM-1 12489WDZ4 CCC (sf) B- (sf)
-- Ultimate repayment of missed interest unlikely at higher
rating levels.
Saxon Asset
Securities
Trust 2004-3 2004-3 M-1 805564QV6 BB (sf) BBB+ (sf)
-- Ultimate repayment of missed interest unlikely at higher
rating levels.
SEQUOIA MORTGAGE 2023-2: Fitch Gives BB- Final Rating on B4 Certs
-----------------------------------------------------------------
Fitch Ratings has assigned final ratings to the residential
mortgage-backed certificates issued by Sequoia Mortgage Trust
2023-2 (SEMT 2023-2).
Entity/Debt Rating Prior
----------- ----- -----
SEMT 2023-2
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 BB-sf New Rating BB-(EXP)sf
B5 LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch assigns final ratings to the residential mortgage-backed
certificates issued by Sequoia Mortgage Trust 2023-2 (SEMT 2023-2)
as indicated above. The certificates are supported by 351 loans
with a total balance of approximately $325 million as of the cutoff
date. The pool consists of prime jumbo fixed-rate mortgages and two
adjusted 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
351 loans totaling approximately $325 million and seasoned
approximately 11 months in aggregate. The borrowers have a strong
credit profile (756 FICO and 37.2% debt-to-income ratio [DTI]) and
moderate leverage (76.7% sustainable loan-to-value ratio [sLTV] and
68.7% mark-to-market combined LTV ratio [cLTV]). However, the
underlying collateral attributes are weaker than those of recently
issued SEMT transactions.
This pool includes adjustable-rate mortgages (two loans); borrowers
with prior delinquencies (three loans); borrowers with lower
average FICOs (down nine points from 2023-1); and borrowers with
higher DTIs (only 0.4% above the previous transaction's but 4.1%
higher than in 2022-1). Overall, the pool consists of 94.7% of
loans where the borrower maintains a primary residence, while 5.3%
are of a second home; 75.2% of the loans were originated through a
retail channel. Additionally, 94.0% are designated as qualified
mortgage (QM) loans and 4.6% are designated as QM rebuttable
assumption, while the QM rule did not apply to the remaining 1.4%
of loans.
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 10.0% 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. As of December 2022, S&P Corelogic Case-Shiller
Index reported an annual gain of 5.8% nationally, down from 7.6%
the previous month, marking sixth consecutive month of declining
home prices.
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
delinquency scenarios.
Due to weaker collateral, Fitch's probability of default
expectations is higher compared to previous transactions. This
resulted in a higher delinquency (DQ) curve. A higher DQ curve
assumes greater percentage of stop-advance loans resulting in
interest reductions. Due to the larger interest reductions, the
structure requires higher CE for a given rating level.
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 41.5% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC, Clayton, and Canopy. The third-party due diligence
described in Form 15E focused on credit, compliance, and property
valuation. Fitch considered this information in its analysis and,
as a result, Fitch made the following adjustment to its analysis: a
5% reduction in its analysis. This adjustment resulted in a 19bps
reduction to the 'AAAsf' expected loss.
DATA ADEQUACY
Fitch relied in its analysis on an independent third-party due
diligence review performed on about 93.4% 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 2023-2 has an ESG Relevance Score of '4' [+] for Transaction
Parties & Operational Risk. Operational risk is well controlled for
in SEMT 2023-2 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.
SIXTH STREET XXII: S&P Assigns BB- (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to Sixth Street CLO XXII
Ltd./Sixth Street CLO XXII LLC's floating-rate notes. The
transaction is managed by Sixth Street CLO XXII Management LLC.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term
loans.
The ratings reflect:
-- S&P views of the collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Sixth Street CLO XXII Ltd./Sixth Street CLO XXII LLC
Class A, $248.00 million: AAA (sf)
Class B, $52.00 million: AA (sf)
Class C (deferrable), $24.80 million: A (sf)
Class D (deferrable), $22.40 million: BBB- (sf)
Class E (deferrable), $12.80 million: BB- (sf)
Subordinated notes, $41.59 million: Not rated
SLM STUDENT 2014-1: Fitch Affirms 'Bsf' Rating on Two Tranches
--------------------------------------------------------------
Fitch Ratings has affirmed the ratings of all outstanding classes
of SLM Student Loan Trust 2013-1, 2013-5, 2014-1, and 2014-2. Fitch
has also affirmed the ratings of the outstanding class A senior
notes of SLM 2013-2. Fitch has downgraded the class B notes of SLM
2013-2 to 'Asf' from 'AAsf', reflecting increasing risk this class
may not pay the xlass B notes ahead of the legal maturity date for
this class. Additionally, the Rating Outlook is Negative following
the downgrade of the SLM 2013-2 subordinate notes.
Entity/Debt Rating Prior
----------- ------ -----
SLM Student Loan
Trust 2013-2
A 78446CAA9 LT AAAsf Affirmed AAAsf
B 78446CAB7 LT Asf Downgrade AAsf
SLM Student Loan
Trust 2014-1
A-3 78448EAC9 LT Bsf Affirmed Bsf
B 78448EAD7 LT Bsf Affirmed Bsf
SLM Student Loan
Trust 2013-5
A-3 78448BAC5 LT AAAsf Affirmed AAAsf
B 78448BAD3 LT AAsf Affirmed AAsf
SLM Student Loan
Trust 2013-1
A-3 78447MAC2 LT AAAsf Affirmed AAAsf
B 78447MAD0 LT A+sf Affirmed A+sf
SLM Student Loan
Trust 2014-2
A-3 78448GAC4 LT AAAsf Affirmed AAAsf
B 78448GAD2 LT AAsf Affirmed AAsf
TRANSACTION SUMMARY
SLM 2013-1: The affirmations reflect the stable collateral
performance for the transaction, in line with Fitch's expectations
since last review. The class A and B notes pass credit and maturity
stresses at the notes' corresponding rating levels with low
maturity risk and sufficient hard credit enhancement (CE).
SLM 2013-2: The class A notes are affirmed at 'AAAsf'/Stable. The
notes pass credit stresses up to 'AAsf' and all maturity stresses.
The class B notes are downgraded to 'Asf' from 'AAsf' and the
Outlook is Negative. In Fitch's cashflow modeling, the risk that
the notes will not pay in full prior to the legal final maturity
date has increased since the last review. A key performance driver
showing this increased maturity risk is the weighted average
remaining loan term, which has increased from 156.7 months to 171.6
months from January 2022 to January 2023 reporting periods. Per
Fitch's FFELP rating criteria, for surveillance there may be an up
to two rating categories difference between the rating assigned and
the maturity stress case in cashflow modelling of for tranches with
more than seven years to maturity. Following the downgrade of the
subordinate notes the Outlook is Negative, reflecting the
possibility of further negative rating action over the next one to
two years.
SLM 2013-5: The class A notes are affirmed at 'AAAsf'/Stable. The
notes pass credit stresses up to 'AAsf' and all maturity stresses.
The class B notes are affirmed at 'AAsf'/Stable. The notes pass
credit stresses up to 'Asf' and maturity stresses up to 'Asf'.
SLM 2014-1: The outstanding class A notes of the trust miss their
legal final maturity date under Fitch's credit and maturity
stresses. If the class A notes miss their legal final maturity
dates, this would constitute an event of default on the
transaction's indenture, which would result in diversion of
interest from the class B notes to pay class A notes until the
class A notes are paid in full. This would cause an event of
default for the class B notes. All classes from these transactions
are eventually paid in full under Fitch's stressed cashflow
analysis.
All notes for the transaction are rated 'Bsf'/Stable, supported by
qualitative factors such as Navient's ability to call the notes
upon reaching 10% pool factor, and the revolving credit agreement
established by Navient, which allows the servicer to purchase loans
from the trusts.
SLM 2014-2: The class A notes are affirmed at 'AAAsf'/Stable. The
notes pass credit stresses up to 'AAsf' and all maturity stresses.
The class B notes are affirmed at 'AAsf'/Stable. The notes pass
credit stresses up to 'Asf' and all maturity stresses.
KEY RATING DRIVERS
U.S. Sovereign Risk: The trust collateral comprises 100% Federal
Family Education Loan Program (FFELP) loans, with guaranties
provided by eligible guarantors and reinsurance provided by the
U.S. Department of Education for at least 97% of principal and
accrued interest. The U.S. sovereign rating is currently
'AAA'/Stable.
Collateral Performance:
For all transactions, after applying the default timing curve per
criteria, the effective default rate is unchanged from the
cumulative default rate. Fitch applies the standard default timing
curve in its credit stress cash flow analysis. Additionally,
consolidation from the Public Service Loan Forgiveness Program is
driving the short-term inflation of CPR, and the claim reject rate
is assumed to be 0.25% in the base case and 2.00% in the 'AAA'
case.
SLM 2013-1: Based on transaction-specific performance to date,
Fitch assumes a cumulative default rate of 26.50% under the base
case scenario and a default rate of 79.50% under the 'AAA' credit
stress scenario, with an effective default rate of 79.50% after
applying the default timing curve, as per criteria. Fitch is
revising the sCDR upwards to 4.00% from 3.60% and maintaining the
sCPR of 10.00% in cash flow modeling. The TTM levels of deferment,
forbearance and IBR are 6.18% (6.54% at Jan. 31, 2022), 17.34%
(17.09%) and 24.74% (27.91%). These assumptions are used as the
starting point in cash flow modelling, and subsequent declines or
increases are modelled as per criteria. The 31-60 DPD and the
91-120 DPD have declined from one year ago and are currently 4.12%
for 31 DPD and 1.87% for 91 DPD compared to 7.04% and 1.98% at Jan.
31, 2022 for 31 DPD and 91 DPD, respectively. The borrower benefit
is approximately 0.09%, based on information provided by the
sponsor.
SLM 2013-2: Based on transaction-specific performance to date,
Fitch assumes a cumulative default rate of 28.25% under the base
case scenario and a default rate of 84.75% under the 'AAA' credit
stress scenario, with an effective default rate of 84.75% after
applying the default timing curve, as per criteria. Fitch is
maintaining the sCDR of 3.80% and the sCPR of 10.00% in cash flow
modelling. The TTM levels of deferment, forbearance and IBR are
5.79% (6.21% at Jan. 31, 2022), 17.89% (17.54%) and 24.66%
(27.69%). These assumptions are used as the starting point in cash
flow modelling, and subsequent declines or increases are modelled
as per criteria. The 31-60 DPD and the 91-120 DPD have declined
from one year ago and are currently 4.00% for 31 DPD and 1.98% for
91 DPD compared to 6.78% and 2.03% at Jan. 31, 2022 for 31 DPD and
91 DPD, respectively. The borrower benefit is approximately 0.05%,
based on information provided by the sponsor.
SLM 2013-5: Based on transaction-specific performance to date,
Fitch assumes a cumulative default rate of 19.00% under the base
case scenario and a default rate of 57.00% under the 'AAA' credit
stress scenario, with an effective default rate of 57.00% after
applying the default timing curve, as per criteria. Fitch is
revising the sCDR upwards to 3.00% from 2.70% and maintaining the
sCPR of 11.00% in cash flow modeling. The TTM levels of deferment,
forbearance and IBR are 5.49% (6.15% at Jan. 31, 2022), 16.42%
(16.39%) and 28.27% (30.84%). These assumptions are used as the
starting point in cash flow modelling, and subsequent declines or
increases are modelled as per criteria. The 31-60 DPD and the
91-120 DPD have declined from one year ago and are currently 4.19%
for 31 DPD and 1.51% for 91 DPD compared to 6.00% and 1.87% at Jan.
31, 2022 for 31 DPD and 91 DPD, respectively. The borrower benefit
is approximately 0.09%, based on information provided by the
sponsor.
SLM 2014-1: Based on transaction-specific performance to date,
Fitch assumes a cumulative default rate of 19.00% under the base
case scenario and a default rate of 57.00% under the 'AAA' credit
stress scenario with an effective default rate of 57.00% after
applying the default timing curve, as per criteria. Fitch is
maintaining the sCDR of 2.70% and the sCPR of 12.00% in cash flow
modelling. The TTM levels of deferment, forbearance and IBR are
5.03% (5.45% at Jan. 31, 2022), 17.19% (16.94%) and 27.17%
(29.68%). These assumptions are used as the starting point in cash
flow modelling, and subsequent declines or increases are modelled
as per criteria. The 31-60 DPD have declined and the 91-120 DPD
have increased from one year ago and are currently 3.49% for 31 DPD
and 1.66% for 91 DPD compared to 6.18% and 1.60% at Jan. 31, 2022
for 31 DPD and 91 DPD, respectively. The borrower benefit is
approximately 0.09%, based on information provided by the sponsor.
SLM 2014-2: Based on transaction-specific performance to date,
Fitch assumes a cumulative default rate of 21.50% under the base
case scenario and a default rate of 61.25% under the 'AAA' credit
stress scenario with an effective default rate of 61.25% after
applying the default timing curve, as per criteria. Fitch is
maintaining the sCDR of 3.20% and the sCPR of 11.50% in cash flow
modelling. The TTM levels of deferment, forbearance and IBR are
5.05% (5.59% at Jan. 31, 2022), 17.01% (17.06%) and 26.25%
(28.74%). These assumptions are used as the starting point in cash
flow modelling, and subsequent declines or increases are modelled
as per criteria. The 31-60 DPD have declined and the 91-120 DPD
have increased from one year ago and are currently 3.86% for 31 DPD
and 1.64% for 91 DPD compared to 6.97% and 1.55% at Jan. 31, 2022
for 31 DPD and 91 DPD, respectively. The borrower benefit is
approximately 0.09%, based on information provided by the sponsor.
Basis and Interest Rate Risk: Basis risk for these transactions
arises from any rate and reset frequency mismatch between interest
rate indices for Special Allowance Payments (SAP) and the
securities. As of January 2023, 99.74%, 99.78%, 100%, 99.77%, and
99.30% of the student loans in SLM 2013-1, 2013-2, 2013-5, 2014-1,
and 2014-2, respectively, are indexed to LIBOR, with the rest
indexed to the 91-day T-Bill rate. All the notes in the five
transactions are indexed to 1-month LIBOR. Fitch applies its
standard basis and interest rate stresses to the transactions as
per criteria.
Payment Structure: Credit enhancement (CE) is provided by excess
spread, overcollateralization, and for the class A notes,
subordination. As of January 2023, the total parity ratios
(including the reserve) are 101.41% (1.39% CE), 101.36% (1.34% CE),
101.38% (1.36% CE), 101.38% (1.36%) and 101.37% (1.35% CE) for SLM
2013-1 2013-2, 2013-5, 2014-1 and 2014-2, respectively. The senior
parity ratios (including the reserve) are 114.12% (12.38% CE),
112.26% (10.92% CE), 112.93% (11.45% CE), 112.66% (11.24%) and
112.42% (11.04% CE) for SLM 2013-1, 2013-2, 2013-5, 2014-1 and
2014-2, respectively. Liquidity support is provided by a reserve
account sized at 0.25% of the outstanding pool balance. The reserve
accounts are currently sized at their floors of $1,249,799,
$1,248,458, $998,874, $996,942 and $995,345 for SLM 2013-1, 2013-2,
2013-5, 2014-1 and 2014-2, respectively. Excess cash will be
released as long as the reported total parity is at least 101.01%.
Operational Capabilities: Day-to-day servicing is provided by
Navient Solutions, LLC. Fitch believes Navient to be an acceptable
servicer, due to its extensive track record as one of the largest
servicers of FFELP loans. Fitch also confirmed with the servicer
the availability of a business continuity plan to minimize
disruptions in the collection process during the coronavirus
pandemic.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
'AAAsf' rated tranches of most FFELP securitizations will likely
move in tandem with the U.S. sovereign rating given the strong
linkage to the U.S. sovereign, by nature of the reinsurance
provided by the ED. Aside from the U.S. sovereign rating, defaults,
basis risk and loan extension risk account for the majority of the
risk embedded in FFELP student loan transactions.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. Fitch conducts credit and maturity stress
sensitivity analysis by increasing or decreasing key assumptions by
25% and 50% over the base case. The credit stress sensitivity is
viewed by stressing both the base case default rate and the basis
spread. The maturity stress sensitivity is viewed by stressing
remaining term, IBR usage and prepayments. The results below should
only be considered as one potential outcome, as the transaction is
exposed to multiple dynamic risk factors and should not be used as
an indicator of possible future performance.
SLM Student Loan Trust 2013-1
Current Model-Implied Ratings: class A 'AAAsf'; class B 'Asf'
(Credit Stress) / 'AAAsf' (Maturity Stress).
Credit Stress Rating Sensitivity
- Default increase 25%: class A 'AAsf'; class B 'Asf';
- Default increase 50%: class A 'AAsf'; class B 'BBBsf';
- Basis spread increase 0.25%: class A 'AAAsf'; class B 'Asf';
- Basis spread increase 0.50%: class A 'AAAsf; class B 'BBBsf'.
Maturity Stress Rating Sensitivity
- CPR decrease 25%: class A 'AAAsf'; class B 'Asf';
- CPR decrease 50%: class A 'AAAsf'; class B 'Asf';
- IBR usage increase 25%: class A 'AAAsf'; class B 'Asf';
- IBR usage increase 50%: class A 'AAAsf; class B 'Asf';
- Remaining term increase 25%: class A 'AAAsf'; class B 'Asf';
- Remaining term increase 50%: class A 'AAAsf'; class B 'Asf'.
SLM Student Loan Trust 2013-2
Current Model-Implied Ratings: class A 'AAsf' (Credit Stress) /
'AAAsf' (Maturity Stress); class B 'Asf' (Credit Stress) / 'BBsf'
(Maturity Stress).
Credit Stress Rating Sensitivity
- Default increase 25%: class A 'AAsf'; class B 'Asf';
- Default increase 50%: class A 'Asf'; class B 'BBBsf';
- Basis spread increase 0.25%: class A 'AAsf'; class B 'Asf';
- Basis spread increase 0.50%: class A 'AAsf; class B 'Asf'.
Maturity Stress Rating Sensitivity
- CPR decrease 25%: class A 'AAAsf'; class B 'Bsf';
- CPR decrease 50%: class A 'AAsf'; class B 'CCCsf';
- IBR usage increase 25%: class A 'AAAsf'; class B 'Bsf';
- IBR usage increase 50%: class A 'AAAsf; class B 'Bsf';
- Remaining term increase 25%: class A 'AAsf'; class B 'CCCsf';
- Remaining term increase 50%: class A 'Asf'; class B 'CCCsf'.
SLM Student Loan Trust 2013-5
Current Model-Implied Ratings: class A 'AAsf' (Credit Stress) /
'AAAsf' (Maturity Stress); class B 'Asf' (Credit Stress) / 'Asf'
(Maturity Stress).
Credit Stress Rating Sensitivity
- Default increase 25%: class A 'Asf'; class B 'Asf';
- Default increase 50%: class A 'Asf'; class B 'Asf';
- Basis spread increase 0.25%: class A 'AAsf'; class B 'Asf';
- Basis spread increase 0.50%: class A 'AAsf; class B 'Asf'.
Maturity Stress Rating Sensitivity
- CPR decrease 25%: class A 'AAAsf'; class B 'BBBsf';
- CPR decrease 50%: class A 'AAAsf'; class B 'Bsf';
- IBR usage increase 25%: class A 'AAAsf'; class B 'Asf';
- IBR usage increase 50%: class A 'AAAsf; class B 'BBBsf';
- Remaining term increase 25%: class A 'AAAsf'; class B 'BBsf';
- Remaining term increase 50%: class A 'AAAsf'; class B 'CCCsf'.
SLM Student Loan Trust 2014-1
Current Model-Implied Ratings: class A 'CCCsf' (Credit and Maturity
Stress); class B 'CCCsf' (Credit and Maturity Stress).
Credit Stress Rating Sensitivity
- Default increase 25%: class A 'CCCsf'; class B 'CCCsf';
- Default increase 50%: class A 'CCCsf'; class B 'CCCsf';
- Basis spread increase 0.25%: class A 'CCCsf'; class B 'CCCsf';
- Basis spread increase 0.50%: class A 'CCCsf; class B 'CCCsf'.
Maturity Stress Rating Sensitivity
- CPR decrease 25%: class A 'CCCsf'; class B 'CCCsf';
- CPR decrease 50%: class A 'CCCsf'; class B 'CCCsf';
- IBR usage increase 25%: class A 'CCCsf'; class B 'CCCsf';
- IBR usage increase 50%: class A 'CCCsf; class B 'CCCsf';
- Remaining term increase 25%: class A 'CCCsf'; class B 'CCCsf';
- Remaining term increase 50%: class A 'CCCsf'; class B 'CCCsf'.
SLM Student Loan Trust 2014-2
Current Model-Implied Ratings: class A 'AAsf' (Credit Stress) /
'AAAsf' (Maturity Stress); class B 'Asf' (Credit Stress) / 'AAAsf'
(Maturity Stress).
Credit Stress Rating Sensitivity
- Default increase 25%: class A 'AAsf'; class B 'Asf';
- Default increase 50%: class A 'Asf'; class B 'Asf';
- Basis spread increase 0.25%: class A 'AAsf'; class B 'Asf';
- Basis spread increase 0.50%: class A 'AAsf; class B 'Asf'.
Maturity Stress Rating Sensitivity
- CPR decrease 25%: class A 'AAAsf'; class B 'AAsf';
- CPR decrease 50%: class A 'AAAsf'; class B 'AAsf';
- IBR usage increase 25%: class A 'AAAsf'; class B 'AAsf';
- IBR usage increase 50%: class A 'AAAsf; class B 'AAsf';
- Remaining term increase 25%: class A 'AAAsf'; class B 'AAsf';
- Remaining term increase 50%: class A 'AAAsf'; class B 'AAsf'.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
SLM Student Loan Trust 2013-1
No upgrade credit stress sensitivity is provided for the class A
notes and no maturity stress sensitivity is provided for either the
class A or class B notes, since they are already at their highest
possible model-implied ratings.
Credit Stress Rating Sensitivity
- Default decrease 25%: class B 'AAAsf';
- Basis spread decrease 0.25%: class B 'AAsf'.
SLM Student Loan Trust 2013-2
No upgrade credit maturity stress sensitivity is provided for the
class A notes, since they are already at their highest possible
model-implied rating.
Credit Stress Rating Sensitivity
- Default decrease 25%: class A 'AAAsf'; class B 'AAAsf';
- Basis spread decrease 0.25%: class A 'AA'; class B 'AAsf'.
Maturity Stress Rating Sensitivity
- CPR increase 25%: class B 'AAsf';
- IBR usage decrease 25%: class B 'Asf';
- Remaining Term decrease 25%: class B 'AAAsf'.
SLM Student Loan Trust 2013-5
No upgrade maturity stress sensitivity is provided for the class A
notes, since they are already at their highest possible
model-implied ratings.
Credit Stress Rating Sensitivity
- Default decrease 25%: class A 'AAsf'; class B 'Asf';
- Basis spread decrease 0.25%: class A 'AAsf'; class B 'Asf'.
Maturity Stress Rating Sensitivity
- CPR increase 25%: class B 'AAsf';
- IBR usage decrease 25%: class B 'AAsf';
- Remaining Term decrease 25%: class B 'AAAsf'.
SLM Student Loan Trust 2014-1
Credit Stress Sensitivity
- Default decrease 25%: class A 'CCCsf'; class B 'CCCsf';
- Basis Spread decrease 0.25%: class A 'CCCsf'; class B 'CCCsf'.
Maturity Stress Sensitivity
- CPR increase 25%: class A 'CCCsf'; class B 'CCCsf';
- IBR usage decrease 25%: class A 'CCCsf'; class B 'CCCsf';
- Remaining Term decrease 25%: class A 'CCCsf'; class B 'CCCsf'
SLM Student Loan Trust 2014-2
No upgrade credit maturity stress sensitivity is provided for the
class A and class B notes, since they are already at their highest
possible model-implied rating.
Credit Stress Rating Sensitivity
- Default decrease 25%: class A 'AAAsf'; class B 'AAsf';
- Basis spread decrease 0.25%: class A 'AA'; class B 'Asf'.
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.
STANIFORD STREET: S&P Lowers Class E Notes Rating to 'D (sf)'
-------------------------------------------------------------
S&P Global Ratings lowered its rating on Staniford Street CLO
Ltd.'s class E notes, a U.S. cash flow collateralized loan
obligation (CLO) transaction, to 'D (sf)' from 'CCC- (sf)'.
The rating action follows its review of the transaction's
redemption, which occurred on March 15, 2023.
According to the notices provided by the trustee, the class E
noteholders agreed to receive a lower amount than the full
redemption price, which permitted the redemption to proceed.
Following this, the transaction liquidated all collateral
obligations from its portfolio and used the principal proceeds to
pay down the rated notes on March 15, 2023.
The amount of principal proceeds received from the liquidation,
however, were inadequate to pay in full the outstanding interest
(including deferred) and principal due of the class E notes.
S&P said, "Though the class E noteholders agreed to receive a lower
amount, our rating addresses the likelihood that securities receive
their timely interest and full principal by their legal final
maturity date. We lowered the rating on the class E notes to 'D
(sf)' due to the outstanding balance not being fully repaid."
SYMPHONY CLO 38: S&P Assigns BB- (sf) Rating on Class E Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to Symphony CLO 38
Ltd./Symphony CLO 38 LLC's floating- and fixed-rate debt. The
transaction is managed by Symphony Alternative Asset Management
LLC.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term
loans.
The ratings reflect:
-- S&P's view of the collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Symphony CLO 38 Ltd./Symphony CLO 38 LLC
Class A, $103.500 million: AAA (sf)
Class A-1-L loans(i), $150.000 million: AAA (sf)
Class A-2-L loans(ii), $30.000 million: AAA (sf)
Class B-1, $40.500 million: AA (sf)
Class B-2, $18.000 million: AA (sf)
Class C-1 (deferrable), $18.000 million: A (sf)
Class C-2 (deferrable), $9.000 million: A (sf)
Class D (deferrable), $23.500 million: BBB- (sf)
Class E (deferrable), $15.750 million: BB- (sf)
Subordinated notes, $40.882 million: Not rated
(i)All or part of the class A-1-L loans can be converted into
notes.
(ii)The class A-2-L loans may not be converted into notes at any
time.
UBS COMMERCIAL 2012-C1: Fitch Lowers Rating on Cl. E Certs to 'Csf'
-------------------------------------------------------------------
Fitch Ratings has downgraded class E and affirmed class F of UBS
Commercial Trust 2012-C1 (UBS 2012-C1) commercial mortgage
pass-through certificates. Fitch has downgraded class E and
affirmed eight classes of Morgan Stanley Bank of America Merrill
Lynch Trust (MSBAM) commercial mortgage pass-through certificates,
series 2012-C6. The Rating Outlook on class D of MSBAM 2012-C6
remains Negative.
Entity/Debt Rating Prior
----------- ------ -----
UBS 2012-C1
E 90269GAQ4 LT Csf Downgrade CCsf
F 90269GAS0 LT Csf Affirmed Csf
MSBAM 2012-C6
B 61761DAF9 LT AAsf Affirmed AAsf
C 61761DAH5 LT Asf Affirmed Asf
D 61761DAQ5 LT BBB+sf Affirmed BBB+sf
E 61761DAS1 LT CCCsf Downgrade Bsf
F 61761DAU6 LT CCCsf Affirmed CCCsf
G 61761DAW2 LT CCsf Affirmed CCsf
H 61761DAY8 LT Csf Affirmed Csf
PST 61761DAG7 LT Asf Affirmed Asf
X-B 61761DAL6 LT Asf Affirmed Asf
KEY RATING DRIVERS
Concentrated Pools/High Expected Losses: Fitch's analysis consisted
of repayment and recovery expectations on the remaining assets. All
of the remaining assets in the two transactions are specially
serviced, with significant losses expected to each transaction.
UBS 2012-C1: The downgrade of class E and affirmation of class F
reflects the reliance on the remaining specially serviced loan and
the limited recovery expectations upon the resolution of the
Poughkeepsie Galleria loan. The specially serviced loan has a
remaining trust balance of $72.98 million. The total senior debt is
$133.42 million as of March 2023, inclusive of the non-trust $60.45
million pari passu note.
The loan transferred to special servicing in April 2020 due to
imminent default related to pandemic impacts. While the loan is
reported as 90+ days delinquent; the recent special servicer
commentary indicated ongoing negotiations regarding a modification
and extension with the borrower. The loan is sponsored by the
Pyramid Companies.
The loan is secured by a 691,325-sf portion of a two-level 1.2
million-sf enclosed regional mall located in Poughkeepsie, NY,
which is approximately 70 miles north of New York City. The center
is anchored by non-collateral Macy's and Target, both of which only
pay common area expenses. Large tenants include Dick's Sporting
Goods, DSW, H&M (8,968 sf of 21,101 total sf included in the
collateral), RPM Raceway and Regal Cinemas.
YE 2021 in line sales were reported at approximately $360 psf
compared to $384 psf for TTM August 2019. Dick's Sporting Goods
renewed its lease to 2028. Two collateral anchors are now dark;
both Sears (ground lease) and JC Penney (26% of NRA) closed
permanently in 2020. The loss of the two anchors could lead to
co-tenancy issues at the property.
As of the most recent YE 2022 reporting, the property is 56%
occupied with a YE 2022 NOI DSCR of 0.82x. The reported YE 2022 NOI
declined 6.2% from YE 2021. Fitch's expected loss on the loan of
71% reflects an implied cap rate of approximately 23% on the
reported YE 2022 NOI.
MSBAM 2012-C6: The downgrade reflects high expected losses on the
five remaining specially serviced assets, including two assets that
are REO (20.9% of the pool). The Outlook on class D remains
Negative due to potential prolonged workouts and uncertainty
regarding the recoveries upon disposition of the defaulted assets.
The transaction's most senior bonds have a high likelihood of
recovery given the elevated loss expectations on the remaining
specially serviced assets.
1880 Broadway/15 Central Park West Retail (68.6% of the pool)
transferred to special servicing before the loan's scheduled
maturity date in September 2022. The largest tenant, Best Buy
(54.4% of the NRA) vacated in October 2022 prior to its lease
expiration in January 2023. The borrower was unable to refinance
the interest-only loan at maturity. Current occupancy is 45.6% with
West Elm (30.3%, lease through 2029), JP Morgan Chase (12.9%
through YE 2023) and It'Sugar (2.4% through March 2023) operating
at the property. The Best Buy space is being marketed for lease.
Fitch's analysis assumed a discount to the most recent appraisal
value with a recovery value of approximately $750 psf.
300 West Adams (11.3%) transferred to special servicing in Jan 2021
due to loan becoming 60+ days delinquent. The property is the
leasehold interest in a 35-story office building located in
Chicago's Loop. The asset became REO in late 2021. The property was
under contract for sale; however, this was terminated in late 2022.
Occupancy has declined to approximately 57% from 97% in 2018.
Fitch's analysis assumes a recovery value of $29 psf based on a
recent valuation significantly below the total exposure and the
weak submarket.
470 Broadway (9.5%) is a 6,600-sf single tenant retail property
located in the Soho neighborhood of Manhattan. The REO asset
transferred to the special servicer in May 2020 due to imminent
monetary default when Aldo (lease expiration in December 2023)
filed Chapter 15 bankruptcy in May 2020 and has since rejected the
lease. There are no reported prospects to backfill the space and
the space remains vacant. Fitch's loss expectations have increased
since the prior review reflecting the total exposure and lack of
leasing and assumes a recovery value of $435 psf.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Ratings will be downgraded if loss expectations increase or
downgraded to 'Dsf' as losses are incurred.
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 are not expected, but are possible with greater certainty
of recovery on the specially serviced assets.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
VENTURE 47: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Venture 47
CLO Ltd./Venture 47 CLO LLC's fixed- and floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by MJX Asset Management LLC.
The preliminary ratings are based on information as of March 22,
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
Venture 47 CLO Ltd./Venture 47 CLO LLC
Class A-1, $240.00 million: AAA (sf)
Class A-J, $20.00 million: AAA (sf)
Class B, $44.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D1 (deferrable), $17.00 million: BBB (sf)
Class DF (deferrable), $5.00 million: BBB (sf)
Class E (deferrable), $14.00 million: BB- (sf)
Subordinated notes, $29.45 million: Not rated
WFRBS COMMERCIAL 2012-C9: Fitch Affirms B-sf Rating on Cl. F Certs
------------------------------------------------------------------
Fitch Ratings has affirmed three classes of WFRBS Commercial
Mortgage Trust commercial mortgage pass-through certificates,
series 2012-C9.
Entity/Debt Rating Prior
----------- ------ -----
WFRBS 2012-C9
D 92930RAJ1 LT BBB-sf Affirmed BBB-sf
E 92930RAK8 LT BBsf Affirmed BBsf
F 92930RAL6 LT B-sf Affirmed B-sf
TRANSACTION SUMMARY
As of the February 2023 distribution date, the pool's aggregate
principal balance has paid down by 91.3% since issuance, with only
one loan remaining.
The remaining loan in the pool is secured by the Chesterfield Towne
Center, a Brookfield sponsored, one million-sf super-regional mall
and adjacent strip center located in North Chesterfield, VA in the
Richmond metro area. Anchor tenants at the subject include a
non-collateral dark Sears (14% of the NRA), non-collateral JCPenney
(14%, LXP October 2050), Macy's (14%, January 2026), At Home (11%,
January 2025), TJ Maxx/HomeGoods (5%, January 2027) and Ross (2%,
January2025). As of the December 2022 rent roll, the mall was 82%
physically occupied.
The loan transferred to special servicing in September 2022 after
the borrower indicated that they would not be able to pay off the
loan at maturity, and has subsequently requested a maturity
extension. The special servicer is dual-tracking foreclosure and a
potential forbearance proposal that would include two maturity
extensions in exchange for a partial principal paydown at the close
of each extension.
The trailing-twelve-month net operating income (NOI) debt service
coverage ratio (DSCR) as of August 2022 was 1.84x, compared with
1.77x at YE2021, 1.74x at YE2020 and 2.00x at YE2019. YE2022
in-line sales for tenant under 10,000 sf was $374 compared with
$429 at YE2021, $314 psf at YE 2020 and $411 psf at YE 2019.
Fitch's expected loss of 17% is based on a discount to a recent
appraisal, which reflects a recovery value of $74 psf.
KEY RATING DRIVERS
One Specially Serviced Regional Mall Remaining: The affirmations
reflect Fitch's recovery expectations based on current estimates of
value, credit support of the non-rated subordinate class to absorb
expected losses and potential for a maturity extension and other
potential modifications favorable to ultimate recovery of the debt.
The ultimate workout of the loan is uncertain given the challenges
with refinancing and disposition of regional malls in the current
economic environment.
Significant Change in Credit Enhancement (CE): As of the February
2022 distribution date, the pool's aggregate principal balance was
reduced by 91.3% to $91.8 million from $1.05 billion at issuance.
One loan (100%) remains in special servicing and designated as
Fitch Loan of Concern (FLOC). Class D, E, and F are being affected
by interest shortfalls.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The Negative Outlook on class F reflects the potential for
downgrades due to recovery uncertainty given the current challenges
in refinancing regional malls. Downgrades to all remaining classes
would occur if the sponsor does not agree to favorable modification
terms and/or extension, or with a decline in valuation or
significant increase in fees and expenses of the Chesterfield Towne
Center loan.
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 are unlikely due to concentration and exposure to a
regional mall asset, but may be considered, with increased
certainty for timing of disposition and recoverability of the lower
rated 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.
WHITEBOX CLO IV: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Whitebox CLO
IV Ltd./Whitebox CLO IV LLC's floating-rate notes. The transaction
is managed by Whitebox Capital Management LLC.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term
loans.
The preliminary ratings are based on information as of March 17,
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 collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Whitebox CLO IV Ltd./Whitebox CLO IV LLC
Class A-1, $240 million: AAA (sf)
Class A-2, $20 million: Not rated
Class B, $44 million: AA (sf)
Class C (deferrable), $22 million: A (sf)
Class D (deferrable), $22 million: BBB- (sf)
Class E (deferrable), $12 million: BB- (sf)
Subordinated notes, $46 million: Not rated
[*] Moody's Lowers $71.2MM of US RMBS Issued 2007-2008
------------------------------------------------------
Moody's Investors Service has downgraded the ratings of eight bonds
from two US residential mortgage-backed transactions (RMBS), backed
by resecuritized mortgages issued between 2007 and 2008.
A list of Affected Credit Ratings is available at
https://bit.ly/42AMGqp
Issuer: Structured Asset Securities Corp Trust 2007-4
Cl. 1-A1, Downgraded to B1 (sf); previously on Jun 21, 2022
Downgraded to Ba3 (sf)
Cl. 1-A2-A, Downgraded to B1 (sf); previously on Jun 21, 2022
Downgraded to Ba3 (sf)
Cl. 1-A2-B1, Downgraded to B1 (sf); previously on Jun 21, 2022
Downgraded to Ba3 (sf)
Cl. 1-A2-B2, Downgraded to B1 (sf); previously on Jun 21, 2022
Downgraded to Ba3 (sf)
Cl. 3-A1, Downgraded to B1 (sf); previously on Jun 21, 2022
Downgraded to Ba3 (sf)
Cl. 3-A2*, Downgraded to B1 (sf); previously on Jun 21, 2022
Downgraded to Ba3 (sf)
Cl. 1-A4*, Downgraded to B1 (sf); previously on Jun 21, 2022
Downgraded to Ba3 (sf)
Issuer: Structured Asset Securities Corporation Trust 2008-1
Cl. 1-A-1, Downgraded to B1 (sf); previously on Jun 21, 2022
Downgraded to Ba3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
The rating downgrades are primarily due to continued interest
shortfalls as a result of a mismatch between interest promised on
the resec bonds and that on the underlying bonds backing these
resec transactions. The interest due on some of the underlying
bonds are subject to a net weighted average coupon (net WAC) cap
whereas interest due on the resec bonds are not subject to a
similar cap. Thus, the interest due on the resec bonds are
currently higher than that of the underlying bonds, resulting in
continued interest shortfalls on the resec bonds.
Principal Methodologies
The principal methodology used in rating all classes except
interest-only classes was "Guarantees, Letters of Credit and Other
Forms of Credit Substitution Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Given the resec nature of the structure, note-holders are mainly
exposed to the credit risk of the underlying asset(s). A downgrade
or upgrade of the underlying asset(s) could trigger a downgrade or
upgrade on the related resec notes.
An IO bond may be upgraded or downgraded, within the constraints
and provisions of the IO methodology, based on lower or higher
realized and expected loss due to an overall improvement or decline
in the credit quality of the reference bonds.
[*] S&P Discontinues 'D' Ratings on 17 Classes From 6 US CMBS Deals
-------------------------------------------------------------------
S&P Global Ratings discontinued its 'D (sf)' ratings on 17 classes
of commercial mortgage pass-through certificates from six U.S. CMBS
transactions.
S&P said, "We discontinued these ratings according to our
surveillance and withdrawal policies. We previously lowered the
ratings on these classes to 'D (sf)' because of principal losses
and/or accumulated interest shortfalls that we believed would
remain outstanding for an extended period. We view a subsequent
upgrade to a rating higher than 'D (sf)' to be unlikely under the
relevant criteria for the classes within this review."
Ratings List
RATING
ISSUER SERIES CLASS CUSIP TO FROM
WBCMT 2005-C21 2005-C21 E 92976BAA0 NR D (sf)
MSC 2005-HQ7 2005-HQ7 E 617451BW8 NR D (sf)
JPMC 2007-LDP12 2007-LDP12 A-J 46632HAL5 NR D (sf)
JPMCC 2014-DSTY 2014-DSTY X-A 46642MAC2 NR D (sf)
JPMCC 2014-DSTY 2014-DSTY C 46642MAJ7 NR D (sf)
JPMCC 2014-DSTY 2014-DSTY B 46642MAG3 NR D (sf)
JPMCC 2014-DSTY 2014-DSTY A 46642MAA6 NR D (sf)
JPMCC 2014-DSTY 2014-DSTY X-B 46642MAE8 NR D (sf)
JPMCC 2015-FL7 2015-FL7 BL1B 46644PDE6 NR D (sf)
JPMCC 2015-FL7 2015-FL7 BL2E 46644PDN6 NR D (sf)
JPMCC 2015-FL7 2015-FL7 BL1E 46644PDC0 NR D (sf)
JPMCC 2015-FL7 2015-FL7 BL1A 46644PCY3 NR D (sf)
JPMCC 2015-FL7 2015-FL7 BLU1 46644PAS8 NR D (sf)
JPMCC 2015-FL7 2015-FL7 BL2A 46644PDJ5 NR D (sf)
JPMCC 2015-FL7 2015-FL7 BLU2 46644PAU3 NR D (sf)
JPMCC 2015-FL7 2015-FL7 BL2B 46644PDQ9 NR D (sf)
HMH 2017-NSS 2017-NSS E 40390AAJ0 NR D (sf)
NR--Not rated.
[*] S&P Takes Various Actions on 40 Classes From 15 U.S. RMBS Deals
-------------------------------------------------------------------
S&P Global Ratings completed its review of 40 ratings from 15 U.S.
RMBS transactions issued between 2002 and 2006. The review yielded
13 upgrades, five downgrades, and 22 affirmations.
A list of Affected Ratings can be viewed at:
https://bit.ly/3K11B5U
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by its projected cash flows. These considerations
are based on transaction-specific performance and/or structural
characteristics and their potential effects on certain classes.
Some of these considerations may include:
-- Collateral performance or delinquency trends;
-- An increase or decrease in available credit support;
-- Historical missed interest payments or interest shortfalls;
and
-- Reduced interest payments due to loan modifications.
Rating Actions
The rating changes reflect S&P's view regarding the associated
transaction-specific collateral performance, structural
characteristics, and/or the application of specific criteria
applicable to these classes.
The upgrades primarily reflect the classes' increased credit
support. Most of these transactions have failed their cumulative
loss triggers, which resulted in a permanent sequential principal
payment mechanism. This prevents credit support from eroding and
limits the affected classes' exposure to losses. As a result, the
upgrades reflect the classes' ability to withstand a higher level
of projected losses than S&P had previously anticipated. In
addition, most of these classes are receiving all of the principal
payments or are next in the payment priority when the more senior
class pays down.
The rating affirmations reflect S&P's view that its projected
credit support, collateral performance, and credit-related
reductions in interest on these classes have remained relatively
consistent with our prior projections.
[*] S&P Takes Various Actions on 52 Classes From 20 U.S. RMBS Deals
-------------------------------------------------------------------
S&P Global Ratings completed its review of 52 classes from 20 U.S.
RMBS transactions issued between 1998 and 2007. These transactions
are backed by prime jumbo, subprime, or negative amortization
collateral. The review yielded 14 upgrades, seven downgrades, and
31 affirmations.
A list of Affected Ratings can be viewed at:
https://bit.ly/3K08iVR
Analytical Considerations
S&P incorporate various considerations into its decisions to raise,
lower, or affirm ratings when reviewing the indicative ratings
suggested by its projected cash flows. These considerations are
based on transaction-specific performance and/or structural
characteristics and their potential effects on certain classes.
Some of these considerations may include:
-- Collateral performance or delinquency trends;
-- Erosion of or increases in credit support;
-- An expected short duration; and
-- Historical and/or outstanding missed interest payments.
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."
The upgrades are primarily due to increased credit support. The
majority of these transactions have failed its cumulative loss
trigger, which provides a permanent sequential principal payment
mechanism. This prevents credit support from eroding and limits the
class's exposure to losses. As a result, the upgrades on these
classes reflect their ability to withstand a higher level of
projected losses than previously anticipated.
[*] S&P Takes Various Actions on 79 Classes From 11 U.S. RMBS Deals
-------------------------------------------------------------------
S&P Global Ratings completed its review of 79 classes from 11 U.S.
RMBS transactions issued between 2014 and 2021. The review yielded
50 upgrades and 29 affirmations.
A list of Affected Ratings can be viewed at:
https://bit.ly/3lrkllO
S&P said, "We performed a credit analysis for each transaction
using updated loan-level information from which we determined
foreclosure frequency, loss severity, and loss coverage amounts
commensurate for each rating level. We also used the same mortgage
operational assessment, representation and warranty, and due
diligence factors that were applied at issuance. Our geographic
concentration and prior-credit-event adjustment factors reflect the
transactions' current pool composition. We did not apply additional
adjustment factors relating to forbearance or repayment plan
activity.
"The upgrades primarily reflect deleveraging due to the respective
transactions benefitting from low or zero accumulated losses to
date and, although declining, elevated observed prepayment speeds
over the past year, which resulted in a greater percentage of
credit support for the rated classes. In addition, improved
loan-to-value ratios due to significant home price appreciation
resulted in lower projected default expectations. Ultimately, we
believe these classes have sufficient credit support to withstand
projected losses at higher rating levels.
"The affirmations reflect our view that the classes' projected
collateral performance relative to our projected credit support
remain relatively consistent with our previous expectations."
Analytical Considerations
S&P said, "We incorporate various considerations into our 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." These considerations include:
-- Collateral performance or delinquency trends,
-- Priority of principal payments,
-- Priority of loss allocation, and
-- Available subordination and excess spread.
*********
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