/raid1/www/Hosts/bankrupt/TCR_Public/230423.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 23, 2023, Vol. 27, No. 112
Headlines
245 PARK AVENUE 2017-245P: Fitch Affirms 'BBsf' Rating on HRR Certs
AMERICAN CREDIT 2023-2: S&P Assigns Prelim 'BB-' Rating on E Notes
BANK5 2023-5YR1: Fitch Assigns 'B-sf' Rating on Two Tranches
BLUE STREAM 2023-1: Fitch Gives 'BB-(EXP)sf' Rating on Cl. C Notes
BRAVO RESIDENTIAL 2023-NQM3: Fitch Gives B(EXP) Rating on B-2 Notes
BVABS 2023-CAR1: Moody's Assigns B3 Rating to $9.7MM Cl. F1 Notes
BVABS 2023-CAR2: Moody's Assigns B3 Rating to $25MM Class F1 Notes
CIM TRUST 2023-R2: DBRS Finalizes B Rating on Class B2 Notes
CIM TRUST 2023-R4: Fitch Assigns 'B(EXP)sf' Rating on Cl. B2 Notes
CITIGROUP 2013-GCJ11: Fitch Affirms 'Bsf' Rating on Class F Certs
COLT 2023-1: Fitch Gives 'B(EXP)' Rating on Class B2 Certificates
COMM 2014-CCRE20: Fitch Lowers Rating on Class F Notes to 'Dsf'
COMM 2014-UBS6: DBRS Confirms C Rating on Class G Certs
CSAIL 2019-C16: Fitch Affirms B- Rating on Class G-RR Certs
DT AUTO 2023-2: S&P Assigns Prelim BB (sf) Rating on Class E Notes
ELMWOOD CLO 23: S&P Assigns Prelim B- (sf) Rating on Cl. F Notes
EMPOWER CLO 2023-1: S&P Assigns Prelim BB- (sf) Rating on E Notes
FREDDIE MAC 2023-DNA1: DBRS Finalizes BB Rating on 16 Classes
FREDDIE MAC: S&P Assigns Prelim B (sf) Rating on Class B-1I Notes
GLS AUTO 2022-1: S&P Affirms BB- (sf) Rating on Class E Notes
GLS AUTO 2023-1: DBRS Finalizes BB Rating on Class E Notes
GOLD KEY 2014-A: DBRS Confirms BB(high) Rating on Class C Series
GOLDMAN SACHS 2011-GC5: Fitch Cuts Ratings on 2 Tranches to Csf
GOLUB CAPITAL 66(B): Fitch Assigns 'BB-sf' Rating on Class E Notes
GS MORTGAGE 2018-RIVR: S&P Lowers Class D Certs Rating to 'BB-'
GS MORTGAGE 2019-GC39: Fitch Affirms B-sf Rating on Cl. G-RR Debts
GS MORTGAGE 2021-ROSS: DBRS Confirms B(low) Rating on G Certs
GS MORTGAGE 2023-RPL1: Fitch Assigns 'Bsf' Rating on Cl. B-2 Notes
JP MORGAN 2023-3: Fitch Assigns 'B-(EXP)sf' Rating on Cl. B-5 Certs
JPMCC COMMERCIAL 2017-JP6: DBRS Confirms BB Rating on F-RR Certs
KAWARTHA CAD 2022-1: DBRS Confirms BB Rating on Tranche E
MILL CITY 2023-NQM2: DBRS Finalizes B Rating on Class B-2 Certs
MORGAN STANLEY 2006-HQ10: Fitch Affirms Dsf Rating on Ten Tranches
MORGAN STANLEY 2023-1: Fitch Affirms B-(EXP) Rating on B-5 Certs
MVW LLC 2023-1: Fitch Assigns 'BB' Rating on Class D Notes
OBX TRUST 2023-NQM3: Fitch Assigns 'B(EXP)' Rating on Cl. B-2 Notes
OHA CREDIT 11: Fitch Affirms 'BB-sf' Rating on Class E Notes
PACWEST REFERENCE 2022-1: Fitch Cuts Ratings on 2 Tranches to 'BB+'
PIKES PEAK 14 (2023): Fitch Gives BB-(EXP) Rating on Cl. E Notes
READY CAPITAL 2020-FL4: DBRS Cuts 2 Classes Ratings to CCC
SYCAMORE TREE 2023-3: S&P Assigns BB- (sf) Rating on Class E Notes
UBS COMMERCIAL 2018-C11: Fitch Affirms 'B-sf' Rating on E-RR Certs
UNITED AUTO 2022-2: S&P Lowers Class E Notes Rating to 'B (sf)'
VERUS SECURITIZATION 2023-3: S&P Assigns (P) B-(sf) on B-2 Notes
WELLS FARGO 2018-C45: Fitch Lowers Rating on Cl. H-RR Certs to CCC
*********
245 PARK AVENUE 2017-245P: Fitch Affirms 'BBsf' Rating on HRR Certs
-------------------------------------------------------------------
Fitch Ratings has affirmed seven classes of 245 Park Avenue Trust
2017-245P (245 Park Avenue Trust 2017-245P) Commercial Mortgage
Trust Commercial Mortgage Pass-Through Certificates. The Rating
Outlooks have all been revised to Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
245 Park Avenue
2017-245P
A 90187LAA7 LT AAAsf Affirmed AAAsf
B 90187LAG4 LT AA-sf Affirmed AA-sf
C 90187LAJ8 LT A-sf Affirmed A-sf
D 90187LAL3 LT BBB-sf Affirmed BBB-sf
E 90187LAN9 LT BBsf Affirmed BBsf
HRR 90187LAQ2 LT BBsf Affirmed BBsf
X-A 90187LAC3 LT AAAsf Affirmed AAAsf
KEY RATING DRIVERS
The affirmations reflect the high quality and prime location of the
collateral, institutional sponsorship and property management, and
the historically strong performance and quality tenant base at the
property. While recent performance was expected to be depressed due
to a variety of factors, including the prior borrower's bankruptcy
action, substantial lease rollover and a transition to new
ownership and property management, Fitch expects property
performance to improve and stabilize gradually over the loan term.
The Negative Outlook revisions reflect the potential for downgrades
if the new property management is unable to execute its business
plan to re-tenant vacant space and improve cash flow due to
prolonged challenging market conditions. Fitch will continue to
monitor performance and leasing at the property.
The loan previously transferred to special servicing in November
2021 after the loan's borrower, which was controlled by HNA of
China, filed for bankruptcy in October 2021. After litigation
surrounding the bankruptcy, SL Green, which held a preferred equity
position, has assumed a controlling interest in the property and is
managing the property. The loan returned to the master servicer in
November 2022.
Fitch Cash Flow and Leverage: Based on current in-place cash flow
and near-term tenancy projections, the Fitch trust debt service
coverage ratio (DSCR) and loan-to-value (LTV) are 0.95x and 93.3%,
respectively. Fitch's net cash flow (NCF) of $96.4 million factors
current leases per the YE 2022 rent roll, with adjustments for
near-term rent steps and tenants expected to take occupancy, and
assumes lease-up to conservative market level rents and occupancy.
Additionally, Fitch applied a higher stressed cap rate of 7.50% in
its analysis.
High-Quality Office Collateral in Prime Location: The loan is
secured by a 44-story class A, LEED-Gold certified office building
located on an entire block bound by Park Avenue, Lexington Avenue
and 47th and 48th Streets in the Grand Central office submarket of
Midtown Manhattan. Fitch Ratings assigned a property quality grade
of 'A-' at issuance.
High Historical Occupancy and High-Quality Tenancy: Although
occupancy has declined to approximately 79% as of YE 2022 from
83.3% at YE 2021, and 93.2% at YE 2020, the property has maintained
an average occupancy of over 90% since 2007. The YE 2022
servicer-reported NCF DSCR was 2.09x. Creditworthy tenants account
for a large portion of the property's tenancy, including Societe
Generale (29.4% of NRA through 2032; A-/F1/Stable), Ares (9.9%
through 2026, A-/Stable) and Rabobank (6.2% through 2026;
A+/F1/Stable). The property serves as the U.S. headquarters for
Societe Generale and Rabobank. Other major tenants include Houlihan
Lokey (11.6% through 2034) and Angelo Gordon (7.8% through 2031).
As expected at issuance, JPMorgan Chase Bank (previously 45% of
NRA) did not renew its space at lease expiration in October 2022.
The tenant had been subleasing the bulk of its space for several
years. In 2012, sub-tenant, Societe Generale, executed a direct
10-year lease with the prior owner to commence in November 2022
with two five-year extension options. Additional tenants also
subleased space from JPMorgan Chase including Houlihan Lokey, which
executed a direct lease at market level for several floors in the
building that commenced in November 2022.
Single Asset Office: The transaction is secured by a single office
property and is, therefore, more susceptible to single-event risks
related to the secular shifts in market demand for office space,
sponsor, or the largest tenants occupying the property.
Loan and Transaction Structure: The certificates follow a
sequential-pay structure. The 245 Park Avenue Trust 2017-245P
interests consist of a pari passu $380 million A-note (of an entire
$1.08 billion A-note) and $120 million in subordinate B-notes. The
trust loan has a debt of $696 per square foot (psf). The total debt
package includes mezzanine financing in the amount of $568 million
that is not included in the trust. The loan is interest only for
the entire 10-year term with scheduled maturity in June 2027.
There are significant reserves totaling $55.5 million available
(excluding tax and insurance escrows) as of the March 2023 servicer
reporting, which includes required deposits related to prior tenant
MLB vacating its space.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A continued and sustained decline in collateral occupancy and/or
a significant deterioration in cash flow, especially if the new
property management is unable to execute its business plan to
re-tenant vacant space as a result of prolonged challenging market
conditions.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A significant and sustained improvement in occupancy and cash
flow of the underlying asset.
ESG CONSIDERATIONS
245 Park Avenue 2017-245P has an ESG Relevance Score of '4+' for
Waste & Hazardous Materials Management; Ecological Impacts due to
the collateral's sustainable building practices including Green
building certificate credentials, which has a positive impact on
the credit profile, and is relevant to the ratings in conjunction
with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
AMERICAN CREDIT 2023-2: S&P Assigns Prelim 'BB-' Rating on E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to American
Credit Acceptance Receivables Trust 2023-2's automobile
receivables-backed notes.
The note issuance is an ABS transaction backed by subprime auto
loan receivables.
The preliminary ratings are based on information as of April 18,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The availability of approximately 64.4%, 57.8%, 46.9%, 37.6%,
and 32.9% credit support (hard credit enhancement and haircut to
excess spread) for the class A, B, C, D, and E notes, respectively,
based on stressed cash flow scenarios. These credit support levels
provide at least 2.35x, 2.10x, 1.70x, 1.37x, and 1.20x coverage of
S&P's expected cumulative net loss (ECNL) of 27.25% for the class
A, B, C, D, and E notes, respectively.
-- The expectation that under a moderate ('BBB') stress scenario
(1.37x S&P's expected loss level), all else being equal, S&P's
preliminary 'AAA (sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)', and 'BB-
(sf)' ratings on the class A, B, C, D, and E notes, respectively,
are within its credit stability limits.
-- The timely payment of interest and principal by the designated
legal final maturity dates under S&P's stressed cash flow modeling
scenarios, which S&P believes are appropriate for the assigned
preliminary ratings.
-- The collateral characteristics of the series' subprime
automobile loans, S&P's view of the credit risk of the collateral,
and its updated macroeconomic forecast and forward-looking view of
the auto finance sector.
-- The series' bank accounts at Wells Fargo Bank N.A., which do
not constrain the preliminary ratings.
-- S&P's operational risk assessment of American Credit Acceptance
LLC as servicer, and its view of the company's underwriting and the
backup servicing arrangement with Computershare Trust Co. N.A.
-- S&P's assessment of the transaction's potential exposure to
environmental, social, and governance credit factors, which are in
line with its sector benchmark.
The transaction's payment and legal structures.
Preliminary Ratings Assigned
American Credit Acceptance Receivables Trust 2023-2
Class A, $148.40 million: AAA (sf)
Class B, $33.60 million: AA (sf)
Class C, $61.40 million: A (sf)
Class D, $54.99 million: BBB (sf)
Class E, $36.40 million: BB- (sf)
BANK5 2023-5YR1: Fitch Assigns 'B-sf' Rating on Two Tranches
------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to BANK5
2023-5YR1 commercial mortgage pass-through certificates, series
2023-5YR1, as follows:
Entity/Debt Rating Prior
----------- ------ -----
BANK5 2023-5YR1
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAAsf New Rating AAA(EXP)sf
A-2-1 LT AAAsf New Rating AAA(EXP)sf
A-2-2 LT AAAsf New Rating AAA(EXP)sf
A-2-X1 LT AAAsf New Rating AAA(EXP)sf
A-2-X2 LT AAAsf New Rating AAA(EXP)sf
A-3 LT AAAsf New Rating AAA(EXP)sf
A-3-1 LT AAAsf New Rating AAA(EXP)sf
A-3-2 LT AAAsf New Rating AAA(EXP)sf
A-3-X1 LT AAAsf New Rating AAA(EXP)sf
A-3-X2 LT AAAsf New Rating AAA(EXP)sf
A-S LT AAAsf New Rating AAA(EXP)sf
A-S-1 LT AAAsf New Rating AAA(EXP)sf
A-S-2 LT AAAsf New Rating AAA(EXP)sf
A-S-X1 LT AAAsf New Rating AAA(EXP)sf
A-S-X2 LT AAAsf New Rating AAA(EXP)sf
B LT AA-sf New Rating AA-(EXP)sf
B-1 LT AA-sf New Rating AA-(EXP)sf
B-2 LT AA-sf New Rating AA-(EXP)sf
B-X1 LT AA-sf New Rating AA-(EXP)sf
B-X2 LT AA-sf New Rating AA-(EXP)sf
C LT A-sf New Rating A-(EXP)sf
C-1 LT A-sf New Rating A-(EXP)sf
C-2 LT A-sf New Rating A-(EXP)sf
C-X1 LT A-sf New Rating A-(EXP)sf
C-X2 LT A-sf New Rating A-(EXP)sf
D LT BBBsf New Rating BBB(EXP)sf
E LT BBB-sf New Rating BBB-(EXP)sf
F LT BB-sf New Rating BB-(EXP)sf
G LT B-sf New Rating B-(EXP)sf
H LT NRsf New Rating NR(EXP)sf
RR Interest LT NRsf New Rating NR(EXP)sf
X-A LT AAAsf New Rating AAA(EXP)sf
X-B LT WDsf Withdrawn AA-(EXP)sf
X-D LT BBB-sf New Rating BBB-(EXP)sf
X-F LT BB-sf New Rating BB-(EXP)sf
X-G LT B-sf New Rating B-(EXP)sf
X-H LT NRsf New Rating NR(EXP)sf
- $8,265,000c class A-1 'AAAsf'; Outlook Stable;
- $159,200,000b class A-2 'AAAsf'; Outlook Stable;
- $0a class A-2-1 'AAAsf'; Outlook Stable;
- $0ab class A-2-X1 'AAAsf'; Outlook Stable;
- $0a class A-2-2 'AAAsf'; Outlook Stable;
- $0ab class A-2-X2 'AAAsf'; Outlook Stable;
- $514,785,000a class A-3 'AAAsf'; Outlook Stable;
- $0a class A-3-1 'AAAsf'; Outlook Stable;
- $0ab class A-3-X1 'AAAsf'; Outlook Stable;
- $0a class A-3-2 'AAAsf'; Outlook Stable;
- $0ab class A-3-X2 'AAAsf'; Outlook Stable;
- $682,250,000b class X-A 'AAAsf'; Outlook Stable;
- $112,084,000a class A-S 'AAAsf'; Outlook Stable;
- $0a class A-S-1 'AAAsf'; Outlook Stable;
- $0ab class A-S-X1 'AAAsf'; Outlook Stable;
- $0a class A-S-2 'AAAsf'; Outlook Stable;
- $0ab class A-S-X2 'AAAsf'; Outlook Stable;
- $43,859,000a class B 'AA-sf'; Outlook Stable;
- $0a class B-1 'AA-sf'; Outlook Stable;
- $0ab class B-X1 'AA-sf'; Outlook Stable;
- $0a class B-2 'AA-sf'; Outlook Stable;
- $0ab class B-X2 'AA-sf'; Outlook Stable;
- $40,204,000ac class C 'A-sf'; Outlook Stable;
- $0ac class C-1 'A-sf'; Outlook Stable;
- $0abc class C-X1 'A-sf'; Outlook Stable;
- $0ac class C-2 'A-sf'; Outlook Stable;
- $0abc class C-X2 'A-sf'; Outlook Stable;
- $23,148,000d class D 'BBBsf'; Outlook Stable;
- $9,747,000c class E 'BBB-sf'; Outlook Stable;
- $32,895,000bc class X-D 'BBB-sf'; Outlook Stable;
- $18,274,000c class F 'BB-sf'; Outlook Stable;
- $18,274,000bc class X-F 'BB-sf'; Outlook Stable;
- $12,183,000c class G 'B-sf'; Outlook Stable;
- $12,183,000bc class X-G 'B-sf'; Outlook Stable.
The following classes are not rated by Fitch:
- $32,894,967c class H;
- $32,894,967bc class X-H;
- $51,297,051cd RR Interest.
(a) Exchangeable Certificates. The class A-2, class A-3, class A-S,
class B and class C are exchangeable certificates. Each class of
exchangeable certificates may be exchanged for the corresponding
classes of exchangeable certificates, and vice versa. The dollar
denomination of each of the received classes of certificates must
be equal to the dollar denomination of each of the surrendered
classes of certificates. The class A-2 may be surrendered (or
received) for the received (or surrendered) classes A-2-1, A-2-X1,
A-2-2 and A-2-X2. The class A-3 may be surrendered (or received)
for the received (or surrendered) classes A-3-1, A-3-X1, A-3-2 and
A-3-X2. The class A-S may be surrendered (or received) for the
received (or surrendered) classes A-S-1, A-S-X1, A-S-2 and A-S-X2.
The class B may be surrendered (or received) for the received (or
surrendered) classes B-1, B-X1, B-2 and B-X2. The class C may be
surrendered (or received) for the received (or surrendered) classes
C-1, C-X1, C-2 and C-X2. The ratings of the exchangeable classes
would reference the ratings of the associate referenced or original
classes.
(b) Notional amount and interest only.
(c) Privately placed and pursuant to Rule 144A.
(d) Represents the "eligible vertical interest" comprising 5.0% of
the pool.
Since Fitch published its expected ratings on March 23, 2023,
several changes have occurred. The balances for classes A-2 and A-3
were finalized. At the time the expected ratings were published,
the initial aggregate certificate balance of the A-2 class was
expected to be in the range of $0 - $300,000,000 and the balance
for the A-3 class was expected to be in the range of $373,985,000 -
$673,985,000, subject to a variance of plus or minus 5%. The final
class balances for classes A-2 and A-3 are $159,200,000 and
$514,785,000, respectively.
The ratings are based on information provided by the issuer as of
April 19, 2023.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 24 loans secured by 134
commercial properties having an aggregate principal balance of
$1,025,941,018 as of the cut-off date. The loans were contributed
to the trust by Wells Fargo Bank, National Association, Morgan
Stanley Mortgage Capital Holdings LLC, Citi Real Estate Funding
Inc. and Bank of America, National Association. The Master Servicer
is Wells Fargo Bank, N.A. and the Special Servicer is CWCapital
Asset Management LLC.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 45.6% of the loans by
balance, cash flow analysis of 95.4% of the pool and asset summary
reviews on 100% of the pool.
Fitch has withdrawn the expected rating of 'AA-(EXP)sf' for class
X-B because the class was removed from the final deal structure.
The classes above reflect the final ratings and deal structure.
KEY RATING DRIVERS
Lower Leverage Compared with Recent Transactions: The pool has
lower leverage compared with recent multiborrower transactions
rated by Fitch. The pool's Fitch loan-to value ratio (LTV) of 91.1%
is lower than both the YTD 2023 and 2022 averages of 95.2% and
106.1%, respectively. The pool's Fitch NCF debt yield (DY) of 10.6%
is higher than the YTD 2023 and 2022 averages of 10.3% and 9.9%,
respectively. Excluding credit opinion loans, the pool's Fitch LTV
and DY are 96.6% and 9.8%, respectively, compared with the
equivalent conduit YTD 2023 LTV and DY averages of 95.2% and 10.1%,
respectively.
Higher Pool Concentration: The pool is more concentrated than
recently rated Fitch transactions. The top 10 loans in the pool
make up 68.7% of the pool, higher than the 2023 YTD and 2022 levels
of 60.2% and 55.2%, respectively. Fitch measures loan concentration
risk with an effective loan count, which accounts for both the
number and size of loans in the pool. The pool's effective loan
count is 19.4.
Shorter-Duration Loans: The pool is 100% composed of loans with
five-year terms, whereas standard conduit transactions have
historically included mostly loans with 10-year terms. The shorter
the remaining term of a loan, the lower the term PD, all else
equal.
Investment-Grade Credit Opinion Loans: Three loans representing
20.3% of the pool received an investment-grade credit opinion. Oak
Street NLP Fund Portfolio (9.5%) received a standalone credit
opinion of 'A-sf*', Brandywine Strategic Office Portfolio (7.9%)
received a standalone credit opinion of 'BBB-sf*', and 1201 3rd
Ave. (2.9%) received a standalone credit opinion of 'BBB+sf*'. The
pool's total credit opinion percentage of 20.35% is above the 2023
YTD and 2022 averages of 15.81% and 14.38%, respectively.
Below-Average Amortization: Based on the scheduled balances at
maturity, the pool will pay down by 0.9%, which is below the 2023
YTD average of 2.3% and below the 2022 average of 3.3%. The pool
has 19 interest-only loans (83.3% of pool by balance), which is
higher than the 2023 YTD average of 71.0% and 2022 average of
77.5%. Two loans (11.8% of pool by balance) are partial interest
only, which is below the 2023 YTD average of 12.4%, but above the
2022 average of 10.2%.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Declining cash flow decreases property value and capacity to meet
its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes in one variable, Fitch
NCF:
- Original Rating: 'AAAsf' / AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' /
'BBB-sf' / 'BB-sf' / 'B-sf';
- 10% NCF Decline: 'AAAsf' / 'AAsf' / 'Asf' / 'BBBsf' / 'BB+sf' /
'BBsf' / 'B-sf' / '
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Improvement in cash flow increases property value and capacity to
meet its debt service obligations. The table below indicates the
model-implied rating sensitivity to changes to in one variable,
Fitch NCF:
- Original Rating: 'AAAsf' / AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' /
'BBB-sf' / 'BB-sf' / 'B-sf';
- 10% NCF Increase: 'AAAsf' / 'AAAsf' / 'AA+sf' / 'A+sf' / 'BBB+sf'
/ 'BBBsf' / 'BBsf' / 'B+sf'.
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 Ernst & Young LLP. The third-party due diligence
described in Form 15E focused on a comparison and re-computation of
certain characteristics with respect to each of the mortgage 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.
BLUE STREAM 2023-1: Fitch Gives 'BB-(EXP)sf' Rating on Cl. C Notes
------------------------------------------------------------------
Fitch Ratings has issued a presale report for Blue Stream Issuer,
LLC, Secured Fiber Network Revenue Notes, Series 2023-1.
Entity/Debt Rating
----------- ------
Blue Stream
Issuer, LLC,
Secured Fiber
Network Revenue
Notes, Series
2023-1
A-1 LT A(EXP)sf Expected Rating
A-2 LT A(EXP)sf Expected Rating
B LT BBB-(EXP)sf Expected Rating
C LT BB-(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
Fitch expects to rate the transaction and assign Rating Outlooks as
follows:
- $70,000,000 series 2023-1, class A-1, 'Asf'; Outlook Stable;
- $297,800,000 series 2023-1, class A-2, 'Asf'; Outlook Stable;
- $55,800,000 series 2023-1, class B, 'BBB-sf'; Outlook Stable;
- $111,600,000 series 2023-1, class C, 'BB-sf'; Outlook Stable.
The following class is not expected to be rated by Fitch:
- $27,100,000(a) series 2023-1, class R.
(a) Horizontal credit risk retention interest representing 5% of
the 2023-1 notes.
TRANSACTION SUMMARY
The transaction is a securitization of the contract payments
derived from existing Fiber to the Home (FTTH) networks. Debt is
secured by the net revenue of operations and benefits from a
perfected security interest in the securitized assets, which
include conduits, cables, network-level equipment, access rights,
customer contracts, transaction accounts and an equity pledge from
the asset entities.
The collateral consists of high-quality fiber networks that support
the provision of internet, cable, telephony and alarm services to a
portfolio of homeowners' associations (HOAs) and condominium
owners' associations (COAs), located exclusively in Florida. These
agreements are governed by long-term contracts with the
associations directly. The transaction also includes right-of-entry
(ROE) networks and supporting contracts, which represent a small
portion (4.5%) of Annualized Run-rate Revenue (ARRR) of the total
collateral pool.
The ratings reflect a structured finance analysis of the cash flows
from the ownership interest in the pledged fiber optic networks,
not an assessment of the corporate default risk of the ultimate
parent, Blue Stream Communications LLC.
KEY RATING DRIVERS
Net Cash Flow and Leverage: Fitch's net cash flow (NCF) on the pool
is $47.5 million, implying a 15.6% haircut to issuer NCF as of
March 2023. The debt multiple relative to Fitch's NCF on the rated
classes is 11.27x, versus the debt/issuer NCF leverage of 9.5x.
Credit Risk Factors: The major factors impacting Fitch's
determination of cash flow and maximum potential leverage (MPL)
include: the high quality of the underlying collateral networks,
long-term contractual cash flow, diverse and creditworthy customer
base, market position of the sponsor, capability of the operator
and strength of the transaction structure.
Technology-Dependent Credit: Due to the specialized nature of the
collateral and potential for changes in technology to affect
long-term demand for digital infrastructure, the senior classes of
this transaction do not achieve ratings above 'Asf'. The securities
have a rated final payment date 30 years after closing, and the
long-term tenor of the securities increases the risk that an
alternative technology, rendering obsolete the current transmission
of data through fiber optic cables, will be developed. Fiber optic
cable networks are currently the fastest and most reliable means to
transmit information and data providers continue to invest in and
utilize this technology.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Declining cash flow as a result of higher expenses, contract churn,
or the development of an alternative technology for the
transmission of data could lead to downgrades.
Fitch's NCF was 15.6% below the issuer's underwritten cash flow as
of March 2023. A further 10% decline in Fitch's NCF indicates the
following ratings based on Fitch's determination of Maximum
Potential Leverage: Class A to 'BBBsf' from 'Asf'; class B to
'BBsf' from 'BBB-sf'; class C to 'B-' from 'BB-sf'.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Increasing cash flow without an increase in corresponding debt,
from rate increases, additional contracts, or contract amendments
could lead to upgrades.
A 10% increase in Fitch's NCF indicates the following ratings based
on Fitch's determination of Maximum Potential Leverage: Class A to
'Asf' from 'Asf'; class B to 'BBB+' from 'BBB-sf'; class C to
'BBsf' from 'BB-sf'.
Upgrades are unlikely for these transactions given the provision
for the issuer to issue additional notes, which rank pari passu or
subordinate to existing notes, without the benefit of additional
collateral. In addition, the transaction is capped in the 'Asf'
category, given the risk of technological obsolescence.
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 of certain
characteristics with respect to the portfolio of fiber assets and
related contracts in the data file. 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.
BRAVO RESIDENTIAL 2023-NQM3: Fitch Gives B(EXP) Rating on B-2 Notes
-------------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed notes
to be issued by BRAVO Residential Funding Trust 2023-NQM3 (BRAVO
2023-NQM3).
Entity/Debt Rating
----------- ------
BRAVO 2023-NQM3
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
A-3 LT A(EXP)sf Expected Rating
M-1 LT BBB(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
FB LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
SA LT NR(EXP)sf Expected Rating
AIOS LT NR(EXP)sf Expected Rating
XS LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The notes are supported by 674 loans with a total interest-bearing
balance of approximately $302 million as of the cut-off date. There
is also roughly 130,201 of non-interest-bearing deferred amounts
whose payments or losses will be used solely to pay down or write
off the class FB notes.
Loans in the pool were originated primarily by Acra Lending and
LoanStream Mortgage, with the remainder coming from multiple
originators. The loans are serviced by Citadel and Rushmore Loan
Management Services LLC.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 5.4% above a long-term sustainable level (versus
7.8% on a national level as of January 2023, down 2.7% qoq). The
rapid gain in home prices through the coronavirus pandemic has
shown signs of moderating, with declines in 3Q22 and 4Q22. Home
prices rose 5.8% yoy nationally as of December 2022 due to strong
gains in 1H22.
Nonqualified Mortgage Credit Quality (Negative): The collateral
consists of 674 loans totaling $302 million and seasoned at
approximately 18 months in aggregate, calculated as the difference
between the origination date and the cutoff date. The borrowers
have a moderate credit profile — a 727 model FICO and a 51%
debt-to-income ratio (DTI), which includes mapping for debt service
coverage ratio (DSCR) loans — and leverage, as evidenced by a 67%
sustainable loan-to-value ratio (sLTV).
The pool comprises 40.0% of loans treated as owner-occupied, while
60.0% are treated as an investor property or second home, which
includes loans to foreign nationals or loans where residency status
was not confirmed. Additionally, 7.7% of the loans were originated
through a retail channel. Of the loans, 1.1% are higher priced QM
(HPQM) and 47.0% are non-QM.
Loan Documentation (Negative): Approximately 96.6% of the pool
loans were underwritten to less than full documentation and 36.2%
were underwritten to a 12-month or 24-month bank statement program
for verifying income, which is not consistent with Appendix Q
standards and Fitch's view of a full documentation program. A key
distinction between this pool and legacy Alt-A loans is that these
loans adhere to underwriting and documentation standards required
under the Consumer Financial Protections Bureau's (CFPB)
Ability-to-Repay/Qualified Mortgage Rule (ATR), which reduces the
risk of borrower default arising from lack of affordability,
misrepresentation or other operational quality risks due to the
rigors of the ATR mandates regarding underwriting and documentation
of the borrower's ability to repay.
Modified Sequential Payment Structure (Mixed): The structure
distributes principal pro rata among the senior notes while
shutting out subordinate bonds from principal until all senior
classes are reduced to zero. If a cumulative loss trigger event or
delinquency trigger event occurs in a given period, principal will
be distributed sequentially to the class A-1, A-2 and A-3 notes
until they are reduced to zero.
No P&I Advancing (Mixed): The transaction is structured without
servicer advances for delinquent P&I. The lack of advancing reduces
loss severities, as there is a lower amount repaid to the servicer
when a loan liquidates and liquidation proceeds are prioritized to
cover principal repayment over accrued but unpaid interest. The
downside is the additional stress on the structure side, as there
is limited liquidity in the event of large and extended
delinquencies.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper market value declines (MVDs) at
the national level. The analysis assumes MVDs of 10.0%, 20.0% and
30.0% in addition to the model projected 38.5% at 'AAA'. The
analysis indicates that there is some potential for rating
migration with higher MVDs for all rated classes, compared with the
model projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
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 multiple third-party review firms. The third-party due
diligence described in Form 15E focused on credit, compliance and
property valuation review. Fitch considered this information in its
analysis and, as a result, Fitch made the following adjustments to
its analysis:
- A 5% PD credit was applied at the loan level for all loans graded
either 'A' or 'B';
- Fitch lowered its loss expectations by approximately 34bps as a
result of the diligence review.
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.
BVABS 2023-CAR1: Moody's Assigns B3 Rating to $9.7MM Cl. F1 Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to the
notes issued by BVABS 2023-CAR1 (BOF URSA VI Funding Trust I). This
is the first auto loan transaction sponsored by Bayview Asset
Selector VI, LLC. The notes will be backed by a pool of prime
retail automobile loans originated by U.S. Bank National
Association (A1/negative, Aa3 (cr), P-1) ("USB"), who is also the
servicer for the transaction.
The complete rating actions are as follows:
Issuer: BVABS 2023-CAR1 (BOF URSA VI Funding Trust I)
$54,064,000, 5.542%, Class A2 Notes, Definitive Rating Assigned Aaa
(sf)
$13,516,000, 6.029%, Class B Notes, Definitive Rating Assigned Aa3
(sf)
$21,239,000, 5.000%, Class C Notes, Definitive Rating Assigned A3
(sf)
$6,758,000, 5.000%, Class D Notes, Definitive Rating Assigned Baa3
(sf)
$8,689,000, 5.000%, Class E Notes, Definitive Rating Assigned Ba3
(sf)
$9,654,000, 5.000%, Class F1 Notes, Definitive Rating Assigned B3
(sf)
RATINGS RATIONALE
The ratings are based on the quality of the underlying collateral
and its expected performance, the experience and expertise of USB
as the servicer and originator, and the repurchase obligation from
USB for loans that are deemed uncollectable, unenforceable or not
valid as a result of USB not having a perfected lien.
Moody's expected median cumulative net loss expectation for BVABS
2023-CAR1 (BOF URSA VI Funding Trust I) is 0.75% and the loss at a
Aaa stress is 5.00%. Moody's based its cumulative net credit loss
expectation and loss at a Aaa stress on an analysis of the quality
of the underlying collateral; the historical credit loss
performance of similar collateral and managed portfolio
performance; the ability of USB to perform the servicing functions;
and current expectations for the macroeconomic environment during
the life of the transaction.
At closing, the Class A2 notes, Class B notes, Class C notes, Class
D notes, Class E notes, and Class F1 notes are expected to benefit
from 6.92%, 5.52%, 3.30%, 2.60%, 1.70%, and 0.70% of hard credit
enhancement, respectively. Hard credit enhancement for the notes
consists of a combination of overcollateralization, subordination,
and a reserve account for the A2 and B notes. The notes also
benefit from excess spread.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Auto Loan- and Lease-Backed ABS" published in
November 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the Class B, C, D, E, and F1 notes if levels
of credit enhancement are higher than necessary to protect
investors against current expectations of portfolio losses. Losses
could decline from Moody's original expectations as a result of a
lower number of obligor defaults or appreciation in the value of
the vehicles securing an obligor's promise of payment. Portfolio
losses also depend greatly on the US job market and the market for
used vehicles. Other reasons for better-than-expected performance
include changes to servicing practices that enhance collections or
refinancing opportunities that result in prepayments.
Down
Moody's could downgrade the notes if levels of credit enhancement
are insufficient to protect investors against current expectations
of portfolio losses. Losses could rise above Moody's original
expectations as a result of a higher number of obligor defaults or
deterioration in the value of the vehicles securing an obligor's
promise of payment. Portfolio losses also depend greatly on the US
job market and the market for used vehicles. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud. Moody's could downgrade the notes if USB's rating is
downgraded considering the repurchase obligation from USB for loans
not having a perfected lien.
BVABS 2023-CAR2: Moody's Assigns B3 Rating to $25MM Class F1 Notes
------------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to the
notes issued by BVABS 2023-CAR2 (BOF URSA VII Funding Trust I).
This is the first auto loan transaction sponsored by Bayview Asset
Selector VII, LLC. The notes will be backed by a pool of prime
retail automobile loans originated by U.S. Bank National
Association (A1/negative, Aa3 (cr), P-1) ("USB"), who is also the
servicer for the transaction.
The complete rating actions are as follows:
Issuer: BVABS 2023-CAR2 (BOF URSA VII Funding Trust I)
$141,151,000, 5.542%, Class A2 Notes, Definitive Rating Assigned
Aaa (sf)
$35,288,000, 6.029%, Class B Notes, Definitive Rating Assigned Aa3
(sf)
$55,452,000, 5.000%, Class C Notes, Definitive Rating Assigned A3
(sf)
$17,644,000, 5.000%, Class D Notes, Definitive Rating Assigned Baa3
(sf)
$22,685,000, 5.000%, Class E Notes, Definitive Rating Assigned Ba3
(sf)
$25,206,000, 5.000%, Class F1 Notes, Definitive Rating Assigned B3
(sf)
RATINGS RATIONALE
The ratings are based on the quality of the underlying collateral
and its expected performance, the experience and expertise of USB
as the servicer and originator, and the repurchase obligation from
USB for loans that are deemed uncollectable, unenforceable or not
valid as a result of USB not having a perfected lien.
Moody's expected median cumulative net loss expectation for BVABS
2023-CAR2 (BOF URSA VII Funding Trust I) is 0.75% and the loss at a
Aaa stress is 5.00%. Moody's based its cumulative net credit loss
expectation and loss at a Aaa stress on an analysis of the quality
of the underlying collateral; the historical credit loss
performance of similar collateral and managed portfolio
performance; the ability of USB to perform the servicing functions;
and current expectations for the macroeconomic environment during
the life of the transaction.
At closing, the Class A2 notes, Class B notes, Class C notes, Class
D notes, Class E notes, and Class F1 notes are expected to benefit
from 6.92%, 5.52%, 3.30%, 2.60%, 1.70%, and 0.70% of hard credit
enhancement, respectively. Hard credit enhancement for the notes
consists of a combination of overcollateralization, subordination,
and a reserve account for the A2 and B notes. The notes also
benefit from excess spread.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Auto Loan- and Lease-Backed ABS" published in
November 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the Class B, C, D, E, and F1 notes if levels
of credit enhancement are higher than necessary to protect
investors against current expectations of portfolio losses. Losses
could decline from Moody's original expectations as a result of a
lower number of obligor defaults or appreciation in the value of
the vehicles securing an obligor's promise of payment. Portfolio
losses also depend greatly on the US job market and the market for
used vehicles. Other reasons for better-than-expected performance
include changes to servicing practices that enhance collections or
refinancing opportunities that result in prepayments.
Down
Moody's could downgrade the notes if levels of credit enhancement
are insufficient to protect investors against current expectations
of portfolio losses. Losses could rise above Moody's original
expectations as a result of a higher number of obligor defaults or
deterioration in the value of the vehicles securing an obligor's
promise of payment. Portfolio losses also depend greatly on the US
job market and the market for used vehicles. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud. Moody's could downgrade the notes if USB's rating is
downgraded considering the repurchase obligation from USB for loans
not having a perfected lien.
CIM TRUST 2023-R2: DBRS Finalizes B Rating on Class B2 Notes
------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the Mortgage-Backed
Notes, Series 2023-R2 (the Notes) issued by CIM Trust 2023-R2 (CIM
2023-R2 or the Trust):
-- $364.8 million Class A1 at AAA (sf)
-- $23.9 million Class A2 at AA (sf)
-- $16.8 million Class M1 at A (sf)
-- $12.1 million Class M2 at BBB (sf)
-- $8.1 million Class B1 at BB (sf)
-- $4.0 million Class B2 at B (sf)
The AAA (sf) rating on the Class A1 Notes reflects 18.45% of credit
enhancement provided by subordinated notes in the transaction. The
AA (sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect
13.10%, 9.35%, 6.65%, 4.85%, and 3.95% of credit enhancement,
respectively.
Other than the classes specified above, DBRS Morningstar does not
rate any other classes in this transaction.
This transaction is a securitization of a portfolio of primarily
seasoned performing and reperforming first-lien residential
mortgages funded by the issuance of the Notes. The Notes are backed
by 4,343 loans with a total principal balance of $447,383,860 as of
the Cut-Off Date (January 31, 2023).
The loans are approximately 167 months seasoned on average.
As of the Cut-Off Date, 97.4% of the pool is current, 2.3% is 30
days delinquent under the Mortgage Bankers Association (MBA)
delinquency method, and 0.3% is in bankruptcy. (All except one of
the bankruptcy loans are performing.) All loans reported as
delinquent because of servicing transfers were treated as current
by DBRS Morningstar. Approximately 92.5% and 83.5% of the mortgage
loans have been zero times (x) 30 days delinquent for the past 12
months and 24 months, respectively, under the MBA delinquency
method.
In the portfolio, 60.3% of the loans are modified. The
modifications happened more than two years ago for 79.9% of the
modified loans. Within the pool, 1,866 mortgages have
non-interest-bearing deferred amounts, which equate to 3.6% of the
total principal balance. Unless specified otherwise, all statistics
on the mortgage loans in this assessment are based on the current
balance, including the applicable non-interest-bearing deferred
amounts.
The majority of the pool (82.1%) is exempt from the Consumer
Financial Protection Bureau Ability-to-Repay (ATR)/Qualified
Mortgage (QM) rules. The loans subject to the ATR rules are
designated as QM Safe Harbor (6.6%) and Non-QM (11.3%) by unpaid
principal balance.
Fifth Avenue Trust (the Seller) acquired the mortgage loans prior
to the Cut-Off Date and, through a wholly owned subsidiary, Funding
Depositor LLC (the Depositor), will contribute the loans to the
Trust. As the Sponsor, Chimera Investment Corporation (Chimera) or
one of its majority-owned affiliates will acquire and retain a 5%
eligible horizontal residual interest in the Notes, consisting of a
portion of the Class B1 Notes and all of the Class B2, Class B3,
Class B4, and Class C Notes, in the aggregate, to satisfy the
credit risk retention requirements. Various entities originated and
previously serviced the loans through purchases in the secondary
market.
Prior to CIM 2023-R2, Chimera had issued 50 seasoned
securitizations under the CIM shelf since 2014, all of which were
backed by subprime, reperforming, or nonperforming loans. DBRS
Morningstar has rated 10 of the previously issued CIM reperforming
loan deals. Similar to the CIM 2022-R2 deal, this transaction
exhibits much stronger credit characteristics than previously
issued transactions under the CIM shelf. DBRS Morningstar reviewed
the historical performance of both the rated and unrated
transactions issued under the CIM shelf, particularly with respect
to the reperforming transactions, which may not have collateral
attributes similar to CIM 2023-R2. The reperforming CIM
transactions generally have delinquencies and losses in line with
expectations for previously distressed assets.
The loans will all be serviced by Fay Servicing, LLC. There will
not be any advancing of delinquent principal or interest on any
mortgages by the Servicer or any other party to the transaction;
however, the related Servicer is obligated to make advances in
respect of homeowner's association fees, taxes, and insurance as
well as reasonable costs and expenses incurred in the course of
servicing and disposing of properties.
On the earlier of the Payment Date occurring in March 2028, or
after the Payment Date when the aggregate note amount of the
offered Notes is reduced to 10% of the Closing Date note amount,
the Call Option Holder (the Depositor or any successor or assignee)
has the option to purchase all of the mortgage loans and any real
estate owned (REO) properties at a certain purchase price equal to
the unpaid principal balance of the mortgage loans, plus the fair
market value of the REO properties and any unpaid expenses and
reimbursement amounts.
The transaction employs a sequential-pay cash flow structure.
Principal proceeds can be used to cover interest shortfalls on the
Notes, but such shortfalls on Class M1 and more subordinate bonds
will not be paid from principal proceeds until the Class A1 and
Class A2 Notes are retired.
Notes: All figures are in U.S. dollars unless otherwise noted.
CIM TRUST 2023-R4: Fitch Assigns 'B(EXP)sf' Rating on Cl. B2 Notes
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to CIM Trust 2023-R4
(CIM 2023-R4).
Entity/Debt Rating
----------- ------
CIM 2023-R4
A1 LT AAA(EXP)sf Expected Rating
A2 LT AA(EXP)sf Expected Rating
M1 LT A(EXP)sf Expected Rating
M2 LT BBB(EXP)sf Expected Rating
B1 LT BB(EXP)sf Expected Rating
B2 LT B(EXP)sf Expected Rating
B3 LT NR(EXP)sf Expected Rating
B4 LT NR(EXP)sf Expected Rating
AIOS LT NR(EXP)sf Expected Rating
C LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch expects to rate the residential mortgage-backed notes to be
issued by CIM Trust 2023-R4 as indicated. The transaction is
expected to close on or about May 4, 2023. The notes are supported
by one collateral group that consists of 3,744 loans with a total
balance of approximately $394.0 million, which includes $18.2
million, or 4.6%, of the aggregate pool balance in
non-interest-bearing deferred principal amounts as of the cutoff
date. The pool generally consists of seasoned performing loans
(SPLs) and reperforming loans (RPLs), and approximately 8.7% of the
pool is seasoned at less than 24 months as of the cutoff date and
was therefore considered to be a new origination by Fitch.
Distributions of P&I and loss allocations are based on a
traditional senior-subordinate, sequential structure. The
sequential-pay structure locks out principal to the subordinated
notes until the most senior notes outstanding are paid in full. The
servicer will not be advancing delinquent monthly payments of P&I.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 8.9% above a long-term sustainable level (versus
7.8% on a national level as of March 2023, down 2.7% since last
quarter). The rapid gain in home prices through the pandemic has
seen signs of moderating with a decline observed in 3Q22. Driven by
the strong gains seen in 1H22, home prices rose 5.8% yoy nationally
as of December 2022.
Distressed Performance History (Negative): The collateral pool
consists primarily of peak-vintage loans, SPLs and RPLs. Of the
pool, 3.6% was 30 days delinquent as of the cutoff date.
Approximately 42.9% of the loans have been paying on time for at
least the past 24 months (defined as clean current by Fitch) and
48.8% of the loans are currently current, but have missed one or
more payments over the past 24 months. The remaining 4.7% of loans
are seasoned less than 24 months and have been paying on time since
origination. Roughly 60.4% of the loans have been modified.
Low Leverage (Positive): The pool consists of loans with a weighted
average (WA) original combined loan-to-value ratio (CLTV) of 80.3%
as calculated by Fitch. All seasoned loans received an updated
property valuation. 98.9% received a broker price opinion (BPO)
valuation, and the remining 1.1% received form 2055 or an automated
valuation model (AVM) value. AVMs were haircut based on the
provider and confidence score thresholds per Fitch criteria. This
translates to a WA sustainable LTV (sLTV) of 51.4% in the base
case. This indicates low leverage borrowers and added strength
compared with recently rated RPL transactions.
No Servicer P&I Advancing (Mixed): The servicer will not advance
delinquent monthly payments of P&I, which reduces liquidity to the
trust. P&I advances made on behalf of loans that become delinquent
and eventually liquidate reduce liquidation proceeds to the trust.
Due to the lack of P&I advancing, the loan-level loss severity (LS)
is less for this transaction than for those where the servicer is
obligated to advance P&I. Structural provisions and cash flow
priorities, together with increased subordination, provide for
timely payments of interest to the 'AAAsf' and 'AAsf' rated
classes.
Sequential-Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure whereby the subordinate classes
do not receive principal until the senior classes are repaid in
full. Losses are allocated in reverse-sequential order.
Furthermore, the provision to reallocate principal to pay interest
on the 'AAAsf' and 'AAsf' rated notes prior to other principal
distributions is highly supportive of timely interest payments to
those classes in the absence of servicer advancing.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper market value declines (MVDs) at
the national level. The analysis assumes MVDs of 10.0%, 20.0% and
30.0%, in addition to the model-projected 42.3% at 'AAAsf'. The
analysis indicates that there is some potential rating migration
with higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home prices
would lower all rated classes by one full category.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all the rated classes. Specifically,
a 10% gain in home prices would result in a full category upgrade
for the rated class excluding those being assigned ratings of
'AAAsf'.
CRITERIA VARIATION
Fitch's analysis incorporated one criteria variation from the "U.S.
RMBS Rating Criteria."
The variation is related to the primary valuation type for
new-origination first lien loans. Per the criteria, Fitch expects
to receive a full appraisal as primary valuation for all
new-origination first lien loans. Approximately 0.3% of the pool by
loan count (13 loans) is seasoned less than 24 months and did not
receive a full appraisal at origination. These loans received a
drive-by, AVM or stated value as the primary valuation type. All
but six of the 13 loans received recent, updated BPOs and a
property valuation due diligence review. Fitch used the lower of
the original valuation and the updated valuation in its LTV
calculations and analysis. This variation had no rating impact, as
the number of loans affected represents a very small portion of the
overall pool and did not lead to a category-level rating change.
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 SitusAMC and Clayton. A third-party regulatory
compliance review was completed on 100% of the loans in this
transaction. The scope of the due diligence review was consistent
with Fitch criteria for RPL collateral and also included a property
valuation review in addition to the regulatory compliance and pay
history review. All loans received an updated tax and title search
and review of servicing comments. Additionally, the pool includes
64 loans seasoned less than 24 months that received a full new
origination due diligence, which includes credit, compliance and
property valuation review.
Fitch considered this information in its analysis and, as a result,
made the following adjustments to its analysis: increased the LS
due to HUD-1 issues, increased liquidation timelines for loans
missing modification agreements, increased LS due to outstanding
delinquent property taxes or liens, and treated loans found to have
a prior lien as a second lien. These adjustments resulted in an
increase in the 'AAAsf' expected loss of approximately 0.25%.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
CITIGROUP 2013-GCJ11: Fitch Affirms 'Bsf' Rating on Class F Certs
-----------------------------------------------------------------
Fitch Ratings has upgraded three and affirmed three classes of
Citigroup Commercial Mortgage Trust, commercial mortgage
pass-through certificates, series 2013-GCJ11 (CGCMT 2013-GCJ11).
Entity/Debt Rating Prior
----------- ------ -----
CGCMT 2013-GCJ11
B 17320DAQ1 LT AAAsf Affirmed AAAsf
C 17320DAS7 LT AAAsf Upgrade Asf
D 17320DAU2 LT Asf Upgrade BBB-sf
E 17320DAW8 LT BBsf Affirmed BBsf
F 17320DAY4 LT Bsf Affirmed Bsf
X-B 17320DBE7 LT AAAsf Upgrade Asf
TRANSACTION SUMMARY
As of the March 2023 distribution date, the pool's aggregate
principal balance has paid down by 80.5% since issuance, with 11
assets remaining. Four loans (43.0% of the pool) are fully
defeased, all of which have loan maturities in April 2023.
The largest remaining non-defeased loan, the Residence Inn Boston
Harbor (15.9%), is secured by a 168-key limited-service hotel
located in Boston, MA. The hotel is located across the Charles
River Bridge from downtown Boston and is positioned along the
waterfront overlooking the Boston Harbor and the Charlestown Navy
Yard.
The borrower was unable to repay the loan at the scheduled maturity
date of March 1, 2023. The borrower has been granted a 60-day
forbearance to repay the loan by May 1, 2023.
The hotel has reflected a strong recovery in performance with
occupancy increasing to 75% and NOI debt service coverage ratio
(DSCR) of 2.11x as compared to occupancy of 66% and NOI DSCR of
0.96x at YE 2021. According to a December 2022 STR report, the
hotel reported occupancy of 75.4%, $271 in ADR and RevPAR of $204
compared to the competitive set averages of 66.4%, $292, and $194,
respectively.
The largest driver to loss is the Empire Hotel & Retail loan
(27.1%), which is secured by a mixed-use hotel/retail property on
the Upper West Side of Manhattan. Property occupancy improved to
54% as of September 2022 from 6% at YE 2021 and 14% at YE 2020,
however, occupancy remains well below 85% in 2019. The property
experienced declining cash flow due to renovations that took half
of the hotel rooms off line through YE 2019 with further
performance deterioration as a result of the pandemic. The TTM
September 2022 NOI DSCR was 0.87x, up from -0.08x at YE 2021.
The loan transferred to special servicing in June 2021 for payment
default and was returned to the master servicer in September 2022
following a loan modification which included a a two-year extension
option. The borrower exercised the extension option and the
maturity was extended to January 2025 with the loan balance being
reduced by 5%. Fitch's loss expectation of 32.0% reflects concerns
about the loan's refinancing risk.
KEY RATING DRIVERS
High Credit Enhancement of Senior Classes: The senior bonds have a
high likelihood of recovery given the credit support of the
subordinate classes.
Increasing Certainty of Paydown and Refinance: The upgrades of
classes C and D reflect the expectation of imminent repayment from
defeased collateral. The Rating Outlook revision on class E
reflects the class' high likelihood of recovery if the majority of
the loans in the pool are repaid as expected, and the limited
recovery required from the Empire Hotel & Retail loan to pay off
the remaining balance of the class.
Undercollateralization: The transaction is undercollateralized by
approximately $1.8 million due to a WODRA on the Empire Hotel &
Retail loan, which was reflected in the August 2022 remittance
report.
Alternative Loss Considerations: Fitch's analysis of the remaining
loans included an expected recovery and liquidation analysis which
assumed ultimate recovery of defeased collateral and loans that are
expected to repay at maturity. The Empire Hotel and Retail loan is
anticipated to be the last loan remaining with expected losses.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Downgrades to classes B and C are not likely as the class balances
are covered by defeased collateral; downgrade to class D is
unlikely due to the sufficient credit enhancement of the class and
the high likelihood of repayment for the majority of the loans in
the pool; downgrades to class E and F are possible if one or more
loans are not repaid/refinanced within the expected timeline,
and/or if the remaining assets in the pool liquidate with outsized
losses.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
An upgrade to class E is possible if the majority of the loans in
the pool are repaid as expected, and expected losses for the Empire
Hotel & Retail loan remain stable; an upgrade to class F is
unlikely due to the class' subordinate position but may be possible
if there is an increased certainty for the repayment or
higher-than-expected recovery of the Empire Hotel & Retail loan.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
COLT 2023-1: Fitch Gives 'B(EXP)' Rating on Class B2 Certificates
-----------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed
certificates to be issued by COLT 2023-1 Mortgage Loan Trust (COLT
2023-1).
Entity/Debt Rating
----------- ------
COLT 2023-1
A1 LT AAA(EXP)sf Expected Rating
A2 LT AA(EXP)sf Expected Rating
A3 LT A(EXP)sf Expected Rating
M1 LT BBB(EXP)sf Expected Rating
B1 LT BB(EXP)sf Expected Rating
B2 LT B(EXP)sf Expected Rating
B3 LT NR(EXP)sf Expected Rating
AIOS LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
X LT NR(EXP)sf Expected Rating
COLLAT LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The certificates are supported by 585 non-prime loans with a total
balance of approximately $292 million as of the cut-off date. Loans
in the pool were originated by multiple originators, including
Change Lending, Northpointe Bank, Loanstream Mortgage and others.
Loans were aggregated by Hudson Americas L.P. Loans and are
currently serviced by Select Portfolio Servicing, Inc. (SPS) or
Northpointe Bank.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 5.9% above a long-term sustainable level compared
with 7.8% on a national level, as of March 2023, down 2.7% since
last quarter. The rapid gain in home prices through the pandemic
has seen signs of moderating with a decline observed in 3Q22.
Driven by the strong gains seen in 1H22, home prices rose 5.8% yoy
nationally as of December 2022.
Non-QM Credit Quality (Negative): The collateral consists of 585
loans, totaling $292 million and seasoned approximately four months
in aggregate. The borrowers have a moderate credit profile of a 735
model FICO and leverage with a 76.9% sustainable loan-to-value
ratio (sLTV) and 72.4% combined current LTV (cLTV).
The pool consists of 60.0% of loans where the borrower maintains a
primary residence, while 37.7% comprise an investor property.
Additionally, 62.3% are nonqualified mortgage (non-QM). The QM rule
does not apply to the remainder. Fitch's expected loss in the
'AAAsf' stress is 19.75%. This is mainly driven by the non-QM
collateral and the significant investor cash flow product
concentration.
Loan Documentation (Negative): Around 93.1% of loans in the pool
were underwritten to less than full documentation, and 58.6% were
underwritten to a bank statement program for verifying income,
which is not consistent with Appendix Q standards and Fitch's view
of a full documentation program. A key distinction between this
pool and legacy Alt-A loans is these loans adhere to underwriting
and documentation standards required under the Consumer Financial
Protections Bureau's (CFPB) Ability to Repay (ATR) Rule (ATR
Rule).
This reduces risk of borrower default arising from lack of
affordability, misrepresentation or other operational quality risks
due to rigor of the ATR Rule's mandates with respect to the
underwriting and documentation of a borrower's ATR. Its treatment
of alternative loan documentation increased 'AAAsf' expected loss.
'AAAsf' expected losses for this cohort are 15.8% compared with
12.5% to fully documented loans.
High Percentage of DSCR Loans (Negative): There are 256 debt
service coverage ratio (DSCR) products in the pool (43.8% by loan
count). These business purpose loans are available to real estate
investors that are qualified on a cash flow basis, rather than debt
to income (DTI), and borrower income and employment are not
verified.
Compared with standard investment properties, for DSCR loans, Fitch
converts the DSCR values to a DTI and treats as low documentation.
Its treatment for DSCR loans results in a higher Fitch reported
non-zero DTI. Expected losses for DSCR loans is 28.5% in the
'AAAsf' stress. Expected losses in this cohort are most
conservative for the low ratio DSCR (less than 0.75x) at a 'AAAsf'
expected loss of 32.8%.
Modified Sequential-Payment Structure with Limited Advancing
(Mixed): The structure distributes principal pro rata among the
senior certificates while shutting out the subordinate bonds from
principal until all senior classes are reduced to zero. If a
cumulative loss trigger event, delinquency trigger event or credit
enhancement (CE) trigger event occurs in a given period, principal
will be distributed sequentially to class A-1, A-2 and A-3
certificates until they are reduced to zero.
Advances of delinquent principal and interest (P&I) will be made on
the mortgage loans for the first 90 days of delinquency, to the
extent such advances are deemed recoverable. If the P&I advancing
party fails to make a required advance, the master servicer and
then securities administrator will be obligated to make such
advance.
The limited advancing reduces loss severities, as a lower amount is
repaid to the servicer when a loan liquidates and liquidation
proceeds are prioritized to cover principal repayment over accrued
but unpaid interest. The downside to this is the additional stress
on the structure, as there is limited liquidity in the event of
large and extended delinquencies.
COLT 2023-1 has a step-up coupon for the senior classes (A-1, A-2
and A-3). After four years, the senior classes pay the lesser of a
100bps increase to the fixed coupon or the net weighted average
coupon (WAC) rate. The unrated class B-3 interest allocation goes
toward the senior cap carryover amount for as long as the senior
classes are outstanding. This increases the P&I allocation for the
senior classes.
As a sensitivity to its rating stresses, Fitch took into account a
WAC deterioration that varied by rating stress. The WAC cut was
derived by assuming a 2.5% cut (based on the most common historical
modification rate) on 40% (historical Alt-A modification
percentage) of the performing loans. Although the WAC reduction
stress is based on historical modification rates, Fitch did not
include the WAC reduction stress in its testing of the delinquency
trigger.
Fitch viewed the WAC deterioration as more of a pre-emptive cut
given the ongoing macroeconomic and regulatory environment. A
portion of borrowers will likely be impaired but will not
ultimately default due to modifications and reduced P&I. This
approach had the largest impact on the back-loaded benchmark
scenario.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analysis was conducted at the
state and national level to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model projected 38.8% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. A 10% additional
decline in home prices would lower all rated classes by one full
category.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analysis was conducted at the state and national level
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes. A 10% gain
in home prices would result in a full category upgrade for the
rated class excluding those assigned 'AAAsf' ratings.
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 Consolidated Analytics, Covius, Canopy, Selene, and
Evolve. The third-party due diligence described in Form 15E focused
on credit, compliance and property valuation review. Fitch
considered this information in its analysis and, as a result, Fitch
made the following adjustment to its analysis: a 5% credit at the
loan level for each loan where satisfactory due diligence was
completed. This adjustment resulted in a 46bps reduction to the
'AAAsf' expected loss.
DATA ADEQUACY
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. The loan-level
information Fitch received was provided in the American
Securitization Forum's data layout format.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
COMM 2014-CCRE20: Fitch Lowers Rating on Class F Notes to 'Dsf'
---------------------------------------------------------------
Fitch has Downgraded One Class of COMM 2014-CCRE20 Mortgage Trust
and takes no action on the ratings of the remaining 12 classes.
Entity/Debt Rating Prior
----------- ------ -----
COMM 2014-CCRE20
F 12592LAS1 LT Dsf Downgrade Csf
KEY RATING DRIVERS
Class F has been downgraded as it experienced its' first dollar
loss following the disposal of the REO Crowne Plaza Houston Katy
Freeway. The sale closed on March 2, 2023 and net proceeds to the
trust were $3.996 million ($19,308 per key) and the resulting loss
on the sale was $24.240 million. The loss wiped out the subordinate
classes G and H, both of which are not rated by Fitch.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
No further negative rating changes are expected as these bonds have
incurred principal losses.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
While the bonds that have defaulted are not expected to recover any
material amount of lost principal in the future, there is a limited
possibility this may happen. In this unlikely scenario, Fitch would
further review the affected classes.
COMM 2014-UBS6: DBRS Confirms C Rating on Class G Certs
-------------------------------------------------------
DBRS Limited confirmed its ratings on all classes of the Commercial
Mortgage Pass-Through Certificates, Series 2014-UBS6 issued by COMM
2014-UBS6 Mortgage Trust as follows:
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class PEZ at A (low) (sf)
-- Class X-C at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at B (high) (sf)
-- Class F at CCC (sf)
-- Class G at C (sf)
All trends are Stable, with the exception of Classes F and G, which
have ratings that do not carry trends.
DBRS Morningstar's expectations for the pool remain in line with
the last rating action in November 2022. Since then, University
Village (Prospectus ID#5) was disposed from the pool with a better
recovery than DBRS Morningstar had anticipated; however, Highland
Oaks Portfolio (Prospectus ID#8, 3.4% of the pool) transferred to
special servicing with the March 2023 reporting for imminent
default following the loss of the property's largest tenant in
December 2022 at lease expiration, which occupied over half of net
rentable area (NRA).
To date, five loans have been liquidated from the trust with losses
totaling $25.8 million contained to the nonrated Class H
Certificate, which has been reduced by nearly 65% to $14.1 million.
As noted above, the most recent liquidation was the $39.9 million
University Village loan, which was secured by a student housing
property in Tuscaloosa, Alabama, and incurred a loss of $7.1
million upon disposition. In its previous review, DBRS Morningstar
had assumed a haircut to the May 2022 appraised value of $30.9
million and liquidated the loan from the trust with a projected
loss of $24.1 million, factoring in the $9.5 million of accumulated
servicer advances. With this review, DBRS Morningstar increased the
expected loss on six loans reflective of the individual credit risk
profiles, but only liquidated one loan from the trust with a
projected loss under $0.5 million.
As of the March 2023 reporting, 73 of the original 89 loans
remained in the trust, with an aggregate principal balance of
$954.2 million, reflecting a collateral reduction of 25.2% since
issuance, as a result of loan repayments, scheduled loan
amortization, and loan liquidations. In addition, 25 loans,
representing 20.0% of the pool, are secured by collateral that has
been fully defeased. There are eight loans, representing 14.0% of
the pool, on the servicer watchlist, and five loans, representing
10.9% of the pool, in special servicing.
The largest loan in special servicing, University Edge (Prospectus
ID#7, 3.6% of the pool), transferred to special servicing in
October 2022 for imminent default because of the borrower's
inability to continue covering property cash flow shortfalls. The
collateral is a 148-unit (578-bed) off-campus student housing
complex in Akron, Ohio, across from University of Akron's main
campus. The property also includes 18,225 square feet (sf) of
street-level retail and a 40-space parking garage. The borrower has
managed to keep the loan current despite consistently reporting
lower than breakeven cash flows, which were amplified by the
outbreak of the Coronavirus Disease (COVID-19) pandemic, and has
requested a loan modification to extend the maturity beyond the
November 2024 maturity date, while attempting to increase cash
flows by implementing a new lease structure that would allow
expenses to be passed through to tenants. According to the
servicer, any extensions would typically require capital infusion
from the borrower along with covering the fees and costs associated
with the transaction. Discussions and negotiations are currently
ongoing.
As of the August 2022 rent roll, the student housing portion of the
property reported an occupancy rate comparable with issuance
figures of 98.1%, trending positively over the December 2021 figure
of 87.0% and recovering from a low of 82.7% in December 2020 as a
result of the impacts of the pandemic on enrollment. University of
Akron's total enrollment had been steadily declining since 2012, a
trend that was amplified by the impact of the coronavirus pandemic
and is mirrored among several northeast Ohio public universities;
however, according to an article published by Ideastream Public
Media in February 2023, there are signs that enrollment may be
stabilizing. Per the August 2022 rent roll, the property reported
an average rental rate of $544 per bed, reflecting an 18.1% decline
from $664 per bed prior to the pandemic in June 2019. For the
academic year of 2023–24, Reis projected the University of Akron
submarket would have a vacancy rate of 2.7% and an asking rental
rate of $570 per ped, slightly above the property's average rental
rate. Reis forecasts rent growth of 1.8% by the 2024–25 academic
year. The property's retail portion was 80.6% occupied by nine
tenants, with no rollover within the next 12 months.
According to the trailing six-month financials ended June 30, 2022,
the loan reported an annualized net cash flow of $1.9 million (a
debt service coverage ratio (DSCR) of 0.90 times (x)), an increase
from a low of $1.6 million at YE2020 (a DSCR of 0.74x), but below
the pre-pandemic figure of $2.6 million (a DSCR of 1.51x) at
YE2019. Given the loan's historical performance challenges and
University of Akron's total enrollment decline of more than 40%
since issuance, DBRS Morningstar has concerns about the loan being
able to secure refinancing at maturity in November 2024. No updated
appraisal has been provided since issuance when the property was
valued at $46.4 million; however, property value has likely
declined significantly, elevating the loan's leverage and credit
risk to the trust. As a result, DBRS Morningstar has elevated its
probability of default (POD) from the previous year and stressed
the loan-to-value assumption, increasing the loan's expected loss.
With the March 2023 remittance, the Highland Oaks Portfolio
(Prospectus ID#8, 3.4% of the current pool balance) was transferred
to special servicing for imminent default following the departure
of the property's largest tenant, Health Care Service Corporation
(Health Care; 55.6% of NRA), which vacated as expected upon its
lease expiration in December 2022, bringing occupancy down to its
current rate of 33.8%. Another two tenants, representing 5.0% of
NRA, have lease expirations in the next 12 months. The property is
secured by two Class B office properties totaling 319,665 sf in
Downers Grove, Illinois. While the servicer had previously noted
the borrower's aggressive leasing efforts to find new tenants to
backfill the space and potentially refreshing the interior and
exterior of the building, no prospective tenants have been reported
to date. The loan has nearly $5.0 million in reserves to aid with
leasing efforts; however, the March 2023 site inspections reported
that no capital expenditures were under way or planned. According
to Reis, comparable properties within the West submarket of Chicago
reported asking and effective rental rates of $22.54 per sf (psf)
and $16.85 psf as of Q4 2022, respectively, compared with the
subject's current rental rate of $16.24 psf.
Prior to the Health Care departure, performance had been healthy as
the loan reported a DSCR of 1.73x as of Q3 2022; however, coverage
has abruptly declined with the borrower unable to cover property
shortfalls. Given the sharp increase in vacancy paired with the
soft submarket conditions—which reported a vacancy figure of
22.8% as of Q4 2022 according to Reis data—DBRS Morningstar
applied a POD penalty to significantly increase the expected loss
for this loan.
DBRS Morningstar ran an updated model given the meaningful changes
since last review. Material deviations from the North American CMBS
Insight Model were reported for Class E, as the quantitative
results suggested higher ratings. The material deviations were
warranted given the uncertain loan-level event risk with the
increase in defeasance, and the loan's on the servicer's watchlist
and in special servicing.
Notes: All figures are in U.S. dollars unless otherwise noted.
CSAIL 2019-C16: Fitch Affirms B- Rating on Class G-RR Certs
-----------------------------------------------------------
Fitch Ratings has affirmed 14 classes of CSAIL 2019-C16 Commercial
Mortgage Trust commercial mortgage pass-through certificates. Fitch
has also revised one Rating Outlook to Stable from Negative.
Entity/Debt Rating Prior
----------- ------ -----
CSAIL 2019-C16
A-1 12596WAA2 LT AAAsf Affirmed AAAsf
A-2 12596WAB0 LT AAAsf Affirmed AAAsf
A-3 12596WAC8 LT AAAsf Affirmed AAAsf
A-S 12596WAG9 LT AAAsf Affirmed AAAsf
A-SB 12596WAD6 LT AAAsf Affirmed AAAsf
B 12596WAH7 LT AA-sf Affirmed AA-sf
C 12596WAJ3 LT A-sf Affirmed A-sf
D 12596WAM6 LT BBB-sf Affirmed BBB-sf
E-RR 12596WAP9 LT BBB-sf Affirmed BBB-sf
F-RR 12596WAR5 LT BB-sf Affirmed BB-sf
G-RR 12596WAT1 LT B-sf Affirmed B-sf
X-A 12596WAE4 LT AAAsf Affirmed AAAsf
X-B 12596WAF1 LT A-sf Affirmed A-sf
X-D 12596WAK0 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Generally Stable Loss Expectations: Loss expectations have been
stable since Fitch's last rating action. The Negative Outlook on
the class G-RR reflects concerns regarding the performance of three
lodging loans; Embassy Suites Seattle Bellevue, Hampton Inn Livonia
and Comfort Suites Grand Rapids North, combined 7.5% of the pool,
that are yet to stabilize since being affected by the pandemic.
Nine loans are considered FLOCs (24.7% of the pool) including the
one specially serviced loan (4.4% of the pool) in the top 15.
Fitch's current ratings reflect a base case loss of 4.70%.
The largest contributor to losses is the Embassy Suites Seattle
Bellevue loan (5.4% of the pool), which is secured by a 240-room
full-service hotel in Bellevue, WA. The hotel was built in 1990 and
renovated in 2016. Between 2015 and 2016, the hotel underwent $10.1
million ($41,977 per key) in renovations to guestrooms, lobby,
atrium, restaurant and common area improvements. The loan is
considered a Fitch loan of concern (FLOC) due to declining
occupancy and cash flow, the property's performance has yet to
return to pre-pandemic levels.
As of the TTM ended December 2022, the hotel's reported occupancy,
ADR, and RevPAR of 61.5%, $179, and $110, respectively, compared
with 35%, $109, and $38 at TTM June 2021; 27%, $131, and $36 at TTM
December 2020; and 77%, $181, and $140 at YE 2019. The hotel
reported a RevPAR Penetration index of 99.6% as of the TTM December
2022, and for the same period, the hotels competitive set reported
an occupancy, ADR and RevPAR, of 61.7%, $188 and $116,
respectively. The NOI debt service coverage ratio (DSCR) as of YE
2022 was 1.18x, from 0.17x at YE 2021, -0.53x at YE 2020 and 1.61x
at YE 2019.
Fitch's analysis reflects a stressed value per key of $100,026.
Specially Serviced Loan: The Santa Fe Portfolio loan (4.4%) is
secured by a portfolio of 11 properties (six retail, four office
and one mixed-use) located in downtown Santa Fe, NM. The loan
transferred to special servicing for payment default in June 2020.
The loan was modified in June 2021 and was brought current in
February 2022 after having been 60+ days delinquent since its
initial default; however, the Borrower re-defaulted after the loan
became delinquent in August 2022. The special servicer is dual
tracking foreclosure/receivership while discussions continue with
the borrower.
The portfolio's major tenants include Gerald Peters Gallery (23.5%
NRA; lease expiry October 2033), Santa Fe Properties (8.7% NRA;
October 2033) and Hidden Mountain Brewing Company (3.9% NRA;
October 20233). As of the September 2022 rent roll, portfolio
occupancy was 98%, from 90% at YE 2021, 89% at YE 2020, 96% at YE
2019 and 95% at issuance.
Fitch's loss expectation reflects a stressed value of approximately
$149 psf and is based on a discount to the December 2022 appraisal
for the portfolio.
Minimal Change in Credit Enhancement: As of the March 2023
remittance, the pool balance has been reduced by 1.7% to $774.5
million from $787.5 million at issuance. Two loans (1.6%) have been
fully defeased, eighteen loans (50.6% of pool) have interest only
payments and 26.7% of pool have partial interest only payments. The
pool has not experienced any realized losses since issuance.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Sensitivity factors that could lead to downgrades include an
increase in pool-level losses from underperforming or specially
serviced loans/assets. Downgrades to the super senior 'AAAsf'-rated
classes are not likely due to the position in the capital
structure, but may occur should interest shortfalls affect these
classes. Downgrades to the junior 'AAAsf' and 'AA-sf'-rated classes
are possible should expected losses for the pool increase
significantly, all of the FLOCs and loans susceptible to further
performance deterioration and/or interest shortfalls occur.
Downgrades to the 'A-sf' and 'BBB-sf'-rated classes are possible
should loss expectations increase due to continued performance
declines and/or lack of stabilization on the lodging FLOCs,
additional loans transfer to special servicing and/or the specially
serviced loan experience higher than expected losses upon
resolution. Downgrades to the F-RR and G-RR will occur with further
certainty of losses and/or actual losses are incurred.
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, particularly on the FLOCs, coupled with
paydown and/or defeasance. Upgrades of the 'A-sf' and 'AA-sf'
categories would only occur with significant improvement in CE
and/or defeasance and with the stabilization of performance on the
FLOCs; however, adverse selection, increased concentrations and
further underperformance of the larger FLOCs could cause this trend
to reverse.
Upgrades to the 'BBB-sf' categories are not likely until the later
years in a transaction and only if the performance of the pool and
lodging loans is stable and/or properties and there is sufficient
CE to the classes. Classes would not be upgraded above 'Asf' if
there is a likelihood of interest shortfalls.
Upgrades to classes F-RR and G-RR are unlikely unless there is
significant performance improvement on the FLOCs, lodging loans and
higher recoveries than expected on the specially serviced loan.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
DT AUTO 2023-2: S&P Assigns Prelim BB (sf) Rating on Class E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to DT Auto
Owner Trust 2023-2's asset-backed notes.
The note issuance is an ABS securitization backed by subprime auto
loan receivables.
The preliminary ratings are based on information as of April 13,
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 availability of approximately 60.68%, 54.20%, 44.11%,
35.44%, and 32.10% credit support (hard credit enhancement and a
haircut to excess spread) for the class A, B, C, D, and E notes,
respectively, based on stressed break-even cash flow scenarios.
These credit support levels provide at least 2.37x, 2.12x, 1.72x,
1.38x, and 1.25x coverage of S&P's expected cumulative net loss of
25.50% for the class A, B, C, D, and E notes, respectively.
-- The expectation that under a moderate ('BBB') stress scenario
(1.38x our expected loss level), all else being equal, S&P's
preliminary 'AAA (sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)', and 'BB
(sf)' ratings on the class A, B, C, D, and E notes, respectively,
will be within the credit stability limits.
-- The timely payment of interest and principal by the designated
legal final maturity dates under S&P's stressed cash flow modeling
scenarios that we believe are appropriate for the assigned
preliminary ratings.
-- The collateral characteristics of the subprime automobile
loans, S&P's view of the credit risk of the collateral, and its
updated macroeconomic forecast and forward-looking view of the auto
finance sector.
-- The series' bank accounts at Wells Fargo Bank N.A., which do
not constrain the preliminary ratings.
-- S&P's operational risk assessment of Bridgecrest Acceptance
Corp. as servicer, along with its view of the originator's
underwriting and the backup servicing arrangement with
Computershare Trust Co. N.A.
-- S&P's assessment of the transaction's potential exposure to
environmental, social, and governance credit factors that are in
line with our sector benchmark.
-- The transaction's payment and legal structure.
Preliminary Ratings Assigned
DT Auto Owner Trust 2023-2
Class A, $240.44 million: AAA (sf)
Class B, $51.24 million: AA (sf)
Class C, $56.89 million: A (sf)
Class D, $77.49 million: BBB (sf)
Class E, $23.94 million: BB (sf)
ELMWOOD CLO 23: S&P Assigns Prelim B- (sf) Rating on Cl. F Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Elmwood CLO
23 Ltd./Elmwood CLO 23 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 Elmwood Asset Management.
The preliminary ratings are based on information as of April 14,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Elmwood CLO 23 Ltd./Elmwood CLO 23 LLC
Class A, $252.00 million: AAA (sf)
Class B, $52.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D (deferrable), $23.00 million: BBB- (sf)
Class E (deferrable), $13.40 million: BB- (sf)
Class F (deferrable), $6.60 million: B- (sf)
Subordinated notes, $30.75 million: Not rated
EMPOWER CLO 2023-1: S&P Assigns Prelim BB- (sf) Rating on E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Empower CLO
2023-1 Ltd./Empower CLO 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 Empower Capital Management LLC.
The preliminary ratings are based on information as of April 18,
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
Empower CLO 2023-1 Ltd./Empower CLO 2023-1 LLC
Class A, $320.00 million: AAA (sf)
Class B, $60.00 million: AA (sf)
Class C (deferrable), $27.50 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $15.00 million: BB- (sf)
Subordinate notes, $45.00 million: Not rated
FREDDIE MAC 2023-DNA1: DBRS Finalizes BB Rating on 16 Classes
-------------------------------------------------------------
DBRS, Inc. finalized the following provisional ratings on the
Structured Agency Credit Risk (STACR) REMIC 2023-DNA1 Notes to be
issued by Freddie Mac STACR REMIC Trust 2023-DNA1 (STACR
2023-DNA1):
-- $282.0 million Class M-1A at BBB (high) (sf)
-- $99.0 million Class M-1B at BBB (sf)
-- $74.0 million Class M-2A at BB (high) (sf)
-- $74.0 million Class M-2B at BB (sf)
-- $41.0 million Class B-1A at B (high) (sf)
-- $41.0 million Class B-1B at B (low) (sf)
-- $148.0 million Class M-2 at BB (sf)
-- $148.0 million Class M-2R at BB (sf)
-- $148.0 million Class M-2S at BB (sf)
-- $148.0 million Class M-2T at BB (sf)
-- $148.0 million Class M-2U at BB (sf)
-- $148.0 million Class M-2I at BB (sf)
-- $74.0 million Class M-2AR at BB (high) (sf)
-- $74.0 million Class M-2AS at BB (high) (sf)
-- $74.0 million Class M-2AT at BB (high) (sf)
-- $74.0 million Class M-2AU at BB (high) (sf)
-- $74.0 million Class M-2AI at BB (high) (sf)
-- $74.0 million Class M-2BR at BB (sf)
-- $74.0 million Class M-2BS at BB (sf)
-- $74.0 million Class M-2BT at BB (sf)
-- $74.0 million Class M-2BU at BB (sf)
-- $74.0 million Class M-2BI at BB (sf)
-- $74.0 million Class M-2RB at BB (sf)
-- $74.0 million Class M-2SB at BB (sf)
-- $74.0 million Class M-2TB at BB (sf)
-- $74.0 million Class M-2UB at BB (sf)
-- $82.0 million Class B-1 at B (low) (sf)
-- $82.0 million Class B-1R at B (low) (sf)
-- $82.0 million Class B-1S at B (low) (sf)
-- $82.0 million Class B-1T at B (low) (sf)
-- $82.0 million Class B-1U at B (low) (sf)
-- $82.0 million Class B-1I at B (low) (sf)
-- $41.0 million Class B-1AR at B (high) (sf)
-- $41.0 million Class B-1AI at B (high) (sf)
Classes M-2, M-2R, M-2S, M-2T, M-2U, M-2I, M-2AR, M-2AS, M-2AT,
M-2AU, M-2AI, M-2BR, M-2BS, M-2BT, M-2BU, M-2BI, M-2RB, M-2SB,
M-2TB, M-2UB, B-1, B-1R, B-1S, B-1T, B-1U, B-1I, B-1AR, and B-1AI
are Modifiable and Combinable STACR Notes (MACR Notes). Classes
M-2I, M-2AI, M-2BI, B-1I, and B-1AI are interest-only MACR Notes.
The BBB (high) (sf), BBB (sf), BB (high) (sf), BB (sf), B (high)
(sf), and B (low) (sf) ratings reflect 3.250%, 2.550%, 2.025%,
1.500%, 1.125%, and 0.750% of credit enhancement, respectively.
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
STACR 2023-DNA1 is the 37th transaction in the STACR DNA series.
The Notes are subject to the credit and principal payment risk of a
certain reference pool (the Reference Pool) of residential mortgage
loans held in various Freddie Mac-guaranteed mortgage-backed
securities (MBS).
As of the Cut-Off Date, the Reference Pool consists of 47,367
greater-than-20-year fully amortizing first-lien fixed-rate
mortgage loans underwritten to a full documentation standard, with
original loan-to-value ratios (LTV) greater than 60% and less than
or equal to 80%. The mortgage loans were estimated to be originated
on or after July 1, 2021 and were securitized by Freddie Mac
between July 1, 2022, and July 31, 2022.
On the Closing Date, the trust will enter into a Collateral
Administration Agreement (CAA) with Freddie Mac. Freddie Mac, as
the credit protection buyer, will be required to make transfer
amount payments. The trust is expected to use the aggregate
proceeds realized from the sale of the Notes to purchase certain
eligible investments to be held in a custodian account. The
eligible investments are restricted to highly rated, short-term
investments. Cash flow from the Reference Pool will not be used to
make any payments; instead, a portion of the eligible investments
held in the custodian account will be liquidated to make principal
payments to the Noteholders and return amounts, if any, to Freddie
Mac upon the occurrence of certain specified credit events and
modification events.
The coupon rates for the Notes are based on the Secured Overnight
Financing Rate (SOFR). There are replacement provisions in place in
the event that SOFR is no longer available, please see the Private
Placement Memorandum (PPM) for more details. DBRS Morningstar did
not run interest rate stresses for this transaction, as the
interest is not linked to the performance of the reference
obligations. Instead, the trust will use the net investment
earnings on the eligible investments together with Freddie Mac's
transfer amount payments to pay interest to the Noteholders.
In this transaction, approximately 20.7% of the loans were
originated using property values determined by using Freddie Mac's
automated collateral evaluation (ACE) assessment rather than a
traditional full appraisal. Loans where the property values were
determined by using ACE assessments generally have better credit
score and lower original LTV. Please see the PPM for more details
about the ACE assessment.
The calculation of principal payments to the Notes will be based on
actual principal collected on the Reference Pool. For STACR DNA
transactions issued after and including STACR 2018-DNA2, the
scheduled and unscheduled principal will be combined and allocated
pro rata between the senior and nonsenior tranches only if certain
performance tests are satisfied. For transactions previous to this,
the scheduled principal was allocated pro rata between the senior
and nonsenior (mezzanine and subordinate) tranches, regardless of
deal performance, while the unscheduled principal was allocated pro
rata subject to certain performance tests being met.
The minimum credit enhancement test—one of the three performance
tests—for STACR 2023-DNA1 is set to pass at the Closing Date.
Additionally, the nonsenior tranches are also entitled to
supplemental subordinate reduction amount if the offered reference
tranche percentage increases above 5.50%.
The Notes are scheduled to mature on the payment date in March
2043, but are also subject to a mandatory redemption prior to the
scheduled maturity date in the case of a termination of the CAA.
The Sponsor of the transaction is Freddie Mac. U.S. Bank Trust
Company, National Association will act as the Indenture Trustee and
Exchange Administrator. The Bank of New York Mellon (rated AA
(high) with a Stable trend and R-1 (high) with a Stable trend by
DBRS Morningstar) will act as the Custodian. Wilmington Trust,
National Association (rated AA (low) with a Stable trend and R-1
(middle) with a Stable trend by DBRS Morningstar) will act as the
Owner Trustee.
The Reference Pool consists of approximately 0.7% of loans
originated under the Home Possible® program. Home Possible® is
Freddie Mac's affordable mortgage products designed to expand the
availability of mortgage financing to creditworthy low- to
moderate-income borrowers. In addition, no loans were originated
under Freddie Mac Refi PossibleSM, which offers low- to moderate-
income borrowers options to refinance their current loans and
approximately 0.01% of loans were originated under Freddie Mac HFA
Advantage®, a conventional mortgage product designed for borrowers
who qualify for HFA homeownership programs.
If a reference obligation is refinanced under the Enhanced Relief
Refinance Program, then the resulting refinanced reference
obligation may be included in the Reference Pool as a replacement
of the original reference obligation. The Enhanced Relief Refinance
Program provides refinance opportunities to borrowers with existing
Freddie Mac mortgages who are current in their mortgage payments
but whose LTVs exceed the maximum permitted for standard refinance
products. The refinancing and replacement of a reference obligation
under this program will not constitute a credit event.
For this transaction, if a loan becomes delinquent and the related
Servicer reports that such loan is in disaster forbearance before
the sixth reporting period from the landfall of the hurricane,
Freddie Mac will remove the loan from the pool to the extent that
the related mortgaged property is located in a Federal Emergency
Management Agency (FEMA) major disaster area and in which FEMA had
authorized individual assistance to homeowners in such area as a
result of such hurricane that affects such related mortgaged
property prior to the Closing Date.
The transaction assumptions consider DBRS Morningstar's baseline
macroeconomic scenarios for rated sovereign economies, available in
its commentary: Baseline Macroeconomic Scenarios For Rated
Sovereigns: December 2022 Update, dated December 21, 2022. These
baseline macroeconomic scenarios replace DBRS Morningstar's
moderate and adverse Coronavirus Disease (COVID-19) pandemic
scenarios, which were first published in April 2020.
Notes: All figures are in U.S. dollars unless otherwise noted.
FREDDIE MAC: S&P Assigns Prelim B (sf) Rating on Class B-1I Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Freddie Mac
STACR REMIC Trust 2023-DNA2's notes.
The note issuance is an RMBS securitization backed by fully
amortizing, first-lien, fixed-rate residential mortgage loans
secured by one- to four-family residences, planned-unit
developments, condominiums, cooperatives, and manufactured housing
to mostly prime borrowers.
The preliminary ratings are based on information as of April 17,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The credit enhancement provided by the subordinated reference
tranches, as well as the associated structural deal mechanics;
-- The REMIC structure that reduces the counterparty exposure to
Freddie Mac for periodic principal and interest payments, but, at
the same time, pledges the support of Freddie Mac (a highly rated
counterparty) to cover shortfalls, if any, on interest payments and
to make up for any investment losses;
-- The issuer's aggregation experience and the alignment of
interests between the issuer and noteholders in the transaction's
performance, which, in S&P's view, enhances the notes' strength;
-- The enhanced credit risk management and quality control (QC)
processes Freddie Mac uses in conjunction with the underlying R&W
framework; and
-- The potential impact current and near-term macroeconomic
conditions may have on the performance of the mortgage borrowers in
the pool. S&P said, "On April 17, 2020, we updated our mortgage
outlook and corresponding archetypal foreclosure frequency levels
to account for the potential impact the COVID-19 pandemic may have
on the overall credit quality of collateralized pools. While
COVID-19 pandemic-related performance concerns have waned, given
our current outlook for the U.S. economy considering the impact of
the Russia-Ukraine military conflict, supply-chain disruptions, and
rising inflation and interest rates, we continue to maintain our
updated 'B' foreclosure frequency for the archetypal pool at
3.25%."
Preliminary Ratings Assigned
Freddie Mac STACR REMIC Trust 2023-DNA2
Class A-H(i), $16,907,300,413: NR
Class M-1A, $382,000,000: BBB+ (sf)
Class M-1AH(i), $20,554,771: NR
Class M-1B, $127,000,000: BBB- (sf)
Class M-1BH(i), $7,184,924: NR
Class M-2, $169,000,000: BB- (sf)
Class M-2A, $84,500,000: BB+ (sf)
Class M-2AH(i), $4,956,616: NR
Class M-2B, $84,500,000: BB- (sf)
Class M-2BH(i), $4,956,616: NR
Class M-2R, $169,000,000: BB- (sf)
Class M-2S, $169,000,000: BB- (sf)
Class M-2T, $169,000,000: BB- (sf)
Class M-2U, $169,000,000: BB- (sf)
Class M-2I, $169,000,000: BB- (sf)
Class M-2AR, $84,500,000: BB+ (sf)
Class M-2AS, $84,500,000: BB+ (sf)
Class M-2AT, $84,500,000: BB+ (sf)
Class M-2AU, $84,500,000: BB+ (sf)
Class M-2AI, $84,500,000: BB+ (sf)
Class M-2BR, $84,500,000: BB- (sf)
Class M-2BS, $84,500,000: BB- (sf)
Class M-2BT, $84,500,000: BB- (sf)
Class M-2BU, $84,500,000: BB- (sf)
Class M-2BI, $84,500,000: BB- (sf)
Class M-2RB, $84,500,000: BB- (sf)
Class M-2SB, $84,500,000: BB- (sf)
Class M-2TB, $84,500,000: BB- (sf)
Class M-2UB, $84,500,000: BB- (sf)
Class B-1, $44,000,000: B (sf)
Class B-1A, $22,000,000: B+ (sf)
Class B-1AR, $22,000,000: B+ (sf)
Class B-1AI, $22,000,000: B+ (sf)
Class B-1AH(i), $22,728,308: NR
Class B-1B, $22,000,000: B (sf)
Class B-1BH(i), $22,728,308: NR
Class B-1R, $44,000,000: B (sf)
Class B-1S, $44,000,000: B (sf)
Class B-1T, $44,000,000: B (sf)
Class B-1U, $44,000,000: B (sf)
Class B-1I, $44,000,000: B (sf)
Class B-2H(i)(ii), $134,184,924: NR
Class B-3H(i), $44,728,308: NR
(i)Reference tranche only and will not have corresponding notes.
Freddie Mac retains the risk of these tranches.
(ii)Class B-2H is deemed to bear interest solely for the purposes
of calculating modification gain or loss amounts.
NR--Not rated.
GLS AUTO 2022-1: S&P Affirms BB- (sf) Rating on Class E Notes
-------------------------------------------------------------
S&P Global Ratings raised its ratings on seven classes of notes and
affirmed its ratings on three classes of notes from GLS Auto
Receivables Issuer Trust 2021-4 and 2022-1.
The rating actions reflect the transactions':
-- Collateral performance to date and S&P's expectations regarding
future collateral performance;
-- Each transaction's structure and credit enhancement levels;
-- Other credit factors, including credit stability, payment
priorities under various scenarios, and sector- and issuer-specific
analyses; and
-- S&P's most recent macroeconomic outlook that incorporates a
baseline forecast for U.S. GDP and unemployment.
Considering all these factors, S&P believes the notes'
creditworthiness are consistent with the raised and affirmed
ratings.
Table 1
Collateral Performance (%)(i)
Pool Current 60+ day
Series Mo. factor CNL delinq.
2021-4 15 63.67 5.05 5.03
2022-1 12 69.55 4.80 4.97
(i)As of the March 2023 distribution date.
Mo.--Month.
CNL--Cumulative net loss.
Delinq.--Delinquencies.
S&P said, "The series 2021-4 transaction is performing better than
our initial expectation. As a result, we revised and lowered our
expected cumulative net loss (CNL) for this transaction. In
contrast, the series 2022-1 transaction's performance is trending
worse than our initial CNL expectation. We believe the series
2022-1, which has only 12 months of performance and a higher pool
factor, is more exposed to potential adverse economic headwinds and
possibly weaker recovery rates. As a result, we revised and raised
our expected CNL for series 2022-1."
Table 2
CNL Expectations (%)
Original Prior revised
lifetime lifetime Revised
Series CNL exp. CNL exp. CNL exp.(i)
2021-4 16.25-17.25 N/A 16.00
2022-1 16.25-17.25 N/A 17.50
(i)As of March 2023.
CNL exp.--Cumulative net loss expectations.
N/A–-Not applicable.
Each transaction contains a sequential principal payment structure
in which the notes are paid principal by seniority. The sequential
payment structure increases subordination as a percentage of the
amortizing pool for all classes except the lowest-rated subordinate
class. Each also has credit enhancement in the form of a
non-amortizing reserve account, overcollateralization, and excess
spread.
As of the March 2023 distribution date, the overcollateralization
levels for series 2021-4 and 2022-1 were at their targets of 10.75%
and 12.75% of current receivables, respectively, plus 1.5% of
initial receivables. The reserve account for each transaction is at
its required level of 1.00% of initial collateral pool balance.
S&P believes the total credit support as a percentage of the
outstanding pool's balance, compared with its current loss
expectations, is adequate for the raised and affirmed ratings.
Table 3
Hard Credit Support(i)
Total hard Current total hard
credit support credit support
Series Class at issuance (%) (% of current)
2021-4 A 51.40 84.80
2021-4 B 38.85 65.09
2021-4 C 25.85 44.67
2021-4 D 12.60 23.86
2021-4 E 6.75 14.68
2022-1 A 52.60 79.39
2022-1 B 40.75 62.36
2022-1 C 28.25 44.38
2022-1 D 15.60 26.19
2022-1 E 8.75 16.34
(i)As of the March 2023 distribution date. Consists of
overcollateralization and a reserve account, as well as
subordination for the higher tranches; and excludes excess spread,
which can also provide additional enhancement.
S&P said, "We considered the current hard credit enhancement
compared to the remaining expected CNLs for those classes where
hard credit enhancement alone--without credit to the stressed
excess spread--was sufficient, in our opinion, to raise or affirm
the ratings on the notes. For other classes, we incorporated a cash
flow analysis to assess the loss coverage level, giving credit to
stressed excess spread.
"Our various cash flow scenarios included forward-looking
assumptions on recoveries, timing of losses, and voluntary absolute
prepayment speeds that we believe are appropriate, given each
transaction's performance to date. Aside from our break-even cash
flow analysis, we also conducted sensitivity analyses for these
series to determine the impact that a moderate ('BBB') stress
scenario would have on our ratings if losses began trending higher
than our revised base-case loss expectation.
"In our view, the results demonstrated that all of the classes have
adequate credit enhancement at the raised and affirmed rating
levels.
"We will continue to monitor the performance of all 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 RAISED
GLS Auto Receivables Issuer Trust
Rating
Series Class To From
2021-4 B AAA (sf) AA (sf)
2021-4 C AA (sf) A (sf)
2021-4 D BBB+ (sf) BBB- (sf)
2021-4 E BB (sf) BB- (sf)
2022-1 B AA+ (sf) AA (sf)
2022-1 C A+ (sf) A (sf)
2022-1 D BBB (sf) BBB- (sf)
RATINGS AFFIRMED
GLS Auto Receivables Issuer Trust
Series Class Rating
2021-4 A AAA (sf)
2022-1 A AAA (sf)
2022-1 E BB- (sf)
GLS AUTO 2023-1: DBRS Finalizes BB Rating on Class E Notes
----------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of notes issued by GLS Auto Receivables Issuer Trust 2023-1
(the Issuer):
-- $50,900,000 Class A-1 Notes at R-1 (high) (sf)
-- $97,890,000 Class A-2 Notes at AAA (sf)
-- $44,730,000 Class B Notes at AA (sf)
-- $42,770,000 Class C Notes at A (sf)
-- $42,430,000 Class D Notes at BBB (low) (sf)
-- $26,700,000 Class E Notes at BB (sf)
The ratings are based on DBRS Morningstar's review of the following
analytical considerations:
(1) Transaction capital structure, ratings, and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization
(OC), subordination, amounts held in the reserve account, and
excess spread. Credit enhancement levels are sufficient to support
the DBRS Morningstar-projected cumulative net loss (CNL) assumption
under various stress scenarios.
(2) The DBRS Morningstar CNL assumption is 16.65%, based on the
expected Cut-Off Date pool composition.
(3) The transaction assumptions consider DBRS Morningstar's
baseline macroeconomic scenarios for rated sovereign economies,
available in its commentary "Baseline Macroeconomic Scenarios For
Rated Sovereigns: December 2022 Update, published on December 21,
2022." These baseline macroeconomic scenarios replace DBRS
Morningstar's moderate and adverse Coronavirus Disease (COVID-19)
pandemic scenarios, which were first published in April 2020.
(4) The consistent operational history of Global Lending Services
LLC (GLS or the Company) and the strength of the overall Company
and its management team.
-- The GLS senior management team has considerable experience and
a successful track record within the auto finance industry.
(5) The capabilities of GLS with regard to originations,
underwriting, and servicing.
-- DBRS Morningstar performed an operational review of GLS and
considers the entity to be an acceptable originator and servicer of
subprime automobile loan contracts with an acceptable backup
servicer.
(6) DBRS Morningstar exclusively used the static pool approach
because GLS has enough data to generate a sufficient amount of
static pool projected losses.
-- DBRS Morningstar was conservative in the loss forecast analysis
performed on the static pool data.
(7) The legal structure and presence of legal opinions that address
the true sale of the assets to the Issuer, the nonconsolidation of
the special-purpose vehicle with GLS, that the trust has a valid
first-priority security interest in the assets, and the consistency
with the DBRS Morningstar “Legal Criteria for U.S. Structured
Finance.”
GLS is an independent full-service automotive financing and
servicing company that provides (1) financing to borrowers who do
not typically have access to prime credit-lending terms for the
purchase of late-model vehicles and (2) refinancing of existing
automotive financing.
The rating on the Class A-1 and Class A-2 Notes reflects 55.60% of
initial hard credit enhancement provided by subordinated notes in
the pool (47.80%), the reserve account (1.00%), and OC (6.80%). The
ratings on the Class B, Class C, Class D, and Class E Notes reflect
41.95%, 28.90%, 15.95%, and 7.80% of initial hard credit
enhancement, respectively. Additional credit support may be
provided from excess spread available in the structure.
Notes: All figures are in in U.S. dollars unless otherwise noted.
GOLD KEY 2014-A: DBRS Confirms BB(high) Rating on Class C Series
----------------------------------------------------------------
DBRS, Inc. confirmed its ratings on three classes of securities
issued by Gold Key Resorts 2014-A, LLC as follows:
-- Series 2014-A, Class A at A (sf)
-- Series 2014-A, Class B at BBB (sf)
-- Series 2014-A, Class C at BB (high) (sf)
The rating actions are based on the following analytical
considerations:
-- The transaction assumptions consider DBRS Morningstar's
baseline macroeconomic scenarios for rated sovereign economies,
available in its commentary "Baseline Macroeconomic Scenarios for
Rated Sovereigns: December 2022 Update," published on December 21,
2022. These baseline macroeconomic scenarios replace DBRS
Morningstar's moderate and adverse Coronavirus Disease (COVID-19)
pandemic scenarios, which were first published in April 2020.
-- The transaction's capital structure and form and sufficiency of
available credit enhancement.
-- The transaction's performance to date, with losses coming
within DBRS Morningstar's initial expectations.
Notes: The principal methodology applicable to the ratings is DBRS
Morningstar Master U.S. ABS Surveillance (February 6, 2023;
https://www.dbrsmorningstar.com/research/409444).
GOLDMAN SACHS 2011-GC5: Fitch Cuts Ratings on 2 Tranches to Csf
---------------------------------------------------------------
Fitch Ratings has downgraded two classes of Goldman Sachs
Commercial Mortgage Capital, LP, series 2011-GC5 (GSMS 2011-GC5)
commercial mortgage pass-through certificates. Fitch has also
revised the Outlook on class B to Negative from Stable.
Entity/Debt Rating Prior
----------- ------ -----
GSMS 2011-GC5
A-S 36191YAE8 LT AAAsf Affirmed AAAsf
B 36191YAG3 LT BBsf Affirmed BBsf
C 36191YAJ7 LT Csf Downgrade CCCsf
D 36191YAL2 LT Csf Downgrade CCsf
E 36191YAN8 LT Csf Affirmed Csf
F 36191YAQ1 LT Csf Affirmed Csf
X-A 36191YAA6 LT AAAsf Affirmed AAAsf
KEY RATING DRIVERS
Greater Certainty of Losses: The downgrades on classes C and D, and
outlook revision on the class B reflect a greater certainty of
losses given recent updates to the specially serviced Park Place
Mall and Champlain Centre loans. Fitch's analysis reflects a
look-through analysis on the remaining loans including the
likelihood of repayment and recovery prospects. Three of the five
remaining loans are in special servicing after failing to payoff in
full at their respective scheduled maturity dates and are all
secured by retail properties, including two regional malls located
in secondary/tertiary market locations.
The largest specially serviced loan is 1551 Broadway (36.9% of
pool), which is secured by a 25,600-sf retail property located in
Manhattan's Times Square neighborhood. The collateral also includes
a 250-foot rentable LED signage tower. The retail space covers
three stories and the signage is spread across 12 separate screens
and 14,500 square feet. Performance has been stable as the property
remains 100% occupied by American Eagle whose lease expires in
February 2024. The property serves as the flagship store for
American Eagle. The loan did not pay off at its scheduled maturity
on July 6, 2021. According to the special servicer, the borrower
(Wharton Properties) is continuing efforts to secure financing
and/or a sale to payoff the loan. Due to the property's strong
infill location, Fitch expects strong recovery prospects for the
loan. Fitch's base case loss accounts for the property's strong
infill location and reflects a stressed value of approximately
$5,168 psf.
Specially Serviced Regional Mall Loans: The largest specially
serviced regional mall, Park Place Mall loan (35.4%), is secured by
a 478,333-sf portion of a 1.1 million-sf regional mall located in
Tucson, AZ. The loan was transferred to special servicing in
September 2020 due to hardships caused by the pandemic. The loan
failed to pay off at its scheduled May 2021 maturity. The borrower
(Brookfield) has indicated they no longer intend to inject
additional equity into the property, and will assist with a
consensual sale and/or foreclosure. The special servicer is dual
tracking a foreclosure and loan modification. Fitch's base case
loss reflects a stress to the most recent appraisal, factoring the
weakening regional mall performance and sales, reduced sponsorship
commitment and significant upcoming lease rollover; Fitch's loss
implies an 25% cap rate on YE 2022 NOI.
Non-collateral anchors include Dillard's, Round 1 Bowling and
Entertainment and a vacant box that was formerly occupied by Macy's
(closed in 2020). Round 1 Bowling and Entertainment opened in 2019
in the former Sears space (closed in July 2018). The collateral is
anchored by a 20-screen Century Theaters.
Property performance continues to struggle due to declining
occupancy. As of YE 2022, occupancy was 61.1%, compared to 79.9% at
YE 2021, 89.8% at YE 2020 and 97% at YE 2019. The servicer-reported
NOI debt service coverage ratio (DSCR) as of YE 2022 was 1.05x from
1.08x at YE 2021, 1.11x at YE 2020 and 1.30x at YE 2019.
The next largest specially serviced loan, Champlain Centre loan
(6.3% of pool), is secured by a 484,556-sf regional mall located in
Plattsburgh, NY. The loan, sponsored by The Pyramid Companies,
initially transferred to the special servicer in May 2020 and
received a loan modification due to hardships related to the
pandemic. The loan subsequently returned to the master servicer but
then re-transferred to the special servicer in April 2021 for
maturity default. The special servicer is proceeding with
foreclosure, which was filed on Dec. 9, 2021.
Fitch's analysis is based on a 34% cap rate on the YE 2021 NOI.
The collateral is anchored by Hobby Lobby, Dick's Sporting Goods
and JCPenney. The property's occupancy declined to 72.2% as of
September 2022, from 77.6% at YE 2021, 79.6% at YE 2020 and 82.8%
at YE 2019. The occupancy decline is primarily related to the
departure of Gander Outdoors (previously 10.6% of the NRA), which
vacated ahead of its scheduled lease expiration and several other
smaller tenants vacating upon lease expiration. Additionally,
tenant sales at the property have declined to $182 psf as of YE
2022, from $200 psf at YE 2021, $176 at YE 2020, and $210 at YE
2019.
High Credit Enhancement: As of the March 2023 remittance, the pool
has been reduced by 74.6% to $443 million from $1.7 billion at
issuance. While credit enhancement (CE) is relatively high, further
improvement is unlikely as the remaining loans are in maturity
default and are likely to experience significant losses. Interest
shortfalls totaling $3.0 million and realized losses totaling $6.6
million are currently impacting the non-rated NR class.
Pool Concentration; High Regional Mall Exposure: Due to the
concentrated nature of the pool, Fitch performed a sensitivity
analysis that grouped the remaining loans based on the likelihood
of repayment and recovery prospects. Three loans (55.7% of pool)
are secured by regional malls located in secondary and tertiary
markets. The downgrades on the classes C and D, and outlook
revision on the class B reflect a greater certainty of losses given
recent updates to the specially serviced Park Place Mall and
Champlain Centre loans.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
A downgrade of class A-S is not expected due to high CE, but may
occur with interest shortfalls and/or if the 1551 Broadway loan
experiences significant performance declines. A downgrade to class
B could occur with higher than expected losses. Classes C through F
could be further downgraded as losses are realized or become more
certain.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrades are not expected due to adverse selection and high loss
expectations, but would occur if performance of the malls improves
substantially or recoveries are better than expected.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
GOLUB CAPITAL 66(B): Fitch Assigns 'BB-sf' Rating on Class E Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings and Ratings Outlooks to Golub
Capital Partners CLO 66(B), Ltd.
Entity/Debt Rating
----------- ------
Golub Capital
Partners CLO 66(B)
A LT AAAsf New Rating
A-J LT AAAsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB-sf New Rating
E LT BB-sf New Rating
Subordinated LT NRsf New Rating
TRANSACTION SUMMARY
Golub Capital Partners CLO 66(B), Ltd. (the issuer) is an arbitrage
cash flow collateralized loan obligation (CLO) that will be managed
by OPAL BSL LLC. Net proceeds from the issuance of the secured and
subordinated notes will provide financing on a portfolio of
approximately $400.0 million of primarily first lien senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 24.77, versus a maximum covenant, in
accordance with the initial expected matrix point of 26. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from appropriate credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
99.75% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 76.78% versus a
minimum covenant, in accordance with the initial expected matrix
point of 75.10%.
Portfolio Composition (Negative): The largest three industries may
comprise up to 53% 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
obligor and geographic concentrations is in line with other recent
CLOs. The initial portfolio has a higher industry concentration
than other recent U.S. CLOs, which was taken into account in
Fitch's stress scenarios.
Portfolio Management (Neutral): The transaction has a 5.0-year
reinvestment period and reinvestment criteria similar to other U.S.
CLOs. Fitch Ratings' analysis was based on a stressed portfolio
created by making adjustments to the indicative portfolio to
reflect permissible concentration limits and collateral quality
test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings. The weighted average life (WAL) used for the
transaction stress portfolio and matrices analysis is 12 months
less than the WAL covenant to account for structural and
reinvestment conditions after the reinvestment period. In Fitch's
opinion, these conditions would reduce the effective risk horizon
of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A, between 'BBBsf'
and 'AA+sf' for class A-J, between 'BB+sf' and 'A+sf' for class B,
between 'B-sf' and 'BBB+sf' for class C, between 'less than B-sf'
and 'BB+sf' for class D; and between 'less than B-sf' and 'B+sf'
for class E.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrade scenarios are not applicable to the class A and A-J notes,
as these notes are in the highest rating category of 'AAAsf'.
At other rating levels, variability in key model assumptions, such
as increases in recovery rates and decreases in default rates,
could result in an upgrade. Fitch evaluated the notes' sensitivity
to potential changes in such metrics. The minimum rating results
under these sensitivity scenarios are 'AAAsf' for class B, 'A+sf'
for class C, 'Asf' for class D; and 'BBB+sf' for class E.
DATA ADEQUACY
A majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
GS MORTGAGE 2018-RIVR: S&P Lowers Class D Certs Rating to 'BB-'
---------------------------------------------------------------
S&P Global Ratings lowered its rating on one class and affirmed its
ratings on three classes of commercial mortgage pass-through
certificates from GS Mortgage Securities Corp. Trust 2018-RIVR, a
U.S. CMBS transaction.
This U.S. stand-alone (single-borrower) CMBS transaction is backed
by a two-year, floating-rate, interest-only (IO) mortgage loan with
five one-year extension options. The loan is secured by the
borrower's fee simple interest in River North Point, a mixed-use
property in Chicago.
Rating Actions
The affirmations on classes A, B, and C and the downgrade on class
D reflect S&P's re-evaluation of the mixed-use property that
secures the sole loan in the transaction. The property consists of
about 1.7 million sq. ft., of which about 1.3 million sq. ft. is
office space, and another 437,000 sq. ft. is hotel. The hotel
component has 535 rooms and is leased to Holiday Inn under a lease
that expires in June 2050, per the December 2022 rent roll. At
issuance, the lease to Holiday Inn expires August 2042; it is
unclear if a lease amendment was made that resulted in the
modification of the Holiday Inn lease.
S&P said, "Our current analysis considers the decline in the
property's occupancy rate since our last review in April 2022. This
resulted in a decline in the S&P Global Ratings expected-case
valuation of the property. During our April 2022 review, our
analysis using the December 2021 rent roll arrived at an occupancy
rate of 75.9%, exclusive of the hotel component. Based on the
December 2022 rent roll and excluding the hotel component, the
occupancy rate had declined to 72.0%, after accounting for the
known upcoming vacancy of existing tenants. The larger tenants that
have vacated from or downsized at the property included Howmedica
Osteonics Corp. that occupied about 21,000 sq. ft. at the property
and vacated upon lease expiration in March 2022, and Stantec
Consulting Services Inc. that downsized from about 43,000 sq. ft.
to 27,000 sq. ft.
"We noted in our last review in April 2022 that media reports
indicated the property had signed Stripe Inc. to approximately
45,000 sq. ft., which had indeed occurred. Stripe's lease started
in June 2022 and expires in June 2025.
"Our property-level analysis considered the aforementioned tenant
activity as well as the declining 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 lowered our sustainable net cash flow (NCF) to
$16.1 million (down 8.4% from our last review of $17.6 million).
Our NCF is based on an occupancy rate of 72.0% and an average base
rent of $39.22 per sq. ft. for the office space (as calculated by
S&P Global Ratings). We arrived at a 54.4% operating expense ratio,
primarily using servicer-reported 2021 and 2022 financials, except
for general and administrative expense, which we normalized to
approximately 5.0% of income. This is primarily because the
servicer-reported general and administrative expense for 2021 and
2022 total around $5.5 million and account for almost 14.0% of
income. We believe the borrower may be able to normalize and lower
the reported general and administrative expense. Based on our NCF
of $16.1 million and using a 7.25% S&P Global Ratings
capitalization rate (unchanged from last review), we arrived at an
expected-case valuation of $221.9 million, down from $242.1 million
at last review. This yielded an S&P Global Ratings loan-to-value
ratio of 139.6% on the loan balance. Our revised value is 54.6%
lower than the issuance appraisal value of $489.0 million."
Although the model-indicated ratings were lower than the classes'
current or revised ratings, S&P affirmed its ratings on classes A,
B, and C, and tempered its downgrade on class D based on certain
qualitative considerations. These include:
-- The potential that the office component's operating performance
could improve above our revised expectations;
-- The significant market value decline that would be needed
before these classes experience principal losses;
-- The liquidity support provided in the form of servicer
advancing; and
-- The relative position of the classes in the waterfall.
If the property's performance does not improve or if there are
reported negative changes in the performance beyond what S&P has
already considered, it may revisit its analysis and adjust its
ratings as necessary.
Property-Level Analysis
The property is a 1.7 million-sq.-ft. mixed-use building comprising
approximately 1.3 million sq. ft. of LEED-certified gold,
multi-tenanted class A office space, and 437,000 sq. ft. of
additional hotel space leased to the 535-key Holiday Inn Mart Plaza
Hotel in Chicago. The hotel portion occupies the south office tower
on floors 14 to 23 and operates under a lease with the sponsor that
expires in June 2050. The office and hotel portions represent 74.8%
and 25.2% of total net rentable area (NRA), respectively.
The property was built in 1977 and originally served as a wholesale
buying center for the clothing industry, adjacent to the
Merchandise Center. The sponsor, Blackstone Real Estate Partners
VIII L.P., acquired the property in 2015 for $388.9 million, and as
part of its $135.1 million capital improvement plan, spent
approximately $49.8 million through 2018 in leasing costs and base
building capital to create a modern office environment with
amenities such as a fitness center, lounge/conference center, roof
deck, new windows, and improved security system. The servicer did
not provide an update on whether the sponsor infused the additional
$85.3 million capital for primarily additional building amenities,
a façade improvement, and leasing costs into the property.
According to the Dec. 31, 2022, rent roll, the five largest office
tenants at the property comprised approximately 32.0% of NRA and
included:
-- Brookfield Properties Retail Inc. (13.1% of NRA; 19.5% of gross
rent, as calculated by S&P Global Ratings; December 2027 lease
expiration);
-- Gartner Inc. (5.7%; 8.5%; August 2032);
-- Virtu KCG Holdings LLC (5.1%; 6.2%; August 2026);
-- Affirm Inc. (4.3%; 7.2%; November 2030); and
-- Gelber Group LLC (3.5%; 4.7%; January 2023 and January 2024).
Additionally, EQ Spaces, a co-working tenant, occupies about 45,000
sq. ft. at the property under a lease that expires in December
2049.
The property's notable rollover risk is in 2024 (12.8% of sq. ft.)
and 2027 (17.6%), when each year has more than 10.0% of sq. ft.
rolling. Notable tenants with leases that expire in 2024 include
Chicago Sports TV Holdings LLC (40,181 sq. ft.; 2.8% of gross
rent), Gelber Group LLC (45,168 sq. ft.; 4.7%), and Discover
Properties LLC (27,346 sq. ft.; 3.0%).
According to CoStar, the River North submarket in Chicago is a
neighborhood filled with residential, retail, and office
properties. However, with 19.9 million sq. ft. of office inventory,
and another 1.4 million sq. ft. of new developments, including the
newly developed 1.2 million sq. ft. Salesforce Tower, rental growth
is expected to be flat to negative. CoStar noted the submarket's
vacancy rate as of April 2023 to be 19.1% and availability rate to
be 28.1%. The submarket vacancy rate of 19.1% is up from 8.3% in
2018 when this loan was originated, and submarket vacancy is
expected to remain elevated for several years due to lower demand
for office space in light of hybrid work arrangements. Submarket
rents average $39.43 per sq. ft. and are in line with 2018, when
they averaged $39.36 per sq. ft.
As previously mentioned, S&P utilized a 72.0% occupancy rate and
in-place rent in determining our sustainable NCF. The office
component at the property generates an average base rent of $39.22
per sq. ft. and gross rent of $44.89 per sq. ft., as calculated by
S&P Global Ratings. This compares to CoStar's submarket rent of
$39.43 per sq. ft. Using a 54.4% operating expense ratio, it
arrived at our sustainable NCF of $16.1 million.
Transaction Summary
The IO mortgage loan had an initial balance of $310.0 million and a
current balance of $309.8 million. The small paydown was due to
remaining upfront leasing holdback reserve funds that were applied
to the trust loan and subordinate mezzanine loan (discussed more
below) on a pro-rata basis in February 2020. The mortgage loan pays
an annual floating interest rate of one-month LIBOR plus a weighted
average component spread of 1.495% (will increase 0.25% upon
commencement of the fourth extension term), and currently matures
on July 9, 2023. The remaining two extension options are
exercisable if the borrower obtains a replacement interest rate cap
agreement, among other factors. The loan is currently hedged
against the floating rate risk via an interest rate cap agreement
with SMBC Capital Markets Inc., with guaranty from SMBC Derivative
Products Ltd., that expires on July 15, 2023, at a strike rate of
5.27%. The loan's fully extended maturity date is July 9, 2025. To
date, the trust has not incurred any principal losses.
In addition to the mortgage loan, the borrower obtained a
subordinate mezzanine loan totaling $60.0 million at issuance, of
which has a current balance of $59.9 million as of the March 2023
trustee remittance report. The mezzanine loan is IO and is
co-terminous with the mortgage loan.
The loan is currently on the master servicer's watchlist because of
a decline in occupancy since issuance as well as the upcoming
maturity date of the loan. Furthermore, all excess cash is being
swept and held in reserves due to a low debt yield, which S&P
calculated to be around 4.8% based on the servicer-reported 2022
net operating income of $14.9 million and the trust mortgage loan
balance. Per the March 2023 servicer reserve report, approximately
$10.1 million of funds are currently held in reserves. Under the
loan agreement, through the third extension date of July 9, 2023, a
full cash sweep occurs when either the mortgage debt yield or
aggregate debt yield is less than 7.76% or 6.50%, respectively.
These thresholds increase to 8.35% for the mortgage debt yield and
7.00% for the aggregate debt yield, during the fourth extension
period, which runs through July 9, 2024.
The borrower has been current on its debt service payments through
March 2023. The servicer reported a debt service coverage (DSC) of
1.42x as of year-end 2022, and 1.91x for year-end 2021. These are
down from 2.59x at the time of securitization as underwritten by
the issuer. Based on the strike rate of 5.27% and loan spread of
1.495%, we calculated a DSC of 0.64x based on the year-end 2022
financials. To date, the trust has not incurred any principal
losses.
Rating Lowered
Class D to 'BB- (sf)' from 'BB (sf)'
Ratings Affirmed
Class A: AAA (sf)
Class B: A+ (sf)
Class C: BBB+ (sf)
GS MORTGAGE 2019-GC39: Fitch Affirms B-sf Rating on Cl. G-RR Debts
------------------------------------------------------------------
Fitch Ratings has affirmed 15 classes of GS Mortgage Securities
Trust 2019-GC39. The Rating Outlooks on classes F and G-RR remain
Negative.
Entity/Debt Rating Prior
----------- ------ -----
GSMS 2019-GC39
A-1 36260JAA5 LT AAAsf Affirmed AAAsf
A-2 36260JAB3 LT AAAsf Affirmed AAAsf
A-3 36260JAC1 LT AAAsf Affirmed AAAsf
A-4 36260JAD9 LT AAAsf Affirmed AAAsf
A-AB 36260JAE7 LT AAAsf Affirmed AAAsf
A-S 36260JAH0 LT AAAsf Affirmed AAAsf
B 36260JAJ6 LT AA-sf Affirmed AA-sf
C 36260JAK3 LT A-sf Affirmed A-sf
D 36260JAL1 LT BBBsf Affirmed BBBsf
E 36260JAQ0 LT BBB-sf Affirmed BBB-sf
F 36260JAS6 LT BB-sf Affirmed BB-sf
G-RR 36260JAU1 LT B-sf Affirmed B-sf
X-A 36260JAF4 LT AAAsf Affirmed AAAsf
X-B 36260JAG2 LT A-sf Affirmed A-sf
X-D 36260JAN7 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Stable Loss Expectations: Fitch's loss expectations for the pool
are inline with Fitch's prior rating action in 2022 due to the
overall stable property-level performance. Fitch's ratings
incorporate a base case loss of 3.8%. The Negative Outlooks reflect
Fitch's concerns surrounding the underperformance of the pool's
Fitch Loans of Concerns (FLOCs), particularly The Garfield
Apartments (3.0%) as well as the pool's exposure to loans secured
by office properties (39% of pool balance). Fitch has flagged five
FLOCs (29.2%) for upcoming lease expirations, declining
performance, high vacancy and/or pandemic-related underperformance.
As of March 2023, there were no loans in special servicing.
The largest contributor to expected losses is The Garfield
Apartments, which is secured by a multifamily/retail property
located in Cleveland, OH. YE 2022 occupancy was 80% compared to a
historical low of 67% in June 2020 from 82% as of December 2019 and
94% as of February 2019. Occupancy has due to the property offering
lower rents and rent concessions in 2019 and 2020. The loan's
lockbox has been activated. Subject YE 2021 NOI debt service
coverage ratio (DSCR) was 0.73x.
At issuance, the third-party rental company Stay Alfred rented 19
units (15% of total units); however, Stay Alfred has entirely
vacated the property following the company's announcement that it
would cease operations in May 2020. As of February 2022, leased
rent was $1,332 per unit compared to $1,637 per unit as of February
2019. Fitch's expected loss of 27.8% reflects YE 2021 NOI with an
8.75% cap rate.
The largest improvement in expected losses was Waterford Lakes Town
Center (6.5%), which is secured by a power center located 11.5
miles east of Downtown Orlando. This loan was flagged as a FLOC at
prior rating actions due to transferring to special servicing in
April 2021 for an imminent non-monetary default following the
announcement that the loan's sponsor, Washington Prime Group, Inc.
(WPC), would be entering Chapter 11 Bankruptcy in June 2021. The
borrower and lender have executed a forbearance agreement allowing
additional time to cure potential non-monetary defaults and the
loan returned to master servicing in November 2021. The loan is
under cash management under the terms of the forbearance
agreement.
Subject September 2022 occupancy was 95% compared to underwritten
occupancy of 99%. The decline in occupancy is largely due to
smaller tenants vacating since issuance. Annualized September 2022
NOI was $16.9 million compared to $15.4 million as of YE 2021 and
underwritten NOI of $16.7 million. Given stable performance since
emerging from special servicing the FLOC designation has been
removed. Fitch's expected loss of 2.7% considers a 9.5% cap rate
and a 10% haircut on annualized September 2022 NOI to reflect
upcoming lease expirations.
Minimal Change to Credit Enhancement: As of the March 2023
distribution date, the pool's aggregate principal balance has paid
down by 1.4% to $791.3 million from $802.5 million at issuance.
Four loans comprising 15.8% of outstanding pool balance are
scheduled to mature by May 2024. This includes the FLOCs Arbor
Hotel Portfolio (6.3%) and Borel Square Shopping Center (1.9%),
which have been flagged as FLOCs for pandemic-related
underperformance and concentrated tenant roll, respectively. Of the
remaining pool balance, 19 loans comprising 69.4% of the pool were
classified as full IO through the term of the loan. Two loans
comprising 2.8% of outstanding loan balance have been fully
defeased.
Additional Loss Considerations
Investment-Grade Credit Opinion Loans: Three loans comprising 23.7%
of the transaction received an investment-grade credit opinion at
issuance. 101 California Street (9.8% of pool) received a credit
opinion of 'BBB-sf*' on a standalone basis; Moffett Towers II
Building V (8.2%) received a standalone credit opinion of
'BBB-sf*'; 365 Bond (5.7%) received a standalone credit opinion of
'BBB-sf*'. Fitch no longer considers the 101 California Street loan
to have the characteristics of an investment grade credit opinion
given increased vacancy.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Sensitivity factors that lead to downgrades include an increase in
pool-level losses from underperforming or specially serviced
loans/assets. Downgrades to classes A-1 through A-S and X-A are not
likely due to the position in the capital structure, but may occur
should interest shortfalls occur.
Downgrades to classes B, C, D, E, X-B and X-D are possible should
performance of the FLOCs continue to decline; should loans
susceptible to the coronavirus pandemic not stabilize. Classes F
and G-RR may be downgraded should loans transfer to special
servicing and/or as there is more certainty of loss expectations
from other FLOCs. The Rating Outlooks on these classes may be
revised back to Stable if performance of the FLOCs improves.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Sensitivity factors that could lead to upgrades would include
stable to improved asset performance, coupled with additional
paydown and/or defeasance. Due to the limited amortization
expected, near-term upgrades of the 'A-sf' and 'AA-sf' rated
classes are not expected unless there is an increase in
defeasance.
Upgrades of the 'BBBsf' and 'BBB-sf' class are unlikely as well;
classes would not be upgraded above 'Asf' if there is a likelihood
of interest shortfalls.
Upgrades to the 'B-sf' and 'BB-sf' rated classes is not likely
unless the performance of the remaining pool stabilizes and the
senior classes pay off.
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.
GS MORTGAGE 2021-ROSS: DBRS Confirms B(low) Rating on G Certs
-------------------------------------------------------------
DBRS Limited confirmed its ratings on the Commercial Mortgage
Pass-Through Certificates issued by GS Mortgage Securities
Corporation Trust 2021-ROSS, Series 2021-ROSS as follows:
-- Class A at AAA (sf)
-- Class A-Y at AAA (sf)
-- Class A-Z at AAA (sf)
-- Class A-IO at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at AA (low) (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of
the transaction, which remains in line with DBRS Morningstar's
expectations since issuance.
Collateral for the trust consists of the fee-simple interest in
seven Class A/Class B office properties totaling approximately 2.1
million square feet (sf) in Arlington, Virginia. Between 2017 and
2021, the sponsor invested approximately $168.7 million ($79 per
square foot (psf)) in capital expenditures to improve the
collateral. The collateral benefits from an accessible location
less than five miles west of the Washington, D.C. central business
district in the Rosslyn neighborhood. The portfolio is owned by a
joint venture between U.S. Real Estate Opportunities I, L.P.
(approximately 89% ownership) and an affiliate of Monday Properties
(approximately 11% ownership). Based on the as-is appraised value
of $1.17 billion ($550 psf) at issuance, the sponsor had
approximately $329.0 million of unencumbered market equity
remaining in the transaction.
The $691.0 million mortgage loan has a two-year initial term with
three one-year extension options available, subject to certain
provisions, including spread increases, the purchase of a new
interest rate cap, and a debt yield hurdle for the third extension
option. The mortgage loan pays floating-rate interest on an
interest-only (IO) basis through the initial maturity in May 2023.
The borrower has not yet indicated whether it intends to exercise
the first extension option. Given the current environment, DBRS
Morningstar has inquired about whether an interest rate cap has
been purchased, but notes the minimal upcoming tenant roll, stable
performance expectations, and cash in reserves as factors
mitigating the uncertainty surrounding the loan's upcoming
maturity. Property releases are permitted with certain prepayment
conditions and no properties have been released to date. As noted
at issuance, there is also a $150.0 million mezzanine loan in
place, held outside of the trust.
As of December 2022, the collateral was 75.1% occupied with an
average rental rate of $50.14 psf, slightly below the occupancy
rate of 78.2% at issuance. The portfolio's largest tenant is the
U.S. Department of State (16.1% of the portfolio's net rentable
area (NRA)), with a lease expiration in 2034. No other single
tenant occupies more than 6.0% of the portfolio's NRA or represents
more than 8.0% of the gross rents. Tenant rollover during the fully
extended loan term totals only 16.7% of NRA and, in 2023, tenants
representing just 4.3% of NRA are scheduled to roll. In addition,
the sponsor has signed new leases with tenants representing a
combined 2.3% of NRA, with commencement dates in 2023. Per the most
recent financials, the loan reported a YE2022 net cash flow (NCF)
of $52.6 million, slightly below the YE2021 NCF of $55.7 million
but still above the DBRS Morningstar NCF of $44.6 million derived
at issuance. DBRS Morningstar increased the assumptions for tenant
improvement/leasing commission amounts in its analysis given the
contractions of office space use over the past few years.
According to the March 2023 loan-level reserve reporting, tenant
and leasing reserves totaled approximately $7.7 million. As of Q4
2022, Reis reported that the Rosslyn/Courthouse submarket had a
vacancy rate of 19.9% and average asking rents of $44.34 psf. Over
the next five years, Reis projects modest increases in asking
rents, with vacancy expected to remain flat at approximately
20.0%.
The Class A, A-Y, A-Z, and A-IO certificates (the CAST
certificates) can be exchanged for other classes of CAST
certificates and vice versa, as described in the offering
memorandum.
Notes: All figures are in U.S. dollars unless otherwise noted.
GS MORTGAGE 2023-RPL1: Fitch Assigns 'Bsf' Rating on Cl. B-2 Notes
------------------------------------------------------------------
Fitch Ratings has assigned ratings to the residential mortgage
backed notes issued by GS Mortgage-Backed Securities Trust
2023-RPL1 (GSMBS 2023-RPL1).
Entity/Debt Rating
----------- ------
GSMBS 2023-RPL1
A-1 LT AAAsf New Rating
A-2 LT AAsf New Rating
A-3 LT AAsf New Rating
M-1 LT Asf New Rating
A-4 LT Asf New Rating
M-2 LT BBBsf New Rating
A-5 LT BBBsf New Rating
B-1 LT BBsf New Rating
B-2 LT Bsf New Rating
B-3 LT NRsf New Rating
B-4 LT NRsf New Rating
B-5 LT NRsf New Rating
B LT NRsf New Rating
PT LT NRsf New Rating
CERT LT NRsf New Rating
R LT NRsf New Rating
RISKRETEN LT NRsf New Rating
SA LT NRsf New Rating
X LT NRsf New Rating
TRANSACTION SUMMARY
The notes are supported by one collateral group that consists of
2,834 seasoned performing loans and reperforming loans (RPLs) with
a total balance of approximately $416 million, which includes $41
million of the aggregate pool balance in non-interest-bearing
deferred principal amounts as of the cutoff date.
Distributions of P&I and loss allocations are based on a
traditional senior-subordinate, sequential structure. The
sequential-pay structure locks out principal to the subordinated
notes until the most senior notes outstanding are paid in full. The
servicers will not be advancing delinquent monthly payments of
P&I.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 8.8% above a long-term sustainable level (vs. 7.8%
on a national level as of March 2023, down 2.7% since last
quarter). The rapid gain in home prices through the pandemic
continues to moderate with declines observed in Q3 and Q4 2022.
Driven by the strong gains seen in H1 2022, home prices rose 5.8%
YoY nationally as of December 2022.
RPL Credit Quality (Negative): The collateral consists of 2,834
seasoned performing and re-performing first and second lien loans,
totaling $416 million, and seasoned approximately 190 months in
aggregate. The pool is 100% current and 0% delinquency. Over the
last two years 60% of loans have been clean current. Additionally,
86% of loans have a prior modification. The borrowers have a
moderate credit profile (688 FICO and 45% DTI) and low leverage
(60% sustainable loan-to-value [sLTV]). The pool consists of 99.5%
of loans where the borrower maintains a primary residence.
No Advancing (Mixed): The deal is structured to zero months of
servicer advances for delinquent principal and interest. The lack
of advancing reduces loss severities, as there is a lower amount
repaid to the servicer when a loan liquidates and liquidation
proceeds are prioritized to cover principal repayment over accrued
but unpaid interest. The downside to this is the additional stress
on the structure side, as there is limited liquidity in the event
of large and extended delinquencies.
Sequential Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure whereby the subordinate classes
do not receive principal until the senior classes are repaid in
full. Losses are allocated in reverse-sequential order.
Furthermore, the provision to re-allocate principal to pay interest
on the 'AAAsf' and 'AAsf' rated notes prior to other principal
distributions is highly supportive of timely interest payments to
those classes.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper market value declines (MVDs) at
the national level. The analysis assumes MVDs of 10.0%, 20.0% and
30.0% in addition to the model projected 40.8% at 'AAA'. The
analysis indicates that there is some potential rating migration
with higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home prices
would lower all rated classes by one full category.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up- and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
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 situsAMC. The third-party due diligence described in
Form 15E focused on a regulatory compliance review that covered
applicable federal, state and local high-cost loan and/or
anti-predatory laws, as well as the Truth In Lending Act (TILA) and
Real Estate Settlement Procedures Act (RESPA). The scope was
consistent with published Fitch criteria for due diligence on RPL
RMBS. Fitch considered this information in its analysis and, as a
result, Fitch made the following adjustment(s) to its analysis:
Loans with an indeterminate HUD1 located in states that fall under
Freddie Mac's "Do Not Purchase List" received a 100% loss severity
over-ride.
Loans with an indeterminate HUD1 but not located in states that
fall under Freddie Mac's "Do Not Purchase List" received a
five-point loss severity increase.
Loans with a missing modification agreement received a three-month
liquidation timeline extension.
Unpaid taxes and lien amounts were added to the loss severity.
In total, these adjustments increased the 'AAAsf' loss by
approximately 50bps.
ESG CONSIDERATIONS
GSMBS 2023-RPL1 has an ESG Relevance Score of '4' for Transaction
Parties & Operational Risk due to increased operational risk
considering R&W, transaction due diligence and originator and
servicer results in an increase in expected losses, which has a
negative impact on the credit profile, and is relevant to the
rating(s) in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
JP MORGAN 2023-3: Fitch Assigns 'B-(EXP)sf' Rating on Cl. B-5 Certs
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to JP Morgan Mortgage
Trust 2023-3 (JPMMT 2023-3).
Entity/Debt Rating
----------- ------
JPMMT 2023-3
A-1 LT AA+(EXP)sf Expected Rating
A-1-A LT AA+(EXP)sf Expected Rating
A-1-B LT AA+(EXP)sf Expected Rating
A-1-C LT AA+(EXP)sf Expected Rating
A-1-X LT AA+(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
A-3 LT AAA(EXP)sf Expected Rating
A-3-A LT AAA(EXP)sf Expected Rating
A-3-C LT AAA(EXP)sf Expected Rating
A-3-X LT AAA(EXP)sf Expected Rating
A-4 LT AAA(EXP)sf Expected Rating
A-4-A LT AAA(EXP)sf Expected Rating
A-4-B LT AAA(EXP)sf Expected Rating
A-4-C LT AAA(EXP)sf Expected Rating
A-4-X LT AAA(EXP)sf Expected Rating
A-5 LT AAA(EXP)sf Expected Rating
A-5-A LT AAA(EXP)sf Expected Rating
A-5-B LT AAA(EXP)sf Expected Rating
A-5-C LT AAA(EXP)sf Expected Rating
A-5-X LT AAA(EXP)sf Expected Rating
A-6 LT AAA(EXP)sf Expected Rating
A-6-A LT AAA(EXP)sf Expected Rating
A-6-B LT AAA(EXP)sf Expected Rating
A-6-C LT AAA(EXP)sf Expected Rating
A-6-X LT AAA(EXP)sf Expected Rating
A-7 LT AAA(EXP)sf Expected Rating
A-7-A LT AAA(EXP)sf Expected Rating
A-7-B LT AAA(EXP)sf Expected Rating
A-7-C LT AAA(EXP)sf Expected Rating
A-7-X LT AAA(EXP)sf Expected Rating
A-8 LT AAA(EXP)sf Expected Rating
A-8-A LT AAA(EXP)sf Expected Rating
A-8-B LT AAA(EXP)sf Expected Rating
A-8-C LT AAA(EXP)sf Expected Rating
A-8-X LT AAA(EXP)sf Expected Rating
A-9 LT AAA(EXP)sf Expected Rating
A-9-A LT AAA(EXP)sf Expected Rating
A-9-B LT AAA(EXP)sf Expected Rating
A-9-C LT AAA(EXP)sf Expected Rating
A-9-X LT AAA(EXP)sf Expected Rating
A-10 LT AAA(EXP)sf Expected Rating
A-10-A LT AAA(EXP)sf Expected Rating
A-10-B LT AAA(EXP)sf Expected Rating
A-10-C LT AAA(EXP)sf Expected Rating
A-10-X LT AAA(EXP)sf Expected Rating
A-11 LT AAA(EXP)sf Expected Rating
A-11-A LT AAA(EXP)sf Expected Rating
A-11-B LT AAA(EXP)sf Expected Rating
A-11-C LT AAA(EXP)sf Expected Rating
A-11-X LT AAA(EXP)sf Expected Rating
A-12 LT AAA(EXP)sf Expected Rating
A-12-A LT AAA(EXP)sf Expected Rating
A-12-B LT AAA(EXP)sf Expected Rating
A-12-C LT AAA(EXP)sf Expected Rating
A-12-X LT AAA(EXP)sf Expected Rating
A-13 LT AA+(EXP)sf Expected Rating
A-13-A LT AA+(EXP)sf Expected Rating
A-13-B LT AA+(EXP)sf Expected Rating
A-13-C LT AA+(EXP)sf Expected Rating
A-13-X LT AA+(EXP)sf Expected Rating
A-14 LT AA+(EXP)sf Expected Rating
A-14-A LT AA+(EXP)sf Expected Rating
A-14-B LT AA+(EXP)sf Expected Rating
A-14-C LT AA+(EXP)sf Expected Rating
A-14-X LT AA+(EXP)sf Expected Rating
A-15 LT AA+(EXP)sf Expected Rating
A-15-A LT AA+(EXP)sf Expected Rating
A-15-B LT AA+(EXP)sf Expected Rating
A-15-C LT AA+(EXP)sf Expected Rating
A-15-X LT AA+(EXP)sf Expected Rating
A-X-1 LT AA+(EXP)sf Expected Rating
A-X-2 LT AA+(EXP)sf Expected Rating
A-X-3 LT AA+(EXP)sf Expected Rating
A-X-4 LT AA+(EXP)sf Expected Rating
A-X-5 LT AA+(EXP)sf Expected Rating
B-1 LT AA-(EXP)sf Expected Rating
B-2 LT A-(EXP)sf Expected Rating
B-3 LT BBB-(EXP)sf Expected Rating
B-4 LT BB-(EXP)sf Expected Rating
B-5 LT B-(EXP)sf Expected Rating
B-6 LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch expects to rate the residential mortgage-backed certificates
issued by J.P. Morgan Mortgage Trust 2023-3 (JPMMT 2023-3) as
indicated above. The certificates are supported by 374 loans with a
total balance of approximately $424.34 million as of the cutoff
date. The pool consists of prime-quality fixed-rate mortgages from
various mortgage originators.
The pool consists of loans mainly originated by United Wholesale
Mortgage, LLC (57.5%) with the remaining 42.5% of the loans
originated by various originators, each contributing less than 10%
to the pool. The loan-level representations and warranties are
provided by the various originators, Maxex or Versus
(aggregators).
NewRez LLC (f/k/a New Penn Financial, LLC), d/b/a Shellpoint
Mortgage Servicing (Shellpoint), will act as interim servicer for
approximately 30.5% of the pool from the closing date until the
servicing transfer date, which is expected to occur on or about
June 1, 2023. After the servicing transfer date, these mortgage
loans will be serviced by JPMorgan Chase Bank, National Association
(Chase). Since Chase will service these loans after the transfer
date, Fitch performed its analysis assuming Chase is the servicer
for these loans. The other main servicer in the transaction is
United Wholesale Mortgage, LLC (servicing 57.5% of the loans); the
remaining 12.0% of the loans are being serviced by various
servicers, each contributing less than 10% to the pool. Nationstar
Mortgage LLC (Nationstar) will be the master servicer.
99.8% of the loans qualify as safe-harbor qualified mortgage
(SHQM), or QM safe-harbor (average prime offer rate [APOR]); the
remaining 0.2% qualify as QM rebuttable presumption (APOR).
There is no exposure to LIBOR in this transaction. The collateral
comprises 100% fixed-rate loans, and the certificates are
fixed-rate and capped at the net weighted average coupon (WAC) or
based on the net WAC.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 6.2% above a long-term sustainable level (vs. 7.8%
on a national level as of March 2023, down 2.7% since last
quarter). The rapid gain in home prices through the pandemic has
seen signs of moderating with a decline observed in Q3 2022. Driven
by the strong gains seen in H1 2022, home prices rose 5.8% YoY
nationally as of December 2022.
High Quality Mortgage Pool (Positive): The pool consists of
high-quality, fixed-rate, fully amortizing loans with maturities of
up to 30 years. 99.8% of the loans qualify as safe-harbor qualified
mortgage (SHQM) or QM safe-harbor (average prime offer rate
[APOR]); the remaining 0.2% qualify as QM rebuttable presumption
(APOR). The loans were made to borrowers with strong credit
profiles, relatively low leverage and large liquid reserves.
The loans are seasoned at an average of nine months, according to
Fitch (seven months per the transaction documents). The pool has a
WA original FICO score of 755, as determined by Fitch, which is
indicative of very high credit quality borrowers. Approximately
59.3%, as determined by Fitch, of the loans have a borrower with an
original FICO score equal to or above 750. In addition, the
original WA combined loan-to-value (CLTV) ratio of 74.9%,
translating to a sustainable loan-to-value (sLTV) ratio of 77.5%,
represents moderate borrower equity in the property and reduced
default risk compared with a borrower with a CLTV over 80%.
A 96.0% portion of the pool comprises nonconforming loans, while
the remaining 4.0% represents conforming loans. All of the loans
are designated as QM loans, with 46.3% of the pool originated by a
retail and correspondent channel.
Of the pool, 100.0% comprises loans where the borrower maintains a
primary or secondary residence. Single-family homes, planned unit
developments (PUDs) and single-family attached dwellings constitute
92.8% of the pool; condominiums and site condos make up 5.8%;
co-ops make up 0.1% and multifamily homes make up 1.3%. The pool
consists of loans with the following loan purposes: purchases
(77.1%), cashout refinances (18.2%) and rate-term refinances
(4.7%). Fitch views favorably that there are no loans to investment
properties and the majority of the mortgages are purchases.
A total of 211 loans in the pool are over $1.0 million, and the
largest loan is approximately $2.95 million.
Of the pool, 31.5% is concentrated in California. The largest MSA
concentration is in the Los Angeles-Long Beach-Santa Ana, CA MSA
(11.9%), followed by the Miami-Fort Lauderdale-Miami Beach, FL MSA
(7.2%) and New York-Northern New Jersey-Long Island, NY-NJ-PA MSA
(5.6%). The top three MSAs account for 25% of the pool. As a
result, there was no probability of default (PD) penalty applied
for geographic concentration.
Shifting-Interest Structure with Full Advancing (Mixed): The
mortgage cash flow and loss allocation are based on a
senior-subordinate, shifting-interest structure whereby the
subordinate classes receive only scheduled principal and are locked
out from receiving unscheduled principal or prepayments for five
years. The lockout feature helps to maintain subordination for a
longer period should losses occur later in the life of the
transaction. The applicable credit support percentage feature
redirects subordinate principal to classes of higher seniority if
specified credit enhancement (CE) levels are not maintained.
The servicers will provide full advancing for the life of the
transaction; each servicer is expected to advance delinquent P&I on
loans that enter into a coronavirus pandemic-related forbearance
plan. Although full P&I advancing will provide liquidity to the
certificates, it will also increase the loan-level loss severity
(LS) since the servicer looks to recoup P&I advances from
liquidation proceeds, which results in less recoveries.
Nationstar is the master servicer and will advance if the servicer
is unable to do so. If the master servicer is unable to advance,
then the securities administrator (Citibank) will advance.
CE Floor (Positive): A CE or senior subordination floor of 2.30%
has been considered to mitigate potential tail-end risk and loss
exposure for senior tranches as the pool size declines and
performance volatility increases due to adverse loan selection and
small loan count concentration. Additionally, a junior
subordination floor of 1.30% has been considered to mitigate
potential tail-end risk and loss exposure for subordinate tranches
as the pool size declines and performance volatility increases due
to adverse loan selection and small loan count concentration.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
This defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model-projected 39.0% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC and Clayton. The third-party due diligence
described in Form 15E focused on four areas: compliance review,
credit review, valuation review and data integrity. Fitch
considered this information in its analysis and, as a result, Fitch
decreased its loss expectations by 0.32% at the 'AAAsf' stress due
to 100% due diligence with no material findings.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
SitusAMC, and Clayton were engaged to perform the review. Loans
reviewed under this engagement were given compliance, credit and
valuation grades and assigned initial grades for each subcategory.
Minimal exceptions and waivers were noted in the due diligence
reports. Refer to the "Third-Party Due Diligence" section for more
detail.
Fitch also utilized data files provided by the issuer on its SEC
Rule 17g-5 designated website. Fitch received loan level
information based on the ResiPLS data layout format, and the data
are considered comprehensive. The data contained in the ResiPLS
layout data tape were reviewed by the due diligence companies, and
no material discrepancies were noted.
ESG CONSIDERATIONS
JPMMT 2023-3 has an ESG Relevance Score of '4+' for Transaction
Parties and Operational Risk. Operational risk is well controlled
for in JPMMT 2023-3, including strong transaction due diligence, an
'Above Average' aggregator, the majority of the pool originated by
an 'Above Average' originator, and the majority of the pool being
serviced by an 'RPS1-' servicer. All of these attributes have a
positive impact on the credit profile that resulted in a reduction
in expected losses and are relevant to the ratings in conjunction
with other factors.
Although this transaction has loans purchased in connection with
the sponsor's Elevate Diversity and Inclusion program or the
sponsor's Clean Energy program, Fitch did not take these programs
into consideration when assigning an ESG Relevance Score, as the
programs did not directly affect the expected losses assigned or
were not relevant to the rating, in Fitch's view.
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.
JPMCC COMMERCIAL 2017-JP6: DBRS Confirms BB Rating on F-RR Certs
----------------------------------------------------------------
DBRS Limited confirmed the following ratings on the Commercial
Mortgage Pass-Through Certificates, Series 2017-JP6 issued by JPMCC
Commercial Mortgage Securities Trust 2017-JP6:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class D at A (sf)
-- Class E-RR at BBB (sf)
-- Class F-RR at BB (sf)
-- Class G-RR at B (high) (sf)
All trends are Stable.
The rating confirmations reflect the pool performance that
generally remains in line with DBRS Morningstar's expectations
since the last rating action. Bond-level credit enhancement
continues to support the ratings despite ongoing concerns with a
select number of assets, which are further detailed below.
As of the March 2023 remittance, 32 of the original 48 loans remain
in the pool with an aggregate principal balance of $586.6 million,
which represents a collateral reduction of 25.4% since issuance
following scheduled loan amortization and repayment. Nine loans,
representing 20.2% of the total pool balance, are on the servicer's
watchlist. Four of the watchlist loans (11.8% of the pool) are
secured by office properties, another three by retail properties
(5.5% of the pool), while the remaining two are secured by
mixed-use and hotel properties (0.6% and 2.3% of the pool,
respectively).
Given the shift in demand for office space because of the
Coronavirus Disease (COVID-19) pandemic, DBRS Morningstar expects
higher vacancy rates and difficulties backfilling space, especially
for Class B/C properties in less desirable markets. Although the
pool's office concentration is high, representing 55.4% of the
overall trust balance, reported credit metrics remain generally
healthy. The weighted-average occupancy for pooled office
properties is 90.3% as of the most recent reporting, and the
weighted-average debt service coverage ratio (DSCR) was 2.36 times
(x) for the YE2021. Despite this, DBRS Morningstar remains cautious
about the high office concentration in the pool, especially given
nine of the 11 underlying office properties are in suburban
markets. Therefore, DBRS Morningstar has increased the probability
of default and applied stressed loan-to-value ratios (LTVs) in
certain instances.
The largest loan in the pool, 245 Park Avenue (Prospectus ID#1,
16.7% of the pool), is secured by a high-rise Class A office tower
in Midtown Manhattan. The loan was recently returned to the master
servicer following a loan assumption. It previously transferred to
special servicing in November 2021 after the original sponsor (PWM
Property Management LLC, an affiliate of HNA Group Co.) filed for
Chapter 11 bankruptcy. According to servicer documents, SL Green
Realty Corp. purchased the property and assumed the debt in late
2022. There had been occupancy declines prior to this, specifically
with major tenant Major League Baseball (MLB; previously 12.7% of
the net rentable area (NRA)) vacating in January 2020 prior to its
October 2022 lease expiration and the subsequent challenges in
backfilling the space. DBRS Morningstar has requested the most
recent rent roll but has not received it yet. The property was 79%
occupied as of December 2022, down from 83% at YE2021 and 93% at
YE2020, according to servicer reporting. Rollover risk was a
primary concern throughout 2022, with JP Morgan's lease (45.4% of
NRA) and MLB's lease (12.7% of NRA) both expiring in October 2022.
The sponsor website suggests 112,000 square feet of space in total
is currently available for lease, representing 6.5% of the NRA,
with approximately 4.0% of the NRA scheduled to become available
throughout 2023. DBRS Morningstar did not apply an LTV stress to
this loan given the new sponsor's ability to backfill vacant space
and strong experience. DBRS Morningstar expects performance to
continue improving as the remaining space is backfilled.
The largest loan on the watchlist, Bingham Office Center
(Prospectus ID#6, 4.8% of the pool), is secured by a Class B
low-rise office complex in Bingham Farms, Michigan. The servicer
added the loan to its watchlist in February 2022 for a low DSCR
because of the departure of the largest tenant, Comcast Corporation
(14.0% of NRA), in August 2019, which triggered a cash flow sweep.
Physical occupancy declined to 70.0% at the time, although the
borrower has signed 42 new tenants, which have signed new leases or
lease extensions since Q4 2019. Occupancy has bounced back to
approximately 80.0% as of the June 2022 rent roll. Despite leasing
activity, cash flow and DSCR have been in year-over-year decline
since issuance. The annualized NCF for the trailing six months
ended June 2022 was $2.28 million (a DSCR of 1.25x), compared with
YE2020 at $3.05 million (a DSCR of 1.67x) and the issuance NCF of
$3.65 million (a DSCR of 1.99x). The decline in cash flows can be
attributed to a consistent decline in base rents. In its analysis,
DBRS Morningstar applied a stressed LTV to this loan to reflect
rollover concerns and potential for further cash flow decline. The
resulting expected loss for this loan is 250.0% higher than the
pool-level expected loss.
The second-largest loan in the pool is 211 Main Street (Prospective
ID#2, 11.1% of the pool). It is backed by a Class A office tower in
San Francisco, which has been 100.0% occupied by Charles Schwab
since issuance. Although the recent collapse of Silicon Valley Bank
resulted in financial turmoil for many financial institutions,
Charles Schwab's financial position remains well defended given its
access to cash and capital and recent influx of deposits as former
clients of troubled banks transfer their assets to large
brokerages. Although DBRS Morningstar does not believe Charles
Schwab is at risk of defaulting on its lease, high vacancy rates in
downtown San Francisco and the loan's upcoming maturity in April
2024 post increased maturity risk. To reflect this, DBRS
Morningstar has applied a stressed LTV adjustment in its analysis
for this loan.
Notes: All figures are in U.S. dollars unless otherwise noted.
KAWARTHA CAD 2022-1: DBRS Confirms BB Rating on Tranche E
---------------------------------------------------------
DBRS, Inc. confirmed the following provisional ratings on the
Tranche A Amount, Tranche B Amount, Tranche C Amount, Tranche D
Amount, and Tranche E Amount (collectively, the Tranche Amounts) of
two unexecuted, unfunded financial guarantees (the Financial
Guarantees) of Kawartha CAD Ltd., Boreal 2022-1 with respect to a
portfolio of Canadian commercial real estate (CRE) secured loans
originated or managed by the Bank of Montreal (BMO; rated AA with a
Stable trend by DBRS Morningstar):
-- Tranche A Amount at AAA (sf)
-- Tranche B Amount at AA (low) (sf)
-- Tranche C Amount at A (sf)
-- Tranche D Amount at BBB (low) (sf)
-- Tranche E Amount at BB (sf)
The provisional ratings on the Tranche Amounts address the
likelihood of a reduction to the respective tranche notional
amounts resulting from obligor defaults within the guaranteed
portfolio during the period from the Effective Date until the
Scheduled Termination Date. For obligors within the guaranteed
portfolio, default events are limited to payment default,
insolvency, and restructuring events.
DBRS Morningstar also confirmed the following ratings on the Boreal
Series 2022-1 Class B Notes (the Class B Notes), the Boreal Series
2022-1 Class C Notes (the Class C Notes), the Boreal Series 2022-1
Class D Notes (the Class D Notes), and the Boreal Series 2022-1
Class E Notes (the Class E Notes) (collectively, the Notes) issued
by Kawartha CAD Ltd. (the Issuer) referencing the executed Junior
Loan Portfolio Financial Guarantees (the Financial Guarantee),
dated as of April 14, 2022, between the Issuer as Guarantor and the
Bank of Montreal (BMO; rated AA with a Stable trend by DBRS
Morningstar) as Beneficiary with respect to a portfolio of Canadian
CRE secured loans originated or managed by BMO:
-- Class B Notes at AA (low) (sf)
-- Class C Notes at A (sf)
-- Class D Notes at BBB (low) (sf)
-- Class E Notes at BB (sf)
The ratings on the Notes address the timely payment of interest and
ultimate payment of principal on or before the Scheduled
Termination Date (as defined in the Financial Guarantee referenced
above). The payment of the interest due to the Notes is subject to
the Beneficiary's ability to pay the Guarantee Fee Amount (as
defined in the Financial Guarantee referenced above).
RATING RATIONALE
The rating confirmations are a result of the annual surveillance of
the transaction as well as the current performance of the
transaction being within DBRS Morningstar's expectation. Kawartha
CAD Ltd., Boreal 2022-1 is a synthetic risk transfer transaction
with BMO as Beneficiary.
In its analysis, DBRS Morningstar considered the following:
(1) The Financial Guarantee dated as of April 14, 2022.
(2) The integrity of the transaction structure.
(3) DBRS Morningstar's assessment of the portfolio quality.
(4) Adequate credit enhancement to withstand projected collateral
loss rates.
DBRS Morningstar analyzed the transaction using its CMBS Insight
Model and CLO Asset Model, based on certain reference portfolio
characteristics, including Eligibility Criteria and Replenishment
Criteria, as defined per the Financial Guarantee. The initial
reference portfolio consists of well-diversified CRE secured loans
across various obligors. The analysis produced satisfactory
results, which supported the ratings on the Tranche Amounts and the
Notes.
The provisional ratings on the Tranche Amounts take into
consideration only the creditworthiness of the reference portfolio.
The provisional ratings do not address counterparty risk nor the
likelihood of any event of default or termination event under the
agreement occurring. BMO bought protection under a similar executed
financial guarantee for certain issued notes but has not executed
contracts related to the tranche notional amounts.
DBRS Morningstar's ratings on the Tranche Amounts are expected to
remain provisional until the underlying agreements are executed.
BMO may have no intention of executing the Financial Guarantees.
DBRS Morningstar will maintain and monitor the provisional ratings
throughout the life of the transaction or while it continues to
receive performance information.
To assess portfolio credit quality, DBRS Morningstar may provide a
credit estimate, internal assessment, or ratings mapping of BMO's
internal ratings model. Credit estimates, internal assessments, and
ratings mappings are not ratings; rather, they represent an
abbreviated analysis, including model-driven or statistical
components of default probability for each obligor that is used in
assigning a rating to a facility sufficient to assess portfolio
credit quality.
Notes: All figures are in Canadian dollars unless otherwise noted.
MILL CITY 2023-NQM2: DBRS Finalizes B Rating on Class B-2 Certs
---------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
Mortgage-Backed Certificates, Series 2023-NQM2 (the Certificates)
to be issued by Mill City Mortgage Loan Trust 2023-NQM2 (or the
Trust):
-- $208.1 million Class A-1 at AAA (sf)
-- $28.2 million Class A-2 at AA (low) (sf)
-- $18.6 million Class A-3 at A (sf)
-- $16.1 million Class M-1 at BBB (sf)
-- $12.4 million Class B-1 at BB (sf)
-- $11.4 million Class B-2 at B (sf)
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
The AAA (sf) rating on the Class A-1 Notes reflects 36.05% of
credit enhancement provided by subordinate notes. The AA (low)
(sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 27.40%,
21.70%, 16.75%, 12.95%, and 9.45% of credit enhancement,
respectively.
This transaction is a securitization of a portfolio of fixed- and
adjustable-rate prime and nonprime first-lien residential mortgages
funded by the issuance of the Certificates. The Certificates are
backed by 584 loans with a total principal balance of approximately
$325,463,597, as of the Cut-Off Date of March 1, 2023.
This is the second non-Qualified Mortgage (non-QM) securitization
by the Sponsor, an entity 100% owned by fund entities managed by AB
CarVal Investors, L.P. (CarVal). In February 2022, funds managed by
CarVal established a mortgage conduit, Mill City Loans (Mill City),
to source residential mortgage assets on a flow-and-bulk basis.
Since inception, CarVal has acquired more than 1,300 non-QM loans
totaling $720 million through Mill City. Previously, the Sponsor
has closed 15 rated securitizations of the seasoned, performing,
and reperforming residential mortgages.
The pool is, on average, eight months seasoned with loan age
ranging from three to 14 months. The originators for the mortgage
pool are Castle Mortgage Corporation dba Excelerate Capital
(Excelerate; 45.2%), Oaktree Funding Corp (Oaktree Funding Corp;
32.0%), and HomeXpress Mortgage Corp (HomeXpress; 22.8%). The
Servicer of the loans is NewRez LLC d/b/a Shellpoint Mortgage
Servicing. DBRS Morningstar conducted a review of CarVal's (the
aggregator) residential mortgage platform and believes the company
is an acceptable mortgage loan aggregator.
Mill City Holdings, LLC will act as the Sponsor and Servicing
Administrator. U.S. Bank Trust Company, National Association (rated
AA (high) with a Stable trend by DBRS Morningstar), will act as the
Paying Agent and the Certificate Registrar. Wilmington Savings Fund
Society, FSB will act as the Trustee. Computershare Trust Company,
N.A. (rated BBB with a Stable trend by DBRS Morningstar) will act
as the Custodian.
CVI CVF V Pooling Fund II LP, a fund managed by CarVal, will be the
Representations and Warranties (R&W) provider. As of December, 31,
2022, the R&W provider had a net asset value of approximately $1.78
billion. The obligations of the R&W provider will expire on the
later of (i) Distribution Date in March 2028 and (ii) the date on
which the R&W provider initiates liquidation of the fund (R&W
Sunset Date).
As of the Cut-Off Date, 67 loans (10.5% of the pool) were reported
to have 30 to 90 days delinquent pay history, according to the
Mortgage Bankers Association (MBA) delinquency calculation method.
The remaining loans have been performing since origination.
In accordance with the Consumer Financial Protection Bureau (CFPB)
QM rules, 47.9% of the loans by balance are designated as non-QM.
Approximately 52.1% of the loans in the pool made to investors for
business purposes are exempt from the CFPB Ability-to-Repay (ATR)
and QM rules. No loan has a loan application date before January
10, 2014, and, therefore, each loan is subject to the QM/ATR Rules
issued by the CFPB as part of the Dodd-Frank Wall Street Reform and
Consumer Protection Act.
For this transaction, the Servicer will fund advances of delinquent
principal and interest (P&I) until loans become 90 days delinquent,
contingent upon recoverability determination. Additionally, the
Servicer is obligated to make advances in respect of taxes and
insurance, the cost of preservation, restoration, and protection of
mortgaged properties and any enforcement or judicial proceedings,
including foreclosures and reasonable costs and expenses incurred
in the course of servicing and disposing properties.
The Sponsor, or a majority-owned affiliate of the Sponsor, will
acquire and intends to retain an eligible horizontal residual
interest in the Issuer in the amount of not less than 5.0% of the
aggregate fair value of the Certificates (other than the Class R
Certificates) to satisfy the credit risk-retention requirements
under Section 15G of the Securities Exchange Act of 1934 and the
regulations promulgated thereunder.
The Sponsor, at its option, may purchase any mortgage loan that is
90 days or more delinquent under the MBA method (or in the case of
any loan that has been subject to a Coronavirus Disease (COVID-19)
pandemic-related forbearance plan, on any date from and after the
date on which such loan becomes 90 days MBA delinquent following
the end of the forbearance period) at the repurchase price
(Optional Purchase) described in the transaction documents. The
total balance of such loans purchased by the Depositor will not
exceed 10% of the Cut-Off Date balance.
The Servicer, at its option, on or after the date on which the
balance of the mortgage loans falls below 10% of the loans balance
as of the Cut-Off Date, may purchase all of the mortgage loans and
real estate owned properties at the optional termination price
described in the transaction documents.
The Depositor may, at its option, on or after the later of (i) the
two-year anniversary of the Closing Date, and (ii) the earlier of
(1) the three-year anniversary of the Closing Date or (2) the date
on which the balance of mortgage loans falls to or below 30% of the
loan balance as of the Cut-Off Date (Optional Redemption), purchase
all of the outstanding Certificates at the price described in the
transaction documents.
The transaction's cash flow structure is similar to that of other
non-QM securitizations. The transaction employs a sequential-pay
cash flow structure with a pro rata principal distribution among
the senior tranches subject to certain performance triggers related
to cumulative losses or delinquencies exceeding a specified
threshold (Credit Event). Principal proceeds can be used to cover
interest shortfalls on the Class A-1 and Class A-2 Certificates
(IIPP) before being applied sequentially to amortize the balances
of the senior and subordinated certificates. For the Class A-3
Certificates (only after a Credit Event) and for the mezzanine and
subordinate classes of certificates (both before and after a Credit
Event), principal proceeds will be available to cover interest
shortfalls only after the more senior certificates have been paid
off in full. Also, the excess spread can be used to cover realized
losses first before being allocated to unpaid Cap Carryover Amounts
due to Class A-1 down to Class A-3.
Of note, the Class A-1, Class A-2, and Class A-3 Certificates'
coupon rates step up by 100 basis points on and after the payment
date in April 2027. Also, the interest and principal otherwise
payable to the Class B-3 Certificates as accrued and unpaid
interest may be used to pay the Class A-1, Class A-2, and Class A-3
Certificates' Cap Carryover Amounts before and after the Class A
coupons step up.
On January 15, 2023, the Federal Emergency Management Agency (FEMA)
announced that Federal Disaster Assistance was made available to
the State of California related to several winter storms, flooding,
landslides, and mudslides that began on December 27, 2022. At this
time, the sponsor has informed DBRS Morningstar that it was not
aware of Mortgage Loans secured by Mortgaged Properties that are in
a FEMA disaster area that have suffered any disaster-related
damage. The transaction documents include representations and
warranties regarding the property conditions, which state that the
properties have not been damaged by any casualty. In a sensitivity
analysis, DBRS Morningstar ran an additional scenario applying the
reduction of property values in certain areas of California that
may have been affected.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2006-HQ10: Fitch Affirms Dsf Rating on Ten Tranches
------------------------------------------------------------------
Fitch has downgraded one class and affirmed all other classes of
Wachovia Bank Commercial Mortgage Trust 2005-C21 and affirms Morgan
Stanley Capital I Trust 2006-HQ10.
Entity/Debt Rating Prior
----------- ------ -----
Wachovia Bank
Commercial
Mortgage Trust
2005-C21
E 92976BAA0 LT Csf Downgrade CCsf
F 92976BAB8 LT Dsf Affirmed Dsf
G 92976BAC6 LT Dsf Affirmed Dsf
H 92976BAD4 LT Dsf Affirmed Dsf
J 92976BAE2 LT Dsf Affirmed Dsf
K 92976BAF9 LT Dsf Affirmed Dsf
L 92976BAG7 LT Dsf Affirmed Dsf
Morgan Stanley
Capital I Trust
2006-HQ10
B 61750HAH9 LT CCsf Affirmed CCsf
C 61750HAJ5 LT Csf Affirmed Csf
D 61750HAK2 LT Csf Affirmed Csf
E 61750HAN6 LT Dsf Affirmed Dsf
F 61750HAP1 LT Dsf Affirmed Dsf
G 61750HAQ9 LT Dsf Affirmed Dsf
H 61750HAR7 LT Dsf Affirmed Dsf
J 61750HAS5 LT Dsf Affirmed Dsf
K 61750HAT3 LT Dsf Affirmed Dsf
L 61750HAU0 LT Dsf Affirmed Dsf
M 61750HAV8 LT Dsf Affirmed Dsf
N 61750HAW6 LT Dsf Affirmed Dsf
O 61750HAX4 LT Dsf Affirmed Dsf
KEY RATING DRIVERS
Fitch has affirmed 13 classes of Morgan Stanley Capital I Trust
2006-HQ10 commercial mortgage pass-through certificates. Loss
expectations for MSCI 2006-HQ10 remain high due to the high
certainty of losses from the significant concentration of REO
assets comprising 94.6% of the pool. The largest asset is the
real-estate owned (REO) Gateway Medical Center asset (60.3% of
pool), a 77,386-sf medical office building located in Phoenix, AZ.
The asset was originally part of the larger PPG Portfolio loan,
which was initially secured by seven medical office properties
located in Colorado, Indiana, and Arizona; the special servicer has
since sold six of the properties. The remaining Gateway Medical
Center property is 49.5% occupied as of February 2023 by two
tenants, DEVI Holdings (24.3% NRA; Exp. February 2028) and Phoenix
Orthopedic Ambulatory Center (25.2% NRA; Exp. December 2027). The
special servicer continues to stabilize the property and market the
vacancies for lease. The asset is not currently listed for sale.
The Fort Roc Portfolio (34.3%) originally consisted of seven
cross-collateralized and cross-defaulted loans secured by seven
retail properties totaling 343,769 sf located in Pennsylvania, New
York, Tennessee, and Delaware. One of the assets is currently REO
and the remaining six have been sold. The remaining asset, the Penn
Plaza, consist of a 178,389-sf retail center that is 29%-occupied
and located Muhlenberg, PA. Collateral performance declined
significantly following the closure of the anchor tenant, K-Mart
(previously 60.8% of NRA) in July 2016. Per the special servicer,
Restaurant Depot has recently executed a lease for 51,240-sf (28.7%
NRA), breaking up the vacant K-Mart space, and is projected to take
occupancy in late 2023.
The remainder of the pool consists of one loan secured by a
single-tenant retail property in Akron, OH (Dick's Sporting Goods -
Akron; 5.4% of pool; final maturity date in October 2036) occupied
by Dick's Sporting Goods with an upcoming lease expiration in July
2024.
Fitch has downgraded class E to 'Csf' and affirmed six classes of
Wachovia Bank Commercial Mortgage Trust 2005-C21. The downgrade
reflects the increased loss expectations since the prior review,
driven by increasing exposures on the two remaining REO assets. The
largest remaining asset, Philips Lighting (55.2%) transferred to
special servicing in June 2021 for imminent default, and has
remained fully vacant since December 2021.
The asset manager finalized negotiations with the borrower for a
deed-in-lieu and the asset went REO in April 2022. The second
largest remaining asset is the REO Shelton Technology Center asset,
which is the final remaining asset in the Taurus Pool (35.7%). The
asset manager is continuing to market vacant spaces to stabilize
occupancy at the asset, which is an industrial/flex property in
Shelton, CT. The asset became REO in 2017 and must be disposed of
by YE 2023.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
For the distressed classes across both transactions, downgrades may
occur if expected losses increase due to lower property valuations
and/or higher loan exposure of the assets in special servicing.
Classes rated 'CCsf' and 'Csf' will be downgraded further if losses
become more certain or once realized losses are incurred. Classes
currently rated 'Dsf' will remain unchanged as losses have already
been incurred.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
For the distressed classes across both transactions, although not
expected, factors that could lead to upgrades include significant
improvement in valuations, better than expected recoveries on
specially serviced assets and improvement in performance of the
remaining assets.
MORGAN STANLEY 2023-1: Fitch Affirms B-(EXP) Rating on B-5 Certs
----------------------------------------------------------------
Fitch Ratings has affirmed the expected ratings that were
previously assigned to Morgan Stanley Residential Mortgage Loan
Trust 2023-1 (MSRM 2023-1) on March 10, 2023.
Entity/Debt Rating Prior
----------- ------ -----
MSRM 2023-1
A-1 LT AAA(EXP)sf Affirmed AAA(EXP)sf
A-1-IO LT AAA(EXP)sf Affirmed AAA(EXP)sf
A-2 LT AAA(EXP)sf Affirmed AAA(EXP)sf
A-2-IO LT AAA(EXP)sf Affirmed AAA(EXP)sf
A-3 LT AAA(EXP)sf Affirmed AAA(EXP)sf
A-4 LT AAA(EXP)sf Affirmed AAA(EXP)sf
A-4-IO LT AAA(EXP)sf Affirmed AAA(EXP)sf
A-5 LT AAA(EXP)sf Affirmed AAA(EXP)sf
A-6 LT AAA(EXP)sf Affirmed AAA(EXP)sf
A-6-IO LT AAA(EXP)sf Affirmed AAA(EXP)sf
A-7 LT AAA(EXP)sf Affirmed AAA(EXP)sf
A-8 LT AAA(EXP)sf Affirmed AAA(EXP)sf
A-8-IO LT AAA(EXP)sf Affirmed AAA(EXP)sf
A-9 LT AAA(EXP)sf Affirmed AAA(EXP)sf
A-10 LT AAA(EXP)sf Affirmed AAA(EXP)sf
A-10-IO LT AAA(EXP)sf Affirmed AAA(EXP)sf
B-1 LT AA-(EXP)sf Affirmed AA-(EXP)sf
B-2 LT A-(EXP)sf Affirmed A-(EXP)sf
B-3 LT BBB-(EXP)sf Affirmed BBB-(EXP)sf
B-4 LT BB-(EXP)sf Affirmed BB-(EXP)sf
B-5 LT B-(EXP)sf Affirmed B-(EXP)sf
B-6 LT NR(EXP)sf Affirmed NR(EXP)sf
R LT NR(EXP)sf Affirmed NR(EXP)sf
TRANSACTION SUMMARY
Fitch has affirmed the expected ratings that were previously
assigned to Morgan Stanley Residential Mortgage Loan Trust 2023-1
(MSRM 2023-1) on March 10, 2023, as indicated above.
This is the 11th post-crisis transaction off the Morgan Stanley
Residential Mortgage Loan Trust shelf; the first transaction was
issued in 2014. This is the ninth MSRM transaction that comprises
loans from various sellers and is acquired by Morgan Stanley in its
prime-jumbo aggregation process.
The certificates are supported by 355 prime-quality loans with a
total balance of approximately $349.48 million as of the cutoff
date. The pool consists of 100% fixed-rate mortgages (FRMs) from
various mortgage originators. The servicers for this transaction
are Specialized Loan Servicing, LLC (SLS) and First National Bank
of Pennsylvania. Nationstar Mortgage LLC (Nationstar) will be the
master servicer.
Of the loans, 100.0% qualify as safe-harbor qualified mortgage
(SHQM) or SHQM average prime offer rate (APOR) loans. There are no
high-priced QM loans or non-QM loans in the pool.
There is no exposure to LIBOR in this transaction. The collateral
comprises 100% fixed-rate loans, and the certificates are fixed
rate and capped at the net weighted average coupon (WAC).
Like other prime transactions, this transaction utilizes a
senior-subordinate, shifting-interest structure with subordination
floors to protect against tail risk.
This is an updated press release for MSRM 2023-1 to affirm the
expected ratings that were previously assigned for this transaction
on March 10, 2023. This press release reflects the updated
collateral pool and updated bond sizes/CE. The collateral remains
largely unchanged and reflects loans that had paid off. The updated
collateral pool consists of 355 loans with a total outstanding
balance of $349.48 million, as of the April 1, 2023 cut-off date.
Fitch revised its loss expectations for the 'AAA', 'AA-' and 'A-'
rated classes due to revised sMVD assumptions based on updated
quarterly CSW data. The structure remains the same with bonds
sizes/CE reflecting the updated collateral balance. There were no
changes to Fitch's previously assigned expected ratings.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 6.5% above a long-term sustainable level (vs. 7.8%
on a national level as of March 2023, down 2.7% since last
quarter). The rapid gain in home prices through the pandemic has
seen signs of moderating with a decline observed in 3Q22. Driven by
the strong gains seen in H1 2022, home prices rose 5.8% yoy
nationally as of December 2022.
High Quality Mortgage Pool (Positive): The collateral consists of
30-year, fixed-rate fully amortizing loans seasoned at
approximately 14.9 months in aggregate as determined by Fitch. Of
the loans, 62.1% were originated through the sellers' retail
channels. The borrowers in this pool have strong credit profiles (a
765 FICO, as determined by Fitch) and relatively low leverage (a
73.6% sustainable loan-to-value ratio [sLTV], as determined by
Fitch). A total of 136 loans are over $1.0 million, and the largest
loan totals $2.5 million. Fitch considered 100% of the loans in the
pool to be fully documented loans. Lastly, 11 loans in the pool
comprise nonpermanent residents, and none of the loans in the pool
were made to foreign nationals.
Approximately 38% of the pool is concentrated in California with
moderate MSA concentration. The largest MSA concentration is in the
Los Angeles MSA (13.1%), followed by the San Francisco MSA (5.5%)
and the Riverside MSA (5.1%). The top three MSAs account for 24% of
the pool. There was no adjustment for geographic concentration.
Shifting-Interest Structure and Full Advancing (Mixed): The
mortgage cash flow and loss allocation are based on a
senior-subordinate, shifting-interest structure whereby the
subordinate classes receive only scheduled principal and are locked
out from receiving unscheduled principal or prepayments for five
years. The lockout feature helps to maintain subordination for a
longer period should losses occur later in the life of the
transaction. The applicable credit support percentage feature
redirects subordinate principal to classes of higher seniority if
specified credit enhancement (CE) levels are not maintained.
The servicers will provide full advancing for the life of the
transaction (the servicers are expected to advance delinquent P&I
on loans that enter a coronavirus forbearance plan). Although full
P&I advancing will provide liquidity to the certificates, it will
also increase the loan-level loss severity (LS) since the servicers
look to recoup P&I advances from liquidation proceeds, which
results in less recoveries.
Nationstar is the master servicer and will advance if the servicers
are unable to. If the master servicer is not able to advance, then
the securities administrator (Citibank, N.A.) will advance.
Credit Enhancement Floor (Positive): A CE or senior subordination
floor of 1.80% has been considered to mitigate potential tail-end
risk and loss exposure for senior tranches as the pool size
declines and performance volatility increases due to adverse loan
selection and small loan count concentration. Additionally, a
junior subordination floor of 1.10% has been considered to mitigate
potential tail-end risk and loss exposure for subordinate tranches
as the pool size declines and performance volatility increases due
to adverse loan selection and small loan count concentration.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses were conducted at the state and national
levels to assess the effect of higher MVDs for the subject pool as
well as lower MVDs, illustrated by a gain in home prices.
This defined stress sensitivity analysis demonstrates how the
ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10%, 20% and 30%, in addition to the model
projected MVD, which is 39.2% in the 'AAAsf' stress. The analysis
indicates that there is some potential rating migration with higher
MVDs, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modelling process uses the modification
of these variables to reflect asset performance in up- and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
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 SitusAMC, Clayton, and Covius. The third-party due
diligence described in Form 15E focused on four areas: compliance
review, credit review, valuation review and data integrity. Fitch
considered this information in its analysis and, as a result, Fitch
did not make any adjustment(s) to its analysis based on the
findings. Due to the fact that there was 100% due diligence
provided and there were no material findings, Fitch reduced the
'AAAsf' expected loss by 0.24%.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
SitusAMC, Clayton, and Covius were engaged to perform the review.
Loans reviewed under this engagement were given compliance, credit
and valuation grades, and assigned initial grades for each
subcategory. Minimal exceptions and waivers were noted in the due
diligence reports. Refer to the Third-Party Due Diligence section
of the presale report for more detail.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. Fitch received
loan-level information based on the American Securitization Forum's
(ASF) data layout format, and the data are considered to be
comprehensive. The ASF data tape layout was established with input
from various industry participants, including rating agencies,
issuers, originators, investors and others to produce an industry
standard for the pool-level data in support of the U.S. RMBS
securitization market. The data contained in the ASF layout data
tape were reviewed by the due diligence companies, and no material
discrepancies were noted.
ESG CONSIDERATIONS
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.
MVW LLC 2023-1: Fitch Assigns 'BB' Rating on Class D Notes
----------------------------------------------------------
Fitch Ratings has assigned ratings and Outlooks to notes issued by
MVW 2023-1 LLC (MVW 2023-1).
Entity/Debt Rating Prior
----------- ------ -----
MVW 2023-1 LLC
A LT AAAsf New Rating AAA(EXP)sf
B LT Asf New Rating A(EXP)sf
C LT BBBsf New Rating BBB(EXP)sf
D LT BBsf New Rating BB(EXP)sf
TRANSACTION SUMMARY
The notes are backed by a pool of fixed-rate timeshare loans
originated by Marriott Ownership Resorts, Inc. (MORI) or one of its
wholly owned subsidiaries or affiliates. MORI is a subsidiary of
Marriott Vacations Worldwide Corporation (MVWC/MVW). A portion of
the timeshare loans is from Vistana Signature Experiences (VSE),
the exclusive licensee for Westin and Sheraton brands in vacation
ownership (VO), and Hyatt Vacation Ownership (HVO), the exclusive
licensee for the Hyatt brand in VO. The MVW 2023-1 pool also
includes timeshare loans originated by WHV Resort Group, Inc. (WHV
and fka Welk). This follows the acquisition of ILG, Inc. on Sept.
1, 2018 and the acquisition of WHV Hospitality Group, Inc. on April
1, 2021. Following the acquisitions, the Westin, Sheraton, Hyatt
and Hyatt Platinum Program (HPP and fka WHV) VOs were combined with
those of MVW. As part of the Welk acquisition, MVW plans to rebrand
all Legacy-Welk resorts as Hyatt-branded resorts in 2023. While all
the brands are owned by MVW, due to exclusive license agreements
with the respective hotel brands, each will remain separately
branded under one VO business owned by MVW. This is MORI's 28th
term securitization.
KEY RATING DRIVERS
Borrower Risk - Stable Collateral Pool: This is the eighth
transaction to include originations from both the MVW and VSE
platforms. Overall, the 2023-1pool is comparable with the 2022-2
pool, as the weighted average (WA) FICO score of 732 is generally
in line with 733 in 2022-2. Fifteen-year loans increased slightly
to 43.7% from 41.2% in 2022-2. The concentration of foreign
obligors is at 3.5%, comparable with 3.8% in 2022-2. The seasoning
is down to seven months from 10 months in 2022-2. However,
approximately $15.5 million of called collateral from the Welk
Resorts 2017-A transaction are expected to be added via prefunding
with significant seasoning of 72 months, based on the statistical
pool.
The 2023-1 pool includes 52.0% of Marriott Vacation Club (MVC)
collateral, down from 59.5% in 2022-2, which performs stronger than
other brands except Westin. Collateral for the Westin and Sheraton
is up to 16.7% from 12.4% and 19.7% from 10.3%, respectively.
However, the HPP collateral concentration is down to 11.2% from
16.9% in 2022-2, which have historically had higher forecast losses
compared to other brands. This is also the sixth transaction to
include Hyatt-branded loans, which represents 0.4% of the pool.
Forward-Looking Approach on CGD Proxy — Varied Performance: With
the exception of certain foreign segments, MVC 2010-2016 vintages
continue to display improved performance relative to the weaker
2007-2009 periods, although more recent vintages remain under
stress. The VSE and HPP portfolios also experienced stress during
the recession. Since then, the Westin loan performance has improved
but has experienced elevated defaults in recent periods.
The Sheraton loan performance has deteriorated in recent years,
driven by Sheraton Flex and the longer 15-year term loans, with the
newly included Hyatt-branded loans since the 2020-1 transaction
showing overall high projected losses on par with, and in some
cases, exceeding those of other VSE brands, including Sheraton.
HPP loan performance in recent vintages has been tracking
consistently below that of the recessionary 2006-2009 vintages but
has been weaker compared to the 2010-2013 periods. Fitch's base
case CGD proxy is 13.50% for 2023-1.
Structural Analysis — Higher Credit Enhancement Structure:
Initial hard credit enhancement (CE) is 39.30%, 22.65%, 10.15% and
2.50% for class A, B, C and D notes, respectively. CE is up for
class A, B and C notes relative to 2022-2 from 37.00%, 21.25% and
10.00%, respectively. Available CE is sufficient to support
stressed 'AAAsf', 'Asf', 'BBBsf' and 'BBsf' multiples of Fitch's
base case CGD proxy of 13.50%.
Originator/Seller/Servicer Operational Review — Quality of
Origination/Servicing: MVW/MORI, VSE and HPP have demonstrated
sufficient abilities as originator and servicer of timeshare loans,
as evidenced by the historical delinquency and default 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. Declining
default coverage may make certain note ratings susceptible to
potential negative rating actions, depending on the extent of the
decline in coverage.
Hence, Fitch conducts sensitivity analysis 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 prepayment
sensitivity includes 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 notes to unexpected deterioration of a
trust's performance.
Additionally, Fitch conducts increases of 1.5x and 2.0x to the CGD
proxy, which represents moderate and severe stresses, respectively.
These analyses are intended to provide an indication of the rating
sensitivity of 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 cumulative net loss is 20% less than the
projected proxy, the ratings would be maintained for the class A
note at a stronger rating multiple. For the class B, C and D notes,
the multiples would increase, resulting in potential upgrade of
four notches, two notches and one category, respectively.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with due diligence information from Ernst &
Young LLP. The due diligence information was provided on Form ABS
Due Diligence-15E and focused on a comparison and recalculation of
certain characteristics with respect to 250 sample loans by Ernst &
Young LLP. Fitch considered this information in its analysis, and
the findings did not have an impact on the agency's analysis.
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.
OBX TRUST 2023-NQM3: Fitch Assigns 'B(EXP)' Rating on Cl. B-2 Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to OBX 2023-NQM3
Trust.
Entity/Debt Rating
----------- ------
OBX 2023 - NQM3
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
A-3 LT A(EXP)sf Expected Rating
M-1 LT BBB(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
A-IO-S LT NR(EXP)sf Expected Rating
XS LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch expects to rate the residential mortgage-backed notes issued
by the OBX 2023-NQM3 Trust as indicated above. The transaction is
scheduled to close on or about April 27, 2023. The notes are
supported by 807 loans with an unpaid principal balance of
approximately $407.5 million as of the cutoff date. The pool
consists of fixed-rate mortgages and adjustable-rate mortgages
acquired by Annaly Capital Management, Inc. from various
originators and aggregators.
Distributions of P&I and loss allocations are based on a modified
sequential-payment structure. The transaction has a stop-advance
feature where the P&I advancing party will advance delinquent P&I
for up to 120 days. Of the loans, approximately 70.7% are
designated as non-qualified mortgage (non-QM), 0.9% are safe-harbor
QM (SHQM), and the remaining 28.4% are investment properties not
subject to the Ability to Repay (ATR) Rule.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, it views the home price values of
this pool as 5.3% above a long-term sustainable level (versus 7.8%
on a national level as of March 2023, down 2.7% since last
quarter). The rapid gain in home prices through the pandemic has
seen signs of moderating with a decline observed in 3Q22. Driven by
the strong gains seen in 1H22, home prices rose 5.8% yoy nationally
as of December 2022.
Nonprime Credit Quality (Mixed): The collateral consists of
15-year, 30-year and 40-year fixed-rate and adjustable-rate loans.
Adjustable-rate loans constitute 14.06% of the pool as calculated
by Fitch, which includes 3.7% debt service coverage ratio (DSCR)
loans with a default interest rate feature; 12.4% are interest-only
(IO) loans and the remaining 85.94% are fully amortizing loans.
The pool is seasoned approximately ten months in aggregate, as
calculated by Fitch (eight months per the transaction documents).
Borrowers in this pool have a moderate credit profile with a
Fitch-calculated weighted average (WA) FICO score of 742,
debt-to-income ratio of 40% and moderate leverage of 74%
sustainable loan-to-value ratio. Pool characteristics resemble
recent nonprime collateral.
Investor Properties, Non-QM and Alternative Documentation
(Negative): The pool contains a meaningful amount of investor
properties (28.4%) and non-QM loans (70.7%). The remaining loans
are SHQM (0.9%). Fitch's loss expectations reflect the higher
default risk associated with these attributes as well as loss
severity (LS) adjustments for potential ATR challenges. Higher LS
assumptions are assumed for the investor property product to
reflect potential risk of a distressed sale or disrepair.
Fitch viewed approximately 92.3% of the pool as less than full
documentation, and alternative documentation was used to underwrite
the loans. Of this, 57.6% of loans were underwritten to a bank
statement program to verify income, which is not consistent with
Appendix Q standards or Fitch's view of a full-documentation
program. To reflect the additional risk, Fitch increases the
probability of default (PD) by 1.4x on the bank statement loans.
Besides loans underwritten to a bank statement program, 17.8% of
the loans are a DSCR product, 6.0% are profit & loss (P&L)
statement loans, 4.7% are a WVOE product and 1.9% constitute an
asset depletion product.
Modified Sequential-Payment Structure (Mixed): The structure
distributes principal pro rata among the senior notes while
shutting out the subordinate bonds from principal payments until
all senior classes are paid in full. If a credit event, either a
cumulative loss trigger event or a delinquency trigger event,
occurs in a given period, principal will be distributed
sequentially to class A-1, A-2 and A-3 notes until each class
balance is reduced to zero.
The delinquency trigger for this transaction is tighter than seen
in many other recent NQM transactions. Under Fitch's stresses, the
triggers trip early in the life of the deal, switching the deal to
sequential pay under Fitch's stresses. By paying sequentially, the
structure does not leak principal to the A-2 and A-3 classes, which
is resulting in a smaller differential between Fitch's rating case
expected losses and actual tranche credit enhancement relative to
other recent NQM deals.
The structure includes a step-up coupon feature where the fixed
interest rate for class A-1, A-2 and A-3 will increase by 100 bps
starting on the May 2027 payment date. This reduces the modest
excess spread available to repay losses. However, the interest rate
is subject to the net WA coupon (WAC), and any unpaid cap carryover
amount for class A-1, A-2 and A-3 may be reimbursed from the
distribution amounts otherwise allocable to the unrated class B-3,
to the extent available.
As an additional analysis to Fitch's rating stresses, Fitch ran a
WAC deterioration scenario that varied by rating stress. The
ratings are based off of the most conservative rating scenario.
The WAC cut was derived by assuming a 2.5% cut (based on the most
common historical modification rate) on 40% (historical Alt-A
modification percentage) of the performing loans. Although the WAC
reduction stress is based on historical modification rates, Fitch
did not include the WAC reduction stress in its testing of the
delinquency trigger.
Fitch viewed the WAC deterioration as more of a pre-emptive cut
given the ongoing macroeconomic and regulatory environment. Under
the WAC deterioration scenario, a portion of borrowers will likely
be impaired but will not ultimately default due to modifications
and reduced P&I. The WAC deterioration scenario had the largest
impact on the back-loaded benchmark scenario and resulted in higher
credit enhancement being needed to achieve the same ratings as the
non-WAC deterioration scenario.
Limited Advancing (Mixed): Advances of delinquent P&I will be made
on the mortgage loans for the first 120 days of delinquency, to the
extent such advances are deemed recoverable. The P&I advancing
party (Onslow Bay Financial LLC) is obligated to fund delinquent
P&I advances. If the P&I advancing party fails to remit any P&I
advance required to be funded, the master servicer (Computershare
Trust Company, N.A.) will fund the advance. The ultimate advancing
party in the transaction is the master servicer, Computershare,
rated 'BBB'/'F3' by Fitch.
The stop-advance feature limits the external liquidity to the bonds
in the event of large and extended delinquencies, but the
loan-level LS is less for this transaction than for those where the
servicer is obligated to advance P&I for the life of the
transaction, as P&I advances made on behalf of loans that become
delinquent and eventually liquidate reduce liquidation proceeds to
the trust.
High California Concentration (Negative): Approximately 38.5% of
the pool is located in California. Additionally, the top three MSAs
— Los Angeles (21.7%), New York (10.3%) and Miami (7.8%) —
account for 39.8% of the pool. As a result, a geographic
concentration penalty of 1.02x was applied to the PD.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper market value declines (MVDs) at
the national level. The analysis assumes MVDs of 10.0%, 20.0% and
30.0%, in addition to the model-projected 5.8% in the base case.
The analysis indicates that there is some potential rating
migration with higher MVDs for all rated classes, compared with the
model projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all the rated classes. Specifically,
a 10% gain in home prices would result in a full category upgrade
for the rated class excluding those being assigned ratings of
'AAAsf'.
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 SitusAMC, Canopy Financial Technology Partners, Clayton
Services, Consolidated Analytics, Edge Mortgage Advisory Company,
LLC and Evolve Mortgage Servicers. The third-party due diligence
described in Form 15E focused on three areas: compliance review,
credit review and valuation review.
Fitch considered this information in its analysis and, as a result,
Fitch did not make any adjustments to its analysis due to
loan-level due diligence findings. Based on the results of the 100%
due diligence performed on the pool, the overall expected loss was
reduced by 47 bps.
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.
OHA CREDIT 11: Fitch Affirms 'BB-sf' Rating on Class E Notes
------------------------------------------------------------
Fitch Ratings has affirmed the ratings of class B, C, D and E notes
in OHA Credit Funding 11, Ltd. (OHA 11). The Rating Outlooks on all
rated tranches remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
OHA Credit
Funding 11, Ltd.
B 67115VAC6 LT AAsf Affirmed AAsf
C 67115VAE2 LT Asf Affirmed Asf
D 67115VAG7 LT BBB-sf Affirmed BBB-sf
E 67116BAA3 LT BB-sf Affirmed BB-sf
TRANSACTION SUMMARY
OHA 11 is an arbitrage cash flow collateralized loan obligations
(CLO) managed by Oak Hill Advisors, L.P. OHA 11 closed in May 2022
and will exit its reinvestment period in July 2025. 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 the stable performance of the
portfolio. As of the March 2023 trustee report, the aggregate
portfolio par amount was approximately 0.16% above the original
target par amount. The Fitch weighted average rating factor
remained stable at 25.3 compared to 25.3 at closing, equivalent to
the 'B'/'B-' rating level.
The portfolio consists of 225 obligors, and the largest 10 obligors
represent 11.18% of the portfolio. There were no defaulted obligors
in the portfolio. Exposure to issuers with a Negative Outlooks and
Fitch's watchlist were 18.3% and 2.9%, respectively.
First lien loans, cash and eligible investments comprise 98.7% of
the portfolio. Fitch's weighted average recovery rate increased to
76.6% from 76.2% from closing.
All coverage tests, collateral quality tests (CQTs), and
concentration limitations are in compliance for the transaction.
Cash Flow Analysis
Fitch updated its Fitch Stressed Portfolio (FSP) analysis since the
transaction is still in its reinvestment period. The FSP 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 6.25 years. The portfolio's weighted
average spread was stressed to the covenant minimum level of 3.40%.
Other FSP assumptions include 8.5% non-senior secured assets, 5.0%
fixed rate assets and 7.5% CCC assets.
The rating actions for all classes of notes in OHA 11 are in line
with their model-implied ratings (MIRs), as defined in the CLOs and
Corporate CDOs Rating Criteria.
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 downgrades of two notches for
the class B and C notes and one notch for the class D and E notes,
based on MIRs.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
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 and 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.
PACWEST REFERENCE 2022-1: Fitch Cuts Ratings on 2 Tranches to 'BB+'
-------------------------------------------------------------------
Fitch Ratings has downgraded PacWest Reference Notes, Series 2022-1
(PacWest 2022-1) rated classes M1 and M2 from 'BBB-sf' to 'BB+sf'.
Rating Watch Negative (RWN) has been removed and Negative Rating
Outlook has been assigned. The action follows Fitch placing the
classes on RWN on March 20, 2023.
Entity/Debt Rating Prior
----------- ------ -----
PacWest Reference Notes,
Series 2022-1
M-1 694908AD6 LT BB+sf Downgrade BBB-sf
M-2 694908AE4 LT BB+sf Downgrade BBB-sf
KEY RATING DRIVERS
Counterparty Risk (Negative): On April 14 Fitch downgraded PacWest
Bancorp's (PACW) and its subsidiary bank Pacific Western Bank
Long-Term Issuer Default Rating (IDR) to 'BB+' from 'BBB-' and
Short-Term IDR to 'B' from 'F3'. Bank Outlook Negative. The rating
action was primarily driven by the banks Funding and Liquidity
profile, specifically reliance on non-core funding in the wake of
the failure of Silicon Valley Bank.
Ratings on the notes are directly linked to the IDR of the
counterparty, Pacific Western Bank (BB+/B/Negative). There is no
transfer or sale of assets, and the referenced collateral will
remain on balance sheet as unencumbered assets of the bank.
Interest payments on the notes are unsecured debt obligations of
PacWest. Funds from the sale of the notes are to be deposited in an
eligible account at CitiBank (A+/F1). Principal payments on the
notes will be paid from this account based on the performance of
the underlying.
Stable Deal Performance (Positive): PacWest 2022-1 is a recently
issued NonPrime synthetic transaction seasoned approximately six
months. Over the last six months performance has been stable, 30+
delinquencies remain below 1%. At issuance, the pool reported
approximately 0.09% delinquency compared to 0.18% currently. There
have been no losses incurred within the pool. The pool has only
paid down about 2.5%, as prepayments remain low and flat (3m CPR at
2.94%).
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- PacWest 2022-1 is capped at the rating of Pacific Western Bank,
and negative rating action will result in a similar negative action
for the transaction;
- The actual performance of the transaction to date has been in
line with expectations and the IDR of the issuer is currently the
constraint on the rated notes due to the direct credit linkage.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Any positive rating pressure for the transaction will be capped
at the rating and Outlook of that of Pacific Western Bank. The
actual performance of the transaction to date has been in line with
expectations and the IDR of the issuer is currently the constraint
on the rated notes due to the direct credit linkage.
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.
PIKES PEAK 14 (2023): Fitch Gives BB-(EXP) Rating on Cl. E Notes
----------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Pikes Peak CLO 14 (2023) Ltd.
Entity/Debt Rating
----------- ------
Pikes Peak CLO
14 (2023) Ltd
A-1 LT NR(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
B LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D LT BBB(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
Subordinated LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Pikes Peak CLO 14 (2023) Ltd (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by
Partners Group US Management CLO LLC. Net proceeds from the
issuance of the secured and subordinated notes will provide
financing on a portfolio of approximately $340.0 million of
primarily first-lien senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B/B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 24.59 versus a maximum covenant, in
accordance with the initial expected matrix point of 24.60. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from appropriate credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
100.0% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.3% versus a
minimum covenant, in accordance with the initial expected matrix
point of 71.9%.
Portfolio Composition (Positive): The largest three industries may
constitute up to 45.0% of the portfolio balance in aggregate, while
the top five obligors can represent up to 11.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
U.S. CLOs.
Portfolio Management (Neutral): The transaction has a 5.0-year
reinvestment period and reinvestment criteria similar to other U.S.
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings. The weighted average life (WAL) used for the
transaction stress portfolio and matrices analysis is 12 months
less than the WAL covenant to account for structural and
reinvestment conditions after the reinvestment period. In Fitch's
opinion, these conditions would reduce the effective risk horizon
of the portfolio during stress periods. The performance of the
rated notes at the other permitted matrix points is in line with
other recent CLOs.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; results under these sensitivity scenarios are as severe as
between 'BBB+sf' and 'AA+sf' for class A-2 notes, between 'BB+sf'
and 'A+sf' for class B notes, between 'B+sf' and 'BBB+sf' for class
C notes, and between less than 'B-sf' and 'BB+sf' for class D notes
and between less than 'B-sf' and 'B+sf' for class E notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B notes, 'A+sf' for class C notes,
'A+sf' for class D notes and 'BBB+sf' for class E notes.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, 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.
READY CAPITAL 2020-FL4: DBRS Cuts 2 Classes Ratings to CCC
----------------------------------------------------------
DBRS, Inc. downgraded its ratings on two Classes of Ready Capital
Mortgage Financing 2020-FL4, LLC as follows:
-- Class F to CCC (sf) from BB (low) (sf)
-- Class G to CCC (sf) from B (low) (sf)
DBRS Morningstar also confirmed its ratings on the remaining
classes as follows:
-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
All classes have Stable trends with the exception of Classes of F
and G as they have a rating that does not carry a trend. In
conjunction with this press release, DBRS Morningstar published a
Surveillance Performance Update report with in-depth analysis and
credit metrics for the transaction and with business plan updates
on select loans. For access to this report, please click on the
link under Related Documents below or contact us at
info@dbrsmorningstar.com.
The rating downgrades on Classes and F and G are the result of
accumulated interest shortfalls, which have persisted for more than
six consecutive months. As per DBRS Morningstar's Structured
Finance and Covered Bonds Ratings Committee Global Procedure dated
October 2022, the tolerance threshold for a DBRS Morningstar credit
rating in the BB or B rating category is six months. The shortfalls
stem from the difference in the floating interest rate benchmark
between the bonds and some of the individual loans remaining in the
transaction. While the bonds' benchmark rate has now transitioned
to the Secured Overnight Financing Rate (SOFR), the benchmark rate
on many of the remaining loans has yet to transition from Libor and
is not expected to in the immediate term. As a result, DBRS
Morningstar expects interest shortfalls to continue to accrue on
Classes F and G; however, the shortfalls may ultimately be repaid
over time as the benchmark rates on the loans all transition to
SOFR.
At issuance, the pool consisted of 56 floating-rate mortgages
secured by 63 mostly transitional properties with an aggregate
principal balance of $405.3 million, excluding $147.5 million of
future funding commitments. The transaction was structured with a
24-month acquisition period that expired in July 2022.
As of the March 2023 reporting, 21 of the original 56 loans remain
in the pool with an aggregate principal balance of $276.0 million,
resulting in a collateral reduction of 33.3% since issuance. In
general, the borrowers for the remaining loans have been unable to
execute the stated business plans at issuance as nine loans,
representing 46.9% of the current pool balance, are in special
servicing, five of which are delinquent. In addition, there are
eight loans, representing 2.9% of the current pool balance, being
monitored on the servicer's watchlist, which have been flagged for
credit concerns including maturity risk, delinquency, and low debt
service coverage ratio (DSCR).
Seven of the remaining loans, representing 38.5% of the current
trust balance, are secured by office properties; five loans,
representing 36.7% of the current trust balance, are secured by
industrial properties; and five loans, representing 18.2% of the
current trust balance, are secured by mixed-use properties. The
remaining loans are secured by one retail property and three
multifamily properties. In terms of location, 10 properties,
representing 52.9% of the trust balance, are located in suburban
markets and 11 properties, representing 47.1% of the trust balance,
are in urban markets. This compares with 64.0% of the trust balance
and 27.9% of the trust balance, respectively, at issuance.
Twenty of the 21 remaining loans were structured with future
funding components totaling $115.0 million to assist individual
borrowers in the respective business plans, which included funds
for property renovations, accretive leasing costs, and
performance-based earn-outs. As of February 2023, the lender had
advanced a total of $69.0 million to all 20 individual borrowers.
The largest advance, $11.7 million, was provided to the borrower of
the Frogtown Gilroy loan (Prospectus ID#21, 5.8% of the current
pool balance), which is secured by a portfolio of eight Class C
industrial/flex mixed-use and retail properties totaling 59,279
square feet (sf) in suburban Los Angeles. This loan is currently on
the servicer's watchlist for its upcoming June 2023 maturity date
and poor performance as the YE2022 DSCR was 0.17 times (x).
According to servicer commentary, the borrower is actively pursuing
take-out financing with a third-party lender.
An additional $46.0 million of loan future funding allocated across
16 individual borrowers remains available. The largest portion
($8.3 million) is allocated to the borrower of the Parkwood Plaza
loan (Prospectus ID#7; 6.7% of current pool balance). The loan, the
third-largest in special servicing, is secured by a Class A/B
office building in suburban Atlanta. The loan transferred to
special servicing in February 2023 for maturity default. The
borrower's business plan has stalled as the occupancy rate remains
unchanged from issuance at 2.8%; however, the borrower has
completed the capital improvement plan. An updated appraisal
completed in December 2022 valued the property at $20.0 million, a
minor decrease of 1.0% from the issuance appraisal of $20.2
million. The borrower and lender are currently negotiating a
potential loan modification as the current performance of the
collateral does not meet the required minimum thresholds to qualify
for the first of two 12-month loan extension options. If an
agreement is finalized and the loan is extended, the borrower may
have to pay down the principal balance of the loan, deposit funds
into an operating shortfall reserve, and purchase a new floating
interest rate cap agreement.
The largest loan in the pool, 55 East Jackson (Prospectus ID#1;
16.1% of current pool balance), transferred to special servicing in
February 2023 for ground lease default. According to the servicer,
discussions with the borrower are ongoing with a resolution
expected by August 2023. The loan is secured by a Class B office
building totaling 451,258 sf in the East Loop Submarket of Chicago.
Occupancy decreased to 47.0% after the property's largest tenant,
DePaul University (DePaul), vacated upon its lease expiration in
December 2022. According to the collateral manager, the borrower is
in discussions with a non-profit tenant that would back-fill the
space; however, no further material information has been provided
to date. As of YE2022, the loan reported a DSCR of 2.27x, which is
expected to decrease significantly following the departure of
DePaul. The loan matures in August 2023 and includes one,12-month
extension option.
The second-largest loan in special servicing, 19 South Lasalle
(Prospectus ID#5; 7.2% of pool balance), transferred to special
servicing in May 2022 for imminent default risk and matured in July
2022. The sponsor's business plan at issuance of increasing
occupancy and rents to market levels never materialized because of
a combination of factors caused by the Coronavirus Disease
(COVID-19) pandemic. Since issuance, the property has experienced
sharp declines in occupancy. As of July 2022, the property was
43.3% occupied; however, a February 2023 update from the collateral
noted that additional unspecified tenants have vacated since that
time, further lowering the occupancy rate.
An updated appraisal completed in June 2022 valued the property
with an in-place value of $13.3 million, down from $25.4 million at
issuance. Based on the current outstanding loan balance of $19.9
million and current outstanding advances of $0.9 million, the total
loan exposure to value ratio is 156.6%. DBRS Morningstar liquidated
the loan from the trust in its most recent analysis, resulting in a
loss severity in excess of 50.0%.
Notes: All figures are in U.S. dollars unless otherwise noted.
SYCAMORE TREE 2023-3: S&P Assigns BB- (sf) Rating on Class E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its 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 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
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
UBS COMMERCIAL 2018-C11: Fitch Affirms 'B-sf' Rating on E-RR Certs
------------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of UBS Commercial Mortgage
Trust, commercial mortgage pass-through certificates, series
2018-C11 (UBS 2018-C11).
Entity/Debt Rating Prior
----------- ------ -----
UBS 2018-C11
A2 90276XAR6 LT AAAsf Affirmed AAAsf
A3 90276XAT2 LT AAAsf Affirmed AAAsf
A4 90276XAU9 LT AAAsf Affirmed AAAsf
A5 90276XAV7 LT AAAsf Affirmed AAAsf
AS 90276XAY1 LT AAAsf Affirmed AAAsf
ASB 90276XAS4 LT AAAsf Affirmed AAAsf
B 90276XAZ8 LT AA-sf Affirmed AA-sf
C 90276XBA2 LT A-sf Affirmed A-sf
D 90276XAC9 LT BBB-sf Affirmed BBB-sf
E-RR 90276XAE5 LT B-sf Affirmed B-sf
F-RR 90276XAG0 LT CCCsf Affirmed CCCsf
XA 90276XAW5 LT AAAsf Affirmed AAAsf
XB 90276XAX3 LT AA-sf Affirmed AA-sf
XD 90276XAA3 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Stable Loss Expectations: Overall pool performance has been
relatively stable since Fitch's prior rating action. Nine loans
(29.5% of pool), including one (7.1%) in special servicing, were
designated Fitch Loans of Concern (FLOCs). Fitch's current ratings
reflect a base case loss of 4.40%.
Fitch Loans of Concern: The largest contributor to loss
expectations, 45-55 West 28th Street (2.8%), is secured by a 34,142
sf mixed-use property in Chelsea neighborhood of Manhattan. The
loan, which is sponsored by SGR Trust, transferred to special
servicing in November 2020 for payment default but returned to the
master servicer in November 2021 after forbearance was approved.
Occupancy and servicer-reported NOI debt service coverage ratio
(DSCR) for this IO loan were 88% and 0.77x, respectively, as of the
TTM ended March 2021 compared with 87% and 0.32x as of the YTD June
2020, 80% and 1.03x as of the YTD September 2019 and 95% and 1.47x
at issuance.
Fitch's base case loss of 21% reflects an 8.25% cap rate off the
annualized YTD September 2019 NOI to account for performance
declines/concerns and lack of updated financials, but gives credit
for the loan returning the master servicer, the borrower performing
under the terms of the forbearance and the loan remaining current.
Fitch's stressed value is in-line with the updated servicer
provided valuation.
The largest loan in the pool, 20 Times Square (7.1%) is secured by
the leased fee interest in the ground under a 42-story mixed
building located at 701 Seventh Avenue on the northeast corner of
West 47th Street. The collateral consists of a rectangular-shaped
parcel totaling 16,066 sf. The improvements on top of the
collateral consists of a 42-story story building with 74,820 sf of
retail space, 18,000 sf of digital signage and a 452-room luxury
hotel with various food and beverage options branded as an Edition
Hotel by Marriott. The retail portion is 11.3% occupied by
Hershey's Chocolate World through March 2037.
The loan transferred to special servicing in November 2022 due to
an event of default. Approximately $26.8 million of mechanics liens
have been filed against the property in connection with the
construction of the hotel as well as various foreclosure actions
filed in connection there with the liens. The liens are a breach
under the Ground Lease and the Loan Agreement. Natixis as lender on
the leasehold foreclosed on the leasehold interest and took title
to the hotel in January 2022. A cash sweep is in effect due to the
event of default. Payments to the mezzanine ceased in December
2022.
The special servicer has ordered an appraisal and is preparing to
exercise legal remedies at maturity in May 2023. At issuance, this
loan received a stand-alone investment grade credit opinion of
'Asf'. Fitch modeled a minimal loss to account for potential
maturity risks and servicing fees.
High Office Concentration: Loans secured by office properties
comprise 36.1% of the pool, including seven (28.9%) in the top 15
and three (10.8%) that were designated FLOCs. In its analysis,
Fitch increased the cap rates for several of these loans and
remains concerned with performance, transfer to special servicing
and refinance risk at loan maturity.
Change in Credit Enhancement (CE): Since Fitch's prior rating
action, five loans with a combined balance of $24.9 million balance
were disposed with a $6.4 million loss to the trust, causing a
decline in CE to classes E-RR and F-RR from issuance levels. Four
of these loans were in special servicing and modeled with combined
losses of $8.9 million at Fitch's prior rating action. As of the
March 2023 distribution date, the pool's aggregate balance has been
reduced by 12.7% to $702.1 million from $803.8 million at issuance.
Actual realized losses of $6.4 million affected the non-rated NR-RR
and VRR classes, and cumulative interest shortfalls of $638,717 are
currently affecting the non-rated NR-RR and VRR classes.
Eighteen loans (54.2%) are full-term IO and five (12.1%) were
structured with a partial-term IO component at issuance. All five
are in their amortization periods. Three loans (3.5%) are fully
defeased. Loan maturities are concentrated in 2028 (79.9%). Two
loans (8.9%) mature in 2023, three (8.1%) in 2025 and one (3.1%) in
2027.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Downgrades of the 'AAAsf' rated classes are not likely due to
sufficient CE and the expected receipt of continued amortization
but could occur if interest shortfalls affect the class. Classes B,
X-B, C, D and X-D would be downgraded if interest shortfalls affect
the class, additional loans become FLOCs or if performance of the
FLOCs deteriorates further. Classes E-RR and F-RR would be
downgraded if loss expectations increase or additional loans
transfer to special servicing and/or become FLOCs.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Upgrades of classes B, X-B, C, D and X-D may occur with significant
improvement in CE and/or defeasance, but would be limited based on
sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'Asf' if there
is a likelihood for interest shortfalls. Upgrades of classes E-RR
and F-RR could occur if performance of the FLOCs improves
significantly and/or if there is sufficient CE, which would likely
occur if the non-rated class is not eroded and the senior classes
pay-off.
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.
UNITED AUTO 2022-2: S&P Lowers Class E Notes Rating to 'B (sf)'
---------------------------------------------------------------
S&P Global Ratings lowered its rating on United Auto Credit
Securitization Trust (UACST) 2022-2's class E notes to 'B (sf)'
from 'BB (sf)'. At the same time, S&P removed the rating from
CreditWatch, where it was placed with negative implications on Jan.
17, 2023.
S&P said, "The rating action reflects the transaction's collateral
performance to date and our expectation regarding future collateral
performance, including an increase in the series' cumulative net
loss (CNL) expectation. This rating action also accounts for the
transaction's structure and 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, we believe the
creditworthiness of the class E notes is consistent with the
lowered rating. The transaction's collateral performance is
trending worse than our original CNL expectation. 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. Excess spread has largely been used to
cover net losses, leaving very little or no funds available to
build the transaction's overcollateralization (O/C) amount in
dollar terms. From the January 2023 to March 2023 collection
periods, United Auto Credit Corp. (UACC) forwent its servicing fee,
which slowed the decline in the O/C amount during these months."
Table 1
UACST collateral performance (%)
Pool 60+ days Current Current Current
Mo.(i) factor delinq. Ext. CGL CRR CNL
July 2022 97.02 0.05 0.86 0.03 0.00 0.03
August 2022 93.96 2.46 2.20 0.11 0.00 0.11
September 2022 91.48 4.03 2.27 0.60 19.14 0.48
October 2022 87.96 4.03 5.04 2.34 13.15 2.03
November 2022 84.29 4.20 4.60 4.41 16.60 3.68
December 2022 80.57 4.23 6.74 6.72 17.85 5.52
January 2023 76.82 4.09 6.68 8.68 18.86 7.04
February 2023 73.81 3.53 5.30 10.37 20.15 8.28
March 2023 70.28 3.19 4.64 12.36 21.10 9.75
(i)As of the monthly collection period.
UACST--United Auto Credit Securitization Trust.
Mo.--Month.
Delinq.--Delinquencies.
CGL--Cumulative gross loss.
CRR--Cumulative recovery rate.
CNL--Cumulative net loss.
Ext.--Extensions.
Table 2
UACST 2022-2 overcollateralization summary
Current Target Current Target
Mo.(i) (%)(ii) (%)(ii) ($ mil.)(iii) ($ mil.)(iv)
July 2022 11.84 15.50 32.75 42.86
August 2022 13.08 15.50 35.03 41.51
September 2022 14.02 15.50 36.56 40.41
October 2022 13.78 15.50 34.55 38.86
November 2022 13.33 15.50 32.03 37.24
December 2022 12.59 15.50 28.92 35.59
January 2023 12.49 15.50 27.35 33.94
February 2023 12.57 15.50 26.43 32.60
March 2023 12.39 15.50 24.81 31.04
(i)As of the monthly collection period.
(ii)Percentage of the current pool balance.
(iii)The current overcollateralization amount.
(iv)The target overcollateralization amount for the months listed
above is the product of 15.50% and the collateral pool balance as
of the end of the related collection period.
UACST--United Auto Credit Securitization Trust.
Mo.--Month.
In view of the series' performance to date, which is trending worse
than our initial CNL expectation, along with continued adverse
economic headwinds and weaker recovery rates, we raised our
expected CNL from this series.
Table 3
CNL expectation (%)
Original Current
lifetime lifetime
Series CNL exp. CNL exp.(i)
2022-2 19.75-20.75 25.50
(i)As of the collection period ended March 31, 2023.
CNL exp.--Cumulative net loss expectation.
The 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. The transaction also has credit enhancement in the form of a
non-amortizing reserve account, overcollateralization, and excess
spread. The non-amortizing reserve account for the transaction
remains at its required level, which increases as a percentage of
the current pool balance as the pool amortizes.
Although hard credit enhancement for the class E notes has
increased since issuance, the class remains highly dependent upon
excess spread and is vulnerable to continued losses, which can
exacerbate the decline in overcollateralization. The lowered rating
on the class E notes from series 2022-2 reflects our view that the
total credit support as a percentage of the amortizing pool
balance, compared with our expected remaining losses, is
commensurate with the revised rating.
Table 4
Hard credit support(i)
As of the collection period ended March 31, 2023
Total hard Current total hard
credit support credit support
Series Class at issuance (%) (% of current)
2022-2 E 12.00 14.52
(i)Calculated as a percentage of the total gross receivable pool
balance, which consists of a reserve account and
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 series 2022-2 class E notes, giving credit
to stressed excess spread. 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 the transaction's performance. Additionally, we
conducted sensitivity analyses to determine the impact that a
moderate ('BBB') stress level scenario would have on our rating if
losses trended higher than our revised base-case loss expectation.
In our view, the results demonstrated that the class E notes have
adequate credit enhancement at the lowered rating level, which is
based on our analysis as of the collection period ended March 31,
2023.
"Looking forward, we believe the evolving economic headwinds and
potential negative impact on consumers could result in a greater
proportion of delinquencies and extensions ultimately defaulting,
which, if not offset by recovery, are risks to excess spread and
overcollateralization. As such, we will continue to monitor the
performance of this transaction to ensure that the credit
enhancement remains sufficient, in our view, to cover our CNL
expectation under our stress scenarios for the rated classes."
VERUS SECURITIZATION 2023-3: S&P Assigns (P) B-(sf) on B-2 Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Verus
Securitization Trust 2023-3's mortgage-backed notes.
The note issuance is an RMBS securitization backed by primarily
newly originated first-lien, fixed- and adjustable-rate residential
mortgage loans, (including mortgage loans with initial
interest-only periods) to both prime and non-prime borrowers. The
loans are secured by single-family residences, townhouses,
planned-unit developments, two- to four-family residential
properties, condominiums, condotels, manufactured housing and five-
to 10-unit multifamily residences. The pool has 795 loans backed by
803 properties, which are primarily non-qualified mortgage/ATR
compliant and ATR-exempt loans. Of the 795 loans, two are
cross-collateralized loans backed by 10 properties.
The preliminary ratings are based on information as of April 13,
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, representations and warranties (R&Ws) framework, and
geographic concentration;
-- The mortgage aggregator, Invictus Capital Partners (Invictus);
-- The mortgage originator, Hometown Equity Mortgage LLC; and
-- The potential impact current and near-term macroeconomic
conditions may have on the performance of the mortgage borrowers in
the pool. S&P said, "Per our latest macroeconomic update, we
continue to expect the U.S. will fall into a shallow recession in
2023. We now expect U.S. GDP to decline 0.3% from its peak in
first-quarter 2023 to its third-quarter trough. If correct, this
will beat the 2001 recession as the softest recession in recent
history, since 1960. Although safeguards from the Fed and other
regulators have stabilized conditions, banking concerns increase
risks of a worse outcome. Chances for a worsening recession have
increased, with inflation moderating faster than expected in our
baseline forecast. As a result, we continue to maintain the revised
outlook per the April 2020 update to the guidance to our RMBS
criteria (which increased the archetypal 'B' projected foreclosure
frequency to 3.25% from 2.50%)."
Preliminary Ratings Assigned
Verus Securitization Trust 2023-3(i)
Class A-1, $251,311,000: AAA (sf)
Class A-2, $37,860,000: AA (sf)
Class A-3, $54,615,000: A (sf)
Class M-1, $34,596,000: BBB- (sf)
Class B-1, $22,193,000: BB- (sf)
Class B-2, $16,972,000: B- (sf)
Class B-3, $17,625,182: Not rated
Class A-IO-S, notional(ii): Not rated
Class XS, notional(ii): Not rated
Class R, not applicable: Not rated
(i)The collateral and structural information reflect the term sheet
dated April 11, 2023. The preliminary ratings address the ultimate
payment of interest and principal; they do not address payment of
the cap carryover amounts.
(ii)The notional amount equals the loans' aggregate unpaid
principal balance.
WELLS FARGO 2018-C45: Fitch Lowers Rating on Cl. H-RR Certs to CCC
------------------------------------------------------------------
Fitch Ratings has downgraded three and affirmed 11 classes of Wells
Fargo Commercial Mortgage Trust (WFCM) 2018-C45 Commercial Mortgage
Pass-Through Certificates. The Rating Outlooks on two classes
remain Negative following the downgrades.
Entity/Debt Rating Prior
----------- ------ -----
Wells Fargo
Commercial
Mortgage Trust
2018-C45
A-3 95001NAX6 LT AAAsf Affirmed AAAsf
A-4 95001NAY4 LT AAAsf Affirmed AAAsf
A-S 95001NBB3 LT AAAsf Affirmed AAAsf
A-SB 95001NAW8 LT AAAsf Affirmed AAAsf
B 95001NBC1 LT AA-sf Affirmed AA-sf
C 95001NBD9 LT A-sf Affirmed A-sf
D 95001NAC2 LT BBB-sf Affirmed BBB-sf
E-RR 95001NAE8 LT BBB-sf Affirmed BBB-sf
F-RR 95001NAG3 LT BBsf Downgrade BB+sf
G-RR 95001NAJ7 LT Bsf Downgrade BB-sf
H-RR 95001NAL2 LT CCCsf Downgrade B-sf
X-A 95001NAZ1 LT AAAsf Affirmed AAAsf
X-B 95001NBA5 LT A-sf Affirmed A-sf
X-D 95001NAA6 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Increased Loss Expectations on Fitch Loans of Concern: While the
overall loss expectations for the pool are relatively in-line with
Fitch's prior rating action, the downgrades to classes F-RR, G-RR,
and H-RR reflect continued performance declines for the Fitch Loans
of Concern (FLOCs), particularly higher loss expectations for the
Parkway Center loan (6.7% of the pool) which transferred to special
servicing since Fitch's prior review. Fitch identified seven loans
(13.3% of the pool) as Fitch Loans of Concern (FLOCs), including
three loans (8.4%) in special servicing. Fitch's current ratings
incorporate a base case loss of 5.80%.
The largest contributor and increase to losses since Fitch's prior
rating action is the specially serviced Parkway Center loan (6.7%
of the pool), which is secured by a six building, 588,913-sf
suburban office park located four miles southwest of downtown
Pittsburg, PA. The loan transferred to special servicing in
November 2022 due to imminent monetary default resulting from cash
flow issues and occupancy declines.
Larger tenant, McKesson (previously 8.3% NRA), vacated prior to
their December 2022 lease expiration and Alorica (previously 6.5%
NRA) exercised an early lease termination option and vacated in
October 2022. With the tenant departures, occupancy declined to
64.7% from 79.6% at YE 2021. Per the November 2022 lease
expiration, upcoming rollover includes seven leases for 9.1% of the
NRA in 2022, ten leases for 7.9% in 2023, and seven leases for 9.1%
in 2024. According to the servicer, occupancy has fallen further to
54% as of January 2023.
The loan has remained current and has total reserves in place of
$5.71 million as of March 2023. Per servicer updates, the borrower
has sent a proposal for a loan modification that included securing
new equity, waiver of principal and reserves payments for 18 months
and funding shortfalls in operating expenses from excess cash
reserves. Fitch's base case loss of 23.3% reflects an increased cap
rate of 10.50% due to lower property quality (B- at issuance) and
underperforming suburban office. In addition, a 25% stress was
applied to the YE 2021 NOI to account for upcoming rollover as well
as higher submarket vacancies.
Retail Concentration: The largest property type concentration in
the pool is retail at 35.6%, including five (26.2%) of the top 15
loans. The largest loan in the pool, Village at Leesburg (11.9% of
the pool), while the second largest contributor to loss, also had
the largest improvement in losses since Fitch's prior rating
action. The loan is secured by a 546,107-sf grocery anchored retail
center located in Leesburg, VA, anchored by Wegmans ground lease
(26.0% of the NRA; lease expiration July 2034) with other tenants
including a 14-screen Cobb Theaters (11.7%; February 2029), L.A.
Fitness (8.2%, March 2026) and Bowlero (3.9%; March 2027).
Collateral performance has rebounded from its pandemic-related
performance declines after tenants were granted rent abatements in
2020 and 2021 and the loan reemerged from special servicing in
November 2021 with no forbearance or loan modification. The
annualized YTD September 2022 rental revenue remains about 13.8%
below issuance levels.
Occupancy has remained relatively stable with the collateral about
88.8% occupied as of September 2022. The YTD September 2022 NOI
debt service coverage ratio (DSCR) has recovered to 1.57x from
1.21x and 1.08x for the YTD September 2021 and YE 2020 reporting
periods. The loan is partial, interest-only (IO) for 60 months and
will begin amortizing in May 2023.
Due to the trough performance in 2020 and 2021, Fitch's analysis is
based off YE 2019 NOI with a 5% stress which resulted in a 11.9%
loss. Fitch has removed the loan from FLOC status.
CoolSprings Galleria (3.0%), which is secured by a 640,176-sf
portion of a 1.2 million-sf super-regional mall located in
Franklin, TN. Macy's, JCPenney and Dillard's are non-collateral
anchors, and Belk and Belk Kids and Men are collateral anchors. The
loan is sponsored by a joint venture between TIAA and CBL.
The loan was returned to the master servicer in January 2022
following the execution of a modification agreement and CBL's
reorganization and emergence from Chapter 11 bankruptcy. Under the
terms of the modification, the lender would waive bankruptcy
defaults in exchange for the borrower covering the costs of the
modification, and CBL's ownership interest in the property is being
assumed by one of its newly formed subsidiaries. The loan had
initially transferred to special servicing in October 2021 in
response to CBL entering Chapter 11 bankruptcy in November 2020.
Subject YE 2022 NOI has fallen to $17.4 million from $16.7 million
as of YE 2021, $17.6 million as of YE 2020, $20.3 million as of YE
2019 and underwritten NOI of $19.7 million. YE 2022 EGI was 12.4%
below underwritten expectations at issuance. The NOI DSCR remains
lower at 1.77x as of YE 2022 compared to pre-pandemic levels of
2.09x at YE 2019 and 2.10x at YE 2018.
Fitch's base case loss of 13.4% reflects a 15% cap rate and 10%
haircut to YE 2022 NOI to reflect sponsorship bankruptcy, declining
sales and competition with overlapping anchors. The loan remains a
FLOC.
Changes in Credit Enhancement: As of the March 2023 distribution
date, the pool's aggregate balance has paid down by 6.1% to $618.5
million from $658.8 million. Credit enhancement (CE) for the senior
rated classes has improved due to continued amortization of loans
while the subordinated classes have experienced minimal changes in
CE. Nine loans (24.9% of the pool) are full-term, IO; 17 loans
(16.4%) are currently amortizing; and 20 loans (58.7%) are
currently in their partial IO periods. Three loans (3.8% of the
original pool balance) are fully defeased. Losses of $2,000 and
interest shortfalls of $204,340 are currently impacting the
non-rated J-RR class.
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 of classes A-1, A-2, A-SB, A-3, A-4, X-A, A-S and
B are not considered likely due to the position in the capital
structure, but may occur should interest shortfalls affect these
classes or with a significant deterioration in pool performance.
- Downgrades of the 'Asf' and 'BBBsf' categories would occur should
expected losses for the pool increase substantially.
- Downgrades to the 'BBsf' and 'Bsf' categories would occur should
loss expectations increase as a result of the continued performance
declines of the FLOCs or additional loans default and/or transfer
to the special servicer.
- Downgrades to the 'CCC' category would occur with greater
certainty of loss on the FLOCs and/or as losses are realized.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Outlook changes. However, for some
transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment grade notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Sensitivity factors that lead to upgrades would include stable to
improved asset performance, coupled with pay down and/or
defeasance. Upgrades of the 'Asf' and 'AAsf' categories would only
occur with significant improvement in CE and/or defeasance and with
the stabilization of performance on the larger FLOCs.
- Upgrades to the 'BBBsf' category would take into account 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.
- Upgrades to the 'BBsf' and 'Bsf' categories are not likely until
the later years in a transaction and only if the performance of the
remaining pool is stable and/or properties return to pre-pandemic
levels, and there is sufficient CE to the classes.
- Upgrades to the 'CCCsf' category would occur with stable
performance, improved recovery and workout for the specially
serviced loans.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
*********
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