/raid1/www/Hosts/bankrupt/TCR_Public/230402.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, April 2, 2023, Vol. 27, No. 91
Headlines
1988 CLO 2: S&P Assigns BB- (sf) Rating on $12MM Class E Notes
720 EAST 2023-I: S&P Assigns BB- (sf) Rating on Class E Notes
AB BSL 4: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
ABPCI DIRECT XII: S&P Assigns BB (sf) Rating on Class E Notes
APEX CREDIT 2018: Moody's Cuts Rating on $7.5MM F Notes to Caa1
APIDOS CLO XLIII: Fitch Rates Class E Notes 'BBsf'
APIDOS CLO XLIII: Moody's Assigns B3 Rating to $1MM Class F Notes
BAIN CAPITAL 2022-3: Fitch Affirms 'BB-sf' Rating on Class E Notes
BALBOA BAY 2023-1: S&P Assigns BB- (sf) Rating on Class E Notes
BANK 2017-BNK7: Fitch Affirms 'B-' Rating on Two Tranches
BENCHMARK 2023-B38: Moody's Assigns (P)B2 Rating to 2 Tranches
BENEFIT STREET XXXI: S&P Assigns BB- (sf) Rating on Class E Notes
CALI MORTGAGE 2019-101C: S&P Lowers Cl. F Certs Rating to 'B-(sf)'
COMM 2012-CCRE2: Moody's Lowers Rating on 2 Tranches to Caa3
COMM 2012-CCRE5: Moody's Lowers Rating on Class G Certs to C
COMM 2015-CCRE25: Fitch Affirms Rating at 'BBsf' on Two Tranches
CSMC TRUST 2017-CALI: S&P Lowers Class E Certs Rating to 'B- (sf)'
DRYDEN 105: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
ELMWOOD CLO 22: S&P Assigns B- (sf) Rating on Class F Notes
EXETER AUTOMOBILE 2022-1 : S&P Raises E Certs Rating to BB-(sf)
GALAXY 31: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
GALLATIN IX 2018-1: Moody's Raises Rating on Class E Notes to Ba1
GOLDENTREE LOAN 12: Fitch Affirms 'BB+' Rating on Cl. E Notes
GSCG TRUST 2019-600C: S&P Lowers Class X Certs Rating to 'BB (sf)'
HIN TIMESHARE 2022-A: Fitch Affirms 'Bsf' Rating on Class E Notes
HPS LOAN 2023-17: S&P Assigns BB- (sf) Rating on Class E Notes
INVESCO US 2023-2: Fitch Gives 'BB+sf' Final Rating on Cl. E Notes
INVESCO US 2023-2: Moody's Assigns B3 Rating to $1MM Class F Notes
JP MORGAN 2023-DSC1: S&P Assigns Prelim 'B-' Rating on B-2 Certs
JPMDB COMMERCIAL 2018-C8: Fitch Affirms B-sf Rating on Two Tranches
MCF CLO 10: S&P Assigns BB- (sf) Rating on $25.3MM Class E Notes
MSBAM COMMERCIAL 2012-CKSV: S&P Affirms B(sf) Rating on CK Certs
NOMURA CRE 2007-2: Fitch Affirms D Rating on Class D Notes
OAKTREE CLO 2023-1: S&P Assigns BB- (sf) Rating on Class E Notes
SIERRA TIMESHARE 2023-1: Fitch Gives 'BB-(EXP)' Rating on D Notes
SIERRA TIMESHARE 2023-1: Moody's Assigns (P)Ba2 Rating to D Notes
SLM STUDENT 2008-2: S&P Lowers Class B Notes Rating to 'CC (sf)'
SYCAMORE TREE 2023-3: S&P Assigns Prelim BB-(sf) Rating on E Notes
TRINITAS CLO XX: Fitch Affirms 'BB-sf' Rating on Class E Notes
VENTURE 47: S&P Assigns BB- (sf) Rating on $14MM Class E Notes
VISIO 2023-1: S&P Assigns B- (sf) Rating on Class B-2 Notes
WFRBS COMMERCIAL 2013-C14: Moody's Cuts Cl. C Certs Rating to B2
WHITEBOX CLO IV: S&P Assigns BB- (sf) Rating on Class E Notes
[*] Moody's Upgrades $121.7MM of US RMBS Issued 2005 to 2006
[*] Moody's Upgrades $377.7MM of US RMBS Issued 2005 to 2007
[*] S&P Takes Various Actions on 28 Classes From 14 US RMBS Deals
[*] S&P Takes Various Actions on 42 Ratings From 15 US RMBS Deals
[*] S&P Takes Various Actions on 83 Classes From Six US RMBS Deals
[*] S&P Ups 59 Ratings and Affirms 49 Ratings From 11 US RMBS Deals
*********
1988 CLO 2: S&P Assigns BB- (sf) Rating on $12MM Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned its 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 ratings reflect S&P's view of:
-- The diversification of the collateral pool, which consists
primarily of broadly syndicated speculative-grade (rated 'BB+' and
lower) senior secured term loans.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
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 BB- (sf) Rating on Class E Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to 720 East CLO 2023-I
Ltd./720 East CLO 2023-I 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 Northwestern Mutual Investment
Management Co. LLC.
The ratings reflect:
-- S&P's view of the collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
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
AB BSL 4: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
-------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to AB BSL CLO 4
Ltd./AB BSL CLO 4 LLC's floating-rate notes.
The note issuance is a CLO transaction backed primarily by broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans that are governed by collateral quality tests.
The preliminary ratings are based on information as of March 30,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
AB BSL CLO 4 Ltd./AB BSL CLO 4 LLC
Class A, $248.00 million: AAA (sf)
Class B, $56.00 million: AA (sf)
Class C (deferrable), $22.00 million: A (sf)
Class D (deferrable), $22.00 million: BBB- (sf)
Class E (deferrable), $14.00 million: BB- (sf)
Subordinated notes, $39.60 million: Not rated
ABPCI DIRECT XII: S&P Assigns BB (sf) Rating on Class E Notes
-------------------------------------------------------------
S&P Global Ratings assigned its 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 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.
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
APEX CREDIT 2018: Moody's Cuts Rating on $7.5MM F Notes to Caa1
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Apex Credit CLO 2018 Ltd.:
US$49,500,000 Class B Senior Secured Floating Rate Notes due 2031
(the "Class B Notes"), Upgraded to Aa1 (sf); previously on March
28, 2018 Definitive Rating Assigned Aa2 (sf)
US$25,500,000 Class C Secured Deferrable Floating Rate Notes due
2031 (the "Class C Notes"), Upgraded to A1 (sf); previously on
March 28, 2018 Definitive Rating Assigned A2 (sf)
Moody's has also downgraded the rating on the following note:
US$7,500,000 Class F Secured Deferrable Floating Rate Notes due
2031 (the "Class F Notes"), Downgraded to Caa1 (sf); previously on
September 18, 2020 Confirmed at B3 (sf)
Apex Credit CLO 2018 Ltd., issued in March 2018 is a managed
cashflow CLO. The notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. The
transaction's reinvestment period will end in April 2023.
RATINGS RATIONALE
These rating actions reflect the benefit of the short period of
time remaining before 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) and higher weighted average spread (WAS) compared to their
respective covenant levels. Moody's modeled a WARF of 2710 and a
WAS of 3.63% compared to their respective current covenant levels
of 2954 and 3.50%.
The downgrade rating action on the Class F notes reflects the
specific risks to the junior note posed by par loss observed in the
underlying CLO portfolio. Based on the Moody's calculation, the
current total collateral par balance, including recoveries from
defaulted securities, is approximately $437.4 million, or $12.6
million less than the $450 million initial par amount targeted
during the deal's ramp-up.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $436,202,420
Defaulted par: $9,236,133
Diversity Score: 83
Weighted Average Rating Factor (WARF): 2710
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.63%
Weighted Average Coupon (WAC): 13.25%
Weighted Average Recovery Rate (WARR): 46.47%
Weighted Average Life (WAL): 4.53 years
In addition to 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, 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. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
APIDOS CLO XLIII: Fitch Rates Class E Notes 'BBsf'
--------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Apidos
CLO XLIII Ltd.
Entity/Debt Rating Prior
----------- ------ -----
Apidos CLO XLIII Ltd.
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
B LT AA+sf New Rating AA+(EXP)sf
C LT A+sf New Rating A(EXP)sf
D LT BBB-sf New Rating BBB-(EXP)sf
E LT BBsf New Rating BB(EXP)sf
F LT NRsf New Rating NR(EXP)sf
Subordinated Notes LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Apidos CLO XLIII Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by CVC
Credit Partners, LLC. Net proceeds from the issuance of the secured
and subordinated notes will provide financing on a portfolio of
approximately $500 million of primarily first lien senior secured
leveraged loans.
As a result of a lower weighted average cost of capital on the
notes, the class C notes have improved loss coverage that is now
commensurate with a 'A+sf' rating.
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
97.78% first-lien senior secured loans and has a weighted average
recovery assumption of 75.53%. 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 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 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
metrics. The results under these sensitivity scenarios are between
'BBB+sf' and 'AA+sf' for class A-1, between 'BBB+sf' and 'AA+sf'
for class A-2, 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 'B+sf' for
class E.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrade scenarios are not applicable to the class A-1 and 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 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, 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.
APIDOS CLO XLIII: Moody's Assigns B3 Rating to $1MM Class F Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to two classes of
notes issued by Apidos CLO XLIII Ltd (the "Issuer" or "Apidos
XLIII").
Moody's rating action is as follows:
US$307,500,000 Class A-1 Senior Secured Floating Rate Notes due
2035, Definitive Rating Assigned Aaa (sf)
US$1,000,000 Class F Mezzanine Deferrable Floating Rate Notes due
2035, Definitive Rating 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.
Apidos XLIII is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 96.0% of the portfolio must consist of
senior secured loans, cash, and eligible investments, and up to
4.0% of the portfolio may consist of second lien loans, unsecured
loans, first lien last Moody's loans and permitted non-loan assets.
The portfolio is approximately 85% ramped as of the closing date.
CVC Credit Partners, LLC (the "Manager") will direct the selection,
acquisition and disposition of the assets on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's five year reinvestment period.
Thereafter, subject to certain restrictions, the Manager may
reinvest unscheduled principal payments and proceeds from sales of
credit risk assets.
In addition to the Rated Notes, the Issuer issued 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: $500,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 2963
Weighted Average Spread (WAS): 3.50%
Weighted Average Coupon (WAC): 7.0%
Weighted Average Recovery Rate (WARR): 47.00%
Weighted Average Life (WAL): 8.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
BAIN CAPITAL 2022-3: Fitch Affirms 'BB-sf' Rating on Class E Notes
------------------------------------------------------------------
Fitch Ratings has affirmed the ratings for the class A-1, A-2A,
A-2B, B, C, D-1 and D-2 notes of Bain Capital Credit CLO 2022-2,
Limited (Bain Capital 2022-2) and the class A-1, A-2, B, C, D and E
notes of Bain Capital Credit CLO 2022-3, Limited (Bain Capital
2022-3). The Rating Outlook on all rated tranches remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
Bain Capital
Credit CLO
2022-3, Limited
A-1 05684NAA9 LT AAAsf Affirmed AAAsf
A-2 05684NAC5 LT AAAsf Affirmed AAAsf
B 05684NAE1 LT AAsf Affirmed AAsf
C 05684NAG6 LT Asf Affirmed Asf
D 05684NAJ0 LT BBB-sf Affirmed BBB-sf
E 05684QAA2 LT BB-sf Affirmed BB-sf
Bain Capital
Credit CLO
2022-2, Limited
A-1 05682GAA6 LT AAAsf Affirmed AAAsf
A-2A 05682GAC2 LT AAAsf Affirmed AAAsf
A-2B 05682GAE8 LT AAAsf Affirmed AAAsf
B 05682GAG3 LT AAsf Affirmed AAsf
C 05682GAJ7 LT Asf Affirmed Asf
D-1 05682GAL2 LT BBBsf Affirmed BBBsf
D-2 05682GAN8 LT BBB-sf Affirmed BBB-sf
TRANSACTION SUMMARY
Bain Capital 2022-2 and Bain Capital 2022-3 are broadly syndicated
collateralized loan obligations (CLOs) managed by Bain Capital
Credit U.S. CLO Manager II, LP. Bain Capital 2022-2 closed in April
2022 and will exit its reinvestment period in April 2027. Bain
Capital 2022-3 closed in May 2022 and will exit its reinvestment
period in July 2027. Both CLOs are secured primarily by first-lien,
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality, Asset Security, Portfolio Management and
Portfolio Composition
The affirmations are driven by the portfolios' stable performance
since the last rating actions. The credit quality of both
portfolios as of February 2023 reporting has remained at the
'B'/'B-' rating level. The Fitch weighted average rating factors
(WARF) for Bain Capital 2022-2 and Bain Capital 2022-3 portfolios
were at 25.4 on average, compared to 25.1 at closing.
The portfolio for Bain Capital 2022-2 consists of 364 obligors, and
the largest 10 obligors represent 6.2% of the portfolio. Bain
Capital 2022-3 has 354 obligors, with the largest 10 obligors
comprising 6.8% of the portfolio. Fitch considered 0.3% of each
portfolio to be defaulted. The average exposure to issuers with a
Negative Outlook and Fitch's watchlist of both transactions were
17.4% and 8.6%, respectively.
First lien loans, cash and eligible investments comprise 98.3% of
the portfolios on average.
All coverage tests, collateral quality tests (CQTs), and
concentration limitations are in compliance for both transactions.
Cash Flow Analysis
Fitch conducted updated cash flow analyses based on newly run Fitch
Stressed Portfolio (FSP) since both transactions are still in their
reinvestment periods. The FSP analysis stressed the current
portfolio from the latest trustee report to account for permissible
concentration and CQT limits. The FSP analysis assumed weighted
average life of 7.0 years for Bain Capital 2022-2 and 7.25 years
for Bain Capital 2022-3, respectively. In Bain Capital 2022-3,
weighted average spread, weighted average recovery rating and WARF
were stressed to the covenant Fitch test matrix points reflected in
the latest trustee report. In addition, assumptions of both 0% and
5% fixed rate assets were tested as part of the FSP's cash flow
modelling for both transactions.
The ratings are in line with their respective model-implied rating
(MIR) as defined in Fitch's CLOs and Corporate CDOs Rating
Criteria, except for the class C and D-1 notes in Bain Capital
2022-2. Fitch affirmed the tranches one notch below their MIRs due
to the limited break-even default rate cushion at their respective
MIRs amid anticipated macroeconomic recessionary environment.
The Stable Outlooks reflect Fitch's expectation that the notes have
sufficient level of credit protection to withstand potential
deterioration in the credit quality of the portfolios in stress
scenarios commensurate with each class' rating.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Downgrades may occur if realized and projected losses of the
portfolio are higher than what was assumed at closing and the
notes' credit enhancement do not compensate for the higher loss
expectation than initially assumed.
- Based on the MIRs a 25% increase of the mean default rate across
all ratings along with a 25% decrease of the recovery rate at all
rating levels for the current portfolio would lead to no rating
impact for the class A-1, A-2A, A-2B and B notes in Bain Capital
2022-2 and the class A-1 and A-2 notes in Bain Capital 2022-3. It
would lead to a one-notch downgrade for the other classes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Except for the tranches already at the highest 'AAAsf' rating,
upgrades may occur in the event of better-than-expected portfolio
credit quality and transaction performance.
- Based on the MIRs a 25% reduction of the mean default rate across
all ratings along with a 25% increase of the recovery rate at all
rating levels for the current portfolio would lead to upgrades of
up to five rating notches.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third-party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
securities and markets authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
BALBOA BAY 2023-1: S&P Assigns BB- (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to Balboa Bay Loan Funding
2023-1 Ltd./Balboa Bay Loan Funding 2023-1 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 Pacific Investment Management Company
LLC.
The ratings reflect S&P's view of:
-- The collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Balboa Bay Loan Funding 2023-1 Ltd./
Balboa Bay Loan Funding 2023-1 LLC
Class A, $248.0 million: AAA (sf)
Class B, $56.0 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, $38.4 million: Not rated
BANK 2017-BNK7: Fitch Affirms 'B-' Rating on Two Tranches
---------------------------------------------------------
Fitch Ratings has affirmed all classes of BANK 2017-BNK7 Commercial
Mortgage Pass-Through Certificates Series 2017-BNK7.
Entity/Debt Rating Prior
----------- ------ -----
BANK 2017-BNK7
A-3 06541XAC4 LT AAAsf Affirmed AAAsf
A-4 06541XAE0 LT AAAsf Affirmed AAAsf
A-5 06541XAF7 LT AAAsf Affirmed AAAsf
A-S 06541XAJ9 LT AAAsf Affirmed AAAsf
A-SB 06541XAD2 LT AAAsf Affirmed AAAsf
B 06541XAK6 LT AA-sf Affirmed AA-sf
C 06541XAL4 LT A-sf Affirmed A-sf
D 06541XAV2 LT BBB-sf Affirmed BBB-sf
E 06541XAX8 LT BB-sf Affirmed BB-sf
F 06541XAZ3 LT B-sf Affirmed B-sf
X-A 06541XAG5 LT AAAsf Affirmed AAAsf
X-B 06541XAH3 LT AA-sf Affirmed AA-sf
X-D 06541XAM2 LT BBB-sf Affirmed BBB-sf
X-E 06541XAP5 LT BB-sf Affirmed BB-sf
X-F 06541XAR1 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Stable Loss Expectations: Overall pool performance and loss
expectations have remained stable since Fitch's prior rating
action. All loans within the pool are performing with no loans in
special servicing. Three loans (12.9% of the pool) have been
designated as Fitch Loans of Concern (FLOCs). Fitch's current
ratings incorporate a base case loss of 3.8% for the pool.
Fitch Loans of Concern: The largest driver to losses is the Mall of
Louisiana loan (5.5%), which is secured by 776,789-sf portion of a
1.5 million-sf super-regional mall located in Baton Rouge, LA.
Non-collateral anchor tenant, Sears closed at the location in May
2021 with no reported leasing prospects. The servicer-reported YE
2021 NOI declined by 8% from YE2020 and was down 24% from the
originator's underwritten level at issuance. However, the NOI as of
September 2022, on an annualized basis, reflected a 5% improvement
from the prior year.
In-line tenant sales in 2021 were reported at $539 psf for stores
under 10,000 sf, excluding Apple, and $678 psf including Apple,
both of which are an improvement from 2020 and 2019, reporting $334
psf and $394 psf, $454 psf and $587 psf, respectively. However,
reported sales for AMC Theaters were $64,467 per screen in 2021, a
68% decrease from $199,956 per screen in 2020. Updated sales from
2022 were unavailable at the time of review.
Fitch modeled a loss of approximately 16.0% on the loan based on a
12.5% cap rate and a 5% stress to the YE2021 NOI which reflects
declining NOI and a dark Sears box.
The second largest driver to losses is the Redondo Beach Hotel
Portfolio (5.2%), a two-property, 319-key limited-service/extended
stay hotel portfolio located in Redondo Beach, CA. Portfolio
performance continues to recover but remains below levels prior to
the pandemic. Trailing-twelve-month NOI as of September 2022
increased 26% compared to YE2021 but remains 30% below the YE2019
NOI. Portfolio-level occupancy of 78% and RevPAR of $120.24 as of
September 2022 continued to trail occupancy and RevPAR levels in
2019 of 90% and $138.87, however, ADR of $154.55 from September
2022 fell in line with 2019 level of $155.07.
Fitch's modeled loss of 13% is based on a cap rate of 11.5% and a
10% stress to the YE2019 NOI to reflect the expectation of
continued recovery.
The largest increase in losses is contributed by First Stamford
Place (2.2%), which consists of three office buildings totaling
810,475-sf and located in Stamford, CT. Following Franklin
Templeton's acquisition of Legg Mason in 2020, the tenant
subsequently reduced its footprint by 7% of the property NRA
causing property occupancy to fall to 75% from 82% in 2020.
Occupancy declined further to 71% as of YE 2022 after Odyssey
Reinsurance Company, the largest tenant at the subject, downsized
by 1.5% of the property space.
Fitch's modeled loss of 12% is based on a cap rate of 10% and a 5%
stress to the YE2022 NOI, which reflects the decline in occupancy
at the subject property.
Minimal Change to Credit Enhancement: As of the February 2023
distribution date, the pool's aggregate principal balance was
reduced by 6.8% to $1.13 billion from $1.21 billion at issuance.
One loan (1.4%) is fully defeased. Twenty-two loans (52.9%) are
full-term interest-only (IO) loans and 12 loans (20.8%) are
partial-term IO loans, all of which have begun amortizing. Interest
shortfalls are currently impacting class G.
Investment-Grade Credit Opinion Loans: Four loans (23.0%) were
assigned investment-grade credit opinions at issuance and all loans
continue to perform in line with Fitch's expectations at issuance.
The General Motors Building (9.4%), Westin Building Exchange
(5.7%), The Churchill (4.1%) and Moffett Place B4 (2.7%) were
assigned 'AAAsf*', 'AAAsf*', 'AAAsf*' and 'BBB-sf*' standalone
credit opinions, respectively, at issuance.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Downgrades to the senior classes, A-1, A-2, A-3, A-SB, A-4, A-5,
X-A, B, X-B and C are not likely due to the high credit enhancement
(CE), but could occur if interest shortfalls occur or if loans of
concern transfer to special servicing and realize significant
losses. Downgrades to classes D and X-D would occur should overall
pool losses increase, one or more large loans, have an outsized
loss, which would erode CE. Downgrades to classes E, X-E, F and X-F
would occur should loss expectations increase due to an increase in
specially serviced loans, or a further decline in the FLOCs'
performance.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrades of classes B, X-B and C may occur with significant
improvement in CE or defeasance, but would be limited should the
deal be susceptible to a concentration whereby the underperformance
of FLOCs could cause this trend to reverse. Upgrades to classes D
and X-D would also consider these factors, but would be limited
based on sensitivity to concentrations or the potential for future
concentration; classes would not be upgraded above 'Asf' if there
is a likelihood for interest shortfalls. Upgrades to classes E,
X-E, F and X-F is not likely until the later years in a transaction
and only if the performance of the remaining pool is stable and/or
if there is sufficient CE, which would likely occur when class G is
not eroded and the senior classes payoff.
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.
BENCHMARK 2023-B38: Moody's Assigns (P)B2 Rating to 2 Tranches
--------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 16
classes of CMBS securities, to be issued by Benchmark 2023-B38
Mortgage Trust, Commercial Mortgage Pass-Through Certificates,
Series 2023-B38:
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-SB, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aaa (sf)
Cl. A-M, Assigned (P)Aa1 (sf)
Cl. B, Assigned (P)Aa3 (sf)
Cl. C, Assigned (P)A3 (sf)
Cl. D, Assigned (P)Baa2 (sf)
Cl. E, Assigned (P)Baa3 (sf)
Cl. F, Assigned (P)Ba1 (sf)
Cl. G, Assigned (P)B2 (sf)
Cl. X-A*, Assigned (P)Aa1 (sf)
Cl. X-D*, Assigned (P)Baa3 (sf)
Cl. X-F*, Assigned (P)Ba1 (sf)
Cl. X-G*, Assigned (P)B2 (sf)
*Reflects interest-only Classes
RATINGS RATIONALE
The Certificates are collateralized by 25 loans secured by 42
properties. The ratings are based on the collateral and the
structure of the transaction and the following Structured Credit
Assessments:
Moody's assigned an SCA of aa1 (sca.pd) to the 1201 Third Avenue
loan, which represents approximately 9.1% of the pool balance. The
loan is secured by the borrower's fee simple interests in 55-story
Class A office building in Seattle, WA.
Moody's assigned a SCA of baa2 (sca.pd) to the CX – 250 Water
Street loan, which represents approximately 8.1% of the pool
balance. The loan is secured by the borrower's fee simple interest
in an approximately 479,000 SF, Class A, mixed-use, life sciences
laboratory and office building located in Cambridge, MA.
Moody's assigned an SCA of baa2 (sca.pd) to the Green Acres loan,
which represents approximately 7.6% of the pool balance. The loan
is secured by the borrower's fee simple and leasehold interests in
an approximately 2.1 million SF regional mall in Valley Stream,
NY.
Moody's assigned an SCA of baa1 (sca.pd) to the Great Lakes
Crossing, which represents approximately 7.6% of the pool balance.
The loan is secured by the borrower's fee simple interests in an
approximately 1.4 million retail outlet center in Auburn Hills,
MI.
Moody's assigned an SCA of aa2 (sca.pd) to the Scottsdale Fashion
Square, which represents approximately 7.5% of the pool balance.
The loan is secured by the borrower's fee simple interests in an
approximately 1.6 million SF super regional mall in Scottsdale,
AZ.
Moody's assigned an SCA of a1 (sca.pd) to The Grove, which
represents approximately 1.8% of the pool balance. The loan is
secured by the borrower's fee simple in an approximately 136,614 sf
retail anchor center in Hoover, AL.
Moody's approach to rating CMBS deals combines both commercial real
estate and structured finance analysis. Based on commercial real
estate analysis, Moody's determines the credit quality of each
mortgage loan and calculates an expected loss on a loan specific
basis. Under structured finance, the credit enhancement for each
certificate typically depends on the expected frequency, severity,
and timing of future losses. Moody's also considers a range of
qualitative issues as well as the transaction's structural and
legal aspects.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this transaction,
Moody's make various adjustments to the MLTV. Moody's adjust the
MLTV for each loan using a value that reflects capitalization (cap)
rates that are between Moody's sustainable cap rates and market cap
rates. Moody's also use an adjusted loan balance that reflects each
loan's amortization profile.
The Moody's Actual DSCR of 1.68x (1.48x excluding SCAs) is lower
than the trailing four quarters (ending 4Q 2022) conduit/fusion
transaction average of 2.08x (1.71x excluding SCAs). The Moody's
Stressed DSCR of 1.16x (1.09x excluding SCAs) is higher than the
trailing four quarters (ending 4Q 2022) conduit/fusion transaction
average of 1.04x (0.93x excluding SCAs).
The pooled trust loan balance of $656,890,689 represents a Moody's
LTV ratio of 89.8% (100.0% excluding SCAs), which is lower than the
trailing four quarters (ending 4Q 2022) conduit/fusion transaction
average of 110.0% (118.4% excluding SCAs).
The Moody's adjusted LTV is 82.1% (89.8% excluding SCAs) and is
based on Moody's adjusted Moody's value taking into account the
current interest rate environment.
Moody's also considers both loan level diversity and property level
diversity when selecting a ratings approach. With respect to loan
level diversity, the pool's loan level Herfindahl score is 16.9
(12.7 excluding SCAs). The transaction loan level diversity profile
is lesser than Moody's-rated transactions during the trailing four
quarters (ending 4Q 2022), which averaged 23.4 (20.7 excluding
SCAs). With respect to property level diversity, the pool's
property level Herfindahl score is 17.7 (14.0 excluding SCAs).
Notable strengths of the transaction include: (i) six loans
assigned an investment-grade SCA; (ii) low Moody's LTV with little
leverage dispersion (iii) above-average market composition; (iv)
average loan size; and (v) multiple property share.
Notable concerns of the transaction include: (i) the pool's low
diversity; (ii) full-term interest-only profile (iii) office
properties concentration; (iv) high share of refinancing loans; and
(v) certain asset-level legal considerations.
Moody's also grades properties on a scale of 0 to 5 (best to worst)
and considers those grades when assessing the likelihood of debt
payment. The factors considered include property age, quality of
construction, location, market, and tenancy. The pool's weighted
average property quality grade is 2.00 (2.32 excluding SCAs), which
is in line with the trailing four quarters (ending 4Q 2022) average
score of 2.10 (2.28 excluding SCAs).
The principal methodology used in rating all classes except
interest-only classes was "US and Canadian Conduit/Fusion
Commercial Mortgage-Backed Securitizations Methodology" published
in July 2022.
Moody's analysis of credit enhancement levels for conduit deals is
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate Moody's uses to estimate Moody's value). Moody's fuses the
conduit results with the results of its analysis of
investment-grade structured credit assessed loans and any conduit
loan that represents 10% or greater of the current pool balance.
Moody's analysis considers the following inputs to calculate the
proposed IO rating based on the published methodology: original and
current bond ratings and credit estimates; original and current
bond balances grossed up for losses for all bonds the IO(s)
reference(s) within the transaction; and IO type corresponding to
an IO type as defined in the published methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan paydowns or
amortization, an increase in the pool's share of defeasance or
overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall
performance of the pool, loan concentration, increased expected
losses from specially serviced and troubled loans or interest
shortfalls.
BENEFIT STREET XXXI: S&P Assigns BB- (sf) Rating on Class E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Benefit Street Partners
CLO XXXI Ltd./Benefit Street Partners CLO XXXI 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 BSP CLO Management LLC.
The ratings reflect S&P's view of:
-- The collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Benefit Street Partners CLO XXXI Ltd./
Benefit Street Partners CLO XXXI LLC
Class A-1, $300.00 million: AAA (sf)
Class A-2, $15.00 million: AAA (sf)
Class B-1, $50.00 million: AA (sf)
Class B-2, $15.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $27.50 million: BBB- (sf)
Class E (deferrable), $17.50 million: BB- (sf)
Subordinated notes, $40.50 million: Not rated
CALI MORTGAGE 2019-101C: S&P Lowers Cl. F Certs Rating to 'B-(sf)'
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on the class E and F
commercial mortgage pass-through certificates from CALI Mortgage
Trust 2019-101C, a U.S. CMBS transaction. At the same time, S&P
affirmed its ratings on six 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 a class A
office property located at 101 California Street in San Francisco's
Financial District office submarket.
Rating Actions
S&P said, "The downgrades on classes E and F reflect our revised
valuation, which is lower than the valuation we derived in our last
review in April 2022 and as well as our value at issuance due
primarily to higher vacancy at the property and our concerns over
deteriorating conditions in the office submarket." The Financial
District submarket of San Francisco is increasingly challenged by
lower demand and longer re-leasing timeframes as more companies
adopt a hybrid work arrangement, manage headcount, or relocate to
lower cost areas or states. On the other hand, our affirmations on
classes A, B, C, and D consider the possibility that, during the
remaining six years of the loan term, market conditions improve and
property performance reverses trend due to physical improvements
the sponsorship (a joint venture involving Hines, GIC, and an Asian
government investor) is making at the property, among other
factors.
S&P said, "Since our last review in April 2022, the property's
largest tenant, Merrill Lynch Pierce Fenner (Merrill Lynch; 9.8% of
net rentable area [NRA]), vacated at its October 2022 lease
expiration, as expected. Merrill Lynch had occupied its space on
floors 9, 11, 13, 14, 17, 21, 25, and 28 since the early 1990s, and
the sponsorship is renovating to modernize the space in the hope of
attracting new tenants. All the vacated space at our last review
remains vacant per the Dec. 31, 2022, rent roll.
"We noted at the last review that Chime Financial Inc. (Chime) had
signed a lease for the entirety of the 200,000-sq.-ft. annex tower,
backfilling space vacated by Cooley LLP (upon their lease
expiration in December 2020) and Morgan Stanley (after they reduced
their footprint in September 2019). Chime, a financial technology
company that provides app-based, digital banking solutions, is now
the largest tenant at the property, representing 15.6% of NRA and
14.0% of our total S&P Global Ratings rent. Chime is taking its
space in phases, and now occupies 173,569 sq. ft.; it will take its
final 19,979 sq. ft. in May 2023. Recent media reports indicate
Chime may be considering subleasing approximately 35,000 sq. ft. of
its space.
"Our property-level analysis reflects the weakened office submarket
fundamentals highlighted above and our belief that the property
will continue to face challenges in reletting vacant space, as the
sponsor has not made any material leasing progress since our last
review, and the technology and financial tenants that typically
power the San Francisco office market have generally been in a
contraction mode. As such, we assumed an in-place occupancy rate of
78.6% compared to the Dec. 31, 2022, rent roll occupancy of 76.3%,
as we gave credit for leases beginning later in 2023.
"Our sustainable net cash flow (NCF) remains unchanged from our
last review at $46.9 million, but we increased our S&P Global
Ratings capitalization rate by 25 basis points to 7.25% from 7.00%
to reflect adverse office submarket conditions, a lack of leasing
momentum and any clear catalyst for demand, and upcoming potential
tenant rollover. Our expected-case valuation is now $650.3 million
($523 per sq. ft.), 3.2% lower than that of our last review value
of $671.8 million, 18.8% lower than our issuance value of $800.8
million, and 55.6% lower than the issuance appraisal value of
$1,466.0 million. Our S&P Global Ratings loan-to-value (LTV) ratio
has increased to 116.1% on the whole loan balance, from 112.4% at
our review in April 2022 and 94.3% at issuance.
"The affirmation on class HRR reflects our continued 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,
B, C, and D and tempered our downgrades on classes E and F based on
certain weighed qualitative considerations. These include:
-- The property's desirable location in downtown San Francisco
should leasing conditions turn more favorable;
-- The potential for leasing momentum to improve above our revised
expectations following a $70.0 million lobby and plaza renovation
estimated to be completed by third quarter 2023;
-- The relatively high appraised land value of $327.7 million in
2018;
-- The significant market value decline that would need to occur
before these classes experience principal losses;
-- The liquidity support provided in the form of servicer
advancing; and
-- The relative position of the classes in the payment waterfall.
S&P said, "The affirmation on the class X-A IO certificates
reflects 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 classes A, B, and C.
"We may take additional rating action if the property's performance
does not improve or if there are reported changes in the
performance beyond what we have already considered."
Property-Level Analysis
The loan collateral includes a 48-story, 1.25 million-sq.-ft. LEED
platinum certified class A high rise office tower, an attached
seven-story 200,000-sq.-ft. annex building (occupied fully by
Chime), and a two-story subterranean parking garage totaling 210
spaces. The office tower was built in 1983 and includes 23,000 sq.
ft. of ground floor retail space. The property is located at 101
California Street, in downtown San Francisco, within the Financial
District office submarket.
S&P said, "Our property-level analysis considered that while the
sponsor was able to re-tenant the property by signing a new 10-year
lease with Chime (193,548 sq. ft.; 15.6% of NRA), we believe the
occupancy level will continue to face elevated pressure due to
adverse submarket conditions. As discussed above, we currently
expect an occupancy rate of 78.6%, compared with 97.0% in 2019,
88.1% in 2020, and 76.2% in 2021. The property is performing
slightly better than the first-quarter 2023 office submarket
average occupancy rate of 75.1%, as per CoStar."
As of the Dec. 31, 2022, rent roll, the five largest tenants are:
-- Chime (15.6% of NRA; $87.21 per sq. ft. in-place gross rent, as
calculated by S&P Global Ratings; October 2032 lease expiration);
-- Deutsche Bank Securities Inc. (4.8%; $91.13 per sq. ft.;
December 2024);
-- Winston & Strawn LLP (4.2%; $86.83 per sq. ft.; October 2024);
-- Baker Botts LLP (4.2%; $110.04 per sq. ft.; August 2031); and
-- Morgan Stanley (4.1%; $84.76 per sq. ft.; March 2030).
The property faces concentrated rollover in 2024 (16.1% of NRA) and
2032 (16.5%). In 2024, the aforementioned second and third largest
tenants (by percentage of NRA) expire. The loan matures in March
2029.
S&P's revised expected-case assumptions and valuation of the
property reflect the following factors:
-- The weakened Financial District office submarket (where the
property is located) fundamentals, stemming from more companies
embracing flexible work arrangements due to the COVID-19 pandemic
or relocating to lower cost areas or states because of rising
business costs in the Bay Area.
-- Property performance trends, which continue to decrease with
servicer-reported year-end 2022 NCF down 15.0% from year-end 2021.
-- The borrower's 2023 budget, provided by the master servicer,
forecasts a further 5.2% decline. However, S&P attributes some of
the decline to rent abatements given to Chime, which on average
have roughly six months remaining.
Known upcoming tenant movements.
The Financial District office submarket is home to several of the
city's most iconic buildings and numerous financial institutions.
Due to lower demand, market rent for peer properties in the
submarket declined 12.1% in 2020, 4.8% in 2021, and 0.8% in 2022,
according to CoStar. CoStar projects further decline in four- and
five-star properties' rents of 3.6% and 2.0% in 2023 and 2024,
respectively. As of March 2023, asking rent, vacancy rate, and
availability rate for four- to five-star properties in the
submarket were $65.72 per sq. ft., 25.3%, and 30.1%, respectively.
CoStar projects peer properties submarket vacancy rate of 23.2% and
asking rent of $66.74 per sq. ft. in 2023.
The property benefits from large institutional long-term
sponsorship. Hines was a joint-venture partner in the development
of the property and retained 5% of the equity ownership in the 2012
recapitalization. Hines now partners with GIC and an Asian
government investor.
As mentioned above, S&P assumed an occupancy rate of 78.6%, an
in-place gross rent of $96.81 per sq. ft., 38.1% OPEX ratio, and
higher tenant improvement expenses, which result in an S&P Global
Ratings NCF of $46.9 million.
Transaction Summary
The mortgage whole loan had an initial and current balance of
$755.0 million, pays an annual weighted average fixed interest rate
of 4.1815%, and matures on March 6, 2029. The whole loan is split
into nine senior A (at a rate of 3.8500%) and two subordinate B
notes (at a rate of 4.9500%). The $515.0 million trust balance
(according to the March 10, 2023, trustee remittance report),
comprises the $245.3 million A-1 senior note, $41.7 million A-2
senior note, $171.0 million B-1 subordinate note, and $57.0 million
B-2 subordinate note. The remaining seven senior A notes totaling
$240.0 million are in four other U.S. CMBS conduit transactions.
The senior A notes are pari passu to each other and senior to the B
notes.
The borrower is permitted to incur up to $130.0 million in
mezzanine debt, subject to certain conditions. The servicer has
confirmed the borrower has not incurred any, and S&P believes the
borrower will unlikely be able to, based on the property's current
level of performance.
S&P notes that all upfront reserves from securitization have been
completely disbursed, including the $10.0 million upfront
re-tenanting reserve related to the former Cooley's space, 112,000
sq. ft. vacated in December 2020.
Through its March 2023 debt service payment, the whole loan has a
reported current payment status. To date, the trust has not
incurred any principal losses. The master servicer, Midland Loan
Services, reported a debt service coverage ratio of 1.54x and an
occupancy rate of 76.3% as of Dec. 31, 2022--a decline from 1.77x
and relatively flat from 76.2%, respectively, as of year-end 2021.
Ratings Lowered
CALI Mortgage Trust 2019-101C
Class E to 'B+ (sf)' from 'BB- (sf)'
Class F to 'B- (sf)' from 'B (sf)'
Ratings Affirmed
CALI Mortgage Trust 2019-101C
Class A: AAA (sf)
Class B: AA- (sf)
Class C: A- (sf)
Class D: BBB- (sf)
Class HRR: CCC (sf)
Class X-A: A- (sf)
COMM 2012-CCRE2: Moody's Lowers Rating on 2 Tranches to Caa3
------------------------------------------------------------
Moody's Investors Service has downgraded the ratings on six classes
in COMM 2012-CCRE2 Mortgage Trust ("COMM 2012-CCRE2"), Commercial
Pass-Through Certificates, Series 2012-CCRE2 as follows:
Cl. D, Downgraded to Ba1 (sf); previously on Sep 22, 2022
Downgraded to Baa2 (sf)
Cl. E, Downgraded to B1 (sf); previously on Sep 22, 2022 Downgraded
to Ba2 (sf)
Cl. F, Downgraded to Caa1 (sf); previously on Sep 22, 2022
Downgraded to B2 (sf)
Cl. G, Downgraded to Caa3 (sf); previously on Sep 22, 2022 Affirmed
Caa1 (sf)
Cl. PEZ, Downgraded to Ba1 (sf); previously on Sep 22, 2022
Downgraded to A2 (sf)
Cl. X-B*, Downgraded to Caa3 (sf); previously on Sep 22, 2022
Affirmed B1 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on four P&I classes were downgraded due to increased
risk of losses and interest shortfalls driven primarily by the
significant exposure to specially serviced and troubled loans. The
largest loan in the pool, Chicago Ridge Mall loan (53% of the
pool), is secured by a super-regional mall and may face increased
refinance risk at its maturity in July 2023. Furthermore, the
Crossgates Mall loan (41% of the pool), which was previously
modified transferred back to special servicing due to imminent
maturity default ahead of its extended maturity date in May 2023.
The ratings on one IO class was downgraded due to decline in the
credit quality of its referenced classes. The IO Class references
all P&I classes including Class H, which is not rated by Moody's.
The rating on the exchangeable class was downgraded based on a
decline in the credit quality of its referenced exchangeable
classes, and from principal paydowns of the higher quality
reference classes.
Moody's regard e-commerce competition as a social risk under
Moody's ESG framework. The rise in e-commerce and changing consumer
behavior presents challenges to brick-and-mortar discretionary
retailers.
Moody's rating action reflects a base expected loss of 36.1% of the
current pooled balance, compared to 6.5% at Moody's last review.
Moody's base expected loss plus realized losses is now 4.0% of the
original pooled balance, compared to 1.3% at Moody's last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, an increase in realized and
expected losses from specially serviced and troubled loans or
interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except
interest-only classes was "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-Backed Securitizations Methodology"
published in July 2022.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 36% of the pool is in
special servicing and Moody's has identified additional troubled
loans representing 64% of the pool. In this approach, Moody's
determines a probability of default for each specially serviced and
troubled loan that it expects will generate a loss and estimates a
loss given default based on a review of broker's opinions of value
(if available), other information from the special servicer,
available market data and Moody's internal data. The loss given
default for each loan also takes into consideration repayment of
servicer advances to date, estimated future advances and closing
costs. Translating the probability of default and loss given
default into an expected loss estimate, Moody's then applies the
aggregate loss from specially serviced and troubled loans to the
most junior class(es) and the recovery as a pay down of principal
to the most senior class(es).
DEAL PERFORMANCE
As of the March 10, 2023 distribution date, the transaction's
aggregate certificate balance has decreased by 89% to $144.9
million from $1.32 billion at securitization. The certificates are
collateralized by four mortgage loans ranging in size from 7% to
53% of the pool
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 3, the same as at Moody's last review.
Three loans, constituting 47% of the pool, are currently in special
servicing. All the specially serviced loans have transferred to
special servicing since March 2020. Additionally, there is one
troubled loan constituting 53% of the pool that is on the servicer
watchlist.
The largest specially serviced loan is the Crossgates Mall Loan
($58.6 million – 40.5% of the pool), which represents a
pari-passu portion of a $244.2 million mortgage loan. The loan is
secured by a two-story, 1.3 million square feet (SF) super regional
mall located in Albany, New York. The mall is anchored by Macy's
(non-collateral), J.C. Penney, Dick's Sporting Goods, Burlington
Coat Factory, Best Buy, and Regal Crossgates 18. A non-collateral
anchor, Lord & Taylor, has closed its store at the property due to
its recent filing for Chapter 11 bankruptcy reorganization. As of
December 2022, the total mall and collateral occupancy was 94%,
compared to 96% in June 2020. The in-line occupancy was 76% in
December 2022 compared to 86% occupied in June 2020 and 90% in
December 2019. Several large tenants leasing spaces over 5,000 SF
are listed as month-to-month as of the December 2022 rent roll.
Property performance had been relatively stable through year-end
2022 and NOI was 10% lower than securitization levels. The mall
represents a dominant super-regional mall with over 10 anchors and
junior anchors and benefits from its location at the junction of
Interstate 87 and Interstate 90. The loan had originally
transferred to special servicing in April 2020 in relation to the
business disruptions from the coronavirus pandemic. An updated
appraisal in August 2020 valued the property at $281.0 million, a
40% decline from the value at securitization. The loan was extended
through May 2023 after receiving a modification. The loan
transferred back to speacial servicing for imminent default in
February 2023. As of the March 2023 remittance date, the loan was
current on P&I payments, and had amortized by 18.3% since
securitization.
The second largest specially serviced loan is the Green Crossroads
Loan ($9.5 million – 6.6% of the pool), which is secured by a
neighborhood center located in Houston, Texas. The property is
anchored by a Burlington Coat Factory (54% of NRA) who recently
extended their lease by five years to April 2027. The loan had
transferred to special servicing in June 2020 due to monetary
default in relation to the coronavirus pandemic, and subsequently
received a modification extending the maturity date to March 2023
from July 2022. The loan returned to the master servicer in July
2021. Occupancy at the property was 80% in March 2022, compared to
84% in 2017 and 91% at securitization. In July 2022, the loan
transferred back into special servicing due to the borrower's
inability to pay off the loan at the anticipated maturity date in
March 2023. The loan entered foreclosure in October 2022. An
updated appraisal in September 2022 valued the property at $13.4
million, a 21% decline from the value at securitization, but above
the outstanding loan balance. As of the March 2023 remittance date,
the loan was last paid through July 2022 and has amortized by 25%
since securitization.
Moody's has also assumed a high default probability on the Chicago
Ridge Mall and estimates an aggregate $52.3 million loss for the
specially serviced and troubled loans (a 36% expected loss on
average). The largest loan not in special servicing is the Chicago
Ridge Mall Loan ($76.7 million – 53.0% of the pool), which is
secured by a 569,000 SF portion of an 868,000 SF super-regional
mall located approximately 15 miles southwest of the Chicago
central business district (CBD). At securitization, the mall was
anchored by a Sears, Kohl's, Carson Pirie Scott and an AMC
Theatres. The Sears and Kohl's are non-collateral and Sears has
since vacated. Carson Pirie Scott has also vacated the property in
2018 but a portion of the space has been replaced with a Dick's
Sporting Goods. The collateral was 73% leased as of December 2022,
compared to 82% as of December 2021 and 95% at securitization. An
updated appraisal in April 2022 valued the property at $65.7
million, 49% decline in value since securitization, though above
the outstanding loan balance. This loan was modified in July 2022,
and the maturity date was extended to July 2023, after which, the
loan was subsequently returned to the master servicer in October
2022. As of the March 2023 payment date, the loan was last paid
through January 2023 and is less than one month delinquent, and has
amortized by 4.0% since securitization.
As of the March 2023 remittance statement cumulative interest
shortfalls were $247,989. Moody's anticipates interest shortfalls
will continue because of the exposure to specially serviced loans.
Interest shortfalls are caused by special servicing fees, including
workout and liquidation fees, appraisal entitlement reductions
(ASERs), loan modifications and extraordinary trust expenses.
COMM 2012-CCRE5: Moody's Lowers Rating on Class G Certs to C
------------------------------------------------------------
Moody's Investors Service has downgraded the ratings on six classes
in COMM 2012-CCRE5 Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2012-CCRE5 as follows:
Cl. C, Downgraded to Baa1 (sf); previously on Nov 1, 2022
Downgraded to A2 (sf)
Cl. D, Downgraded to Ba1 (sf); previously on Nov 1, 2022 Downgraded
to Baa2 (sf)
Cl. E, Downgraded to B3 (sf); previously on Nov 1, 2022 Downgraded
to B1 (sf)
Cl. F, Downgraded to Caa3 (sf); previously on Nov 1, 2022
Downgraded to Caa2 (sf)
Cl. G, Downgraded to C (sf); previously on Nov 1, 2022 Affirmed
Caa3 (sf)
Cl. PEZ, Downgraded to Baa1 (sf); previously on Nov 1, 2022
Affirmed Aa2 (sf)
RATINGS RATIONALE
The ratings on five P&I classes were downgraded due to increased
risk of losses and interest shortfalls driven primarily by the
significant exposure to loans in special servicing (100% of the
current pool balance). All of the loans have passed their original
maturity date. The largest loan in the pool, Eastview Mall and
Commons Loan (60% of the pool) is secured by a regional mall with
declining performance in recent years and as of the March 2023
remittance report has already recognized an appraisal reduction of
55% of its outstanding loan balance. The second largest loan,
Widener Building Loan (31% of the pool), is secured by an office
property with recent declines in net operating income (NOI) and
occupancy. Furthermore, the remaining specially serviced loan
Verizon Operations Center (9% of the pool) is now fully vacant
after the former single tenant vacated in October 2022.
The rating on one exchangeable class, Cl. PEZ, was downgraded based
on the credit quality of its referenced exchangeable classes and
principal paydowns of higher quality reference classes.
Moody's regard e-commerce competition as a social risk under
Moody's ESG framework. The rise in e-commerce and changing consumer
behavior presents challenges to brick-and-mortar discretionary
retailers.
Moody's rating action reflects a base expected loss of 50.0% of the
current pooled balance, compared to 16.3% at Moody's last review.
Moody's base expected loss plus realized losses is now 6.6% of the
original pooled balance, compared to 5.3% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, an increase in realized and
expected losses from specially serviced and troubled loans or
interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Large Loan and
Single Asset/Single Borrower Commercial Mortgage-Backed
Securitizations Methodology" published in July 2022.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 100% of the pool is in
special servicing. In this approach, Moody's determines a
probability of default for each specially serviced and troubled
loan that it expects will generate a loss and estimates a loss
given default based on a review of broker's opinions of value (if
available), other information from the special servicer, available
market data and Moody's internal data. The loss given default for
each loan also takes into consideration repayment of servicer
advances to date, estimated future advances and closing costs.
Translating the probability of default and loss given default into
an expected loss estimate, Moody's then applies the aggregate loss
from specially serviced to the most junior classes and the recovery
as a pay down of principal to the most senior classes.
DEAL PERFORMANCE
As of the March 10, 2023 distribution date, the transaction's
aggregate certificate balance has decreased by 87% to $150 million
from $1.13 billion at securitization. The certificates are
collateralized by three mortgage loans ranging in size from 9% to
60% of the pool, all of which are currently in special servicing.
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 2, compared to 7 at Moody's last review.
As of the March 2023 remittance report, loans representing 100% of
the pool were past their maturity dates.
One loan has been liquidated from the pool, resulting in a minimal
loss to the trust. Three loans, constituting 100% of the pool, are
currently in special servicing.
The largest specially serviced loan is the Eastview Mall and
Commons loan ($90 million – 60% of the pool), which represents a
pari passu portion of a $210 million first mortgage. The loan is
secured by a 725,300 SF portion of a 1.4 million SF regional mall
(Eastview Mall) and an adjacent 86,300 SF power center (Eastview
Commons), totaling 811,600 SF of retail located in Victor, New
York, approximately 15 miles southeast of Rochester. Non-collateral
anchors at Eastview Mall include Macy's, JC Penny, Von Maur and
Dick's House of Sports, and the collateral anchors include Regal
Cinemas and Raymour & Flanigan furniture. Eastview Commons includes
non-collateral Home Depot and Target stores, and collateral tenants
Best Buy, Staples and Old Navy. Property NOI declined since 2018
and the 2021 NOI was 33% lower than in 2012. The loan transferred
to the special servicer in June 2022 ahead of its September 2022
maturity date and has made interest only payments through its March
2023 payment date. An updated appraisal value from October 2022
valued the property 73% below the value at securitization and 52%
below the outstanding loan balance. Servicer commentary indicates a
loan extension is currently being negotiated. Due to decline in
performance since securitization and current market conditions,
Moody's expects a significant loss on this loan.
The second largest specially serviced loan is the Widener Building
Loan ($46.8 million – 31.1% of the pool), which is secured by an
18-story multi-tenant Class B office building located in
Philadelphia, Pennsylvania. The building has approximately 423,000
SF of office space with 32,000 SF of ground floor retail space. The
largest tenant is Philadelphia Municipal Authority (44% of the net
rentable NRA), with a lease expiration in January 2026. The
property was 90% occupied as of December 2022, compared to 95% in
December 2021 and 88% at securitization. The second largest tenant,
Rawle and Henderson (15.2% of NRA) has announced that they will
vacate the property at lease expiration in April 2023. Property
performance has declined since 2020 due to lower revenues and
higher expenses. The loan matured in December 2022 and transferred
to special servicing in January 2023. The loan has amortized 21%
since securitization. Special servicer commentary indicates that
the lockbox has been triggered and the lender will negotiate with
borrower to complete a short-term extension while dual tracking a
foreclosure action.
The third specially serviced loan is the Verizon Operations Center
Loan ($13.5 million – 9% of the pool), which is secured by a
class A, built-for-suit office building for Verizon, located in
northeast of downtown Columbia, South Carolina. The property serves
as a call and operations center for the company. While property
performance had been stable since securitization, the sole tenant,
Verizon's lease expired in October 2022 and was not extended. The
borrower requested a loan transfer to special servicing and the
loan did not pay off at maturity in December 2022. An updated
appraisal in December 2022 valued the property at a 73% decline
from its value at securitization and was 42% below the outstanding
loan amount. The loan has amortized 29% since securitization and is
last paid through its January 2023 payment date. Special servicer
commentary indicates borrower is attempting to sell the property
and pay off loan and receiver was appointed in February 2023.
As of the March 2023 remittance statement cumulative interest
shortfalls were $405,000. Moody's anticipates interest shortfalls
will continue because of the exposure to specially serviced loans
and/or modified loans. Interest shortfalls are caused by special
servicing fees, including workout and liquidation fees, appraisal
entitlement reductions (ASERs), loan modifications and
extraordinary trust expenses.
COMM 2015-CCRE25: Fitch Affirms Rating at 'BBsf' on Two Tranches
----------------------------------------------------------------
Fitch Ratings has affirmed 10 classes of COMM 2015-CCRE25 Mortgage
Trust.
Entity/Debt Rating Prior
----------- ------ -----
COMM 2015-CCRE25
A-3 12593PAV4 LT AAAsf Affirmed AAAsf
A-4 12593PAW2 LT AAAsf Affirmed AAAsf
A-M 12593PAY8 LT AAAsf Affirmed AAAsf
A-SB 12593PAU6 LT AAAsf Affirmed AAAsf
B 12593PAZ5 LT AA-sf Affirmed AA-sf
C 12593PBA9 LT A-sf Affirmed A-sf
D 12593PBB7 LT BBsf Affirmed BBsf
E 12593PAE2 LT CCCsf Affirmed CCCsf
X-A 12593PAX0 LT AAAsf Affirmed AAAsf
X-C 12593PAC6 LT BBsf Affirmed BBsf
KEY RATING DRIVERS
Improved Loss Expectations: The affirmations reflect overall stable
pool performance and improved loss expectations since Fitch's prior
rating action primarily due to improved performance of loans
previously impacted by the pandemic and additional defeasance. In
total, 19 loans are defeased (17.8% of pool balance). Nine loans
(9.5%) are considered Fitch Loans of Concern (FLOCs), including two
loans (5.5%) in special servicing. Fitch's current ratings
incorporate a base case loss of 6.8%.
Largest Contributors to Base Case Loss/Specially Serviced Loans:
The largest contributor to expected losses is the specially
serviced Monarch 815 at East Tennessee State (3.1%). The asset is a
student housing property in Johnson City, TN that transferred to
the special servicer in June 2018 due to payment default and became
REO in February 2019. The property is less than one mile from East
Tennessee State University's main campus and there is a free
shuttle bus with a stop located across the street from the
property. The fall 2022 semester had total enrollment of 13,738,
which is slight increase from the prior year and included the
largest incoming class in a decade with 2,056 students.
The property manager has been working on improvements which
includes replacing the roof, updating the flooring in the hallways,
painting the hallways, upgrading the internet, and updating select
units with upgraded flooring and new refrigerators. The property
also has a new bus, a new package delivery system, updated exterior
landscaping, and new pool furniture. Significant fire code
deficiencies have also been addressed.
Occupancy declined to 85.3% as of February 2023 from 96.2% as of
September 2022 due to several unexpected move outs after the fall
semester. The NOI debt service coverage ratio (DSCR) for YE 2022
was .51x compared to .20 at YE 2021, .17x at YE 2020, and -.03x at
YE 2019. Fitch's expected loss of 70% is based on a discount to the
November 2022 appraisal.
The second largest contributor to expected losses is the specially
serviced Square 95 (2.3%). The asset is a 155,309-sf retail
property located in Woodbridge, VA. The asset transferred to the
special servicer in February 2018 due to occupancy declining to 49%
after Gander Mountain vacated in 2017 when the lease was rejected
in bankruptcy. The asset became REO in July 2018. The asset is
adjacent to the Potomac Mills Mall, an outlet mall with more than
200 stores.
In July 2022, a long-term lease was signed by Prince William County
for the space previously occupied by Gander Mountain and they took
possession of the space in August 2022. Prince William County is
using the space as a rehabilitation clinic, crisis recovery center,
and community services board. The special servicer had difficulty
finding long-term tenants that the adjacent mall did not restrict.
The YE 2022 NOI DSCR was .46x, YE 2021 was .70x, YE 2020 was 0.45x,
YE 2019 was 0.47x, YE 2018 was 0.37x and YE 2017 was 1.05x. Fitch's
expected loss of approximately 60% is based on a discount to the
November 2022 appraisal.
Increasing Credit Enhancement: As of the March 2023 distribution
date, the pool's aggregate principal balance was reduced by 16.2%
to $944.4 million from $1.127 billion at issuance and includes $7.6
million in realized losses incurred since December 2020. Of the 84
loans in the transaction at issuance, 76 loans remain. There are 19
loans (17.8%) that have defeased compared with 13 loans (11.7%) at
the prior review. Eight loans (14.8%) are full-term IO loans. There
are 30 loans, representing 52.9% of the pool, that had partial IO
periods that have expired. The transaction has not realized any
losses since the prior review and interest shortfalls are affecting
non-rated classes F and G. All remaining loans mature from April
through August 2025.
Loan Concentration: The largest 10 loans comprise 42.6% of the
pool. Twenty-six loans (29%) are secured by retail properties,
while mixed-use properties with a retail component comprise an
additional four loans (7.2% of the pool). Seventeen loans (18%) are
secured by multifamily properties, and 11 loans (18.1%) are secured
by hotel properties.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Sensitivity factors that lead to downgrades include an increase in
pool-level losses from underperforming or specially serviced loans.
Downgrades to the A-3, A-4, A-SB, X-A and A-M are not expected
given their high credit enhancement (CE) relative to expected
losses and continued amortization, but may occur if interest
shortfalls occur or if a high proportion of the pool defaults and
expected losses increase considerably.
Downgrades to classes B and C, would occur if overall pool losses
increase substantially, performance of the FLOCs deteriorate
further, and/or one or more large loans have an outsized loss,
which would erode CE.
Downgrades to classes D and X-C would occur should loss
expectations increase from continued performance decline of the
FLOCs or loans default and/or transfer to the special servicer.
Further downgrades to the 'CCCsf'-rated class E will occur with a
greater certainty of loss and/or as further losses are realized.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Sensitivity factors that lead to upgrades would include stable to
improved asset performance coupled with pay down and/or defeasance.
Upgrades to classes B and C would likely occur with significant
improvement in CE and/or defeasance; however, adverse selection,
increased concentrations and/or further underperformance of the
FLOCs could cause this trend to reverse.
An upgrade of classes D and X-C would also consider these factors,
but would be limited based on sensitivity to concentrations or the
potential for future concentration. Classes would not be upgraded
above 'Asf' if there is likelihood for interest shortfalls.
An upgrade to class E is possible with continued performance
improvement of the FLOCs, better than expected recoveries on
specially serviced loans, and there is sufficient CE to the class.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
CSMC TRUST 2017-CALI: S&P Lowers Class E Certs Rating to 'B- (sf)'
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on five classes of
commercial mortgage pass-through certificates from CSMC Trust
2017-CALI, a U.S. CMBS transaction. At the same time, S&P affirmed
its ratings on three 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 One
California Plaza, a 42-story, 1.05 million-sq.-ft. class A office
building in the Downtown Los Angeles office submarket.
Rating Actions
S&P said, "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 May 2022 and at issuance due primarily to our
higher vacancy assumptions and our concerns over the low reported
debt service coverage (DSC), which was 1.05x as of the nine months
ended Sept. 30, 2022. They also reflect our assessment that the
borrower may have difficulty refinancing the loan by its Nov. 6,
2024, maturity date, based on the property's current performance.
On the other hand, our affirmations on classes A and B consider the
possibility that property performance improves, given that the
borrower is currently negotiating with several prospective tenants
to take up to 16.6% of net rentable area (NRA), among other
factors.
"We noted in our last review in May 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 the Sept. 30, 2022, rent roll, the property was 77.5%
leased, compared with 76.4% in our last review and 85.1% at
issuance. However, the Sept. 30, 2022, rent roll included a former
tenant, Dentons US LLP (6.0% of NRA), which vacated at the end of
its lease in September 2022. While our analysis excludes this
tenant and assumes a 71.5% occupancy rate, we did qualitatively
consider that, per the borrower, four tenants may be interested in
signing leases comprising approximately 16.6% of the property's
NRA; however, the negotiations each involve substantial tenant
improvement allowances and approximately one year of rent
concessions. Additionally, several other existing tenants have
leases that have expired or will soon expire for which we have not
received leasing updates: Willis Towers Watson US LLC (2.4% of NRA;
October 2022 lease expiration), JP Morgan Chase Bank N.A. (2.9%;
March 2023), Beacon Capital Partners LLC (0.3%; May 2023), and
Degenkolb Engineers (0.9%; September 2023). Furthermore, the leases
of four tenants, representing 14.9% of NRA, are set to expire in
2024.
"Our property-level analysis also reflects the deteriorating office
submarket fundamentals from lower demand and longer re-leasing
timeframes as companies continue to embrace hybrid or remote work
arrangements, manage headcount, or relocate to lower cost areas or
states. Reflecting these factors, we revised and lowered our
sustainable NCF to $14.4 million (down 11.5% from our last review
NCF of $16.3 million and 19.6% from our issuance NCF of $17.9
million) using a 71.5% occupancy rate, a $40.56-per-sq.-ft. gross
rent (as calculated by S&P Global Ratings), and a 51.1% operating
expense ratio, which is 1.1% lower than the 2021 servicer-reported
NCF of $14.5 million. The reported NCF as of the nine months ended
Sept. 30, 2022, was $9.1 million. Using a 7.00% S&P Global Ratings
capitalization rate (unchanged from our last review and at
issuance), we arrived at an expected-case valuation of $205.4
million, or $196 per sq. ft., 11.5% lower than that of our last
review value of $232.2 million, or $222 per sq. ft. (see "Three
Ratings Lowered, Five Affirmed From CSMC Trust 2017-CALI,"
published May 25, 2022), 19.7% lower than our issuance value of
$255.8 million and 55.3% lower than the issuance appraisal value of
$459.0 million. This yielded an S&P Global Ratings loan-to-value
ratio of 146.0% on the whole loan balance, up from 129.2% in our
last review and 117.3% 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 its downgrades on classes C, D, and E because
S&P weighed certain qualitative considerations, including:
-- The potential that the office property's operating performance
could improve above our revised expectations given potential
leasing prospects. As of March 2023, there is $15.6 million in
replacement, tenant, 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; and
-- The relative position of the classes in the payment waterfall.
S&P said, "We affirmed our rating on the class X-A certificates and
lowered our rating on the class X-B IO certificates based on our
criteria for rating IO securities, which states that the ratings on
the IO securities would not be higher than that of the lowest-rated
reference class. The notional amount of class X-A references class
A, while class X-B references classes B and C.
"If the property's performance does not improve or if there are
reported negative changes in the performance beyond what we have
already considered, we may revisit our analysis and adjust our
ratings as necessary."
Property-Level Analysis
The One California Plaza property is a 42-story, 1.05
million-sq.-ft., class A LEED Platinum certified office building
located at 300 South Grand Avenue in the Downtown Los Angeles
office submarket. The property was built in 1985 and is part of a
mixed-use development that occupies an entire city block within the
Bunker Hill neighborhood. The overall development includes: Two
California Plaza, a 1.40 million-sq.-ft. office tower adjacent to
the collateral property; the Omni Hotel, a 453-room full-service
hospitality property; and a 1.5-acre water court, an open-air
courtyard and amphitheater with multi-level seating, situated
between the two office properties. From 2012 to 2016, approximately
$15 million was invested in the property to renovate and upgrade
the lobby, elevators, and other amenities. Amenities at the
property include a rooftop helipad, rooftop terrace, and retail
pavilion. The sponsor, Colony NorthStar Inc., acquired the property
in June 2017 for $459 million ($438 per sq. ft.) from Beacon
Capital Partners.
As previously discussed, the property's occupancy rate dropped to
82.4% at the onset of the pandemic in 2020 from 87.4% in 2019 and
89.1% in 2018. The occupancy rate further fell to 76.4% in 2021 and
then to 71.5%, after excluding the vacated tenant (Denton US LLP),
as of the Sept. 30, 2022, rent roll.
According to the Sept. 30, 2022, rent roll (excluding vacated
tenant Dentons US LLP), the five largest tenants at the property
comprised 40.5% of NRA and included:
-- AECOM (11.9% of NRA; 12.8% of base rent, as calculated by S&P
Global Ratings; February 2032 lease expiration);
-- Skadden, Arps, Slate, Meagher & Flom LLP (10.3%; 13.3%;
November 2024);
-- Morgan Lewis & Bockius LLP (9.8%; 12.8%; September 2027);
-- Nixon Peabody LLP (4.5%, 5.8%, April 2028); and
-- Locke Lord LLP (4.0%, 5.9%, September 2025).
The property's notable rollover risk is in 2024 (14.9% of NRA) and
2025 (9.9%), bookending the loan's November 2024 maturity date. The
rollover in 2024 is primarily attributable to Skadden, Arps, Slate,
Meagher & Flom LLP and Financial Industry Regulatory Authority
(3.7% of NRA; June 2024 expiry). The rollover in 2025 is primarily
attributable to Locke Lord LLP, Hill, Farrer & Burrill LLP (3.2%;
June 2025), and Best, Best & Krieger LLP (1.9%; December 2025).
According to CoStar, the Downtown Los Angeles office submarket, in
which the property is situated, had elevated vacancies prior to the
pandemic that continue today, and rents have been flat since late
2020. As of March 2023, four- and five-star office properties in
the submarket have a gross market rent of $43.32 per sq. ft.,
vacancy rate of 20.2%, and availability rate of 23.6%. The
submarket rent was $40.06 per sq. ft. and the vacancy rate for
four- and five-star properties was 14.4% at issuance in 2017.
CoStar expects elevated submarket vacancy and flat market rent to
continue through at least 2025. CoStar does note that the Downtown
submarket attracts tenants looking for value or who prioritize
proximity to courts and transportation infrastructure. Notably,
CoStar expects negative absorption rates for four- to five-star
properties in the submarket until 2025.
As previously mentioned, S&P utilized a 71.5% occupancy rate and
in-place gross rent in determining our sustainable NCF. The
property's assumed average gross rent of $40.56 per sq. ft., as
calculated by S&P Global Ratings, is on par with CoStar's submarket
gross rent for four- and five-star office properties.
Transaction Summary
The IO mortgage whole loan had an initial and current balance of
$300.0 million, pays an annual fixed interest rate of 3.8%, and
matures on Nov. 6, 2024. The whole loan is split into two senior A
notes and a subordinate B note. The $250.0 million trust balance
(as of the March 10, 2023, trustee remittance report) comprises the
$86.0 million senior note A-1 and $164.0 million subordinate note
B. The $50.0 million senior note A-2 is in CSAIL 2017-CX10
Commercial Mortgage Trust, a U.S. CMBS transaction. The senior A
notes are pari passu to each other and senior to the B note.
The whole loan was transferred to the special servicer on Feb. 17,
2021, due to the borrower's failure to return $3.9 million in funds
that were mistakenly sent to the borrower after cash management was
triggered by the servicer in October 2020. As part of the
settlement, the borrower executed the cash management documents and
remitted the funds back to the servicer. The loan was returned to
the master servicer, KeyBank Real Estate Capital, on Sept. 24,
2021. The loan is currently on the master servicer's watchlist
because the loan is being cash managed due to a low reported DSC
and Skadden Trigger Event, as defined in the transaction documents.
The borrower has been current on its debt service payments through
March 2023. The servicer reported a DSC of 1.26x as of year-end
2021 and 1.05x for the nine months ended Sept. 30, 2022. To date,
the trust has not incurred any principal losses.
Ratings Lowered
CSMC Trust 2017-CALI
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)'
Class X-B to 'BBB+ (sf)' from 'A- (sf)'
Ratings Affirmed
CSMC Trust 2017-CALI
Class A: AAA (sf)
Class B: AA- (sf)
Class X-A: AAA (sf)
DRYDEN 105: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Dryden 105
CLO Ltd./Dryden 105 CLO 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 PGIM Inc.
The preliminary ratings are based on information as of March 23,
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 senior secured
term loans.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Dryden 105 CLO Ltd./Dryden 105 CLO LLC
Class A, $250.00 million: AAA (sf)
Class B, $54.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D (deferrable), $23.20 million: BBB- (sf)
Class E (deferrable), $12.40 million: BB- (sf)
Subordinated notes, $33.47 million: Not rated
ELMWOOD CLO 22: S&P Assigns B- (sf) Rating on Class F Notes
-----------------------------------------------------------
S&P Global Ratings assigned 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 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
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
EXETER AUTOMOBILE 2022-1 : S&P Raises E Certs Rating to BB-(sf)
---------------------------------------------------------------
S&P Global Ratings lowered its ratings on and removed its
CreditWatch with negative implications placement from four classes,
raised its ratings on one class, and affirmed its ratings on three
of the classes from Exeter Automobile Receivables Trust (EART)
2022-1, 2022-2, 2022-3, and 2022-4.
S&P said, "The rating actions reflect the transactions' collateral
performance to date and our expectations regarding future
collateral performance, including an increase in each series
cumulative net loss (CNL) expectations, which for EART 2022-2,
2022-3, and 2022-4 represent a minimum loss expectation. These
rating actions also account for each transaction's structure and
respective level of credit enhancement. Additionally, we
incorporated secondary credit factors, including credit stability,
payment priorities under various scenarios, and sector- and
issuer-specific analyses, including our most recent macroeconomic
outlook, which incorporates a baseline forecast for U.S. GDP and
unemployment. Based on these factors and Exeter Finance LLC's
(Exeter's) capital contribution to EART 2022-2 and 2022-3, we
believe the creditworthiness of the notes is consistent with the
lowered, raised, and affirmed ratings.
"Each transaction's collateral performance is trending worse than
our original CNL expectations. Cumulative gross losses are
significantly higher than prior transactions at this point in time,
which, coupled with lower cumulative recoveries, is resulting in
elevated CNLs. Delinquencies and extensions, while having
normalized, are still a concern. Excess spread has largely been
used to cover net losses, leaving very little or no funds available
to build the transactions' overcollateralization (O/C) amounts in
dollar terms. For EART 2022-1, the dollar amount of O/C build
during the January and February 2023 collection periods was
entirely attributable to Exeter forgoing its servicing fee. For
EART 2022-2 and 2022-3, the servicing fee waiver cushioned the
decline in the dollar amount of O/C in January and aided its build
in February. For EART 2022-4, even with Exeter forgoing its
servicing fee, the dollar amount of O/C decreased during the
January and February collection periods."
Table 1
EART Collateral Performance (%)
As of the collection period ended Feb. 28, 2023
Pool 60+ days Current Current Current
Series Mo. Factor delinq. Ext. CGL CRR CNL
2022-1 13 63.91 8.46 4.19 11.50 31.45 7.89
2022-2 11 70.00 8.34 4.35 11.35 30.20 7.92
2022-3 9 76.89 7.43 4.46 9.50 27.98 6.84
2022-4 7 80.39 7.33 5.45 7.12 22.48 5.52
Mo.--Month.
Delinq.—Delinquencies.
CGL--Cumulative gross loss.
CRR--Cumulative recovery rate.
CNL--Cumulative net loss.
Ext.--Extensions.
Table 2a
EART 2022-1 Overcollateralization Summary
Current Target(iii)
Mo.(i) Current (%)(ii) Target (%)(ii) ($ mil.) ($ mil.)
Feb-22 4.03 16.00 34.06 135.34
Mar-22 5.28 16.00 43.54 131.89
Apr-22 6.32 16.00 50.76 128.41
May-22 6.93 16.00 53.92 124.50
Jun-22 7.21 16.00 53.99 119.86
Jul-22 7.52 16.00 54.19 115.27
Aug-22 7.78 16.00 53.72 110.53
Sep-22 8.19 16.00 54.56 106.59
Oct-22 8.57 16.00 55.0 102.78
Nov-22 8.63 16.00 53.49 99.22
Dec-22 8.78 16.00 52.57 95.80
Jan-23 9.11 16.00 52.6 92.42
Feb-23 9.66 16.00 53.84 89.14
(i)As of the monthly collection period.
(ii)Percentage of the current pool balance.
(iii)The target overcollateralization amount for the months
listed above is the product of 16.00% and the collateral pool
balance as of the end of the related collection period.
Table 2b
EART 2022-2 Overcollateralization Summary
Current Target(iii)
Mo.(i) Current (%)(ii) Target (%)(ii) ($ mil.) ($ mil.)
Apr-22 5.91 17.50 67.44 199.76
May-22 6.97 17.50 77.93 195.79
Jun-22 7.96 17.50 87.07 191.35
Jul-22 8.41 17.50 89.15 185.43
Aug-22 8.13 17.50 82.67 177.86
Sep-22 8.13 17.50 79.44 170.93
Oct-22 7.92 17.50 74.47 164.46
Nov-22 7.88 17.50 71.52 158.88
Dec-22 7.84 17.50 68.70 153.28
Jan-23 8.06 17.50 68.29 148.23
Feb-23 8.63 17.50 70.70 143.30
(i)As of the monthly collection period.
(ii)Percentage of the current pool balance.
(iii)The target overcollateralization amount for the months
listed above is the product of 17.50% and the collateral pool
balance as of the end of the related collection period.
Table 2c
EART 2022-3 Overcollateralization Summary
Current Target(iii)
Mo.(i Current (%)(ii Target (%)(ii) ($ mil.) ($ mil.)
Jun-22 6.54 17.50 69.13 184.89
Jul-22 7.62 17.50 79.16 181.88
Aug-22 8.49 17.50 86.32 177.84
Sep-22 8.66 17.50 85.39 172.50
Oct-22 8.24 17.50 78.15 166.05
Nov-22 7.75 17.50 70.75 159.81
Dec-22 7.47 17.50 65.83 154.32
Jan-23 7.59 17.50 64.76 149.25
Feb-23 8.14 17.50 67.21 144.47
(i)As of the monthly collection period.
(ii)Percentage of the current pool balance.
(iii)The target overcollateralization amount for the months
listed above is the product of 17.50% and the collateral pool
balance as of the end of the related collection period.
Table 2d
EART 2022-4 Overcollateralization Summary
Current Target(iii)
Mo.(i) Current (%)(ii) Target (%)(ii) ($ mil.) ($ mil.)
Aug-22 8.94 18.95 54.37 115.21
Sep-22 10.16 18.95 60.55 112.98
Oct-22 10.86 18.95 63.25 110.33
Nov-22 10.73 18.95 60.34 106.57
Dec-22 10.42 18.95 56.38 102.51
Jan-23 10.65 18.95 55.58 98.91
Feb-23 10.96 18.95 55.07 95.18
(i)As of the monthly collection period.
(ii)Percentage of the current pool balance.
(iii)The target overcollateralization amount for the months
listed above is the product of 18.95% and the collateral pool
balance as of the end of the related collection period.
S&P said, "In view of the series' performance to date, which is
trending worse than our initial CNL expectations along with
continued adverse economic headwinds and weaker recovery rates, we
raised our expected CNLs for all four series. If the current pace
of losses continues, we may consider a higher loss expectation to
be more appropriate during future surveillance. This is especially
the case for EART 2022-2, 2022-3, and 2022-4, which are at an
earlier stage of their lifecycle than EART 2022-1. We have
reflected this view by stating a minimum revised ECNL for these
three series."
Table 3
CNL Expectations (%)
Original Current
lifetime lifetime
Series CNL exp. CNL exp.(i)
2022-1 18.50-19.50 22.00
2022-2 18.25-19.25 At least 23.00
2022-3 18.50-19.50 At least 23.00
2022-4 18.50-19.50 At least 23.00
(i)As of the collection period ended Feb. 28, 2023.
CNL exp.--Cumulative net loss expectations.
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 non-amortizing reserve account, overcollateralization, and excess
spread. The non-amortizing reserve account for each transaction
remains at its required level, which increases as a percentage of
the current pool balance as the pool amortizes.
In S&P's analysis, it also considered a written plan from Exeter
outlining their proposal to contribute additional capital to EART
2022-2 and 2022-3, which has been deposited into the series reserve
accounts and will be available for distribution on the April 2023
payment date. The capital contribution is a one-time cash infusion
into EART 2022-2 and 2022-3 intended to build O/C. Our cash flow
analysis indicated that the capital contribution will build O/C and
increase credit enhancement to a level that is commensurate with
'BB-' ratings on the series' class E notes given our current
minimum expected CNLs.
The lowered, raised, and affirmed ratings on the notes from the
series under review reflect our view that the total credit support
as a percentage of the amortizing pool balance, compared with our
minimum expected remaining losses, is commensurate with the revised
ratings.
Table 4
Hard Credit Support(i)
As of the collection period ended Feb. 28, 2023
Total hard Current total hard
credit support credit support
Series Class at issuance (%) (% of current)
2022-1 A 53.90 90.10
2022-1 B 39.30 67.25
2022-1 C 25.80 46.12
2022-1 D 12.70 25.62
2022-1 E 3.50 11.23
2022-2 E 5.50 10.06
2022-3 E 7.30 10.61
2022-4 E 8.15 12.21
(ii)Calculated as a percentage of the total gross receivable pool
balance, which consists of a reserve account,
overcollateralization. Excess spread is excluded from the hard
credit support and can also provide additional enhancement.
S&P said, "We incorporated a cash flow analysis to assess the loss
coverage levels for the notes, giving credit to stressed excess
spread for each series under review. Our 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. Additionally,
we conducted sensitivity analyses to determine the impact that a
moderate ('BBB') stress level scenario would have on our ratings if
losses trended higher than our revised base-case loss expectations.
"In our view, the results demonstrated that all of the classes have
adequate credit enhancement at the lowered, raised, and affirmed
rating levels which is based on our analysis as of the collection
period ended Feb. 28, 2023, and which gives credit to Exeter's
capital contribution to EART 2022-3 and 2022-4. We will continue to
monitor the performance of the outstanding transactions to ensure
that the credit enhancement remains sufficient, in our view, to
cover our CNL expectations under our stress scenarios for each of
the rated classes."
RATINGS LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE
Exeter Automobile Receivables Trust
Rating
Series Class To From
2022-1 E BB-(sf) BB (sf)/Watch Neg
2022-2 E BB-(sf) BB (sf)/Watch Neg
2022-3 E BB-(sf) BB (sf)/Watch Neg
2022-4 E BB-(sf) BB (sf)/Watch Neg
RATINGS RAISED
Exeter Automobile Receivables Trust
Rating
Series Class To From
2022-1 B AAA (sf) AA (sf)
RATINGS AFFIRMED
Exeter Automobile Receivables Trust
Series Class Rating
2022-1 A AAA (sf)
2022-1 C A (sf)
2022-1 D BBB (sf)
GALAXY 31: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Galaxy 31
CLO Ltd./Galaxy 31 CLO 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 PineBridge Investments LLC.
The preliminary ratings are based on information as of March 23,
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 notes through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Galaxy 31 CLO Ltd./Galaxy 31 CLO LLC
Class A, $270.00 million: AAA (sf)
Class B, $56.25 million: AA (sf)
Class C-1, $24.75 million: A+ (sf)
Class C-2, $18.00 million: A (sf)
Class D, $25.65 million: BBB- (sf)
Class E, $13.05 million: BB- (sf)
Subordinated notes, $40.16 million: Not rated
GALLATIN IX 2018-1: Moody's Raises Rating on Class E Notes to Ba1
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Gallatin CLO IX 2018-1, Ltd.:
US$2,750,000 Class C-1 Deferrable Mezzanine Floating Rate Notes due
2028, Upgraded to Aaa (sf); previously on January 20, 2022 Upgraded
to Aa1 (sf)
US$17,500,000 Class C-2 Deferrable Mezzanine Floating Rate Notes
due 2028, Upgraded to Aaa (sf); previously on January 20, 2022
Upgraded to Aa1 (sf)
US$1,000,000 Class C-3 Deferrable Mezzanine Fixed Rate Notes due
2028, Upgraded to Aaa (sf); previously on January 20, 2022 Upgraded
to Aa1 (sf)
US$22,500,000 Class D-1 Deferrable Mezzanine Floating Rate Notes
due 2028, Upgraded to A1 (sf); previously on January 20, 2022
Upgraded to A3 (sf)
US$3,000,000 Class D-2 Deferrable Mezzanine Floating Rate Notes due
2028, Upgraded to A1 (sf); previously on January 20, 2022 Upgraded
to A3 (sf)
US$19,125,000 Class E Deferrable Mezzanine Floating Rate Notes due
2028, Upgraded to Ba1 (sf); previously on January 20, 2022 Upgraded
to Ba2 (sf)
US$32,265,000 Secured Structured Notes due 2028 (current
outstanding balance of $22,344,592.45), Upgraded to Aaa (sf);
previously on January 20, 2022 Upgraded to Aa1 (sf)
Gallatin CLO IX 2018-1, Ltd., issued in August 2018, is a managed
cashflow CLO. The notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. The
transaction's reinvestment period ended in January 2020.
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since March 2022. The Class A
notes have been paid down by approximately 39.7% or $66.8 million
since then. Based on the trustee's report dated January 31,
2023[1], the OC ratios for the Class A/B, Class C, Class D and
Class E notes are reported at 166.99%, 145.79%, 126.52% and
115.10%, respectively, versus March 2022[2] levels of 147.08%,
133.74%, 120.61% and 112.33%, respectively.
Nevertheless, the credit quality of the portfolio has deteriorated
since March 2022. Based on the trustee's report dated January 31,
2023[3], the weighted average rating factor (WARF) is currently
3139 compared to 2990 in March 2022[4].
The upgrade on the Secured Structured Notes is primarily the result
of reduction of the Secured Structured Notes Balance. Based on
Moody's calculation, the Secured Structured Notes have been paid
down by approximately $2.0 million or 8.2% since March 2022.
Currently, the Secured Structured Notes Balance is entirely
covered by the balances from the rated debts components.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $240,012,399
Defaulted par: $4,877,292
Diversity Score: 37
Weighted Average Rating Factor (WARF): 3039
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.57%
Weighted Average Recovery Rate (WARR): 47.84%
Weighted Average Life (WAL): 2.2 years
In addition to 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. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
GOLDENTREE LOAN 12: Fitch Affirms 'BB+' Rating on Cl. E Notes
-------------------------------------------------------------
Fitch Ratings has affirmed the ratings of class A, B, C, D, and E
notes in GoldenTree Loan Management US CLO 12, Ltd. (GoldenTree US
CLO 12). The Rating Outlooks on all rated tranches remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
GoldenTree
Loan Management
US CLO 12, Ltd.
A 38138FAC5 LT AAAsf Affirmed AAAsf
B 38138FAG6 LT AAsf Affirmed AAsf
C 38138FAJ0 LT Asf Affirmed Asf
D 38138FAL5 LT BBB-sf Affirmed BBB-sf
E 38138YAA8 LT BB+sf Affirmed BB+sf
TRANSACTION SUMMARY
GoldenTree US CLO 12 is a broadly syndicated collateralized loan
obligations (CLO) managed by GoldenTree Loan Management II, LP, an
affiliate of GoldenTree Asset Management LP. GoldenTree US CLO 12
closed in May 2022 and will exit its reinvestment period in April
2027. The CLO is secured primarily by first-lien, senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality, Asset Security, Portfolio Management and
Portfolio Composition
The affirmations are the result of stable performance of the
portfolio. As of February 2023 trustee report, the aggregate
portfolio par amount was approximately 0.1% above the original
target par amount. The Fitch weighted average rating factor (WARF)
remained stable at 25.0 compared to 25.1 at closing, equivalent to
the 'B'/'B-' rating level.
The portfolio consists of 201 obligors, and the largest 10 obligors
represent 10.1% of the portfolio. Defaulted obligors comprised 0.3%
of the portfolio, excluding those with DIP loans. Exposure to
issuers with a Negative Outlooks and Fitch's watchlist (excluding
non-rated assets) were 12.2% and 4.3%, respectively.
First lien loans, cash and eligible investments comprise 98.0% of
the portfolio. Fitch's weighted average recovery rate increased to
74.8% from 74.5% from closing.
All coverage tests, collateral quality tests (CQTs), and
concentration limitations are in compliance for the transaction.
Cash Flow Analysis
Fitch conducted updated cash flow analyses based on newly run Fitch
Stressed Portfolios (FSPs) since the transactions are still in
their reinvestment periods. The FSP analysis stressed the current
portfolio from the latest trustee report to account for permissible
concentration and CQT limits. The FSP analysis assumed weighted
average life of 7.5 years. The portfolio's weighted average spread
was stressed to the covenant minimum level of 3.80%. Other FSP
assumptions include 10% non-senior secured assets, 5.0% fixed rate
assets and 7.5% CCC assets.
The rating actions are in line with the model implied ratings
(MIRs) as defined in the criteria, except for the class B and C
notes, which were affirmed one notch below their respective MIRs.
The variations from the MIRs are due to the remaining reinvestment
period, minimal positive cushions derived on the MIRs from the
re-run FSP, and growing macroeconomic headwinds.
The Stable Outlooks reflect Fitch's expectation that the notes have
sufficient level of credit protection to withstand potential
deterioration in the credit quality of the portfolios in stress
scenarios commensurate with each class' rating.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Downgrades may occur if realized and projected losses of the
portfolio are higher than what was assumed at closing and the
notes' credit enhancement do not compensate for the higher loss
expectation than initially assumed.
A 25% increase of the mean default rate across all ratings, along
with a 25% decrease of the recovery rate at all rating levels for
the current portfolio, would lead to no rating change for the class
A notes, and downgrades of three notches for the class E notes and
one notch for each of the class B, C, and D notes, based on MIRs.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Except for the tranches already at the highest 'AAAsf' rating,
upgrades may occur in the event of better-than-expected portfolio
credit quality and transaction performance.
A 25% reduction of the mean default rate across all ratings, along
with a 25% increase of the recovery rate at all rating levels for
the current portfolio, would lead to upgrades of five notches for
the class D notes, three notches for the class E notes, two notches
for the class B notes, and one notch for the class C notes, based
on MIRs.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third-party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
securities and markets authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
GSCG TRUST 2019-600C: S&P Lowers Class X Certs Rating to 'BB (sf)'
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on three classes of
commercial mortgage pass-through certificates from GSCG Trust
2019-600C, a U.S. CMBS transaction. At the same time, we affirmed
our ratings on two classes from the transaction.
This U.S. stand-alone (single-borrower) CMBS transaction is backed
by a five-year, fixed-rate, interest-only (IO) mortgage loan
secured by the borrower's fee simple interest in a class A- office
property located at 600 California St. in San Francisco's Financial
District office submarket.
Rating Actions
S&P said, "The downgrades on classes C and D reflect our revised
valuation, which is lower than the valuation we derived at issuance
due primarily to higher vacancy and our concerns over the
property's concentrated tenant roster: specifically, its
significant exposure to a financially weak tenant, WeWork Inc.
(rated 'CC/Outlook Negative' by S&P Global Ratings, 51.7% of net
rentable area [NRA]), as well as deteriorating conditions in the
property's office submarket. The Financial District office
submarket of San Francisco is increasingly challenged by lower
demand and longer re-leasing timeframes as more companies adopt a
hybrid work arrangement, manage headcount, or relocate to lower
cost areas or states. On the other hand, our affirmations on
classes A and B consider the possibility that, during the remaining
one and a half years of the loan term, market conditions and
WeWork's financial position could improve, among other factors.
"At issuance, the property was 100.0% leased, and we noted that
about 15.2% of NRA rolled through 2022. We assumed an 8.2% vacancy
rate based on the property's historical average and office
submarket fundamentals at that time. Since then, according to the
September 2022 rent roll, there's been minimal leasing activity at
the property. The sponsors renewed one lease for two years
representing 1.7% of NRA, but four tenants totaling 11.4% of NRA
vacated the property. As a result, according to the Sept. 30, 2022,
rent roll, the property was 87.8% leased, of which WeWork
represents about 51.7% of NRA and 61.5% of in-place gross rent, as
calculated by S&P Global Ratings. While we have yet to receive an
update from the servicer on the property's utilization rate and any
dark or sublet spaces, CoStar noted that about 75,800 sq. ft.
(21.1% of total NRA) at the property, including some of WeWork's
space, is currently being marketed for subleasing.
"Our property-level analysis reflects those weakened office
submarket fundamentals and our belief that the property will
continue to face challenges in reletting vacant space, as the
sponsor has not made any material leasing progress on current
vacancies and the technology and financial tenants that typically
power the San Francisco office market have generally been in a
contraction mode. Reflecting these factors, we revised and lowered
our long-term sustainable net cash flow (NCF) to $10.7 million
(down 25.2% from our issuance NCF of $14.4 million) by assuming a
73.7% occupancy rate (in line with the current office submarket
fundamentals; see below), a $79.24 per sq. ft. base rent and
$85.68-per-sq.-ft. gross rent, as calculated by S&P Global Ratings,
and a 45.0% operating expense ratio, which is 35.5% lower than the
servicer-reported annualized year-to-date Sept. 30, 2022, NCF of
$16.6 million and 35.6% lower than the servicer-reported 2021 NCF
of $16.7 million. In addition, we increased our S&P Global Ratings
capitalization rate by 50 basis points to 7.75% from 7.25% to
reflect adverse office submarket conditions, the lack of leasing
momentum in the market and any clear catalyst for demand,
significant exposure to WeWork, and upcoming potential tenant
rollover. Including $119,208 for the present value of future rent
steps for investment-grade tenants, we arrived at an S&P Global
Ratings' expected-case value of $138.7 million, or $386 per sq.
ft., 30.2% lower than that of our issuance value of $198.7 million,
or $553 per sq. ft. and 60.3% lower than the issuance appraisal
value of $349.0 million. This yielded an S&P Global Ratings'
loan-to-value ratio of 173.0% on the loan balance, up from 120.8%
at issuance."
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 classes C and D based on
certain weighed qualitative considerations. These include:
-- The property's desirable location in downtown San Francisco
should leasing conditions turn more favorable. There is currently
$3.2 million in capital expenditure improvements, repair, unfunded
obligations, and leasing reserve accounts.
-- The potential for WeWork to improve its financial standing and
continue to meet its lease obligations through its March 2035 lease
expiration.
-- The significant market value decline that would need to occur
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 affirmation on the class X IO certificates reflects 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 certificates
references classes A, B, C, and D.
S&P may take additional rating action if the property's performance
does not improve or if there are reported changes in the
performance beyond what it has already considered.
Property-Level Analysis
The loan collateral includes a 20-story, 359,154-sq.-ft. class A-,
LEED Gold certified office tower and a three-level, 200-space,
subterranean parking garage located at 600 California St. in San
Francisco's Financial District office submarket. The office tower,
built in 1991, includes 10,655 sq. ft. of ground floor retail
space, an 11th-floor terrace, an atrium lobby, and column-free
floorplates. The sponsors are a collection of funds and related
entities comprised of several investors at issuance: Ivanhoe
Cambridge Inc. and related entities (48.8% of beneficial ownership
of the borrowers), a Eurasian sovereign wealth fund (29.1%), and
other investors (22.1%). The funds are managed by ARK Capital
Advisors LLC, an investment management vehicle held indirectly by
WeCo (an affiliate of tenant WeWork) and Rhone Group. WeCo holds a
3.4% beneficial ownership of the borrowers, while Rhone Group holds
2.2%. At issuance, the sponsors were expected to invest
approximately $12.0 million to modernize the elevator, waterproof
the exterior, replace the cooling tower, and upgrade the roof and
HVAC system. S&P has not received an update from the sponsors, but
the project was expected to be completed by 2021. S&P also notes
that $9.2 million of the $11.6 million upfront capital improvements
reserve for the project from securitization has been disbursed.
As previously discussed, the property's occupancy rate dropped as
rolling tenants vacated and the borrowers were not able to backfill
the vacant space in a timely manner. The reported occupancy rate
was 99.2% in 2020, 88.4% in 2021, and 87.8% as of the Sept. 30,
2022, rent roll.
As of the Sept. 30, 2022, rent roll, the five largest tenants
comprised 83.1% of the NRA and included:
-- WeWork (51.7% of NRA; $92.09 per sq. ft. in-place gross rent,
as calculated by S&P Global Ratings; March 2035 lease expiration);
-- Cardinia Real Estate LLC (11.6%; $77.21 per sq. ft.; May
2025);
-- Audentes Therapeutics (8.3%; $95.18 per sq. ft.; June 2023);
-- Bridge Housing Corporation (5.8%; $88.32 per sq. ft.; March
2024); and
-- International Training & Exchange Inc. (5.7%; $70.61 per sq.
ft.; December 2024).
The property faces concentrated rollover in 2023 (10.5% of NRA),
2024 (11.9%), and 2025 (11.6%). The rollover in 2023 and 2024 are
mainly attributable to the aforementioned third-, fourth-, and
fifth-largest tenants. The loan matures in September 2024.
According to CoStar, while the Financial District office submarket,
in which the property is situated, is home to several of the city's
most iconic buildings and numerous financial institutions, it
remains weak due to lower demand. As of March 2023, CoStar reported
that for four- and five-star office properties in the submarket,
the market rent was $65.72 per sq. ft., vacancy rate was 25.3%, and
availability rate was 30.1%. This compares with a $79.17 per sq.
ft. market rent and 7.2% vacancy rate for like-quality properties
at issuance in 2019. CoStar expects the submarket vacancy rate to
continue to increase through 2025 and market rent to contract
further in 2023 and 2024 before growing marginally in 2025.
As previously discussed, given the tenancy, concentrated rollover,
lack of leasing activity, in-place rents that exceed the market,
and deteriorating office submarket concerns, S&P utilized a 73.7%
occupancy rate (which is on par with the current market vacancy),
an $85.68 in-place gross rent, a 45.0% operating expense ratio, and
higher tenant improvement assumptions in determining our
sustainable NCF.
Transaction Summary
The five-year, fixed-rate IO mortgage loan had an initial and
current balance of $240.0 million (according to the March 10, 2023,
trustee remittance report), pays an annual fixed interest rate of
4%, and matures on Sept. 6, 2024. There is no additional debt, and
the trust has not incurred any principal losses to date.
The loan had a grace-but-not-yet-due payment status, according to
the March 2023 trustee remittance report. The sponsors had kept the
loan current previously, except for the September 2022 payment
date, when the loan's payment status was also reported as in grace
but not yet due. The master servicer, Midland Loan Services,
reported a debt service coverage of 1.71x for the annualized
year-to-date Sept. 30, 2022, and year-end 2021 periods.
Ratings Lowered
GSCG Trust 2019-600C
Class C to 'BBB (sf)' from 'A- (sf)'
Class D to 'BB (sf)' from 'BBB- (sf)'
Class X to 'BB (sf)' from 'BBB- (sf)'
Ratings Affirmed
GSCG Trust 2019-600C
Class A: AAA (sf)
Class B: AA- (sf)
HIN TIMESHARE 2022-A: Fitch Affirms 'Bsf' Rating on Class E Notes
-----------------------------------------------------------------
Fitch Ratings has affirmed all outstanding ratings of Orange Lake
Timeshare Trust (OLTT) series 2016-A, 2018-A and 2019-A, HIN
Timeshare Trust (HINTT) 2020-A, and HINNT 2022-A LLC (HINNT). Fitch
notes that across all of the aforementioned transactions, the
seller has exercised the option to repurchase and substitute all
defaults, resulting in zero net losses to date.
Entity/Debt Rating Prior
----------- ------ -----
Orange Lake
Timeshare Trust
2016-A
A 68504LAA9 LT Asf Affirmed Asf
B 68504LAB7 LT BBBsf Affirmed BBBsf
Orange Lake
Timeshare Trust
2018-A
A 68504WAA5 LT AAAsf Affirmed AAAsf
B 68504WAB3 LT Asf Affirmed Asf
C 68504WAC1 LT BBBsf Affirmed BBBsf
Orange Lake
Timeshare Trust
2019-A
A 68504UAA9 LT AAAsf Affirmed AAAsf
B 68504UAB7 LT Asf Affirme Asf
C 68504UAC5 LT BBBsf Affirmed BBBsf
D 68504UAD3 LT BBsf Affirmed BBsf
HIN Timeshare
Trust 2020-A
A 40439HAA7 LT AAAsf Affirmed AAAsf
B 40439HAB5 LT Asf Affirmed Asf
C 40439HAC3 LT BBBsf Affirmed BBBsf
D 40439HAD1 LT BBsf Affirmed BBsf
E 40439HAE9 LT Bsf Affirmed Bsf
HINNT 2022-A
LLC
A 40486JAA5 LT AAAsf Affirmed AAAsf
B 40486JAB3 LT Asf Affirmed Asf
C 40486JAC1 LT BBBsf Affirmed BBBsf
D 40486JAD9 LT BBsf Affirmed BBsf
E 40486JAE7 LT Bsf Affirmed Bsf
KEY RATING DRIVERS
The affirmation of the notes reflects loss coverage levels
consistent with their current ratings. The Stable Rating Outlook
for all classes of notes reflects Fitch's expectation that loss
coverage levels will remain supportive of these ratings.
As of the February 2023 collection period, the 61+ day delinquency
rates for OLTT 2016-A, 2018-A, 2019-A, HINTT 2020-A, and HINNT
2022-A were 1.55%, 2.07%, 3.00%, 2.88% and 3.96%, respectively.
Cumulative gross defaults (CGDs; adjusted for substitutions) are
currently at 23.39%, 22.94%, 28.29%, 17.32% and 5.20%,
respectively. CGDs of OLTT 2016-A, 2018-A and 2019-A are currently
above their initial base cases of 18.00%, 17.60%, and 21.50%,
respectively. While HINTT 2020-A and HINNT 2022-A are currently
within initial expectations, they are projecting above their
initial base cases of 24.00% and 22.00%. Due to optional
repurchases and substitutions by the seller, none of the
transactions have experienced a net loss to date.
CGDs in OLTT 2019-A remain elevated and above Fitch's initial base
case proxy; however, default pace has stabilized across the OLTT
outstanding transactions. Stability in timeshare ABS performance
trends are highly correlated to the positive signs exhibited within
the travel and tourism industries. As such, all outstanding notes
in 2019-A have been affirmed (Outlooks Stable) for classes A and B.
HINTT 2020-A and HINNT 2022-A continue to see increasing CGDs given
their limited amortization.
To account for recent performance in OLTT 2019-A and HINTT 2020-A,
Fitch revised up the lifetime CGD proxies to 32.00% from 30.00% and
to 25.00% from 24.00%, respectively, while maintaining proxies from
the prior review for OLTT 2016-A, OLTT 2018-A and HINNT 2022-A at
24.50%, 25.00%, and 22.00%, respectively. The updated base case
default proxies for OLTT 2019-A and HINTT 2020-A were
conservatively derived using extrapolations based on performance to
date.
In certain cases, updated extrapolations were higher than the final
CGD proxies. However, Fitch's analysis does not give any explicit
credit to previously repurchased defaults, resulting in zero losses
on the outstanding transactions. When accounting for previously
repurchased defaults, the lifetime CGDs are materially lower than
the CGD proxies. As such, Fitch believes the CGD proxies are
appropriately conservative and account for the weaker performance.
Under Fitch's stressed cash flow assumptions, loss coverage for the
notes were consistent with the recommended multiples, any
shortfalls were considered nominal and are within the range of the
multiples for the current ratings.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Unanticipated increases in the frequency of defaults could
produce default levels higher than the current projected base case
default proxy and affect available loss coverage and multiples
levels for the transaction;
- Weakening asset performance is strongly correlated to increasing
levels of delinquencies and defaults that could negatively affect
CE levels. Lower loss coverage could affect ratings and Rating
Outlooks, depending on the extent of the decline in coverage;
- In Fitch's initial review of the transactions, the notes were
found to have limited sensitivity to a 1.5x and 2.0x increase of
Fitch's base case loss expectation. For this review, Fitch updated
the analysis of the impact of a 2.0x increase of the base case loss
expectation and the results suggest consistent ratings for the
outstanding notes and in the event of such a stress, these notes
could be downgraded by up to three rating categories.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing CE levels and consideration
for potential upgrades. Fitch applied an up sensitivity, by
reducing the base case proxy by 20%. The impact of reducing the
proxies by 20% from the current proxies could result in up to two
categories of upgrades or affirmations of ratings with stronger
multiples.
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.
HPS LOAN 2023-17: S&P Assigns BB- (sf) Rating on Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to HPS Loan Management
2023-17 Ltd./HPS Loan Management 2023-17 LLC's floating-rate
notes.
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 HPS Investment Partners CLO (UK) LLP,
a subsidiary of HPS Investment Partners LLC.
The ratings reflect S&P's view of:
-- The collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
HPS Loan Management 2023-17 Ltd./HPS Loan Management 2023-17 LLC
Class A, $127.5 million: Not rated
Class A-L loans, $124.5 million: Not rated
Class A-L, $0.0 million: Not rated
Class B-1, $39.0 million: AA (sf)
Class B-2, $13.0 million: AA (sf)
Class C (deferrable), $24.0 million: A (sf)
Class D (deferrable), $20.0 million: BBB- (sf)
Class E (deferrable), $15.0 million: BB- (sf)
Subordinated notes, $39.7 million: Not rated
INVESCO US 2023-2: Fitch Gives 'BB+sf' Final Rating on Cl. E Notes
------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Invesco U.S. CLO 2023-2, Ltd.
Entity/Debt Rating Prior
----------- ------ -----
Invesco U.S.
CLO 2023-2, Ltd.
A LT NRsf New Rating NR(EXP)sf
B LT AAsf New Rating AA(EXP)sf
C LT Asf New Rating A(EXP)sf
D LT BBB-sf New Rating BBB-(EXP)sf
E LT BB+sf New Rating BB+(EXP)sf
F LT NRsf New Rating NR(EXP)sf
Subordinated Notes LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
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 76.6%.
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 11.5% 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 5.1-year
reinvestment period and reinvestment criteria similar to other
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 (Neutral): 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 weight 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 '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, 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.
INVESCO US 2023-2: Moody's Assigns B3 Rating to $1MM Class F Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to two classes of
notes issued by Invesco U.S. CLO 2023-2, Ltd. (the "Issuer" or
"Invesco 2023-2").
Moody's rating action is as follows:
US$320,000,000 Class A Senior Secured Floating Rate Notes due 2036,
Definitive Rating Assigned Aaa (sf)
US$1,000,000 Class F Deferrable Junior Secured Floating Rate Notes
due 2036, Definitive Rating 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.
Invesco 2023-2 is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated senior secured
corporate loans. At least 90.0% of the portfolio must consist of
senior secured loans and up to 10.0% of the portfolio may consist
of senior unsecured loans, second lien loans, first-lien last-out
loans and permitted debt securities. The portfolio is fully ramped
as of the closing date.
Invesco CLO Equity Fund 3 L.P. (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer issued four other
classes of secured notes and two classes of subordinated notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $500,000,000
Diversity Score: 70
Weighted Average Rating Factor (WARF): 3100
Weighted Average Spread (WAS): 3.30%
Weighted Average Coupon (WAC): 7.50%
Weighted Average Recovery Rate (WARR): 47.0%
Weighted Average Life (WAL): 8.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
JP MORGAN 2023-DSC1: S&P Assigns Prelim 'B-' Rating on B-2 Certs
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to J.P. Morgan
Mortgage Trust 2023-DSC1's mortgage-backed certificates series
2023-DSC1.
The certificate issuance is an RMBS transaction backed by
first-lien, fixed- and adjustable-rate, fully amortizing, and
interest-only residential mortgage loans. The loans are secured by
single-family residences, planned-unit developments, two- to
10-unit multifamily homes, condominiums, and townhomes to both
prime and nonprime borrowers. The pool consists of 1,247
business-purpose investor loans that are exempt from the qualified
mortgage and ability-to-repay rules.
The preliminary ratings are based on information as of March 27,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The pool's collateral composition;
-- The transaction's credit enhancement, associated structural
mechanics, geographic concentration, the mortgage aggregators and
mortgage originators, and representation and warranty framework;
and
-- The potential impact current and near-term macroeconomic
conditions may have on the performance of the mortgage borrowers in
the pool. With the Russia-Ukraine conflict ongoing, tensions over
Taiwan escalating, and the China slowdown exacerbating supply-chain
and pricing pressures, the U.S. economy appears to be teetering
toward recession. As a result, S&P continues to maintain the
revised outlook per the April 2020 update to the guidance to our
RMBS criteria, which increased the archetypal 'B' projected
foreclosure frequency to 3.25% from 2.50%.
Preliminary Ratings Assigned(i)
J.P. Morgan Mortgage Trust 2023-DSC1
Class A-1, $199,463,000: AAA (sf)
Class A-1-A, $199,463,000: AAA (sf)
Class A-1-A-X, $199,463,000(ii): AAA (sf)
Class A-1-B, $199,463,000: AAA (sf)
Class A-1-B-X, $199,463,000(ii): AAA (sf)
Class A-1-C, $199,463,000: AAA (sf)
Class A-1-C-X, $199,463,000(ii): AAA (sf)
Class A-2 $27,707,000: AA- (sf)
Class A-2-A, $27,707,000: AA- (sf)
Class A-2-A-X, $27,707,000(ii): AA- (sf)
Class A-2-B, $27,707,000: AA- (sf)
Class A-2-B-X, $27,707,000(ii): AA- (sf)
Class A-2-C, $27,707,000: AA- (sf)
Class A-2-C-X, $27,707,000(ii): AA- (sf)
Class A-3, $35,974,000: A- (sf)
Class A-3-A, $35,974,000: A- (sf)
Class A-3-A-X, $35,974,000(ii): A- (sf)
Class A-3-B, $35,974,000: A- (sf)
Class A-3-B-X, $35,974,000(ii): A- (sf)
Class A-3-C, $35,974,000: A- (sf)
Class A-3-C-X, $35,974,000(ii): A- (sf)
Class M-1, $15,920,000: BBB- (sf)
Class B-1, $11,634,000: BB- (sf)
Class B-2, $8,113,000: B- (sf)
Class B-3, $7,348,779: NR
Class A-IO-S, Notional(iii): NR
Class XS, Notional(iii): NR
Class A-R, N/A: NR
(i)The collateral and structural information in this report reflect
the term sheet dated March 23, 2023. The preliminary ratings
address the ultimate payment of interest and principal and do not
address payment of the cap carryover amounts.
(ii)Notional balance.
(iii)This class will receive certain excess amounts, including
prepayment premiums and default interest.
NR--Not rated.
JPMDB COMMERCIAL 2018-C8: Fitch Affirms B-sf Rating on Two Tranches
-------------------------------------------------------------------
Fitch Ratings has affirmed JPMDB Commercial Mortgage Securities
Trust 2018-C8 commercial mortgage pass-through certificates. The
Rating Outlooks for five classes remain Negative.
Entity/Debt Rating Prior
----------- ------ -----
JPMDB 2018-C8
A-2 46591AAX3 LT AAAsf Affirmed AAAsf
A-3 46591AAZ8 LT AAAsf Affirmed AAAsf
A-4 46591ABA2 LT AAAsf Affirmed AAAsf
A-S 46591ABE4 LT AAAsf Affirmed AAAsf
A-SB 46591ABB0 LT AAAsf Affirmed AAAsf
B 46591ABF1 LT AA-sf Affirmed AA-sf
C 46591ABG9 LT A-sf Affirmed A-sf
D 46591AAG0 LT BBB-sf Affirmed BBB-sf
E 46591AAJ4 LT BB+sf Affirmed BB+sf
F 46591AAL9 LT BB-sf Affirmed BB-sf
G 46591AAN5 LT B-sf Affirmed B-sf
X-A 46591ABC8 LT AAAsf Affirmed AAAsf
X-B 46591ABD6 LT AA-sf Affirmed AA-sf
X-D 46591AAA3 LT BBB-sf Affirmed BBB-sf
X-EF 46591AAC9 LT BB-sf Affirmed BB-sf
X-G 46591AAE5 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Stable Performance: Overall pool performance and loss expectations
remain stable from the prior review. Fitch has identified eight
Fitch Loans of Concerns (30.6% of the pool balance). None of the
loans within the transaction are in special servicing.
Fitch's current ratings incorporate a base case loss of 4.80%. The
Negative Outlooks, which previously accounted for concerns with
regional mall exposure and retail assets with vacant anchor
tenants, now reflect increasing losses across office assets in the
transaction in addition to regional mall exposure. Office loans
represent 27% of the pool and the two regional malls in the pool
account for 5%.
Changes in Loss Expectations: The largest increase in loss from the
prior review is from the Meridian Corporate Center (5.1%) loan,
which is secured by a campus of 11 suburban office buildings
totaling 691,705 sf in Durham, NC. The properties were built
between 1985-1998 and are all located in close proximity to the
Research Triangle Park. Major tenants include Parexel International
(15% of NRA; December 2026), Nvidia Corporation (9.5%; September
2029) and Spoonflower (7.6%; 6.4% February 2025).
Occupancy is expected to decline as the fourth largest tenant in
the campus, Avaya (7% of NRA) filed for bankruptcy in February
2023. The firm's lease payments represent 8.5% of the base rent for
the campus. The tenant has a termination option in 2024, but has
the ability to reject the lease in bankruptcy. As of September
2022, occupancy and NOI DSCR was 83% and 2.40x, respectively, which
compares with YE 2021 occupancy of 82% and NOI DSCR of 2.04x at YE
2021.
Fitch's applied a cap rate of 10.0% and a 10% stress to the YE 2021
NOI to account for the expected decline in occupancy.
The next largest increase in loss is from the Weslaco Shopping
Center loan (2.1%), which is secured by a 141,335 sf retail
property located in Weslaco, TX. Occupancy declined to 72% in 2020
due to the largest anchor tenant, Beall's (28.3% of NRA) vacating
prior to lease expiration. Occupancy declined further to 65% as of
September 2022 with NOI DSCR of 0.74x. Fitch's analysis
incorporates a 5% stress to the YTD September 2022 NOI annualized
reflecting a loss severity of 22%.
The largest improvement in loss is from the Embassy Suites Glendale
loan (6.2%) which is secured by a 272-room full service hotel in
Glendale, CA. The improvement in loss is reflective of the expected
payoff of the loan by maturity in June 2023. As of TTM September
2022, occupancy, ADR and RevPAR were 61.7%, $192 and $118,
respectively, an improvement from 2021 figures of 48.9%, $154, and
$75 but below occupancy, ADR and RevPAR of 84.1%, $189, and $159,
respectively, from the same period in 2019. The servicer has
indicated the sponsor's intention to payoff the loan on or prior to
the maturity date.
Regional Mall Exposure: Two loans within the transaction are
secured by regional malls. The Twelve Oaks Mall loan (2.6%), which
is secured by a 716,771-sf portion of a 1.5 million-sf super
regional mall located in Novi, MI, has non-collateral anchor
tenants, including Macy's, J.C. Penney, Lord & Taylor and
Nordstrom. The non-collateral Sears store closed in March 2019. The
mall is exhibiting a steady recovery in performance with YE 2021
NOI 37% above YE 2020 and within 5% of NOI from YE 2019 prior to
the pandemic. As a result, NOI DSCR increased to 2.41x as of YE
2021 compared to 1.76x at YE 2020 and 2.54x at YE 2019. Occupancy
is relatively in-line with issuance at 93% as of September 2022.
Per the September 2022 sales report, YTD September 2022 sales have
rebounded to $418 psf ($347 psf excluding Apple) and $592 psf ($498
psf excluding Apple) as of YE 2021. This is relatively in-line with
pre-pandemic levels of $573 psf ($455 psf excluding Apple) as of YE
2019 and $590 psf ($479 psf excluding Apple) as of YE 2018.
Fitch's analysis reflects a cap rate of 12% and a 15% stress to the
YE 2021 NOI to account for near-term rollover, resulting in no loss
to the loan.
The Lehigh Valley Mall loan (2.3%) is secured by a 549,531-sf
portion of a regional mall located in Lehigh Valley, PA. The loan
is sponsored by Simon Properties and Pennsylvania Real Estate
Investment Trust. Anchors include Macy's (ground lessee), Boscov's
(non-collateral) and JC Penney (non-collateral); all three anchors
have been at the property since 1957. The largest collateral
tenants are Bob's Discount Furniture and Barnes & Noble. Occupancy
has improved to 89% as of September 2022 from 81% at YE 2020 with
NOI DSCR increasing to 1.97x from 1.71x in the same period. YE 2021
NOI improved 11% above YE 2020, but remains 12% below originator's
NOI underwritten at issuance.
Fitch's expected loss of 9% reflects a 13% cap rate and a 5% stress
to the YE 2021 NOI
Increasing Credit Enhancement (CE): CE has increased since issuance
due to amortization and loan repayments, with 13.8% of the original
pool balance repaid. The transaction has incurred $3.47 million in
realized losses to date impacting the non-rated NR-RR class.
Additionally, 1.7% of the pool has been defeased. Interest
shortfalls are currently affecting the non-rated class NR-RR. Ten
loans (39.9%) are full-term IO, four loans (9.2%) are in their
partial IO period and the remaining 17 loans (50.9%) are
amortizing.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Downgrades would occur with an increase in pool level losses from
underperforming or specially serviced loans. Downgrades to the
'AA-sf' and 'AAAsf' categories are not likely due to the position
in the capital structure, but may occur should interest shortfalls
affect the classes.
Downgrades to the 'BBB-sf' and A-sf' category would occur should
overall pool losses increase significantly and/or one or more large
loans have an outsized loss, which would erode CE. Downgrades to
the 'B-sf' to 'BBB-sf' categories would occur should loss
expectations increase and if performance of the FLOCs fail to
stabilize or loans default and/or transfer to the special
servicer.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Factors that could lead to upgrades would include stable to
improved asset performance coupled with pay down and/or defeasance.
Upgrades of the 'A-sf' and 'AA-sf' categories would likely occur
with significant improvement in CE and/or defeasance; however,
adverse selection, increased concentrations and further
underperformance of the FLOCs could cause this trend to reverse.
Upgrades to the 'BBB-sf' category would be limited based on
sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'Asf' if there
is likelihood for interest shortfalls. Upgrades to the 'B-sf'
through 'BBB-sf' categories are not likely until the later years in
a transaction and only if the performance of the remaining pool is
stable and there is sufficient CE to the classes.
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.
MCF CLO 10: S&P Assigns BB- (sf) Rating on $25.3MM Class E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its 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 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 debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
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(i), $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
(i)The class A-L loans are convertible into class A notes at any
time with the full consent of the class A-L lenders.
MSBAM COMMERCIAL 2012-CKSV: S&P Affirms B(sf) Rating on CK Certs
----------------------------------------------------------------
S&P Global Ratings affirmed its ratings on seven classes of
commercial mortgage pass-through certificates from MSBAM Commercial
Mortgage Securities Trust 2012-CKSV, a U.S. CMBS transaction.
This U.S. CMBS transaction is backed by two uncrossed fixed-rate
mortgage loans. The larger of the two is the Clackamas Town Center
loan, which is secured by the borrower's fee simple interest in a
regional mall property in Happy Valley, Ore. The other one is the
Sunvalley Shopping Center loan, which is secured by the borrower's
fee simple and leasehold interests in a regional mall property in
Concord, Calif.
Rating Actions
S&P said, "The affirmations on classes A-2, B, C, and D reflect
that our current net cash flows (NCFs) and valuations for the two
uncrossed loans in the pool, Clackamas Town Center ($186.3 million;
55.3% of the pooled trust balance) and Sunvalley Shopping Center
($150.8 million; 44.7%), are unchanged from the NCFs and valuations
that we derived in our last review in March 2022. The affirmations
also reflect, among other factors, that the updated 2022 appraisal
values provided by the servicer are above our current valuations as
well as our assessment that the transaction may continue to
deleverage further based on the loans' recent modification and
extension terms.
"In our last review in March 2022, we revised and lowered our
overall long-term sustainable NCF for the two malls to $29.5
million, which generally aligned to the 2021 servicer-reported
figures. Using an 8.65% weighted average S&P Global Ratings
capitalization rate, we arrived at an expected-case valuation, in
aggregate, of $340.5 million. Our current analysis considers that
the partial- or full-year 2022 servicer reported NCFs are at or
above our assumed NCFs. In addition, we noted that the appraisers'
concluded capitalization rates were at or below the capitalization
rates we utilized in our last review. As a result, we maintained
our NCF and value for each loan from our last review. Our combined
expected case value of $340.5 million is 33.5% lower than the
revised combined 2022 appraisal value of $512.0 million.
"Specifically, the affirmation on class D reflects our continued
view that the susceptibility to liquidity interruption and risk of
default and loss remain elevated based on our expected-case values
and current market conditions.
"The affirmation on class CK reflects that our NCF and value are
unchanged on the Clackamas Town Center loan. The class CK nonpooled
certificates derive all their cash flow from a subordinate
nonpooled component of the Clackamas Town Center loan."
Although the model-indicated ratings were lower than the classes'
current ratings, S&P affirmed its ratings on classes A-2, B, and C
because we weighed certain qualitative considerations, including:
-- The expected deleveraging of the trust balance from
amortization and excess cash flow of the loans' balances through
their extended maturity dates in 2024;
-- The potential that the properties' operating performances
continue to improve above our current expectations;
-- The significant market value decline based on the revised
combined 2022 appraisal value 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 these classes in the payment
waterfall.
The affirmations on the class X-A and X-B interest-only (IO)
certificates are based on S&P's criteria for rating IO securities,
in which the ratings on the IO securities would not be higher than
that of the lowest-rated referenced class. Class X-A's notional
amount references classes A-1 (which currently has no outstanding
balance) and A-2, while class X-B references class B.
Transaction Summary
As of the March 17, 2023, trustee remittance report, the trust had
a pooled trust balance of $337.1 million and an aggregate trust
balance of $361.7 million (including the non-pooled loan
component), down from $380.6 million and $405.7 million,
respectively, at issuance. The pooled trust has not incurred any
principal losses to date. Both loans, which were recently
transferred back to master servicing, have a paid-through date of
March 1, 2023.
Clackamas Town Center Loan
The Clackamas Town Center loan, the larger of the two loans, had a
pooled trust balance of $186.3 million (55.3% of the pool balance)
and a whole loan balance of $210.9 million. The $24.6 million
subordinate component of the whole loan supports the class CK
nonpooled certificates. The loan is IO, pays an annual fixed
interest rate of 4.177%, and matured on Oct. 1, 2022. The loan
transferred to special servicing on July 27, 2022, because of
imminent maturity default. The sponsor, Brookfield Properties, was
not able to secure refinancing proceeds to pay off the loan at
maturity. The special servicer, KeyBank Real Estate Capital
(KeyBank), modified the loan, which was subsequently returned to
the master servicer, also KeyBank, on Jan. 4, 2023. The
modification terms included, among other items:
-- Extending the loan's maturity date to Oct. 1, 2024;
-- The borrower contributing $5.0 million of capital to pay down
the principal balance;
-- Triggering cash management;
-- Sweeping excess cash flow into an excess cash flow reserve
account, which would be used to pay down the loan balance on a
quarterly basis; and
-- The borrower paying all fees and costs incurred because of the
loan modification and extension.
S&P's current analysis yielded an S&P Global Ratings loan-to-value
(LTV) ratio of 79.1% on the pooled trust balance and 89.5% on the
whole loan balance. KeyBank reported a 94.5% occupancy rate and
2.50x debt service coverage (DSC) on the trust balance for the nine
months ended Sept. 30, 2022, compared with 94.7% and 2.33x as of
year-end 2021.
Sunvalley Shopping Center Loan
The Sunvalley Shopping Center loan, the smaller of the two loans,
had a pooled trust balance of $150.8 million, down from $189.7
million at issuance. The loan amortizes on a 30-year schedule, pays
an annual fixed interest rate of 4.44%, and matured on Sept. 1,
2022. The loan also transferred to special servicing on July 27,
2022, because of imminent maturity default. The sponsor, Taubman
Center Inc., a subsidiary of Simon Property Group since 2020, was
not able to secure refinancing proceeds to pay off the loan at
maturity. The special servicer, KeyBank, modified the loan, which
was subsequently returned to the master servicer on Feb. 14, 2023.
The modification terms included, among other items:
-- Extending the loan's maturity date to Sept. 1, 2024, with a
one-year extension option to Sept. 1, 2025. The borrower's ability
to exercise the extension option is subject to an 11.00% debt yield
test, among other factors;
-- Triggering cash management;
-- Sweeping excess cash flow into an excess cash flow reserve
account, which would be used to pay down the loan balance monthly;
-- The borrower paying all fees and costs incurred in connection
with the loan modification and extension.
S&P's current analysis yielded an S&P Global Ratings LTV ratio of
143.8% on the trust balance. KeyBank reported a 95.6% occupancy
rate and 1.25x DSC on the trust balance for the year ended Dec. 31,
2022, compared with 93.5% and 0.96x as of year-end 2021.
Property-Level Analysis
S&P's property-level analysis included a reevaluation of the
Clackamas Town Center and Sunvalley Shopping Center properties,
which back the two uncrossed mortgage loans in the pool, using
servicer-provided operating statements from 2018 through partial-
or year-end 2022, the September 2022 rent rolls, and the September
2022 tenant sales reports.
Clackamas Town Center ($186.3 million pooled trust; 55.3% of pooled
trust balance; $210.9 million whole loan balance)
Clackamas Town Center is a 1.4 million-sq.-ft. two-level enclosed
regional mall (of which 631,537 sq. ft. serves as collateral) in
Happy Valley, Ore. It was built in 1981 and renovated in 2007. The
mall is anchored by Macy's (198,935 sq. ft.; noncollateral), Macy's
Home Store (165,832 sq. ft.; noncollateral), JCPenney (146,466 sq.
ft.; noncollateral), Dick's Sporting Goods (144,300 sq. ft.;
noncollateral), and a vacant 119,309 sq. ft. noncollateral anchor
space formerly occupied by Nordstrom.
S&P's current property-level analysis considers that while the
property's reported NCF declined in 2019 through 2021 (5.2% to
$25.7 million in 2019 from $27.1 million in 2018, 14.0% to $22.1
million in 2020, and 3.4% to $21.3 million in 2021), the annualized
servicer-reported NCF for the nine months ended Sept. 30, 2022, of
$17.1 million appears to be around the 2020 and 2021 reported NCFs.
The servicer-reported occupancy for the collateral property for the
same period was in the mid-90s: 96.6% in 2019 and 2020, 94.7% in
2021, and 94.5% as of Sept. 30, 2022. According to the September
2022 tenant sales report, the in-line tenant sales were
approximately $514 per sq. ft. (about $21 per sq. ft. higher than
the September 2021 tenant sales figures), and the occupancy cost
was 13.6%, as calculated by S&P Global Ratings.
As of the Sept. 30, 2022, rent roll, the property was 94.5%
occupied. The five largest collateral tenants comprised 31.6% of
the net rentable area (NRA) and included:
-- Century Theatres (11.1% of NRA; December 2022 lease expiration;
9.3% of gross rent, as calculated by S&P Global Ratings. S&P did
not receive an update on the tenant's leasing status yet; however,
it noted that the tenant is still listed on the mall's directory.
Therefore, S&P considered the tenant as in place in its
analysis.);
-- Dave & Buster's (5.7%; January 2030; 5.9%);
-- Forever 21 (5.3%; January 2024, paying percentage rent);
-- Barnes & Noble Booksellers (5.0%; January 2025; 1.2%); and
-- REI (4.5%; February 2033; 4.3%).
The mall faces elevated tenant rollover in the next three years:
leases representing 13.9% of the NRA expire in 2023, 16.0% in 2024,
and 10.4% in 2025. In addition, leases representing 14.9% of the
total gross rent, as calculated by S&P Global Ratings, expire in
2023, 16.1% in 2024, and 11.8% in 2025.
S&P said, "Our current analysis considered tenant bankruptcies and
store closures and excluded income from tenants that are no longer
listed on the mall directory website or that have announced store
closures, which resulted in our assumed collateral occupancy rate
of 91.6%. We derived our sustainable NCF of $20.0 million, which is
the same as our last review and 6.1% lower than the 2021
servicer-reported NCF. We then divided our NCF by an S&P Global
Ratings' capitalization rate of 8.5% (unchanged from our last
review), arriving at our expected-case value of $235.6 million, the
same as our last review, and 31.1% lower than the Oct. 8, 2022,
appraisal value of $342.0 million. The property was appraised at
$370.0 million at issuance.
Sunvalley Shopping Center ($150.8 million; 44.7%)
Sunvalley Shopping Center is a 1.4 million-sq.-ft. two-level
enclosed regional mall (of which 1.2 million sq. ft. serves as
collateral) in Concord, Calif. It was built in 1966-1967 and
renovated in 1991 and 2012. The mall is anchored by Macy's Mens
Store (179,784 sq. ft.), Macy's (203,232 sq. ft.), JCPenney
(215,769 sq. ft.) and Sears (240,869 sq. ft.; noncollateral). The
property includes approximately 7,100 parking spaces in two
two-level parking garages, a four-level parking garage, and
additional at-grade parking.
Our current property-level analysis considers that while the
servicer-reported NCF from 2018 through 2021 declined (4.8% to
$17.9 million in 2019 from $18.8 million in 2018, 23.9% to $13.6
million in 2020, and 19.3% to $11.0 million in 2021), the
servicer-reported NCF rebounded and increased 30.8% to $14.4
million in 2022. According to the September 2022 tenant sales
report, the in-line tenant sales were approximately $464 per sq.
ft. (about $12 per sq. ft. higher than the September 2021 tenant
sales figures), and the occupancy cost was 13.5%, as calculated by
S&P Global Ratings.
As of the Sept. 30, 2022, rent roll, the property was 96.4%
occupied. The five largest collateral tenants comprised 59.7% of
the NRA and included:
-- JC Penney (18.1% of NRA; May 2027 lease expiration; 1.6% of
gross rent, as calculated by S&P Global Ratings);
-- Macy's (17.1%; July 2028; 2.0%);
-- Macy's Men's Stores (15.1%; August 2029, 3.1%);
-- Safeway (4.9%; August 2031; 4.7%); and
-- Round 1 Bowling Amusement (4.4%; July 2026; 3.8%).
The mall faces elevated tenant rollover in the next four years:
leases representing 15.0% of the NRA expire in 2023, 5.2% in 2024,
6.5% in 2025, and 6.7% in 2026. In addition, leases representing
27.2% of the total gross rent, as calculated by S&P Global Ratings,
expire in 2023, 16.7% in 2024, 18.1% in 2025, and 12.3% in 2026.
S&P said, "Our current analysis assumes a collateral occupancy rate
of 96.4%. We derived our sustainable NCF of $9.4 million, the same
as our last review and 34.3% lower than the servicer-reported 2022
NCF. We then divided our NCF by an S&P Global Ratings'
capitalization rate of 9.0% (unchanged from our last review),
arriving at our expected-case value of $104.9 million, the same as
our last review, and 38.3% lower than the Aug. 31, 2022, appraisal
value of $170.0 million. The property was appraised at $350.0
million at issuance."
Ratings Affirmed
MSBAM Commercial Mortgage Securities Trust 2012-CKSV
Class A-2: A (sf)
Class B: BBB (sf)
Class C: B (sf)
Class D: CCC (sf)
Class CK: B (sf)
Class X-A: A (sf)
Class X-B: BBB (sf)
NOMURA CRE 2007-2: Fitch Affirms D Rating on Class D Notes
----------------------------------------------------------
Fitch Ratings has downgraded three and affirmed 34 classes from six
commercial real estate loan (CREL) collateralized debt obligations
(CDOs). These six transactions represent Fitch's entire portfolio
of outstanding CREL CDO transactions. In addition, the ratings of
three classes have been withdrawn following their downgrades.
Entity/Debt Rating Prior
----------- ------ -----
RAIT CRE CDO I Ltd/LLC
G 751020AH1 LT Dsf Downgrade Csf
G 751020AH1 LT WDsf Withdrawn Dsf
H 751020AJ7 LT Dsf Downgrade Csf
H 751020AJ7 LT WDsf Withdrawn Dsf
J 751020AL2 LT Dsf Downgrade Csf
J 751020AL2 LT WDsf Withdrawn Dsf
Nomura CRE CDO 2007-2, Ltd./LLC
D Fltg Notes Due
2042 37HAF4 LT Dsf Affirmed Dsf
E Fltg Notes Due
2042 65537HAG2 LT Csf Affirmed Csf
F Fltg Notes Due
2042 65537HAH0 LT Csf Affirmed Csf
G Fltg Notes Due
2042 65537HAJ6 LT Csf Affirmed Csf
H Fltg Notes Due
2042 65537HAK3 LT Csf Affirmed Csf
J Fltg Notes Due
2042 65537HAL1 LT Csf Affirmed Csf
K Fltg Notes Due
2042 65537HAM9 LT Csf Affirmed Csf
L Fltg Notes Due
2042 65537GAA7 LT Csf Affirmed Csf
M Fltg Notes Due
2042 65537GAB5 LT Csf Affirmed Csf
N Fltg Notes Due
2042 65537GAC3 LT Csf Affirmed Csf
O Fltg Notes Due
2042 65537GAD1 LT Csf Affirmed Csf
CapitalSource Real
Estate Loan Trust
2006-A
C 140560AD5 LT Bsf Affirmed Bsf
D 140560AE3 LT CCCsf Affirmed CCCsf
E 140560AF0 LT CCCsf Affirmed CCCsf
F 140560AG8 LT Csf Affirmed Csf
G 140560AH6 LT Csf Affirmed Csf
H 140560AJ2 LT Csf Affirmed Csf
J 140560AK9 LT Csf Affirmed Csf
Gramercy Real
Estate CDO 2005-1,
Ltd./LLC
J 385000AK0 LT Dsf Affirmed Dsf
K 385000AL8 LT Csf Affirmed Csf
N-Star REL CDO VI,
Ltd./LLC
J LT Csf Affirmed Csf
K LT Csf Affirmed Csf
N-Star REL CDO
VIII, Ltd./LLC
B 62940FAD1 LT CCCsf Affirmed CCCsf
C 62940FAE9 LT Csf Affirmed Csf
D 62940FAF6 LT Csf Affirmed Csf
E 62940FAG4 LT Csf Affirmed Csf
F 62940FAH2 LT Csf Affirmed Csf
G 62940FAJ8 LT Csf Affirmed Csf
H 62940FAK5 LT Csf Affirmed Csf
J 62940BAA6 LT Csf Affirmed Csf
K 62940BAB4 LT Csf Affirmed Csf
L 62940BAC2 LT Csf Affirmed Csf
M 62940BAE8 LT Csf Affirmed Csf
N 62940BAF5 LT Csf Affirmed Csf
Fitch has withdrawn the ratings of all three classes of RAIT CRE
CDO I. There is no remaining collateral. The transaction is no
longer considered relevant to the agency's coverage.
KEY RATING DRIVERS
RAIT CRE CDO I: The downgrade of classes G, H and J to 'Dsf' from
'Csf' reflects insufficient proceeds to repay these classes'
outstanding balance after all remaining assets were sold and
liquidated. The final distribution for the CDO occurred in December
2022.
Ratings Cap; Pool Concentration and Adverse Selection: Due to the
concentrated nature of the remaining collateral pools for
CapitalSource Real Estate Loan Trust 2006-A and N-Star REL CDO
VIII, a look-through analysis was performed. These two transactions
have seven and five respective assets in their collateral pools,
including CREL interests (whole loans/A-notes, mezzanine loans and
preferred equity positions) and rated securities (RMBS and CREL CDO
bonds).
The ratings of classes C, D and E in CapitalSource Real Estate Loan
Trust 2006-A were capped due to their reliance for repayment on the
Miller Portfolio whole loan, which comprises 98% of the collateral
pool.
The ratings of classes B, C and D in N-Star REL CDO VIII were
capped due to their reliance for repayment on the Healthcare Pref
preferred equity position, which comprises 33% of the collateral
pool. Fitch expects full losses on Meadowlands (48%; preferred
equity), LXR Wyndham (combined, 11%; mezzanine and preferred
equity) and near full losses on N-Star REL CDO VI class J (8%).
Further, class C in CapitalSource Real Estate Loan Trust 2006-A and
class B in N-Star REL CDO VIII are the most senior classes within
their respective transactions, and therefore requires timely
payment of interest; these classes are susceptible to default from
missed timely interest payment in the event of potential collateral
interest shortfalls.
Since Fitch's last rating action, four assisted living properties
within the Miller Portfolio were sold and released from the
portfolio in December 2022. The remaining Miller Portfolio is
comprised of 18 cross-collateralized/cross-defaulted healthcare
loans on facilities totaling 1,854 beds located across Indiana. For
the remaining properties in the portfolio, the asset
manager-provided TTM September 2022 occupancy was 54.9%, compared
with 54.4% at YE 2021, 63.4% at YE 2020 and 68.8% at YE 2019. TTM
September 2022 and 2021 NOI were both negative. Fitch expects
potential further NOI deterioration from increased operating
expenses.
Revenue sources for the portfolio include Medicaid, Medicare,
private pay and an intergovernmental transfer program (IGT)
available in Indiana. The IGT revenue fell by over 35% between 2020
and 2021. The loan was previously extended and has an upcoming
maturity in September 2023.
Undercollateralization: Classes affirmed at 'Csf' indicate default
is considered inevitable. Many of the classes in these CREL CDOs
are undercollateralized due to substantial incurred realized
losses; these include all remaining classes of the Gramercy Real
Estate CDO 2005-1, N-Star REL CDO VI and Nomura CRE CDO 2007-2
transactions.
Classes affirmed at 'Dsf' are due to the declaration of an Event of
Default as they are non-deferrable classes that have experienced
interest payment shortfalls.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Downgrades of the 'Bsf', 'CCCsf' and 'CCsf' rated classes in
these six CREL CDOs would occur should the performance of the
remaining collateral continue to decline, should any of the classes
become the senior-most class in the transaction and miss an
interest payment, and/or if further losses are realized.
- Classes already rated 'Csf' have limited sensitivity to further
negative migration given their highly distressed rating level.
However, there is potential for classes to be downgraded to 'Dsf'
at or prior to legal final maturity if they are non-deferrable
classes that experience any interest payment shortfalls or should
an Event of Default, as set forth in the transaction documents,
occur.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Upgrades to the 'Bsf', 'CCCsf' and 'CCsf' rated classes in these
six CREL CDOs are unlikely due to the CDOs' concentration and
adverse selection but may occur with the receipt of updated
financials that show substantially improved performance of the
underlying assets and/or significantly higher recoveries than
expected on disposed assets.
- Upgrades to the 'Csf' rated classes are not expected as these
classes are either undercollateralized and/or rely on 'Csf' rated
collateral, where minimal to no recoveries are expected, for
repayment. Upgrades to the classes rated 'Dsf' in Gramercy 2005-1
and Nomura CRE CDO 2007-2 are not possible as they are
non-deferrable classes that have already experienced an interest
payment shortfall.
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.
OAKTREE CLO 2023-1: S&P Assigns BB- (sf) Rating on Class E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its 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 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
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
SIERRA TIMESHARE 2023-1: Fitch Gives 'BB-(EXP)' Rating on D Notes
-----------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
notes issued by Sierra Timeshare 2023-1 Receivables Funding LLC
(2023-1).
Entity/Debt Rating
----------- ------
Sierra Timeshare
2023-1 Receivables
Funding LLC
A LT AAA(EXP)sf Expected Rating
B LT A(EXP)sf Expected Rating
C LT BBB(EXP)sf Expected Rating
D LT BB-(EXP)sf Expected Rating
TRANSACTION SUMMARY
The notes are backed by a pool of fixed-rate timeshare loans
originated by Wyndham Vacation Resorts, Inc. (WVRI) and Wyndham
Resort Development Corporation (WRDC). Both entities are indirect,
wholly owned operating subsidiaries of Travel + Leisure Co. (T+L,
formerly Wyndham Destinations, Inc.) This is T+L's 45th public
Sierra transaction.
KEY RATING DRIVERS
Borrower Risk — Shifting Collateral Composition: Approximately
70.0% of Sierra 2023-1 consists of WVRI-originated loans; the
remainder of the pool comprises WRDC loans. Fitch has determined
that, on a like-for-like FICO basis, WRDC's receivables perform
better than WVRI's. The weighted average (WA) original FICO score
of the pool is 734, higher than 731 in Sierra 2022-3 and the
highest for the platform to date. Additionally, compared with the
prior transaction, the 2023-1 pool has overall stronger FICO
distribution and slightly higher concentration in WVRI loans.
Forward-Looking Approach on CGD Proxy — Increasing CGDs: Similar
to other timeshare originators, T+L's delinquency and default
performance exhibited notable increases in the 2007-2008 vintages,
and stabilizing in 2009 and thereafter. However, more recent
vintages, from 2014 through 2019, have begun to show increasing
gross defaults versus prior vintages dating back to 2009, partially
driven by increased paid product exits (PPEs). Fitch's cumulative
gross default (CGD) proxy for this pool is 22.50% (down from 23.00%
for 2022-3). Given the current economic environment, Fitch used
proxy vintages that reflect a recessionary period, along with more
recent vintage performance, specifically of 2007-2009 and 2016-2019
vintages.
Structural Analysis — Lower CE: The initial hard credit
enhancement (CE) for class A, B, C and D notes is 67.75%, 43.50%,
21.75% and 11.25%, respectively. CE is lower for all classes
relative to 2022-3, mainly due to lower overcollateralization (OC)
compared to the prior transaction. Hard CE comprises OC, a reserve
account and subordination. Soft CE is also provided by excess
spread and is expected to be 6.96% per annum. Loss coverage for all
notes is able to support default multiples of 3.25x, 2.25x, 1.50x
and 1.17x for 'AAAsf', 'Asf', 'BBBsf' and 'BB-sf', respectively.
Originator/Seller/Servicer Operational Review — Quality of
Origination/Servicing: T+L has demonstrated sufficient capabilities
as an originator and servicer of timeshare loans. This is evidenced
by the historical delinquency and loss performance of securitized
trusts and of the managed portfolio.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Unanticipated increases in the frequency of defaults could produce
CGD levels higher than the base case and would likely result in
declines of CE and remaining default coverage levels available to
the notes. Additionally, unanticipated increases in prepayment
activity could also result in a decline in coverage. Decreased
default coverage may make certain note ratings susceptible to
potential negative rating actions, depending on the extent of the
decline in coverage.
Therefore, Fitch conducts sensitivity analyses by stressing both a
transaction's initial base case CGD and prepayment assumptions and
examining the rating implications on all classes of issued notes.
The CGD sensitivity stresses the CGD proxy to the level necessary
to reduce each rating by one full category, to non-investment grade
(BBsf) and to 'CCCsf' based on the break-even loss coverage
provided by the CE structure. The CGD and prepayment sensitivities
include 1.5x and 2.0x increases to the prepayment assumptions,
representing moderate and severe stresses, respectively. These
analyses are intended to provide an indication of the rating
sensitivity of the notes to unexpected deterioration of a trust's
performance.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing CE levels and consideration
for potential upgrades. If CGD is 20% less than the projected
proxy, the expected ratings would be maintained for the class A
note at a stronger rating multiple. For class B, C and D notes, the
multiples would increase, resulting in potential upgrade of
approximately up to one rating category for each of the subordinate
classes.
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 Deloitte & Touche LLP. The third-party due diligence
described in Form 15E focused on a comparison and recomputation of
certain characteristics with respect to 150 sample loans. Fitch
considered this information in its analysis and it did not have an
effect on Fitch's analysis or conclusions.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
SIERRA TIMESHARE 2023-1: Moody's Assigns (P)Ba2 Rating to D Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to the
notes to be issued by Sierra Timeshare 2023-1 Receivables Funding
LLC (Sierra 2023-1). Sierra 2023-1 is backed by a pool of timeshare
loans originated by Wyndham Resort Development Corporation (WRDC),
Wyndham Vacation Resorts, Inc. (WVRI) and certain WVRI affiliates.
WVRI and WRDC are wholly owned subsidiaries of Wyndham Vacation
Ownership, Inc. (WVO). WVO, in turn, is a wholly owned subsidiary
of Travel + Leisure Co. (T+L, Ba3 stable). T+L is a global
timeshare company engaged in developing and acquiring vacation
ownership resorts, marketing and selling VOIs, offering consumer
financing in connection with such sales and providing property
management services to property owners' associations (POAs).
Wyndham Consumer Finance, Inc. (WCF) will act as the servicer of
the transaction and T+L will act as the performance guarantor.
Issuer: Sierra Timeshare 2023-1 Receivables Funding LLC
Class A Notes, Assigned (P)Aaa (sf)
Class B Notes, Assigned (P)A2 (sf)
Class C Notes, Assigned (P)Baa2 (sf)
Class D Notes, Assigned (P)Ba2 (sf)
RATINGS RATIONALE
The ratings are based on the quality of the underlying collateral
and its expected performance, the capital structure, and the
experience and expertise of WCF as servicer.
Moody's expected median cumulative net loss expectation for Sierra
2023-1 is 21.3% and the loss at a Aaa stress is 60%. Moody's based
its net loss expectations on an analysis of the credit quality of
the underlying collateral; the historical performance of similar
collateral, including securitization performance and managed
portfolio performance; the ability of WCF to perform the servicing
functions; and current expectations for the macroeconomic
environment during the life of the transaction.
At closing, the Class A notes, Class B notes, Class C notes and
Class D notes are expected to benefit from 67.75%, 43.50%, 21.75%
and 11.25% of hard credit enhancement, respectively. Hard credit
enhancement for the notes consists of a combination of
overcollateralization, a reserve account and subordination. The
notes may also benefit from excess spread.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "US Vacation
Timeshare Loan Securitizations Methodology" published in July
2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the Class B, C and D notes if, given current
expectations of portfolio losses, levels of credit enhancement are
consistent with higher ratings. This transaction has a pro-rata
structure with sequential pay triggers. Moody's expectation of pool
losses could decline as a result of better than expected
improvements in the economy, changes to servicing practices that
enhance collections or refinancing opportunities that result in
prepayments.
Down
Moody's could downgrade the ratings of the notes if pool losses
exceed its expectations and levels of credit enhancement are
consistent with lower ratings. Credit enhancement could decline if
excess spread is not sufficient to cover losses in a given month.
Moody's expectation of pool losses may increase, for example, due
to performance deterioration stemming from a downturn in the US
economy, deficient servicing, errors on the part of transaction
parties, inadequate transaction governance or fraud.
SLM STUDENT 2008-2: S&P Lowers Class B Notes Rating to 'CC (sf)'
----------------------------------------------------------------
S&P Global Ratings lowered its ratings on six classes from SLM
Student Loan Trust 2008-2, 2008-8, and 2008-9 to 'CC (sf)' from
'CCC (sf)'. Each transaction is a student loan asset-backed
securities (ABS) transaction backed by a pool of student loans
originated through the U.S. Department of Education's (ED) Federal
Family Education Loan Program (FFELP).
S&P said, "In determining the ratings, we considered our criteria
for assigning 'CCC' and 'CC' ratings (see "Criteria For Assigning
'CCC+', 'CCC', 'CCC-', and 'CC' Ratings," published Oct. 1, 2012),
which states that an obligation is rated 'CC' when it is currently
highly vulnerable to nonpayment and when we expect default even
under the most optimistic collateral performance.
"Our review considered the transactions' collateral performance and
liquidity position, credit enhancement, and capital and payment
structures. We also considered secondary credit factors, such as
credit stability, peer comparisons, issuer-specific analyses, and
the current macroeconomic environment."
RATIONALE
S&P said, "We believe the collateral amortization's current pace is
not adequate to repay the senior notes by their respective legal
final maturity date. As such, the likelihood that the senior
classes will be repaid on their legal final maturity date is
reliant on the ability of the collateral to be purchased through
the clean-up call described below.
"The transactions report performance on a quarterly basis and all
of the senior classes have maturity dates on April 25, 2023. Since
their last servicer reports, which reflected collections through
Dec. 31, 2022, we have observed a slowdown in prepayments in other
monthly reporting FFELP deals across our FFELP portfolio.
The collateral pool factors for these transactions range from 10.3%
to 18.2% as of the end of the Dec. 31, 2022, collection period. The
transactions have features that allow the servicer to purchase up
to an additional 2.00% or 10.00%, depending on the transaction, of
the initial collateral pool (the additional collateral purchase),
which can be used to provide liquidity and lower the pool factor to
below 10.00%. When the pool factor is below 10.00%, the collateral
may be sold to the servicer or through an auction (the clean-up
call), with the proceeds used to repay the notes.
"If these trusts also experience a decline in prepayments during
the first quarter of 2023, then the transactions' pool factors
might not fall below the 10% requirement to execute the optional
clean-up call. Additionally, if the pool factor does fall below the
10% clean-up call, we believe the current economic conditions
decrease the likelihood that the optional clean-up call will occur
and result in a repayment of the senior notes by their legal final
maturity date."
The following table sets out the current senior class bond balance,
the remaining number of payment dates, and the transactions'
average quarterly pay down over the last year.
Table 1(i)
Transaction Senior class No. of remaining Avg. quarterly
balance quarterly payment amount
(mil. $) payments (mil. $)
SLM 2008-2 332.9 1 15.3
SLM 2008-8 70.3 1 3.9
SLM 2008-9 289.6 1 18.7
(i)As of January 2023 distribution date.
If the senior classes are not repaid on their legal final maturity
date, an event of default (EOD) under the transactions' documents
will occur. An EOD allows noteholders and/or the trustee to take
actions that could negatively affect the repayment of the class A
or class B notes. As such, the likelihood that the class B notes
might be affected is tied to the likelihood that the senior notes
might not be repaid by their legal final maturity dates.
S&P will continue to monitor the macroeconomic environment and the
transactions' performance (including the student loan receivables),
available credit enhancement, and liquidity, and take further
rating actions as we deem appropriate.
RATINGS LOWERED
SLM Student Loan Trust 2008-2
Class A-3 to 'CC (sf)' from 'CCC (sf)'
Class B to 'CC (sf)' from 'CCC (sf)'
SLM Student Loan Trust 2008-8
Class A-4 to 'CC (sf)' from 'CCC (sf)'
Class B to 'CC (sf)' from 'CCC (sf)'
SLM Student Loan Trust 2008-9
Class A to 'CC (sf)' from 'CCC (sf)'
Class B to 'CC (sf)' from 'CCC (sf)'
SYCAMORE TREE 2023-3: S&P Assigns Prelim BB-(sf) Rating on E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Sycamore
Tree CLO 2023-3 Ltd./Sycamore Tree CLO 2023-3 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 Sycamore Tree CLO Advisors L.P.
The preliminary ratings are based on information as of March 29,
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
Sycamore Tree CLO 2023-3 Ltd./Sycamore Tree CLO 2023-3 LLC
Class A-1, $246.00 million: AAA (sf)
Class A-2, $8.00 million: AAA (sf)
Class B-1, $32.00 million: AA (sf)
Class B-2, $14.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D (deferrable), $22.00 million: BBB- (sf)
Class E (deferrable), $14.00 million: BB- (sf)
Subordinated notes, $41.00 million: Not rated
TRINITAS CLO XX: Fitch Affirms 'BB-sf' Rating on Class E Notes
--------------------------------------------------------------
Fitch Ratings has affirmed the ratings for the class C, D-1 and D-2
notes of Trinitas CLO XIX, Ltd. (Trinitas XIX) and the class A-1,
A-2 and E notes of Trinitas CLO XX, Ltd. (Trinitas XX). The Rating
Outlooks on all rated tranches remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
Trinitas CLO
XX, Ltd.
A-1 89640EAA6 LT AAAsf Affirmed AAAsf
A-2 89640EAJ7 LT AAAsf Affirmed AAAsf
E 89640GAA1 LT BB-sf Affirmed BB-sf
Trinitas CLO
XIX, Ltd.
C 89642FAG8 LT A+sf Affirmed A+sf
D-1 89642FAJ2 LT BBB+sf Affirmed BBB+sf
D-2 89642FAL7 LT BBB-sf Affirmed BBB-sf
TRANSACTION SUMMARY
Trinitas XIX and Trinitas XX are broadly syndicated collateralized
loan obligations (CLOs) managed by Trinitas Capital Management,
LLC. Trinitas XIX closed in May 2022 and will exit its reinvestment
period in April 2025. Trinitas XX closed in June 2022 and will exit
its reinvestment period in July 2027. Both CLOs are secured
primarily by first-lien, senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality, Asset Security, Portfolio Management and
Portfolio Composition
The affirmations are driven by the stable performance of both
transactions since closing. The credit quality of both portfolios
as of the latest trustee reports is at the 'B'/'B-' rating level
and there are no reported defaults in both portfolios. The Fitch
weighted average rating factor (WARF) increased to 24.8 on average,
compared to average 23.8 at closing. The aggregate portfolio par
amounts for Trinitas XIX and Trinitas XX changed marginally from
closing, at less than 0.1% below their respective original target
par amounts, as of the February and January 2023 reports,
respectively.
The portfolios for Trinitas XIX and Trinitas XX consisted of 247
and 238 obligors, respectively, and the largest 10 obligors
represent 11.4% and 11.5% of each portfolio, respectively. Exposure
to issuers with a Negative Outlook and on Fitch's watchlist for
Trinitas XIX is 17.8% and 7.3%, respectively, and 14.7% and 4.1%,
respectively, for Trinitas XX.
First lien loans, cash and eligible investments comprise 98.7% of
the portfolios on average. The Fitch weighted average recovery
rates (WARRs) decreased slightly to 75.9% from 76.4% on average
since closing.
All coverage tests, collateral quality tests (CQTs), and
concentration limitations are in compliance for both transactions.
Cash Flow Analysis
Fitch conducted updated cash flow analyses based on newly run Fitch
Stressed Portfolio (FSP) since both transactions are still in their
reinvestment periods. The FSP analysis stressed the current
portfolios from the latest trustee reports to account for
permissible concentration and CQT limits. The FSP analysis assumed
weighted average lives of 6.0 years for Trinitas XIX and 7.44 years
for Trinitas XX. Weighted average spreads were stressed to the
covenant minimum levels of 3.45% for Trinitas XIX and 3.0% for
Trinitas XX. Fixed rate assets were stressed to 4.0% and 5.0% for
Trinitas XIX and Trinitas XX, respectively. Other assumptions
include 7.50% and 10% non-senior secured assets for Trinitas XIX
and Trinitas XX, respectively, and 7.5% CCC assets for both CLOs.
The rating actions for all classes of notes are in line with their
model-implied ratings (MIRs), as defined in the CLOs and Corporate
CDOs Rating Criteria, except for the class D-2 notes in Trinitas
XIX, which were affirmed two notches below the MIR. The variation
from the MIR is due to the remaining reinvestment period and
growing macroeconomic headwinds.
The Stable Outlooks reflect Fitch's expectation that the notes have
sufficient level of credit protection to withstand potential
deterioration in the credit quality of the portfolios in stress
scenarios commensurate with each class' rating.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Downgrades may occur if realized and projected losses of the
portfolio are higher than what was assumed at closing and the
notes' credit enhancement do not compensate for the higher loss
expectation than initially assumed.
A 25% increase of the mean default rate across all ratings, along
with a 25% decrease of the recovery rate at all rating levels for
the current portfolio, would lead to no rating impact for the class
A-1 and A-2 in Trinitas XX, and downgrades of one notch for the
class E notes in Trinitas XX and up to three notches for the
classes in Trinitas XIX, based on the MIRs.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Except for the tranches already at the highest 'AAAsf' rating,
upgrades may occur in the event of better-than-expected portfolio
credit quality and transaction performance.
A 25% reduction of the mean default rate across all ratings, along
with a 25% increase of the recovery rate at all rating levels for
the current portfolio, would lead to no rating impact for the class
C notes and upgrades of up to five notches for the other notes in
Trinitas XIX and up to six notches for the class E notes in
Trinitas XX, based on the MIRs. There would be no rating impact for
the class A-1 and A-2 notes in Trinitas XX, as the notes are
already at the highest level on Fitch's scale and cannot be
upgraded.
VENTURE 47: S&P Assigns BB- (sf) Rating on $14MM Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned its 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 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
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
VISIO 2023-1: S&P Assigns B- (sf) Rating on Class B-2 Notes
-----------------------------------------------------------
S&P Global Ratings assigned its ratings to Visio 2023-1 Trust's
mortgage-backed notes.
The note issuance is an RMBS securitization backed by
investor-only, business-purpose, first-lien, fixed- and hybrid
adjustable-rate residential mortgage loans secured by single-family
residences, planned unit developments, condominiums, and two- to
four-family residential properties to both prime and non-prime
borrowers. The pool has 655 loans that are exempt from
ability-to-repay rules.
The ratings reflect S&P's view of:
-- The pool's collateral composition;
-- The transaction's credit enhancement, associated structural
mechanics, geographic concentration, and representation and
warranty framework;
-- The mortgage originator, Visio Financial Services Inc.; and
-- The potential impact current and near-term macroeconomic
conditions may have on the performance of the mortgage borrowers in
the pool. S&P said, "Per our latest macroeconomic update, we
continue to expect the U.S. will fall into recession in 2023.
Recent indicators support our view, as rising prices and interest
rates eat away at private-sector purchasing power. Indeed, of the
leading indicators we track in our Business Cycle Barometer, only
one of the nine indicators was in positive territory through
October: Seven were negative, and one was neutral. Although our
10-year/three-month term spread indicator remained neutral in
September, daily readings have been inverted since Oct. 25."
Moreover, both the 10-year/one-year and 10-year/two-year indicators
have been inverted for, on average, three straight months, which
signals a recession. The average 10-year/three-month indicator is
headed for an inversion in November, with the average through Nov.
22 at -0.35%. If it's inverted for the second straight month, that
would also be a recession signal. While economic momentum has
protected the U.S. economy this year, what's around the bend in
2023 is the bigger worry. Extremely high prices and aggressive rate
hikes will weigh on affordability and aggregate demand. With the
Russia-Ukraine conflict ongoing, tensions over Taiwan escalating,
and the China slowdown exacerbating supply-chain and pricing
pressures, the U.S. economy appears to be teetering toward
recession. As a result, S&P continues to maintain the revised
outlook per the April 2020 update to the guidance to its RMBS
criteria (which increased the archetypal 'B' projected foreclosure
frequency to 3.25% from 2.50%).
Ratings Assigned
Visio 2023-1 Trust
Class A-1, $108,892,000: AAA (sf)
Class A-2, $16,526,000: AA (sf)
Class A-3, $21,209,000: A (sf)
Class M-1, $11,661,000: BBB (sf)
Class B-1, $11,568,000: BB- (sf)
Class B-2, $6,978,000: B- (sf)
Class B-3, $6,795,124: Not rated
Class XS, notional(i): Not rated
Class R, not applicable: Not rated
(i)The class XS notes will have a notional amount equal to the
aggregate unpaid principal balance of the mortgage loans as of the
first day of the related collection period.
WFRBS COMMERCIAL 2013-C14: Moody's Cuts Cl. C Certs Rating to B2
----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on five classes
and downgraded the ratings on six classes in WFRBS Commercial
Mortgage Trust 2013-C14 as follows:
Cl. A-4, Affirmed Aaa (sf); previously on Nov 8, 2022 Affirmed Aaa
(sf)
Cl. A-4FL, Affirmed Aaa (sf); previously on Nov 8, 2022 Affirmed
Aaa (sf)
Cl. A-4FX*, Affirmed Aaa (sf); previously on Nov 8, 2022 Affirmed
Aaa (sf)
Cl. A-5, Affirmed Aaa (sf); previously on Nov 8, 2022 Affirmed Aaa
(sf)
Cl. A-S, Downgraded to Aa2 (sf); previously on Nov 8, 2022 Affirmed
Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Nov 8, 2022 Affirmed Aaa
(sf)
Cl. B, Downgraded to Ba1 (sf); previously on Nov 8, 2022 Downgraded
to Baa2 (sf)
Cl. C, Downgraded to B2 (sf); previously on Nov 8, 2022 Downgraded
to Ba3 (sf)
Cl. PEX, Downgraded to Ba2 (sf); previously on Nov 8, 2022
Downgraded to Baa3 (sf)
Cl. X-A*, Downgraded to Aa1 (sf); previously on Nov 8, 2022
Affirmed Aaa (sf)
Cl. X-B*, Downgraded to Ba1 (sf); previously on Nov 8, 2022
Downgraded to Baa2 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on the 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, Moody's stressed debt
service coverage ratio (DSCR) and the transaction's Herfindahl
Index (Herf), are within acceptable ranges. In addition, loans
constituting 13% of the current pool have defeased.
The ratings on the P&I classes, Cl. A-S, Cl. B and Cl. C, were
downgraded due to higher anticipated losses and increased risk of
interest shortfalls due to the exposure to specially serviced loans
and potential refinance challenges for certain large loans with
upcoming maturity dates. Five loans, representing 25% of the pool
are in special servicing, including the White Marsh Mall loan
(11.3% of the pool), which has passed its original maturity date in
May 2021, and 301 South College Street loan (8.5%), whose largest
tenant has announced they will vacate the property. Furthermore,
the largest performing loan, Midtown I & II loan (13.0% of the
pool), may face increased refinance risk at maturity due to its
single tenant concentration with a lease expiration in April 2024.
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 ratings on the IO classes were downgraded based on a decline in
the credit quality of their referenced class.
The rating on the exchangeable class, (PEX), was downgraded due to
the decline in credit quality of its referenced exchangeable
classes.
Moody's regard e-commerce competition as a social risk under
Moody's ESG framework. The rise in e-commerce and changing consumer
behavior presents challenges to brick-and-mortar discretionary
retailers.
Moody's rating action reflects a base expected loss of 17.3% of the
current pooled balance, compared to 13.6% at Moody's last review.
Moody's base expected loss plus realized losses is now 11.5% of the
original pooled balance, compared to 10.4% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or 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 "Large Loan and Single Asset/Single Borrower
Commercial Mortgage-Backed Securitizations Methodology" published
in July 2022.
DEAL PERFORMANCE
As of the March 17, 2023 distribution date, the transaction's
aggregate certificate balance has decreased by 35% to $958.5
million from $1.47 billion at securitization. The certificates are
collateralized by 52 mortgage loans ranging in size from less than
1% to 13% of the pool, with the top ten loans (excluding
defeasance) constituting 72.6% of the pool. Twenty loans,
constituting 13% 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 11, compared to 13 at Moody's last review.
As of the March 2023 remittance report, loans representing 84% were
current on their debt service payments, and 16% were greater than
90 days delinquent, in foreclosure or performing past maturity.
Twenty-seven loans, constituting 62% 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.
Two loans have been liquidated from the pool, resulting in an
aggregate realized loss of $3.1 million (for an average loss
severity of 14%). Five loans, constituting 25% of the pool, are
currently in special servicing. All of the specially serviced loans
have transferred to special servicing since August 2020.
The largest specially serviced loan is the White Marsh Mall Loan
($108.3 million -- 11.3% of the pool), which represents a pari
passu portion of a $187.0 million mortgage loan. The loan is
secured by an approximately 700,000 square feet (SF) component of a
1.2 million SF super-regional mall located in Baltimore, Maryland.
The mall is anchored by Macy's, JC Penney, Boscov's, and Macy's
Home Store. Macy's and JC Penny are not part of the loan collateral
and Sears, a former non-collateral anchor, closed in April 2020. As
of September 2022, inline and collateral occupancy were 80% and
88%, respectively, compared to 81% and 89% in December 2021 and 89%
and 93% in June 2020. Property performance has declined annually
since 2018 primarily due to lower rental revenues and the 2021 net
operating income (NOI) was approximately 45% lower than
underwritten levels. The loan transferred to special servicing in
August 2020 and the loan failed to pay off at its May 2021 maturity
date. The most recent appraisal from January 2023 valued the
property 67% below the value at securitization and as of the March
2023 remittance statement, the master servicer has recognized a 46%
appraisal reduction based on the current loan balance. The special
servicer indicated they continue to hold discussions with the
borrower while dual tracking foreclosure.
The second largest specially serviced loan is the 301 South College
Street Loan ($81.9 million -- 8.5% of the pool), which represents a
pari passu portion of a $159.2 million mortgage loan. The loan is
secured by a 988,646 SF Class A office tower located in the central
business district of Charlotte, North Carolina. The property was
55% leased as of September 2022 compared to 99% in March 2020. The
largest tenant, Wells Fargo, downsized their space significantly
from 687,000 SF (or 69% of the net rentable area (NRA)) to 264,000
SF (approximately 27% of the NRA) and recently announced that it
will be fully vacating the property. The lower occupancy caused the
DSCR to decline to 0.78X in September 2022 from 2.17X in 2020. A
reserve is in place that is trapping excess cash for all terminated
space or space being vacated upon expiration and the current
balance is $14.6 million. The borrower made a significant capital
improvement to the property during the pandemic by renovating /
modernizing the mall and plaza level (lobby-common area) of the
building. The loan transferred to special servicing in January 2023
and matures in May 2023. The borrower has requested a loan maturity
extension and the special servicer is currently evaluating all
options.
The third largest specially serviced loan is the Continental Plaza
– Columbus Loan ($17.7 million -- 1.8% of the pool), which is
secured by a 568,741 SF, 35 story Class A office building located
in Columbus, Ohio in the city's central business district (CBD).
The property was 71% leased as of December 2022 compared to 82% as
of June 2022, 76% in 2019 and 94% at securitization. The loan
transferred to special servicing in August 2022 due to imminent
monetary default and is last paid through the December 2022 payment
date. The loan has amortized 19% to date and is scheduled to mature
in May 2023. However, the property faces significant rollover risk
with approximately 60% of NRA expiring within one year. The
borrower has expressed the desire to transition title of the
property to the lender. The special servicer will initiate
foreclosure proceedings and counsel is working with the borrower on
a consensual receivership order.
The fourth largest specially serviced loan is the Mobile Festival
Centre Loan ($17.4 million -- 1.8% of the pool), which is secured
by a 380,619 SF retail power center located in Mobile, Alabama, six
miles west of the CBD. The property was 62% leased as of December
2022 compared to 48% in June 2021 and 80% at securitization. Recent
tenant departures included Bed Bath & Beyond (7% of net rentable
area (NRA)), Virginia College (16%) and Ross Dress for Less (8%).
The loan transferred to special servicing in September 2020 due to
imminent monetary default and is last paid through September 2021.
The loan has amortized by 16% since securitization. The borrower is
working on stabilizing the property and the special servicer is
evaluating a pending new lease which would further increase
occupancy to 74%. The borrower and special servicer are working to
document a modification.
The remaining specially serviced loan is the 808 Broadway Loan
($12.5 million -- 1.3% of the pool), which is secured by a 24,548
SF retail space located on Broadway and East 11 Street in New York,
New York. It is the ground floor retail condo space of a six story
building constructed in 1888. The loan transferred to special
servicing in November 2020 and is last paid through December 2020.
The borrower has indicated the single retail tenant has filed for
chapter 11 bankruptcy protection and is no longer paying rent. As a
result, the property has not been generating enough cash flow to
cover debt service. A receiver was appointed in August 2022 and the
special servicer intends to foreclose on the asset.
Moody's has also assumed a high default probability for one poorly
performing loan, constituting 1.0% of the pool, and has estimated
an aggregate loss of $138.8 million (a 56% expected loss on
average) from these specially serviced and troubled loans.
As of the March 2023 remittance statement cumulative interest
shortfalls were $3.4 million. Moody's anticipates interest
shortfalls will continue because of the exposure to specially
serviced loans and/or modified loans. Interest shortfalls are
caused by special servicing fees, including workout and liquidation
fees, appraisal entitlement reductions (ASERs), loan modifications
and extraordinary trust expenses.
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 2021 operating results for 100% of the
pool, and full or partial year 2022 operating results for 80% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 111%, compared to 103% at Moody's
last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 28% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 10.1%.
Moody's actual and stressed conduit DSCRs are 1.85X and 1.01X,
respectively, compared to 1.88 and 1.08X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three conduit loans represent 33% of the pool balance. The
largest loan is the Midtown I & II Loan ($124.3 million -- 13.0% of
the pool), which is secured by two Class A office buildings
totaling 794,110 SF and an adjacent parking deck located in
Atlanta, Georgia. The properties were built in 2001 and are 100%
leased to AT&T Corporation through April 2024. The loan is interest
only for its entire term and matures in May 2023, approximately one
year prior to the expiration date of the single tenant. Due to the
single tenant risk, Moody's incorporated a lit/dark analysis. While
the loan has maintained a high DSCR over its ten-year term, it may
face heighted refinance risk due to the tenant concentration and
near-term lease expiration date at loan maturity. The loan has an
anticipated repayment date (ARD) in May 2023, at which point it
will begin to amortize and is now in cash management due to the
failure of AT&T, Corp. to extend the term of the lease prior to
April 30, 2022. Moody's LTV and stressed DSCR are 135% and 0.97X,
respectively, compared to 115% and 1.04X at the last review.
The second largest loan is The Plant San Jose Loan ($123.0 million
-- 12.8% of the pool), which is secured by a 486,000 SF component
of a 624,000 SF power center located in San Jose, California
approximately two miles south of the San Jose CBD. The property is
anchored by a Home Depot (29% of NRA; lease expiration January
2034), Best Buy (9% of NRA; lease expiration January 2028) and Ross
Dress for Less (5% of NRA; lease expiration January 2029). The
property is also shadow anchored by Target. The property was 78%
leased as of September 2022 compared to 79% in September 2020, 89%
in December 2017 and 96% at securitization. The decline in
occupancy was partly driven by Toys R Us, (13% of the collateral
NRA) vacating as part of their bankruptcy in early 2018 as well as
Office Max and several smaller tenants. The property's operating
expenses have also increased significantly in recent years compared
with underwritten levels. The loan is interest only for the entire
10-year term. The loan has an anticipated repayment date (ARD) in
May 2023 (final maturity in 2033). The loan is interest only for
its entire term and had a reported NOI DSCR of 2.13X in September
2022. Moody's LTV and stressed DSCR are 129% and 0.75X,
respectively, the same as the last review.
The third largest loan is the Cheeca Lodge & Spa Loan ($72.2
million -- 7.5% of the pool), which is secured by a hotel resort
property located in Islamorada, Florida, in the Florida Keys. The
property sustained prior damages caused by Hurricane Irma in
September 2017, but the property has been renovated and is now
out-performing. The NOI DSCR as of September 2022 was 3.22X
compared to 2.09X at securitization. Occupancy, ADR and RevPAR as
of December 2022 were 85.3%, $599.87 and $511.72, respectively,
compared to 87.2%, $542.40 and $473.21 as of December 2021. Moody's
LTV and stressed DSCR are 102% and 1.11X, respectively, compared to
103% and 1.10X at the last review.
WHITEBOX CLO IV: S&P Assigns BB- (sf) Rating on Class E Notes
-------------------------------------------------------------
S&P Global Ratings assigned its 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 ratings reflect:
-- S&P's view of the collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
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, $22 million: A (sf)
Class D, $22 million: BBB- (sf)
Class E, $12 million: BB- (sf)
Subordinated notes, $46 million: Not rated
[*] Moody's Upgrades $121.7MM of US RMBS Issued 2005 to 2006
------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of $121.7
million of bonds from five US residential mortgage-backed
transactions (RMBS), backed by subprime mortgages issued by
multiple issuers.
A list of Affected Credit Ratings is available at
https://bit.ly/40hHAhd
Complete rating actions are as follows:
Issuer: ACE Securities Corp. Home Equity Loan Trust, Series
2006-OP1
Cl. A-1A, Upgraded to Aa2 (sf); previously on Jun 1, 2022 Upgraded
to A1 (sf)
Cl. A-2D, Upgraded to Baa3 (sf); previously on Aug 8, 2019 Upgraded
to Ba1 (sf)
Issuer: New Century Home Equity Loan Trust 2006-1
Cl. A-1, Upgraded to A3 (sf); previously on Jun 1, 2022 Upgraded to
Baa2 (sf)
Issuer: Structured Asset Investment Loan Trust 2005-5
Cl. M4, Upgraded to A3 (sf); previously on Jun 1, 2022 Upgraded to
Baa2 (sf)
Issuer: Structured Asset Securities Corp Trust 2005-WF1
Cl. M2, Upgraded to Aa3 (sf); previously on Jun 1, 2022 Upgraded to
A2 (sf)
Cl. M3, Upgraded to A2 (sf); previously on Jun 1, 2022 Upgraded to
Baa1 (sf)
Cl. M4, Upgraded to Ba1 (sf); previously on Jun 1, 2022 Upgraded to
Ba3 (sf)
Cl. M5, Upgraded to B1 (sf); previously on Jun 1, 2022 Upgraded to
B3 (sf)
Cl. M6, Upgraded to Caa1 (sf); previously on Jun 1, 2022 Upgraded
to Caa3 (sf)
Cl. M7, Upgraded to Ca (sf); previously on Apr 12, 2010 Downgraded
to C (sf)
Cl. M8, Upgraded to Ca (sf); previously on Apr 12, 2010 Downgraded
to C (sf)
Issuer: Structured Asset Securities Corp Trust 2005-WF2
Cl. M2, Upgraded to Aaa (sf); previously on Jun 1, 2022 Upgraded to
Aa2 (sf)
Cl. M3, Upgraded to Aa3 (sf); previously on Jun 1, 2022 Upgraded to
A2 (sf)
Cl. M4, Upgraded to A2 (sf); previously on Jun 1, 2022 Upgraded to
Baa1 (sf)
Cl. M5, Upgraded to Ba1 (sf); previously on Jun 1, 2022 Upgraded to
Ba3 (sf)
Cl. M6, Upgraded to B3 (sf); previously on Jun 1, 2022 Upgraded to
Caa2 (sf)
Cl. M7, Upgraded to Caa3 (sf); previously on Jun 1, 2022 Upgraded
to Ca (sf)
Cl. M8, Upgraded to Ca (sf); previously on Mar 20, 2009 Downgraded
to C (sf)
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's updated loss expectations on the underlying pools. The
rating upgrades are a result of the improving performance of the
related pools, and/or an increase in credit enhancement available
to the bonds.
Principal Methodology
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] Moody's Upgrades $377.7MM of US RMBS Issued 2005 to 2007
------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 12 bonds from
seven US residential mortgage-backed transactions (RMBS), backed by
subprime mortgages issued by multiple issuers.
A list of Affected Credit Ratings is available at
https://bit.ly/40m8QeC
Issuer: Ellington Loan Acquisition Trust 2007-1
Cl. A-1, Upgraded to Baa2 (sf); previously on Jun 28, 2022 Upgraded
to Ba1 (sf)
Issuer: FBR Securitization Trust 2005-2
Cl. M-3, Upgraded to Baa3 (sf); previously on Jun 27, 2022 Upgraded
to Ba2 (sf)
Issuer: First Franklin Mortgage Loan Trust 2006-FF11
Cl. I-A-1, Upgraded to A2 (sf); previously on Jun 27, 2022 Upgraded
to Baa1 (sf)
Cl. I-A-2, Upgraded to B3 (sf); previously on Jun 27, 2022 Upgraded
to Caa2 (sf)
Issuer: First Franklin Mortgage Loan Trust 2006-FF12
Cl. A1, Upgraded to B3 (sf); previously on Apr 6, 2010 Downgraded
to Caa2 (sf)
Cl. A5, Upgraded to B2 (sf); previously on Apr 9, 2018 Upgraded to
Caa1 (sf)
Issuer: First Franklin Mortgage Loan Trust 2006-FF7
Cl. I-A, Upgraded to Aa2 (sf); previously on Apr 9, 2018 Upgraded
to A1 (sf)
Issuer: Home Equity Loan Asset-Backed Certificates, Series
2007-FRE1
Cl. 1-AV-1, Upgraded to Ba2 (sf); previously on Jun 27, 2022
Upgraded to B1 (sf)
Issuer: IndyMac Home Equity Mortgage Loan Asset-Backed Trust, INABS
2006-C
Cl. 1A, Upgraded to A3 (sf); previously on Jun 27, 2022 Upgraded to
Baa2 (sf)
Cl. 2A, Upgraded to Ba2 (sf); previously on Dec 28, 2017 Upgraded
to B1 (sf)
Cl. 3A-3, Upgraded to B2 (sf); previously on Dec 28, 2017 Upgraded
to Caa1 (sf)
Cl. 3A-4, Upgraded to B3 (sf); previously on Dec 28, 2017 Upgraded
to Caa2 (sf)
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's updated loss expectations on the underlying pools. The
rating upgrades are a result of the improving performance of the
related pools, and/or an increase in credit enhancement available
to the bonds.
Principal Methodologies
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] S&P Takes Various Actions on 28 Classes From 14 US RMBS Deals
-----------------------------------------------------------------
S&P Global Ratings completed its review of 28 ratings from 14 U.S.
RMBS transactions issued between 2003 and 2006 that are backed by
subprime collateral. The review yielded four upgrades and 24
affirmations.
A list of Affected Ratings can be viewed at:
https://bit.ly/3z2JXbx
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by our projected cash flows. These considerations
are based on transaction-specific performance and/or structural
characteristics and their potential effects on certain classes.
Some of these considerations may include:
-- Collateral performance or delinquency trends;
-- An increase or decrease in available credit support; and
-- Historical missed interest payments and reimbursement
provisions.
Rating Actions
The rating changes reflect S&P's opinion regarding the associated
transaction-specific collateral performance and/or structural
characteristics, as well as 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 we had previously anticipated. In
addition, these classes are receiving all or a substantial portion
of the principal payments.
The rating affirmations reflect S&P's opinion that its projected
credit support, collateral performance, and credit-related
reductions in interest on these classes has remained relatively
consistent with our prior projections.
[*] S&P Takes Various Actions on 42 Ratings From 15 US RMBS Deals
-----------------------------------------------------------------
S&P Global Ratings completed its review of 42 ratings from 15 U.S.
RMBS transactions issued between 2004 and 2007. The review yielded
eight upgrades, seven downgrades, and 27 affirmations.
A list of Affected Ratings can be viewed at:
https://bit.ly/3FWuTQF
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 our projected cash flows. These considerations
are based on transaction-specific performance and/or structural
characteristics and their potential effects on certain classes."
Some of these considerations may include:
-- Collateral performance or delinquency trends;
-- 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
S&P said, "The rating changes reflect our view regarding the
associated transaction-specific collateral performance, structural
characteristics, and/or the application of specific criteria
applicable to these classes. See the ratings list for the specific
rationale associated with each of the classes with rating
transitions.
"The rating affirmations reflect our view that our 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 83 Classes From Six US RMBS Deals
------------------------------------------------------------------
S&P Global Ratings completed its review of the ratings on 83
classes from six U.S. RMBS transactions issued between 2019 and
2022. The review yielded 14 upgrades, 68 affirmations, and one
discontinuance.
A list of Affected Ratings can be viewed at:
https://bit.ly/3ZsbPAV
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, S&P
believes these classes have sufficient credit support to withstand
projected losses at higher rating levels.
The affirmations reflect S&P's view that the classes' projected
collateral performance relative to its projected credit support
remain relatively consistent with its previous expectations.
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by the application of our criteria. These
considerations are based on transaction-specific performance or
structural characteristics (or both) and their potential effects on
certain classes. These considerations include:
-- Collateral performance or delinquency trends,
-- Priority of principal payments,
-- Priority of loss allocation, and
-- Available subordination and excess spread.
[*] S&P Ups 59 Ratings and Affirms 49 Ratings From 11 US RMBS Deals
-------------------------------------------------------------------
S&P Global Ratings completed its review of 108 classes from 11 U.S.
RMBS transactions issued between 2019 and 2021. The review yielded
59 upgrades and 49 affirmations.
A list of Affected Ratings can be viewed at:
https://bit.ly/40qcrZ9
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, S&P
believes these classes have sufficient credit support to withstand
projected losses at higher rating levels.
The affirmations reflect S&P's view that the classes' projected
collateral performance relative to its projected credit support
remain relatively consistent with our previous expectations.
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by the application of its criteria. These
considerations are based on transaction-specific performance or
structural characteristics (or both) and their potential effects on
certain classes. These considerations include:
-- Collateral performance or delinquency trends,
-- The priority of principal payments,
-- The priority of loss allocation, and
-- Available subordination and excess spread.
*********
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