/raid1/www/Hosts/bankrupt/TCR_Public/230730.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, July 30, 2023, Vol. 27, No. 210
Headlines
AFFIRM ASSET 2021-B: DBRS Confirms B Rating on Class E Notes
AGL CLO 26: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
AJAX MORTGAGE 2023-C: DBRS Gives Prov. BB Rating on M-2 Notes
AMERICAN AIRLINES 2013-1: Fitch Hikes Rating on Cl. A Certs to 'BB'
AMERICAN CREDIT 2023-3: S&P Assigns Prelim 'BB-' Rating on E Notes
AMSR 2023-SFR2: DBRS Gives Prov. BB Rating on Class F-1 Certs
ARRIVO ACCEPTANCE: DBRS Takes Actions on 4 Trust Transactions
ATLAS SENIOR XXI: S&P Assigns BB- (sf) Rating on Class E Notes
BANK 2017-BNK9: Fitch Lowers Rating on 2 Tranches to 'B-sf'
BANK 2018-BNK10: Fitch Affirms 'BB-sf' Rating on 2 Tranches
BBCMS 2018-BXH: DBRS Confirms BB(low) Rating on Class F Certs
BCC MIDDLE 2023-1: S&P Assigns Prelim BB- (sf) Rating on E Notes
BENCHMARK 2018-B8: Fitch Cuts Rating on Class E-RR Certs to 'BBsf'
BMO 2023-5C1: Fitch Assigns 'B-(EXP)sf' Rating to Class G-RR Certs
BRSP 2021-FL1: DBRS Confirms B(low) Rating on Class G Notes
BX TRUST 2018-BILT: Fitch Hikes Rating on Class F Certs to 'BB-sf'
CANYON CLO 2023-1: S&P Assigns Prelim BB- (sf) Rating on E Notes
CARLYLE US 2023-3: Fitch Assigns 'BB-(EXP)sf' Rating to E Notes
CD 2016-CD2: Fitch Affirms CCsf Rating on 4 Tranches
CEDAR FUNDING XVII: S&P Assigns BB- (sf) Rating on Class E Notes
CIRRUS FUNDING 2018-1: Moody's Ups $36MM E Notes Rating From Ba2
CITIGROUP 2016-C3: Fitch Affirms 'BBsf' Rating on 2 Tranches
COAST COMMERCIAL 2023-2HTL: S&P Assigns B (sf) Rating on HRR Certs
COLLEGIATE FUNDING 2005-B: Fitch Cuts Rating on Cl. B Notes to Bsf
COMM 2014-LC17: DBRS Confirms BB Rating on Class D Certs
COMM 2015-LC19: DBRS Confirms B Rating on Class F Certs
COMM 2015-PC1: DBRS Confirms BB Rating on Class X-D Certs
CPS AUTO 2023-C: DBRS Gives Prov. BB Rating on Class E Notes
CSMC 2021-980M: Fitch Affirms 'B-sf' Rating on Class F Certs
FANNIE MAE 2023-R06: S&P Assigns B-(sf) Rating on Cl. 1B-2X Notes
FRONTIER ISSUER 2023-1: Fitch Gives 'BB-(EXP)sf' Rating to C Notes
GOLUB CAPITAL 68(B): Fitch Assigns 'BBsf' Rating to Class E Notes
GOODLEAP SUSTAINABLE 2023-3: Fitch Gives BB-(EXP) Rating on C Debt
GS MORTGAGE 2017-GS7: Fitch Affirms 'B-sf' Rating on H-RR Certs
IMSCI 2014-5: DBRS Confirms BB(low) Rating on G Certs
IVY HILL XXI: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
JP MORGAN 2017-4: Moody's Upgrades Rating on Cl. B-5 Certs to Ba1
JP MORGAN 2023-6: Fitch Assigns 'B-(EXP)' Rating to B-5 Certs
LCCM 2021-FL2: DBRS Confirms B(low) Rating on Class G Notes
MARYLAND TRUST 2006-IV: Moody's Cuts Rating on Ser. A Certs to Ba2
MORGAN STANLEY 2015-C27: DBRS Cuts Class H Certs Rating to C(sf)
MORGAN STANLEY 2015-UBS8: DBRS Cuts Class H Certs Rating to D
MORGAN STANLEY 2017-C34: Fitch Affirms CCsf Rating on 2 Tranches
MORGAN STANLEY 2018-H3: Fitch Affirms 'B-sf' Rating on G-RR Certs
MOUNTAIN VIEW 2014-1: S&P Cuts Class E Notes Rating to D
NATIXIS COMMERCIAL 2018-FL1: S&P Cuts WAN1 Certs Rating to 'B-'
NAVESINK CLO 1: S&P Assigns BB-(sf) Rating on $12.25MM Cl. E Notes
OHA CREDIT 12: S&P Assigns BB- (sf) Rating on Class E-R Notes
ONE BAMLL 2015-ASTR: S&P Lowers Class E Certs Rating to 'B+ (sf)'
OZLM LTD VII: Moody's Cuts Rating on $5.7MM Cl. E-R Notes to Caa3
PFP 2021-8: DBRS Confirms B(low) Rating on Class G Notes
RR LTD 23: Fitch Assigns 'BB(EXP)sf' Rating to Class D-R Notes
RR LTD 23: Moody's Assigns (P)B3 Rating to $850,000 Cl. E-R Notes
SIERRA TIMESHARE 2023-2: Fitch Assigns 'BB-sf' Rating to D Notes
SIERRA TIMESHARE 2023-2: Moody's Assigns Ba2 Rating to Cl. D Notes
SLM STUDENT 2004-2: Fitch Lowers Rating on Class B Notes to 'BBsf'
SLM STUDENT 2008-2: S&P Raises Class B Notes Rating to 'BB (sf)'
SLM STUDENT 2008-5: S&P Lowers Class A-4 Notes Rating to 'D (sf)'
SYMPHONY CLO 34-PS: S&P Assigns Prelim BB-(sf) Rating on E-R Notes
SYMPHONY CLO 35: Fitch Affirms 'BB-sf' Rating on Class E Notes
TSTAT LTD 2022-1: Fitch Affirms 'B-sf' Rating on Class F Notes
VENTURE CLO XIV: Moody's Cuts Rating on $31.75MM E-R Notes to B3
WELLS FARGO 2015-C28: DBRS Confirms B Rating on Class E Certs
WELLS FARGO 2015-C31: Fitch Affirms CCC Rating on Class F Certs
WELLS FARGO 2015-NXS1: DBRS Confirms B Rating on Class F Certs
WELLS FARGO 2015-P2: Fitch Lowers Rating on Class E Certs to 'Bsf'
WELLS FARGO 2016-C36: Fitch Affirms CCCsf Rating on 4 Tranches
WELLS FARGO 2017-C40: Fitch Affirms 'B-sf' Rating on Class F Notes
WSTN 2023-MAUI: DBRS Gives Prov. BB Rating on Class HRR Certs
WSTN TRUST 2023-MAUI: S&P Assigns BB (sf) Rating on Cl. HRR Certs
[*] Fitch Takes Actions on 13 US CMBS 2016 Vintage Transactions
[*] Fitch Takes Actions on 6 Canadian CMBS Transactions
*********
AFFIRM ASSET 2021-B: DBRS Confirms B Rating on Class E Notes
------------------------------------------------------------
DBRS, Inc. confirmed five ratings on Affirm Asset Securitization
Trust 2021-B.
Class A Notes AA (sf) Confirmed
Class B Notes A (sf) Confirmed
Class C Notes BBB (sf) Confirmed
Class D Notes BB (sf) Confirmed
Class E Notes B (sf) Confirmed
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 - June 2023 Update, published on June 30, 2023.
These baseline macroeconomic scenarios replace DBRS Morningstar's
moderate and adverse COVID-19 pandemic scenarios, which were first
published in April 2020.
-- The transaction parties' capabilities with regard to
originating, underwriting, and servicing.
-- The rating actions are the result of performance to date, DBRS
Morningstar's assessment of future performance assumptions, and the
increasing levels of credit enhancement.
-- The transaction's capital structure and form and sufficiency of
available credit enhancement. The current level of hard credit
enhancement and estimated excess spread are sufficient to support
the DBRS Morningstar-projected remaining cumulative net loss
assumption at a multiple of coverage commensurate with the ratings.
AGL CLO 26: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to AGL CLO 26
Ltd./AGL CLO 26 LLC 's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by AGL CLO Credit Management LLC.
The preliminary ratings are based on information as of July 26,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
AGL CLO 26 Ltd./AGL CLO 26 LLC
Class A, $256.00 million: Not rated
Class B, $48.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D (deferrable), $24.00 million: BBB- (sf)
Class E (deferrable), $12.40 million: BB- (sf)
Subordinated notes, $32.52 million: Not rated
AJAX MORTGAGE 2023-C: DBRS Gives Prov. BB Rating on M-2 Notes
-------------------------------------------------------------
DBRS, Inc. assigned the following provisional ratings to the
Mortgage-Backed Securities, Series 2023-C (the Notes) to be issued
by Ajax Mortgage Loan Trust 2023-C (AJAX 2023-C or the Trust):
-- $135.7 million Class A-1 at AAA (sf)
-- $7.6 million Class A-2 at AA (sf)
-- $4.1 million Class A-3 at A (sf)
-- $3.6 million Class M-1 at BBB (sf)
-- $22.1 million Class M-2 at BB (sf)
The AAA (sf) rating on the Notes reflects 33.35% of credit
enhancement provided by subordinated certificates. The AA (sf), A
(sf), BBB (sf), and BB (sf) ratings reflect 29.60%, 27.60%, 25.85%,
and 15.00% of credit enhancement, respectively.
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
The Trust is a securitization of a portfolio of seasoned performing
and reperforming first-lien residential mortgages funded by the
issuance of the Notes. The Notes are backed by 1,171 loans with a
total principal balance of $203,810,262 as of the Cut-Off Date (May
31, 2023).
The mortgage loans are approximately 196 months seasoned. Although
the number of months clean (consecutively zero times 30 (0 x 30)
days delinquent) at issuance is weaker relative to other DBRS
Morningstar-rated seasoned transactions, the borrowers demonstrate
reasonable cash flow velocity (as by number of payments over time)
in the past six, 12, and 24 months.
The portfolio contains 88.8% modified loans. The modifications
happened more than two years ago for 83.0% of the modified loans.
Within the pool, 509 mortgages (43.5% of the pool) have
non-interest-bearing deferred principal balances and deferred
interest amounts (including Principal Reduction Alternative
deferred principal balances) of $14,713,252, which equate to
approximately 7.2% of the total principal balance.
The mortgage loans were previously included in prior
securitizations issued by Great Ajax Operating Partnership L.P.
(Ajax or the Sponsor). The Seller will acquire such loans as a
result of the exercise of loan sale rights, and, on the Closing
Date, the mortgage loans will be conveyed by the Seller to the
Depositor.
To satisfy the credit risk retention requirements, the Sponsor or a
majority-owned affiliate of the Sponsor will retain at least a 5%
eligible vertical interest in the securities.
Gregory Funding LLC is the Servicer for the entire pool and will
not advance any delinquent principal and interest (P&I) on the
mortgages; however, the Servicer is obligated to make advances in
respect of prior liens, insurance, real estate taxes and
assessments as well as reasonable costs and expenses incurred in
the course of servicing and disposing of properties.
Since 2013, Ajax and its affiliates have issued 46 securitizations
under the Ajax Mortgage Loan Trust shelf prior to AJAX 2023-C.
These issuances were backed by seasoned loans, reperforming loans
(RPLs), or nonperforming loans (NPLs) and are mostly unrated by
DBRS Morningstar. DBRS Morningstar reviewed the historical
performance of the Ajax shelf; however, the nonrated deals
generally exhibit worse collateral attributes than the rated deals
with regard to delinquencies at issuance. The prior nonrated Ajax
transactions generally exhibit relatively high levels of
delinquencies and losses compared with the rated Ajax
securitizations, which are expected given the nature of these
severely distressed assets.
AJAX 2023-C has the option to redeem the rated Notes in full at a
price equal to the remaining note amount of the rated Notes plus
accrued and unpaid interest, and any unpaid expenses and
reimbursement amounts (Rated Note Redemption Price). Such Rated
Note Redemption Rights may be exercised on any date:
-- Beginning the Payment Date after the Redemption Account equals
or exceeds the Rated Note Redemption Price (Funded Redemption); or
-- Beginning three years after the Closing Date at the direction
of the Depositor or, if the Depositor does not intend to redeem,
the Majority Controlling Holders (Optional Redemption).
The Redemption Date is any date when a Funded Redemption or an
Optional Redemption occurs.
The transaction employs a sequential-pay cash flow structure with a
bullet feature to Class A-2 and more subordinate notes on the
Redemption Date. P&I collections are commingled and are first used
to pay interest to the Notes sequentially and then to pay Class A-1
until reduced to zero, which may provide for timely payment of
interest to certain rated Notes. Class A-2 and below are not
entitled to any payments of principal until the Redemption Date or
upon the occurrence of an Event of Default. Prior to the Redemption
Date or an Event of Default, any available funds remaining after
Class A-1 is paid in full will be deposited into a Redemption
Account.
After the Payment Date in July 2030 (Step-Up Date), the Class A-1
Notes will be entitled to its initial Note Rate plus the Step-Up
Note Rate of 1.00% per annum. If the Trust does not redeem the
rated Notes in full by the Step-Up Date, an Accrual Event will be
in effect until the earlier of the Redemption Date or the
occurrence of an Event of Default.
If an Accrual Event is in effect and Class A-1 is outstanding,
Class A-2 and more subordinate notes will become accrual Notes, and
interest that would otherwise be allocated to such classes will be
paid as principal to the Class A-1 Notes until reduced to zero. Any
excess accrual amounts on such payment date will be deposited into
the Redemption Account. All such accrual amounts will be added to
the principal balance of the related outstanding accrual Notes. If
an Accrual Event is in effect and Class A-1 is no longer
outstanding, Class A-2 will be entitled to interest from available
funds, or from the Redemption Account, as applicable. Class A-2 and
more subordinate notes will only receive principal on the
Redemption Date or upon the occurrence of an Event of Default.
If a Redemption Date or an Event of Default has not occurred prior
to the Stated Final Maturity Date, amounts in the Redemption
Account will be paid, sequentially, as interest and then as
principal to the Notes until reduced to zero (IPIP) on the Stated
Final Maturity Date.
In addition to the above bullet and accrual features, a certain
aspect of the interest rates on the Notes is less commonly seen in
DBRS Morningstar-rated seasoned securitizations as well. The
interest rates on the Notes are set at fixed rates, which are not
capped by the net weighted-average coupon (Net WAC) or available
funds. This feature causes the structure to need elevated
subordination levels relative to a comparable structure with
fixed-capped interest rates because more principal must be used to
cover interest shortfalls. DBRS Morningstar considered such nuanced
features and incorporated them in its cash flow analysis.
Similar to AJAX 2023-A, the representations and warranties (R&W)
framework for this transaction incorporates the following
features:
-- A pool-level review trigger that incorporates only cumulative
losses, dissimilar to other rated RPL securitizations;
-- The absence of a repurchase remedy by the Seller, dissimilar to
other rated RPL securitizations; and
-- A Breach Reserve Account, which will be available to satisfy
losses related to R&W breaches. Such account is fully funded
upfront and then funds after interest is paid to the Notes,
dissimilar to other rated RPL securitizations.
Although certain features (the cumulative loss-only pool trigger,
the absence of the Seller repurchase remedy, and the Breach Reserve
Account shortfall amounts funding after interest) weaken the R&W
framework, the historical experience of having minimal putbacks and
comprehensive third-party due diligence for the shelf mitigates
these features. In addition, the Breach Reserve Account is fully
funded upfront, which is more favorable than other rated RPL
securitizations.
DBRS Morningstar's credit ratings on the Notes address the credit
risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations for each of the rated Notes are the related
Interest Payment Amounts and the related Class Balances.
DBRS Morningstar's credit rating on the Class A-1 Notes also
addresses the credit risk associated with the increased rate of
interest applicable to the Class A-1 Notes if the Class A-1 Notes
remain outstanding on the Step-Up Date (as defined in and) in
accordance with the applicable transaction document(s).
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar considers risk of default to be
the risk that an issuer will fail to satisfy the financial
obligations in accordance with the terms under which a long-term
obligation has been issued.
Notes: All figures are in U.S. dollars unless otherwise noted.
AMERICAN AIRLINES 2013-1: Fitch Hikes Rating on Cl. A Certs to 'BB'
-------------------------------------------------------------------
Fitch Ratings has upgraded American Airlines 2017-2 class AA
certificates to 'AA-' from 'A+'. Fitch has also upgraded the class
A certificates of the 2017-2 transaction to 'A' from 'A-', the
2015-1 and 2014-1 to 'BBB' from 'BB+', and 2013-1 to 'BB' from
'B+'. The upgrade is driven by sufficient LTV headroom in the
rating levels in conjunction with an improvement in the airline
obligor credit profile, evidenced by Fitch's recent upgrade of
American Airlines' Issuer Default Rating (IDR) to 'B+' from 'B-'.
Fitch has also upgraded the class B certificates for the 2021-1,
2017-2, and 2017-1 to 'BBB' from 'BB+'. The upgrades are supported
by American's upgraded IDR. Fitch's assessment of the transactions'
affirmation factors, liquidity facility uplift and recovery
prospects are unchanged.
KEY RATING DRIVERS
Class AA Upgrade: Fitch has upgraded American's 2017-2 class AA
certificates to 'AA-' from 'A+'. The senior tranche passes Fitch's
'AA' level stress test with a significant amount of headroom with a
maximum LTV of 87%. In its previous review, Fitch did not upgrade
class AA because Fitch's EETC criteria stipulate that senior
tranches are unlikely to be rated in the 'AA' category when issuers
are rated 'B-' or below. The upgrade of American's IDR to 'B+'
removes this rating cap for the senior tranche, allowing it to be
upgraded. Fitch also considers the collateral pool's low age,
high-quality and diversity supportive of the rating.
Class AA Affirmation: Fitch has affirmed the 2017-1 class AA at
'A+'. The 2017-1 class AA passes Fitch's 'AA' stress at 94%.
However, the collateral pool is weaker than aircraft in the 2017-2
transaction as it consists of more Tier 2 and prior generation Tier
1 aircraft, making LTV sensitive to appraised value changes or
change in tier classification. Fitch may upgrade class AA if the
LTV materially improves to offset the rating's sensitivity to
aircraft values.
Class A Upgrades: Fitch has upgraded American's 2017-2 class A
certificates to 'A' from 'A-'. The certificates pass Fitch 'A'
level stress with an LTV of 90%, leaving sufficient headroom for
the rating.
Fitch has also upgraded 2015-1 and 2014-1 class A to 'BBB' from
'BB+' and 2013-1 class A to 'BB' from 'B+'. The three transactions
fail to pass Fitch 'BBB' stress level, and the ratings are achieved
via a bottom-up approach where Fitch assigns rating uplift from
American's IDR. Fitch recently upgraded American by two notches,
driving a two-notch upgrade for the 2015-1, 2014-1 and 2013-1 class
A certificates.
Fitch considers the collateral in the 2015-1 and 2014-1
transactions, both of which are weighted towards the 777-300ER, to
be of sufficient quality to support the ratings. The aircraft
remain relatively young among American's fleet and are of strategic
importance to the airline's long-haul strategy. Despite the
777-300ERs are being considered a Tier 2 aircraft, Fitch believes
they will continue to be an integral part of American's fleet. The
777-300ERs are considered premier aircraft by American Airlines and
have a 300+ seat count that are ideal for high density routes.
Additionally, American's current widebody fleet includes a large
number of older 777-200LRs that are more likely to be rejected in a
bankruptcy scenario compared to the 777-300ERs that are only
approaching mid-life. Fitch assigns a high affirmation factor
assessment to these transactions and believes the collateral
quality is supportive of the ratings. The 2013-1 transaction lacks
diversification, and its collateral pool is small, relative to the
2015-1 and 2014-1. Fitch maintains a low to moderate affirmation
factor for its pool.
Class A Affirmations: Fitch has affirmed American's class A
certificates for the 2021-1 transaction at 'A'. The 2021-1 passes
Fitch's 'A' stress level with material headroom at 84% LTV;
however, the certificates' slow amortization and a lack of the
collateral diversification are also factors that constrain class A
to the current rating level.
Fitch has also affirmed the 2017-1 transaction at 'A-', US Airways'
LCC 2012-2 at 'A-', and LCC 2013-1 and LCC 2012-1 at 'A'. The LCC
2013-1 and LCC 2012-1 have ample headroom within the 'A' level
stress at 77% and 62% respectively while the American's 2017-1 and
LCC 2012-2 pass with limited LTV cushion at 96% and 98%,
respectively. Exposure to A330-200s are constraints to LCC 2013-1
and LCC 2012-2 ratings as the aircraft are no longer relevant to
the fleet strategy, as evidenced by American's decision to place
them in long-term storage.
LTV Summary:
AAL 2021-1 class A: Base Case - 58%, 'A' Stress Case - 84%
AAL 2017-2 class AA: Base Case - 41%, 'AA' Stress Case - 87%
AAL 2017-2 class A: Base Case - 60%, 'A' Stress Case - 90%
AAL 2017-1 class AA: Base Case - 42%, 'AA' Stress Case 94%
AAL 2017-1 class A: Base Case - 61%, 'A' Stress Case - 96%
AAL 2015-1: Base Case - 69%, 'BBB' Stress Case - 105%
AAL 2014-1: Base Case - 69%, 'BBB' Stress Case - 104%
AAL 2013-1: Base Case - 85%, 'BB' Stress Case - 122%
LCC 2013-1: Base Case - 51%, 'A' Stress Case - 77%
LCC 2012-2: Base Case - 58%, 'A' Stress Case - 98%
LCC 2012-1: Base Case - 42%, 'A' Stress Case - 62%
Subordinated tranche ratings:
Fitch notches subordinated tranche EETC ratings from the airline
IDR based on three primary variables: 1) the affirmation factor
(0-3 notches); 2) the presence of a liquidity facility; (0-1
notch); and 3) recovery prospects (0-1 notch).
Class B Upgrades: Fitch has upgraded American's class B
certificates for the 2021-1, 2017-2, and 2017-1. The class B
certificates are rated via Fitch's bottom-up approach and are
supported by American's upgraded IDR. The 2021-1, 2017-2 and 2017-1
are upgraded to 'BBB' from 'BB+'. All transactions receive 5 notch
uplift from American's 'B+' IDR, consisting of high affirmation
factors (+3), liquidity facility (+1) and strong recovery prospects
(+1).
Fitch notes the class B certificates and class A certificates rated
via the bottom-up approach are unlikely to be upgraded if American
Airlines IDR is upgraded to 'BB-' as affirmation notching would
decrease if the airlines moves from the 'B' to the 'BB' rating
category.
Affirmation Factors:
AAL 2021-1, 2017-2, and 2017-1transactions: High affirmation
factor
Collateral pools for the 2021-1, 2017-1 and 2017-2 transactions
include relatively new narrowbody (NB) aircraft such as 737 MAXs
and A321 NEOs that represent the most fuel-efficient NBs in
American's fleet and are unlikely to be rejected in a bankruptcy.
While American invested heavily in new aircraft in recent years,
the airline still operates approximately 200 NB aircraft that are
over 15 years old and which are more likely to be rejected in a
restructuring compared to the planes in these portfolios.
AAL 2015-1 and 2014-1: High affirmation factor
The 2015-1 and 2014-1 transactions' collateral pools are weighted
towards 777-300ERs delivered from 2012 to 2014 and represent 43%
and 54% of the collateral pool, respectively. Fitch now considers
the 777-300ER to be a tier 2 aircraft due to continued secondary
market pressures. However, the 777-300ERs continue to have a key
position in American's fleet, particularly after other widebodies
are being retired. American views the 777-300ER as its premier
wide-body aircraft, and utilizes the plane on its key long-haul
international routes. The high capacity and long-range capabilities
of this plane make it ideal to serve slot constrained airports such
as Heathrow, JFK, and Tokyo Narita. Importantly, the 300ER is the
only 300+ seat aircraft in American's widebody line-up.
AAL 2013-1: Low to Moderate affirmation factor
Fitch views the affirmation factor for the AAL 2013-1 transaction
as moderate-to-low given the small size of the portfolio. The
transaction consists of entirely four 777-300ERs, which Fitch views
as a strategically important aircraft. However, the small size of
the pool could make the 2013-1 transaction easier to be rejected in
the event of a downturn, particularly in a scenario where long-haul
travel remained depressed for a prolonged period.
LCC 2013-1 and LCC 2012-2: Low affirmation factor
In response to COVID-19, American accelerated the retirement of 150
aircraft including its entire sub-fleets of 757s, 767s, A330s, and
E-190s. The early retirement of the A330s further increases Fitch
view that the plane is increasingly becoming a lower-quality asset
and significantly decreases affirmation factor for the 2013-1 and
2012-2 transactions that contain a significant amount of the
A330-200s.
LCC 2012-1: Moderate affirmation factor
Fitch views the A321-200 in this transaction as decent aircraft.
However, the lack of diversification and the medium age of the pool
in relative to American's NB fleet place the LCC 2012-1 affirmation
factor at moderate.
DERIVATION SUMMARY
American Airlines' 2017-2 class AA rating at 'AA-' is similar to
British Airways' 2018-1 and Air Canada's 2017-1 class AA ratings
and is generally stronger than those in United Airlines' EETCs due
to their exposure to 777-300ERs. The ratings in the 'A' and 'A-'
levels compares well to transactions issued by British Airways and
Air Canada and others that feature limited to sufficient levels of
OC to pass Fitch's 'A' stress level. American Airlines' 2013-1,
2014-1 and 2015-1 class A certificates fail to pass the 'A' level
stress, and the ratings are achieved via a bottom-up approach.
Fitch views the 2013-1, 2014-1, and 2015-1 class A more favorably
than Fitch-rated United transactions as United's exceedingly large
2020-1 EETC issuance reduces the likelihood of affirmation for its
other EETCs.
The 'BBB' ratings on the class B certificates are derived via a
five-notch uplift from American's 'B+' IDR. The five-notch uplift
reflects a high affirmation factor, benefits from a liquidity
facility and strong recovery expectations. The ratings are in line
with Air Canada transactions and generally higher than United's
transaction ratings due to a stronger affirmation factor
assessment.
KEY ASSUMPTIONS
-- Key assumptions within the rating case for the issuer include a
harsh downside scenario in which American declares bankruptcy,
chooses to reject the collateral aircraft, and where the aircraft
are remarketed in the midst of a severe slump in aircraft values.
An American bankruptcy is hypothetical, and Fitch's expectation
that a bankruptcy is unlikely is reflected in the company's 'B-'
IDR. Fitch's models also incorporate a full draw on liquidity
facilities and include assumptions for repossession and remarketing
costs.
-- Fitch's recovery analyses for subordinated tranches utilize
Fitch 'BB' level stress tests and include a full draw on liquidity
facilities and assumptions for repossessions and remarketing
costs.
-- Fitch's analysis incorporates a 6% annual depreciation rate for
Tier 1 aircraft, a 7% annual depreciation rate for Tier 2 aircraft
and 8% annual depreciation rate for Tier 3 aircraft.
-- Fitch treats the A330s in the US Airways transactions as Tier 3
aircraft, a lower assessment than Fitch's updated aircraft tiers
due to a concern about value impacts from the aircraft currently
being placed in long-term storage.
-- The 'AA' stress level incorporates a 40% haircut for the B737
MAX8; a 45% haircut for the A321-200, 737-800 and 787-9; a 50%
haircut for the 787-8; and a 55% haircut for the ERJ175.
-- The 'A' stress level incorporates a 20% haircut for the A321NEO
and 737 MAX 8; a 25% haircut for the A320-200, A321-200, 737-800
and 787-9; a 30% haircut for the 787-8; a 35% haircut for the
A319-100, ERJ175, 777-300ER; and a 50% haircut for the A330-200
aircraft.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- The class AA and class A certificates may be upgraded if
aircraft values improve, resulting in material LTV headroom within
the 'AA' and 'A' level stress respectively, and/or if American's
IDR is upgraded.
-- Class B certificates and class A certificates rated via the
bottom-up approach are unlikely to be upgraded if American's IDR is
upgraded to 'BB-' as affirmation notching would decrease if the
airline moved from the 'B' to 'BB' rating category.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Ratings for individual tranches in the 'AA', 'A' or 'BBB'
categories are primarily based on a top-down analysis of the value
of the collateral. Therefore, negative rating actions could be
driven by an unexpected decline in collateral values. American's
2017-1class A certificates and US Airways 2012-2 class A
certificates pass their respective scenarios with more limited
headroom making them more vulnerable to future downgrades should
aircraft values deteriorate. Senior tranche ratings could also be
affected by a perceived change in the affirmation factor or
deterioration in the underlying airline credit.
-- Ratings for American Airlines' 2015-1, 2014-1 and 2013-1 class
A certificates are achieved via Fitch's bottom-up approach, which
serves as a rating floor. Negative rating actions could result from
changes to Fitch's affirmation factor or deterioration of
American's IDR.
-- Subordinated tranche ratings are based on the bottom-up
approach. Weakness in aircraft values may impact recovery
prospects, leading to a downgrade. In addition, Fitch will
downgrade in line with any downgrades of American's ratings and/or
changes in Fitch's assessment of affirmation factor.
LIQUIDITY AND DEBT STRUCTURE
Liquidity Facilities:
AAL 2021-1
The class A and B certificates feature a standard 18-month
liquidity facility provided by Credit Agricole (A+/F1/Stable).
AAL 2017-2
All three tranches of debt in this transaction feature 18-month
dedicated liquidity facilities provided by National Australia Bank
Ltd. (A+/F1/Stable).
AAL 2017-1
All three tranches of debt in this transaction feature 18-month
dedicated liquidity facilities provided by NAB (A+/F1/Stable).
AAL 2015-1
The 'A' and 'B' tranches feature an 18-month dedicated liquidity
facility provided by Credit Agricole (A+/F1/Stable).
AAL 2014-1
The 'A' and 'B' tranches feature an 18-month dedicated liquidity
facility provided by Credit Agricole (A+/F1/Stable).
AAL 2013-2
The A and B tranches feature an 18-month dedicated liquidity
facility provided by Morgan Stanley (A+/F1/Stable).
AAL 2013-1
The A and B tranches feature an 18-month dedicated liquidity
facility provided by Natixis (A+/F1/Negative).
LCC 2013-1
The class A and class B certificates benefit from a dedicated
18-month liquidity facility. The liquidity facility provider is by
Natixis (A+/F1/Negative).
LCC 2012-2
The class A and class B certificates benefit from a dedicated
18-month liquidity facility. The liquidity facility provider is by
Landesbank Hessen Theuringen Girozentrale (A+/F1+/Stable).
LCC 2012-1
The class A and class B certificates benefit from a dedicated
18-month liquidity facility. The liquidity facility provider is by
Natixis (A+/F1/Negative).
ESG CONSIDERATIONS
Fitch does not provide separate ESG scores for American Airlines'
EETC transactions as ESG scores are derived from its parent.
AMERICAN CREDIT 2023-3: S&P Assigns Prelim 'BB-' Rating on E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to American
Credit Acceptance Receivables Trust 2023-3'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 July 27,
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%, 57.6%, 46.4%, 37.7%,
and 33.1% 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 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, its
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 remain within its credit stability limits.
-- The timely payment of interest and principal by the designated
legal final maturity dates under S&P's stressed cash flow modeling
scenarios, which it believes are appropriate for the assigned
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
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 2023-3
Class A, $158.94 million: AAA (sf)
Class B, $37.40 million: AA (sf)
Class C, $69.70 million: A (sf)
Class D, $57.38 million: BBB (sf)
Class E, $32.30 million: BB- (sf)
AMSR 2023-SFR2: DBRS Gives Prov. BB Rating on Class F-1 Certs
-------------------------------------------------------------
DBRS, Inc. assigned the following provisional ratings to the
Single-Family Rental Pass-Through Certificates (the Certificates)
to be issued by AMSR 2023-SFR2 Trust (AMSR 2023-SFR2):
-- $161.3 million Class A at AAA (sf)
-- $65.5 million Class B at AA (high) (sf)
-- $23.9 million Class C at A (high) (sf)
-- $30.2 million Class D at A (low) (sf)
-- $49.1 million Class E-1 at BBB (sf)
-- $31.5 million Class E-2 at BBB (low) (sf)
-- $22.7 million Class F-1 at BB (sf)
-- $26.5 million Class F-2 at BB (low) (sf)
The AAA (sf) rating on the Class A Certificate reflects 67.7% of
credit enhancement provided by subordinated notes in the pool. The
AA (high) (sf), A (high) (sf), A (low) (sf), BBB (sf), BBB (low)
(sf), BB (sf), and BB (low) (sf) ratings reflect 54.5%, 49.8%,
43.7%, 33.8%, 27.5%, 23.0%, and 17.7% of credit enhancement,
respectively.
Other than the classes specified above, DBRS Morningstar does not
rate any other classes in this transaction.
The Certificates are supported by the income streams and values
from 1,623 rental properties. The properties are distributed across
13 states and 34 MSAs in the United States. DBRS Morningstar maps
an MSA based on the ZIP code provided in the data tape, which may
result in different MSA stratifications than those provided in
offering documents. As measured by BPO value, 68.0% of the
portfolio is concentrated in three states: Florida (42.5%), Georgia
(15.4%), and North Carolina (10.1%). The average value is $310,543.
The average age of the properties is roughly 36 years. The majority
of the properties have three or more bedrooms. The Certificates
represent a beneficial ownership in an approximately five-year,
fixed-rate, interest-only loan with an initial aggregate principal
balance of approximately $498.9 million.
The Sponsor intends to satisfy its risk-retention obligations under
the U.S. Risk Retention Rules, EU Risk Retention Requirements, and
UK Risk Retention Requirements by Class G, which is 17.7% of the
initial total issuance balance, either directly or through a
majority-owned affiliate.
DBRS Morningstar assigned the provisional ratings for each class of
Certificates by performing a quantitative and qualitative
collateral, structural, and legal analysis. This analysis uses DBRS
Morningstar's single-family rental subordination analytical tool
and is based on DBRS Morningstar's published criteria. DBRS
Morningstar developed property-level stresses for the analysis of
single-family rental assets. DBRS Morningstar assigned the
provisional ratings to each class based on the level of stresses
each class can withstand and whether such stresses are commensurate
with the applicable rating level. DBRS Morningstar's analysis
includes estimated base-case net cash flows (NCFs) by evaluating
the gross rent, concession, vacancy, operating expenses, and
capital expenditure data. The DBRS Morningstar NCF analysis
resulted in a minimum debt service coverage ratio of more than 1.0
times.
Furthermore, DBRS Morningstar reviewed the third-party participants
in the transaction, including the property manager, servicer, and
special servicer. These transaction parties are acceptable to DBRS
Morningstar. DBRS Morningstar also conducted a legal review and
found no material rating concerns.
DBRS Morningstar's credit rating on the Certificates addresses the
credit risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations for each of the rated Certificates are the
related Interest Payment Amounts and the related Class Balances. In
addition, the associated financial obligations for the Class E-1,
E-2, F-1, and F-2 Certificates include Deferred Interest Amounts.
DBRS Morningstar's credit rating does not address non-payment risk
associated with contractual payment obligations contemplated in the
applicable transaction document(s) that are not financial
obligations.
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar considers risk of default to be
the risk that an issuer will fail to satisfy the financial
obligations in accordance with the terms under which a long-term
obligation has been issued.
Notes: All figures are in U.S. dollars unless otherwise noted.
ARRIVO ACCEPTANCE: DBRS Takes Actions on 4 Trust Transactions
-------------------------------------------------------------
DBRS, Inc., on July 3, 2023, confirmed seven and upgraded seven
ratings from four Arivo Acceptance, LLC transactions.
Rating Action
------ ------
Arivo Acceptance Auto Loan
Receivables Trust 2019-1
Class B AAA (sf) Confirmed
Class C AA (sf) Upgraded
Arivo Acceptance Auto Loan
Receivables Trust 2021-1
Class A AAA (sf) Upgraded
Class B AA (sf) Upgraded
Class C BBB (sf) Upgraded
Class D BB (sf) Upgraded
Arivo Acceptance Auto Loan
Receivables Trust 2022-1
Class A AA (high) (sf) Upgraded
Class B A (high) (sf) Upgraded
Class C BBB (sf) Confirmed
Class D BB (sf) Confirmed
Arivo Acceptance Auto Loan Receivables Trust 2022-2
Class A Notes AA (sf) Confirmed
Class B Notes A (sf) Confirmed
Class C Notes BBB (sf) Confirmed
Class D Notes BB (sf) Confirmed
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 - June 2023 Update, published on June 30, 2023.
These baseline macroeconomic scenarios replace DBRS Morningstar's
moderate and adverse COVID-19 pandemic scenarios, which were first
published in April 2020.
-- The transaction parties' capabilities with regard to
originating, underwriting, and servicing.
-- The rating actions are the result of collateral performance to
date and DBRS Morningstar's assessment of future performance
assumptions.
-- The transaction's capital structure and form and sufficiency of
available credit enhancement. The current level of hard credit
enhancement and estimated excess spread are sufficient to support
the DBRS Morningstar-projected remaining cumulative net loss
assumption at a multiple of coverage commensurate with the ratings.
ATLAS SENIOR XXI: S&P Assigns BB- (sf) Rating on Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to Atlas Senior Loan Fund
XXI Ltd./Atlas Senior Loan Fund XXI LLC's floating-rate debt. The
transaction is managed by Crescent Capital Group L.P.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term
loans.
The ratings reflect:
-- S&P's view of the collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Atlas Senior Loan Fund XXI Ltd./Atlas Senior Loan Fund XXI LLC
Class A-1, $210.00 million: AAA (sf)
Class A-2, $7.00 million: AAA (sf)
Class B, $49.00 million: AA (sf)
Class C (deferrable), $21.00 million: A (sf)
Class D-1 (deferrable), $15.00 million: BBB (sf)
Class D-2 (deferrable), $3.40 million: BBB- (sf)
Class E (deferrable), $11.40 million: BB- (sf)
Subordinated notes, $31.82 million: Not rated
BANK 2017-BNK9: Fitch Lowers Rating on 2 Tranches to 'B-sf'
-----------------------------------------------------------
Fitch Ratings has downgraded five and affirmed nine classes of BANK
2017-BNK9 Commercial Mortgage Pass-Through Certificates, Series
2017-BNK9. In addition, Fitch has assigned Negative Outlooks on
classes C, D, X-D, E and X-E. The Under Criteria Observation (UCO)
has been resolved.
ENTITY/DEBT RATING PRIOR
---------- ------ -----
BANK 2017-BNK9
A-3 06540RAD6 LT AAAsf Affirmed AAAsf
A-4 06540RAE4 LT AAAsf Affirmed AAAsf
A-S 06540RAH7 LT AAAsf Affirmed AAAsf
A-SB 06540RAC8 LT AAAsf Affirmed AAAsf
B 06540RAJ3 LT AA-sf Affirmed AA-sf
C 06540RAK0 LT BBBsf Downgrade A-sf
D 06540RAU8 LT BB-sf Downgrade BBB-sf
E 06540RAW4 LT B-sf Downgrade Bsf
F 06540RAY0 LT CCCsf Affirmed CCCsf
X-A 06540RAF1 LT AAAsf Affirmed AAAsf
X-B 06540RAG9 LT AA-sf Affirmed AA-sf
X-D 06540RAL8 LT BB-sf Downgrade BBB-sf
X-E 06540RAN4 LT B-sf Downgrade Bsf
X-F 06540RAQ7 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of Fitch's
updated "U.S. and Canadian Multiborrower CMBS Rating Criteria,"
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
Fitch's current ratings incorporate a 'Bsf' rating case loss of
7.4%. Seven loans (19.8% of the pool) have been designated as Fitch
Loans of Concerns (FLOCs), including two loans (6%) in special
servicing.
The downgrades and Negative Outlooks are due to the pool's elevated
level of FLOCs, including exposure to underperforming office
properties facing declining occupancy and high submarket vacancy
rates. Approximately 27% of the remaining pool is secured by office
assets.
The affirmations and Stable Outlooks reflect the impact of the
updated criteria and performance improvement for several larger
loans, including improved performance of the hotel loan portfolios,
over the last 12 months.
Largest Contributor to Loss: The largest contributor to overall
loss expectations is the BWI Airport asset (4.8%), a 315 key,
full-service hotel located in Linthicum Heights, MD. The loan
transferred to special servicing in 2020 due to imminent default as
a result of the pandemic. A foreclosure sale took place in April
2023 and the lender was the winning bidder. The servicer reported
NOI DSCR was 1.26x at YE 2022 compared with 0.35x at YE 2021 and
-0.42x at YE 2020. Fitch modeled a loss of approximately 44% which
reflects a value of approximately $111,000 per key.
The second largest contributor to overall loss expectations, Park
Square (6.7%), is secured by a 503,000-sf office building located
in Boston, MA. The loan is considered a FLOC due to a significant
decline in occupancy as a result of co-working tenant, WeWork
(26.8% of the NRA), vacating in June 2022 prior to their July 2032
lease expiration. As a result, the property's occupancy declined to
53% as of YE 2022 from 86.1% at YE 2021. As of March 2023,
occupancy remains at 53%. WeWork paid a lease termination fee of
$2.7million. At issuance, Fitch noted nearly half of the WeWork
space was dedicated to Amazon for research and development.
The loan has remained current since issuance. Servicer reported NOI
DSCR has steadily declined over the past several years: 1.10x (f YE
2022); 1.76x (YE 2021), 1.91x (YE 2020) and 1.98x (Issuance).
Fitch's 'Bsf' ratings case loss prior to concentration add-on of
23% reflects a 9.5% cap rate and 10% stress to YE 2022 NOI.
The third largest contributor to overall loss expectations, Warwick
Mall (3.3%), is secured by an approximately 588,000-sf regional
mall located in Warwick, RI. The loan sponsorship consists of Bliss
Properties, Lane Family Trust and Mark T. Brennan. This FLOC was
flagged for its secondary market regional mall location, lagged
recovery post pandemic and refinance concerns.
Non-collateral anchors include Macy's and Target. Major collateral
tenants include JCPenney (23.4%; expires March 2030), Jordan's
Furniture (19.3%; expires December 2026), Nordstrom Rack (6.4%;
expires November 2022) and Old Navy (3.8%; expired January 2026).
Showcase Cinema (9.7%) vacated upon its 2023 lease expiration; the
borrower has since re-leased the space to Apple Cinemas on a
15-year term which began in November 2021. The theatre subsequently
opened in March 2022.
Occupancy was 98% as of March 2023, compared with 97% at YE 2022
and 97% at YE 2021. The latest available in-line sales were $499
psf as of TTM June 2017. Fitch requested recent tenant sales but
did not receive a response. Fitch's 'Bsf' ratings case loss prior
to concentration add-on of 18% reflects a 20% cap rate and 10%
stress to the YE 2022 NOI.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to classes rated in the 'AAAsf' category are not likely
due to the position in the capital structure, but may occur should
interest shortfalls occur. Downgrades to classes in the 'AA-sf' and
'BBBsf' category are possible should overall pool losses increase
significantly and additional loans become FLOCs.
Downgrades to classes in the 'BB-sf' and 'B-sf' categories would
occur should loss expectations increase due to a continued
performance decline of the FLOCs, office properties and/or if loans
transfer to special servicing. Downgrades to the distressed classes
F and X-F would occur as losses are realized and/or become more
certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to the investment grade classes of 'AA-sf' and 'BBBsf'
category may occur with significant improvement in CE and/or
defeasance, but would be limited based on the sensitivity to
concentrations or the potential for future concentrations. Classes
would not be upgraded above 'Asf' if there is a likelihood of
interest shortfalls.
Classes in the 'BB-sf' category and below are unlikely to be
upgraded absent sustained performance improvement of distressed
assets, FLOCs and/or office-backed loans.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BANK 2018-BNK10: Fitch Affirms 'BB-sf' Rating on 2 Tranches
-----------------------------------------------------------
Fitch Ratings has affirmed 12 classes of BANK 2018-BNK10 Commercial
Mortgage Pass-Through Certificates, Series 2018-BNK10. The Rating
Outlooks for classes E and X-E have been revised to Negative from
Stable. The criteria observation (UCO) has been resolved.
ENTITY/DEBT RATING PRIOR
----------- ------ -----
BANK 2018-BNK10
A-4 065404BA2 LT AAAsf Affirmed AAAsf
A-5 065404BB0 LT AAAsf Affirmed AAAsf
A-S 065404BC8 LT AAAsf Affirmed AAAsf
A-SB 065404AZ8 LT AAAsf Affirmed AAAsf
B 065404BD6 LT AA-sf Affirmed AA-sf
C 065404BE4 LT A-sf Affirmed A-sf
D 065404AA3 LT BBB-sf Affirmed BBB-sf
E 065404AC9 LT BB-sf Affirmed BB-sf
X-A 065404BF1 LT AAAsf Affirmed AAAsf
X-B 065404BG9 LT A-sf Affirmed A-sf
X-D 065404AN5 LT BBB-sf Affirmed BBB-sf
X-E 065404AQ8 LT BB-sf Affirmed BB-sf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of the
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
The affirmations reflect the impact of the criteria and generally
stable performance of the pool. Fitch's current ratings incorporate
a 'Bsf' rating case loss of 4.69%. Seven loans are Fitch Loans of
Concern (FLOCs; 12.1% of the pool). No loans are currently in
special servicing.
The Negative Outlooks incorporate an additional stress on the
Warwick Mall loan that factors a heighted probability of default
given performance and refinance concerns, in addition to the
underperformance of the One Newark Center and the Wisconsin Hotel
Portfolio loans, which have reported declining cash flow and low
debt service coverage ratio (DSCR).
The largest FLOC and largest contributor to loss expectations,
Wisconsin Hotel Portfolio (5.4% of the pool), is secured by a
1,255-key hotel portfolio across five different submarkets in
Wisconsin, including Milwaukee, Madison and Fond Du Lac. The
portfolio continues to underperform with portfolio occupancy of 37%
as of YE 2022. The servicer-reported NOI DSCR has declined further
to 0.79x at YE 2022 from 1.16x at YE 2021. YE 2022 NOI declined
31.5% from YE 2021 and remains 50.2% below NOI at the peak in
2019.
According to the most recent STR report, the portfolio reported a
weighted average occupancy, ADR and RevPAR of 55.4%, $106, $58 as
of the trailing 12 months March 2023 which compares with 48.5%,
$102, and $48 in the year prior and 67.5%, $101, and $68,
respectively at issuance. Seven of the 11 hotels were ranked in the
bottom half of their respective competitive sets with respect to
RevPAR.
Fitch's 'Bsf' rating case loss of 31% prior to concentration
adjustments is based on a weighted average 11.43% portfolio cap
rate on the YE 2022 NOI, and factors a higher probability of
default accounting for secondary and tertiary market locations and
continued portfolio underperformance.
The second largest contributor to loss expectations is the One
Newark Center loan (2.7%), secured by a portion of a 418,000-sf
office property located in the CBD of Newark, NJ. The loan's
collateral consists of floors 6 through 22 of an office building
and an attached parking garage. The non-collateral floors 1 through
5 are owned and occupied by Seton Hall Law School. Collateral
occupancy declined to 67% as of March 2023 from 72% in December
2021, with NOI DSCR falling to 1.06x from 1.33x in the same period.
Near-term rollover includes 13% of the NRA in 2023, with the next
set of leases (4.2% of NRA) expiring in 2025.
Fitch's 'Bsf' rating case loss of 31% prior to concentration
adjustments is based on a 10.0% cap rate and 10% stress to YE 2022
NOI, and factors a higher probability of default to account for
declining occupancy and NOI with near-term rollover.
The fourth largest contributor to loss expectations, 2020 Southwest
4th Avenue loan (3.6% of the pool), is secured by an approximately
588,000-sf office building in downtown Portland, OR. Occupancy
declined to 73% as June 2023 from 92% at YE 2022 due to CH2M Hill
and City of Portland downsizing portions of their space. The
submarket continues to soften; Costar reported a submarket vacancy
of 22.6% and an availability rate of 28.2% as of 2Q23. Average
in-place rents as of the June 2023 rent roll are in-line with the
submarket.
Fitch's 'Bsf' rating case loss of 7% prior to concentration
adjustments is based on a 10.0% cap rate and 20% stress to YE 2022
NOI to account for deteriorating occupancy and NOI amidst weak
submarket fundamentals.
Regional Mall Exposure: The transaction has exposure to the Warwick
Mall (2.2% of the pool), which is an approximately 588,000-sf
regional mall located in Warwick, RI. The loan sponsorship consists
of Bliss Properties, Lane Family Trust and Mark T. Brennan.
Non-collateral anchors include Macy's and Target. Major collateral
tenants include JCPenney (23.4% NRA expiring March 2030), Jordan's
Furniture (19.3%, December 2026), Apple Cinemas (8.8%, October
2036), Nordstrom Rack (6.4%, November 2027) and Old Navy (3.8%,
January 2026).
Occupancy was 98% as of March 2023 with NOI DSCR of 2.02x, compared
with 97% and 2.78x, respectively, for YE 2022. The mall has
benefited from the renewal of Nordstrom Rack and a new lease with
Apple Cinemas which replaced Showcase Cinema when it vacated at
lease expiration in April 2021. The theater opened in March 2022.
The mall reported YE 2022 in-line sales of $427 psf which compares
with $499 psf as of TTM June 2017 and $494 psf at issuance. Fitch's
'Bsf' rating case loss of 8% prior to concentration adjustments
reflects a 20% cap rate and 5% stress to the YE 2021 NOI. Fitch
also ran an additional scenario that applies a 'Bsf' sensitivity
case loss of 30% on this loan which factors a higher probability of
default due to anticipated refinance concerns at maturity,
secondary market location, non-institutional sponsorship and
deteriorated sales from issuance.
Changes to Credit Enhancement: As of the June 2023 distribution
date, the pool's aggregate balance has been paid down by 4.1% to
$1.23 billion from $1.29 billion at issuance. Two loans (7.4%) are
defeased. Twenty-four loans representing 55.6% of the pool are
full-term interest-only loans. Thirteen loans (21.9%) have a
partial, interest-only component. The pool is scheduled to amortize
by 7.4% of the initial pool balance by maturity.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to 'AAAsf' and 'AAsf' category rated classes are not
expected, but could occur if deal-level expected losses increase
significantly and/or interest shortfalls affect these classes. For
'AAAsf' rated bonds, additional stresses applied to defeased
collateral if the U.S. sovereign rating is lower than 'AAA' could
also contribute to downgrades.
Downgrades to 'Asf' and 'BBBsf' category rated classes could occur
if deal-level losses increase significantly on non-defeased loans
in the transactions and with outsized losses on larger FLOCs.
Downgrades to 'BBsf' category rated classes are possible with
higher expected losses from continued performance of the FLOCs
and/or with greater certainty of losses on FLOCs.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to 'AAsf' and 'Asf' category rated classes are not
expected, but possible with significantly increased CE from
paydowns, coupled with stable-to-improved pool-level loss
expectations and performance stabilization of FLOCs. Upgrades of
these classes to 'AAAsf' will also consider the concentration of
defeased loans in the transaction.
Upgrades to the 'BBBsf' and 'BBsf' category rated classes 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.
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.
BBCMS 2018-BXH: DBRS Confirms BB(low) Rating on Class F Certs
-------------------------------------------------------------
DBRS Limited confirmed its ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2018-BXH issued by BBCMS Trust
2018-BXH as follows:
-- Class A at AAA (sf)
-- Class X-NCP at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at AA (low) (sf)
-- Class D at A (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
All trends are Stable.
The rating confirmations reflect the continued stable performance
of the transaction, which remains in line with DBRS Morningstar's
expectations since the last review. At that time, DBRS Morningstar
changed the trend on Class F to Stable from Negative, given the
general improvement in performance of the underlying collateral,
which had previously faced disruptions as a result of the
Coronavirus Disease (COVID-19) pandemic. The portfolio continues to
demonstrate improvements in key performance indicators, as
evidenced by the last few reporting periods and, as detailed
below.
At issuance, the $257.0 million mortgage loan was secured by the
fee-simple (16) and leasehold (one) interests in a portfolio of 17
limited-service, extended-stay, and full-service hotels totalling
2,189 keys across the United States, all of which were
cross-collateralized and cross-defaulted. The trust loan proceeds
were used to recapitalize the portfolio, with the sponsor, BREIT
Operating Partnership (an affiliate of The Blackstone Group),
retaining more than $176.0 million of equity at closing. The loan
is prepayable in whole or in part at any time, with individual
property releases permitted, subject to a payment release price of
105.0% of the allocated loan amount for the first 25% of the
original principal balance and 110.0% thereafter. For all property
releases, the loan is subject to a minimum debt yield requirement.
According to the June 2023 remittance, the outstanding trust
balance has been reduced to $185.7 million due to prepayments,
primarily related to the release of three properties and a parking
garage parcel from the Hyatt Place San Jose property. In addition,
it appears that additional principal prepayments were made, which
may be related to meeting the minimum debt yield requirement
associated with property releases. DBRS Morningstar has requested
clarification from the servicer and a response is outstanding as of
the date of this press release. The interest-only (IO),
floating-rate loan had an initial two-year term with five one-year
extension options. The loan is currently scheduled to mature in
October 2023; however, there are two extension options remaining.
The servicer noted that it has reached out to the borrower
regarding its plans for the upcoming maturity, but a response is
pending. In addition, a replacement interest rate cap agreement is
required as part of each extension, and it is noteworthy that given
the current interest rate environment, the cost to purchase a rate
cap has likely increased. As of the June 2023 loan-level reserve
report, approximately $1.7 million was held across all reserve
accounts.
The portfolio is geographically diversified across seven different
states with primary concentrations in California, Massachusetts,
and Florida. The hotels operate under franchise agreements with
three major brands—Marriott, Hyatt, and Hilton, allowing the
hotels to benefit from strong brand recognition as well as
brand-wide reservation systems, marketing, and loyalty programs.
All franchise agreements extend beyond the fully extended loan
maturity date, with expirations ranging from 2030 to 2037. The
properties underwent renovations totalling $13.9 million between
2015 and 2018, with the sponsor planning to invest an additional
$14.4 million in improvements through 2023.
Performance has steadily improved with the portfolio reporting
weighted-average occupancy rate, average daily rate, and revenue
per available room (RevPAR) metrics of 75.4%, $154.2, and $115.5,
respectively, for the trailing 12-month period (T-12) ended March
31, 2023. Operating performance across the portfolio has
drastically improved from the lows of the pandemic when RevPAR was
$51.2 (as of YE2020) and has generally seen a rebound close to
issuance levels when RevPAR was reportedly $119.4. Based on the
YE2022 financials, the portfolio generated net cash flow (NCF) of
$23.8 million ($19.9 million for the remaining collateral), a
significant improvement from the negative NCF reported in YE2020
but still below the DBRS Morningstar NCF of $29.8 million ($25.5
million for the remaining collateral). Despite continued interest
rate volatility, the debt service coverage ratio remains healthy at
2.91 times as of YE2022.
For this review, DBRS Morningstar applied a 2.0% haircut to the
YE2022 NCF (excluding the NCFs from the three released properties).
A 9.6% capitalization rate was applied to that figure, resulting in
a DBRS Morningstar value of $204.2 million, a -45.6% variance from
the issuance appraised value of $375.1 million for the remaining
collateral.
DBRS Morningstar maintained positive qualitative adjustments to the
final loan-to-value (LTV) sizing benchmarks used for this rating
analysis, totalling 2.5% to account for cash flow volatility,
property quality, and market fundamentals.
The DBRS Morningstar rating assigned to Class F is higher than the
results implied by the LTV sizing benchmarks by three or more
notches. The variance is warranted given the general improvement in
cash flow trends and key performance indicators over the last
several reporting periods as well as the sponsor's continued
commitment to the portfolio. The transaction benefits from
collateral reduction of 27.8% since issuance and includes $50.0
million of below investment-grade cushion, further strengthening
credit enhancement levels, especially for the higher-rated bonds.
As such, the DBRS Morningstar rating assigned to Class C is lower
than the results implied by the LTV sizing benchmarks by three or
more notches. However, DBRS Morningstar conducted an upgrade stress
to test the durability of the rating on that class, which it did
not pass. As such, the variance is warranted.
Notes: All figures are in U.S. dollars unless otherwise noted.
BCC MIDDLE 2023-1: S&P Assigns Prelim BB- (sf) Rating on E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to BCC Middle
Market CLO 2023-1 LLC's floating- and fixed-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by middle market speculative-grade
(rated 'BB+' or lower) senior secured term loans. The transaction
is managed by Bain Capital Senior Loan Program LLC.
The preliminary ratings are based on information as of July 24,
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
BCC Middle Market CLO 2023-1 LLC
Class A, $234.0000 million: AAA (sf)
Class B-1, $29.0000 million: AA (sf)
Class B-2, $9.0000 million: AA (sf)
Class C (deferrable), $32.0000 million: A (sf)
Class D (deferrable), $24.0000 million: BBB- (sf)
Class E (deferrable), $24.0000 million: BB- (sf)
Subordinated notes, $45.6355 million: Not rated
BENCHMARK 2018-B8: Fitch Cuts Rating on Class E-RR Certs to 'BBsf'
------------------------------------------------------------------
Fitch Ratings has downgraded one class and affirmed 14 classes of
Benchmark 2018-B8 Mortgage Trust. The Rating Outlooks on classes B,
C, D, X-B and X-D were revised to Negative from Stable. A Negative
Outlook was assigned to class E-RR with the rating downgrade. The
Rating Outlook for class F-RR remains Negative. The under criteria
observation (UCO) has been resolved.
ENTITY/DEBT RATING PRIOR
---------- ------ -----
BMARK 2018-B8
A-2 08162UAT7 LT AAAsf Affirmed AAAsf
A-3 08162UAU4 LT AAAsf Affirmed AAAsf
A-4 08162UAV2 LT AAAsf Affirmed AAAsf
A-5 08162UAW0 LT AAAsf Affirmed AAAsf
A-S 08162UBA7 LT AAAsf Affirmed AAAsf
A-SB 08162UAX8 LT AAAsf Affirmed AAAsf
B 08162UBB5 LT AA-sf Affirmed AA-sf
C 08162UBC3 LT A-sf Affirmed A-sf
D 08162UAC4 LT BBBsf Affirmed BBBsf
E-RR 08162UAE0 LT BBsf Downgrade BBB-sf
F-RR 08162UAG5 LT B-sf Affirmed B-sf
G-RR 08162UAJ9 LT CCCsf Affirmed CCCsf
X-A 08162UAY6 LT AAAsf Affirmed AAAsf
X-B 08162UAZ3 LT AA-sf Affirmed AA-sf
X-D 08162UAA8 LT BBBsf Affirmed BBBsf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of Fitch's
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
Stable Loss Expectations: Loss expectations for the pool remain
stable since Fitch's prior rating action. Six loans are considered
Fitch Loans of Concern (FLOCs; 21.6% of the pool), and no loans are
currently in special servicing. Fitch's current ratings reflect a
'Bsf' rating case loss of 5.23%.
The Negative Outlooks on the classes B, C, D, E-RR, F-RR and
interest-only classes X-B and X-D reflect performance and refinance
concerns on four office loans in the top 20 that have experienced
occupancy declines or increases in dark/sublease space. All four
have been designated as FLOCs and include the following: 590 East
Middlefield, 3 Huntington Quadrangle, 5444 &5430 Westheimer and
TripAdivsor HQ. Downgrades to these classes are possible should the
performance of the FLOC's further deteriorate, loss expectations
increase, and/or loans transfer to special servicing.
Fitch Loans of Concern: The largest contributor to loss is the 3
Huntington Quadrangle loan (4.9%), which is secured by a 409,000-sf
suburban office property located in Melville, NY. The loan has been
identified as a FLOC due to significant occupancy declines, falling
to 71% per the March 2023 rent roll, from 94% at YE 2020 and YE
2019. The decline in occupancy is attributed to Travelers
Indemnity, previously 29% of the NRA, vacating at its July 2020
lease expiration. A cash flow sweep has been in place since
Travelers renewal notice period expired in May 2019. The largest
remaining tenant is Northwell Health (30% NRA; lease expiring
September 2028).
Fitch's 'Bsf' rating case loss of 25.9% prior to concentration
adjustments is based on a 10% cap rate on the YE 2021 NO and a
higher default probability to account for the asset type, loss of a
large tenant and limited prospects for backfilling vacant space.
The next largest contributor to expected losses is 590 East
Middlefield, which is secured by a 100,000-sf suburban office
located in Mountain View, CA, 15 miles NW of San Jose. The
property's single-tenant, Omnicell, vacated upon its lease
expiration in October 2022. A cash flow sweep has been activated,
and exceeds $3 million (approximately $35psf) as of July 2023.
Fitch's 'Bsf' rating case loss of 13.6% prior to concentration
adjustments is based on a dark value analysis in which Fitch made
certain assumptions for market rent, downtime between leases,
carrying costs (including real estate taxes and insurance) and
re-tenanting costs. This analysis resulted in a dark value of
approximately $33 million.
The third largest contributor to expected losses is the Saint Louis
Galleria loan (5.7%), which is secured by a 466,000 sf portion of a
1.18 million-sf regional mall located in Saint Louis, MO. The
non-collateral anchors are Dillard's, Macy's and Nordstrom. The
largest collateral tenants are Galleria-6 Cinemas (4.2% NRA) and
H&M (2.8% NRA). Per servicer reporting, occupancy was reported to
be 91% as of YE 2022 compared to 87% as of September 2021 from
95.7% at YE 2020. The most recent servicer reported NOI DSCR as of
YE 2022 declined to 1.57x from 1.68x at YE 2021, 1.79x at YE 2020
and 2.25x at YE 2019.
Inline sales as of the TTM ended March 2023 (excluding Apple) were
reported to be $411 psf compared to $401 psf at YE 2021, and $294
psf at YE 2020. For the same period, the inline sales including
Apple were $525 psf compared to $523 psf at YE 2021 and $364 psf at
YE 2020. The most recent servicer-reported sales per screen for
Galleria 6 Cinemas improved to $201,125 from $172,803 at TTM August
2022, $101,838 at TTM September 2021 and $81,767 at YE 2020.
Fitch's 'Bsf' rating case loss of 11.8% prior to concentration
adjustments is based on a 11.5% cap rate to reflect the regional
mall exposure and a 5% stress to the YE 2021 NOI.
The two other office FLOCs include 5444 &5430 Westheimer, a
405,000-sf suburban office located in Houston, TX, and TripAdivsor
HQ, a 280,892-sf suburban office property located in Needham, MA.
Occupancy for the 5444 &5430 Westheimer is expected to decline to
approximately 50% after the loss of two tenants in 2023. For the
TripAdvisor HQ property, TripAdvisor leases 100% of the building
through 2030; however, the tenant is marketing approximately 50% of
its space for sublease. Both of these loans have remained current.
Minimal Change to Credit Enhancement (CE): As of the June 2023
distribution date, the pool's aggregate principal balance was
reduced by 7.9% to $966 million from $1.05 billion at issuance.
There have been no realized losses to date. Interest shortfalls of
$27,693 are currently affecting the non-rated class NR-RR.
Twenty-two loans (58%) are full-term interest-only (IO), and six
loans (12%) remain in their partial IO period. One loan, Dumbo
Heights Portfolio, matures in September 2023 and two loans,
Workspace and Anthem Eastside Shops, mature in 2025. The remaining
loans in the pool mature in in 2028.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades would occur with an increase in pool level losses from
underperforming or specially serviced loans. Downgrades of the
'AAAsf' categories are not likely due to increasing CE and expected
continued paydowns, but may occur should interest shortfalls affect
these classes. A downgrade of the 'AA-sf' and 'A-sf' rated classes
could occur if expected losses increase significantly and/or all of
the FLOCs suffer losses.
Downgrades to classes D, E-RR, X-B, X-D and F-RR are possible
should loss expectations increase from continued performance
decline of the FLOCs, particularly from 590 East Middlefield, 3
Huntington Quadrangle, 5444 &5430 Westheimer and TripAdivsor HQ. A
downgrade to the distressed class G-RR would occur as losses are
realized or become more certain and/or as losses materialize and CE
becomes eroded.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades would occur with 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 performance stabilization of
FLOCs, and be limited by adverse selection, increased
concentrations and further underperformance of the FLOC office
properties. Upgrades to classes D, E-RR, X-B, X-D, F-RR and G-RR
are unlikely absent significant performance improvement and
substantially higher recoveries than expected on the FLOCs, and
there is sufficient CE to the classes.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BMO 2023-5C1: Fitch Assigns 'B-(EXP)sf' Rating to Class G-RR Certs
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
BMO 2023-5C1 Mortgage Trust Commercial Mortgage Pass-Through
Certificates series 2023-5C1 as follows:
-- $708,000 class A-1 'AAAsf'; Outlook Stable;
-- $125,000,000a class A-2 'AAAsf'; Outlook Stable;
-- $410,695,000a class A-3 'AAAsf'; Outlook Stable;
-- $77,587,000 class A-S 'AAAsf'; Outlook Stable;
-- $50,767,000 class B 'AA-sf'; Outlook Stable;
--$25,862,000 class C 'A-sf'; Outlook Stable;
-- $15,518,000d class D 'BBBsf'; Outlook Stable;
-- $8,429,000cd class E-RR 'BBB-sf'; Outlook Stable;
-- $15,326,000cd class F-RR 'BB-sf'; Outlook Stable;
-- $10,536,000cd class G-RR 'B-sf'; Outlook Stable;
-- $536,403,000b class X-A 'AAAsf'; Outlook Stable;
-- $154,216,000b class X-B 'A-sf'; Outlook Stable;
-- $15,518,000bd class X-D 'BBB-sf'; Outlook Stable.
Fitch does not expect to rate the following class:
-- $25,863,090cd class J-RR.
(a) Initial certificate balances for class A-2 and A-3 are not yet
determined. They are expected to be $535,695,000 in the aggregate,
subject to a 5% variance. The certificate balances will be
determined based on the final pricing of those classes of
certificates. The expected class A-2 balance range is $0 to
$250,000,000 and the expected class A-3 balance range is
$285,695,000 to $535,695,000. The balances above for the classes
A-2 and A-3 trust components reflect the midpoint of its ranges.
(b) Notional amount and interest only.
(c) Classes E-RR, F-RR, G-RR, and J-RR comprise the transactions'
horizontal risk retention interest.
(d) Privately placed and pursuant to Rule 144A.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 27 loans secured by 86
commercial properties having an aggregate principal balance of
$766,291,090 as of the cutoff date. The loans were contributed to
the trust by Bank of Montreal, 3650 Real Estate Investment Trust 2
LLC, Citi Real Estate Funding Inc., Societe Generale Financial
Corporation, German American Capital Corporation, Goldman Sachs
Mortgage Company, Starwood Mortgage Capital LLC, LMF Commercial,
LLC, and KeyBank National Association. The master servicer is
expected to be KeyBank National Association, and the special
servicer is expected to be 3650 REIT Loan Servicing LLC.
KEY RATING DRIVERS
Lower Leverage Compared to Recent Transactions: The pool has lower
leverage compared to recent multiborrower transactions rated by
Fitch. The pool's Fitch loan to value ratio (LTV) of 89.5% is lower
than the YTD 2023 and 2022 averages of 89.9% and 99.3%,
respectively. The pool's Fitch NCF debt yield (DY) of 10.2% is
higher than the YTD 2023 and 2022 averages of 10.6% and 9.9%,
respectively. Excluding credit opinion loans, the pool's Fitch LTV
and DY are 93.5% and 9.9%, respectively, compared to the equivalent
conduit YTD 2023 LTV and DY averages of 95.2% and 10.3%,
respectively.
Shorter-Duration Loans: The pool is 100% comprised of loans with
five-year terms, whereas standard conduit transactions have
historically included mostly loans with 10-year terms. Fitch's
historical loan performance analysis shows that five-year loans
have a modestly lower probability of default than 10-year loans,
all else equal. This is mainly attributed to the shorter window of
exposure to potential adverse economic conditions. Fitch considered
its loan performance regression in its analysis of the pool.
Higher Pool Concentration: The pool is more concentrated than
recently rated Fitch transactions. The top 10 loans in the pool
make up 67.0% of the pool, which is higher than the 2023 YTD level
of 63.5% and 2022 level of 55.2%. The pool's effective loan count
of 19.0 is lower than the 2023 YTD and 2022 average effective loan
count of 20.5 and 25.9, respectively.
Investment-Grade Credit Opinion Loans: Four loans representing
14.5% of the pool received an investment-grade credit opinion.
Gilardian NYC Portfolio II (5.35%) received a standalone credit
opinion of AA-sf, Back Bay Office (3.9%) received a standalone
credit opinion of 'AAAsf*', Harborside 2-3 (3.9%) received a
standalone credit opinion of 'BBBsf*', and Prime Storage Portfolio
#3 (1.3%) received a standalone credit opinion of 'A-sf*'. The
pool's total credit opinion percentage is below the YTD 2023 and
2022 averages of 19.8% and 14.4%, respectively.
Limited Amortization: Based on the scheduled balances at maturity,
the pool will pay down by 0.1%, which is well-below the 2023 YTD
and 2022 averages of 2.0% and 3.3%, respectively. The pool has 25
interest-only loans, or 97.4% of pool by balance, which is
well-above the 2023 YTD and 2022 averages of 78.6% and 77.5%,
respectively.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow decreases property value and capacity to meet
debt service obligations. The table indicates the model-implied
rating sensitivity to changes in one variable, Fitch NCF:
-- Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' /
'BBB-sf' / 'BB-sf' / 'B-sf'
-- 10% NCF Decline: 'AA-sf' / 'A-sf' / 'BBBsf' / 'BB+sf' / 'BBsf'
/ 'B-sf' / 'less than CCCsf'
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet debt service obligations. The table indicates the
model-implied rating sensitivity to changes to in one variable,
Fitch NCF:
-- Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' /
'BBB-sf' / 'BB-sf' / 'B-sf'
-- 10% NCF Increase: 'AAAsf' / 'AAsf' / 'Asf' / 'BBB+sf' /
'BBB-sf' / 'BBsf' / 'Bsf'
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BRSP 2021-FL1: DBRS Confirms B(low) Rating on Class G Notes
-----------------------------------------------------------
DBRS Limited confirmed its ratings on all classes of notes issued
by BRSP 2021-FL1, Ltd. as follows:
-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (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 has remained in line with DBRS Morningstar's
expectations since issuance. In conjunction with this press
release, DBRS Morningstar has 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 transaction closed in July 2021 with an initial collateral pool
of 31 floating-rate mortgage loans secured by 41 mostly
transitional properties with a cut-off balance of $800.0 million.
Most loans were in a period of transition with plans to stabilize
and improve asset value. The transaction is structured with a
Reinvestment Period through the July 2023 Payment Date, whereby the
Issuer may acquire Funded Companion Participations and introduce
new loan collateral into the trust subject to the Reinvestment
Criteria as defined at issuance. As of the June 2023 remittance,
there were no funds available in the Reinvestment Account.
As of the June 2023 remittance, the pool comprises 28 loans secured
by 43 properties with a cumulative trust balance of $800.0 million.
Since issuance, 14 loans with a former cumulative trust balance of
$453.6 million have been successfully repaid from the pool. Over
the same period, 11 loans with a current cumulative trust balance
of $330.9 million have been contributed to the trust, including one
loan (1.8% of the current trust balance) that has been added since
the previous DBRS Morningstar rating action in November 2022.
The transaction is concentrated by property type as 18 loans
(totaling 66.6% of the current trust balance) are secured by
multifamily properties, followed by nine loans (totaling 29.9% of
the current trust balance) secured by office properties, and only
one loan (3.5% of the current trust balance) secured by a mixed-use
property. In comparison with the transaction closing in July 2021,
loans secured by office properties increased by 12.2% and
multifamily properties decreased by 5.5% of the trust balance at
issuance. In addition, the same mixed-use property loan remains in
the pool since issuance, while the only loan secured by a
self-storage property (previously totaling 7.9% of the pool) was
repaid. While the majority of the outstanding loans secured by
office properties are progressing in their business plans, DBRS
Morningstar increased the probability of default for two loans,
representing 9.4% of the current loan balance, as the individual
borrowers have encountered difficulties increasing occupancy and/or
rental rates, resulting in lower-than-expected cash flows. DBRS
Morningstar also took into account the ongoing challenges for the
office sector, which include a decline in desirability for office
product across tenants, investors, and lenders alike in select
markets, that create greater uncertainty regarding the borrowers'
exit strategies upon loan maturity.
By geographical concentration, the collateral is most heavily
concentrated in Texas and California, with loans representing 31.7%
and 23.6% of the cumulative loan balance, respectively. Four loans,
representing 14.1% of the cumulative trust balance, are in urban
markets with DBRS Morningstar Market Ranks of 6, 7, and 8. These
markets have historically shown greater liquidity and demand. The
remaining 24 loans, representing 85.9% of the cumulative loan
balance, are secured by properties in markets with DBRS Morningstar
Market Ranks of 3, 4, and 5, which are suburban in nature and have
historically had higher probability of default levels when compared
with properties in urban markets. In comparison with issuance,
properties in urban and suburban markets have increased as a
percent of the transaction from 13.0% and 79.1%, respectively.
As part of its review, DBRS Morningstar received updates on the
business plans for all loans in the pool and, in general, borrowers
are progressing toward completion of their stated business plans.
Of the current collateral pool, 25 of the 28 outstanding loans were
structured with future funding components and, according to the
collateral manager, it had advanced $60.2 million in loan future
funding through June 2023 to 25 of the current individual borrowers
to aid in property stabilization efforts. The largest advances were
made to the borrowers of the Central Park Plaza ($12.6 million) and
360 Wythe ($11.6 million) loans. The Central Park Plaza loan is
secured by six office properties in San Jose, California, and the
360 Wythe loan is secured by a mixed-use property in Brooklyn, New
York. The borrowers on both loans have used loan future funding for
capital improvement projects and to fund leasing costs. Additional
future funding is available for the borrower of the 360 Wythe loan
for debt service shortfalls and a potential earnout, though the
earnout has not been achieved to date. An additional $52.8 million
of unadvanced loan future funding allocated to 23 individual
borrowers remains outstanding, with the largest portion ($6.4
million) allocated to the borrower of the Mohawk Business Park
loan. That loan is secured by a Class B office property in
Tualatin, Oregon, with loan future funding available to fund
capital improvements and leasing costs.
As of the June 2023 remittance, two loans, representing 7.2% of the
current cumulative trust loan balance, have been modified. Both
loans were modified in order for the borrowers to qualify for a
maturity extension. As of the June 2023 remittance, there are no
loans in special servicing and nine loans, representing 30.1% of
the current trust balance, are being monitored on the servicer’s
watchlist for upcoming loan maturity, low occupancy, and
informational issues. Of these loans, The Daphne loan (Prospectus
ID#12; 3.5% of the pool), which is secured by a 352-unit
multifamily property in Houston, is currently deemed a matured
performing balloon following the loan's maturity in June 2023.
According to the servicer's most recent commentary, the loan
maturity date is expected to be extended to June 2024 as the issuer
and borrower are working on a modification that will require the
borrower to purchase a new interest rate cap agreement and deposit
funds into a reserve account. Four additional loans are being
monitored for upcoming maturity dates; however, another eight loans
(25.3% of the pool) have scheduled maturity dates in 2023. In all
cases, the borrowers have extension options available and the
collateral manager expects the borrowers to exercise their
respective options. For majority of these loans, there are no
performance hurdles associated with the loan extensions, though the
borrowers are expected to purchase new rate cap agreements and
potentially deposit additional equity into the operating and debt
service reserves.
Notes: All figures are in U.S. dollars unless otherwise noted.
BX TRUST 2018-BILT: Fitch Hikes Rating on Class F Certs to 'BB-sf'
------------------------------------------------------------------
Fitch Ratings has upgraded six classes and affirmed 12 classes from
three U.S. CMBS single asset, single borrower (SASB) transactions
backed by hotel collateral located in Phoenix, Arizona (two) and
Santa Monica, California (one). The Rating Outlooks for three
classes have been revised to Stable from Negative.
ENTITY/DEBT RATING PRIOR
---------- ------ -----
BX Trust 2018-BILT
A 05606JAA3 LT AAAsf Affirmed AAAsf
B 05606JAG0 LT AA+sf Upgrade AA-sf
C 05606JAJ4 LT AA-sf Upgrade A-sf
D 05606JAL9 LT A-sf Upgrade BBB-sf
E 05606JAN5 LT BBB-sf Upgrade BB-sf
F 05606JAQ8 LT BB-sf Upgrade B-sf
X-CP 05606JAC9 LT PIFsf Paid In Full BBB-sf
X-EXT 05606JAE5 LT A-sf Upgrade BBB-sf
MSC 2018-SUN
A 61691MAA5 LT AAAsf Affirmed AAAsf
B 61691MAG2 LT AA-sf Affirmed AA-sf
C 61691MAJ6 LT A-sf Affirmed A-sf
D 61691MAL1 LT BBB-sf Affirmed BBB-sf
X-CP 61691MAC1 LT PIFsf Paid In Full AAAsf
X-EXT 61691MAE7 LT AAAsf Affirmed AAAsf
WFCM 2019-JWDR
A 95002NAA5 LT AAAsf Affirmed AAAsf
B 95002NAG2 LT AA-sf Affirmed AA-sf
C 95002NAJ6 LT A-sf Affirmed A-sf
D 95002NAL1 LT BBB-sf Affirmed BBB-sf
E 95002NAN7 LT BB-sf Affirmed BB-sf
F 95002NAQ0 LT B-sf Affirmed B-sf
TRANSACTION SUMMARY
Two of the transactions, BX Trust 2018-BILT (Arizona Biltmore) and
Wells Fargo Commercial Mortgage Trust 2019-JWDR (JW Marriott
Phoenix Desert Ridge Resort & Spa), are each secured by an
individual hotel property located in Arizona. The third
transaction, Morgan Stanley Capital I Trust 2018-SUN (Santa Monica
Hotel Portfolio), is secured by a portfolio of two adjacent hotels,
Shutters on The Beach (Shutters) and Hotel Casa Del Mar, in Santa
Monica, CA.
KEY RATING DRIVERS
Improved Performance and Cash Flow: The upgrades and Stable
Outlooks to classes within the BX Trust 2018-BILT transaction
reflect the strong asset quality, continued performance
improvement, and significant capital investment from the sponsor
and recent renovations to the property. The collateral has shown
significant recovery since reopening, with higher room rates
post-renovations in 2023 compared with 2019 and issuance. The
hotel, which reopened in May 2021, has benefited from a $70 million
renovation project that has boosted room rates.
The affirmations for classes within Morgan Stanley Capital I Trust
2018-SUN and Wells Fargo Commercial Mortgage Trust 2019-JWDR
reflect stabilizing performance and sustained improvement of
property net cash flow (NCF); all the hotels reported negative NCF
in 2020 due to the pandemic. The resumption of leisure travel and
reopening of the properties resulted in a recovery for the assets
starting in 2021. Further cash flow growth was experienced for 2022
and the TTM period ending March 2023.
The Outlook revisions to Stable from Negative for classes D, E, and
F within the Wells Fargo Commercial Mortgage Trust 2019-JWDR
transaction reflect Fitch's expectation of continued cash flow
stabilization. The collateral has shown significant recovery, with
higher room rates and RevPAR in 2022 compared with issuance.
Although there are concerns related to historical reliance on group
business that may impact future recovery given the uncertainty
related to meeting and group demand moving forward, based on recent
performance, continued recovery is expected.
In addition, Class X-CP within the BX Trust 2018-BILT and Morgan
Stanley Capital I Trust 2018-SUN are no longer receiving interest
distributions, following its fully extended final distribution
date. As such, the class has been paid in full in both
transactions.
Fitch relied on the most recent servicer reporting as of YE 2022
and TTM March 2023 for its analysis. The current Fitch NCFs, which
generally factor in a 10% stress to the YE 2022 and TTM March 2023
ADR, exceed the Fitch NCF from issuance for the Arizona Biltmore
hotel, while the Santa Monica Hotel Portfolio and JW Marriott
Phoenix Desert Ridge Resort & Spa hotels lagged behind the Fitch
NCF from issuance. While occupancy levels remain below those
reported at issuance, the properties have generally reported
increases in RevPAR from higher ADRs since issuance. In addition,
Fitch inflated the TTM March 2023 insurance expense by 30% for the
Santa Monica Hotel Portfolio, given its location in California.
The Arizona Biltmore is a 606-key, luxury, full-service hotel
located in Phoenix, AZ. The hotel reopened in May 2021 after being
closed since March 2020 during the pandemic. The hotel website
detailed various renovations undertaken at the property, including
remodeled villas and updates to the pool, spa and food and beverage
outlets. The hotel's TTM March 2023 NCF of $38.6 million was up
from YE 2022 NCF of $33.8 million, and the depressed YE2021 NCF of
$420,723 and the YE 2020 NCF (during the renovations) of -$5.8
million. TTM March 2023 NCF was 49.7% above Fitch's NCF at
issuance.
According to the TTM December 2022 STR report, occupancy, ADR and
RevPar were reported to be 56.9%, $404.26 and $230.18,
respectively, compared with 54.4%, $398.73 and $216.91 as of the
TTM May 2022 STR report, 65.8%, $265.05 and $174.40 as of YE 2019
and 66%, $271.90 and $179.37 as of TTM March 2018 at the time of
issuance. The hotel reported TTM December 2022 occupancy, ADR and
RevPAR penetration ratios of 87.5%, 113.3%, and 99.2%,
respectively, compared with 83.9%, 113.3% and 95.1% as of TTM May
2022.
The Santa Monica Hotel Portfolio loan is secured by the fee
interests in two adjacent beachfront, luxury, full-service hotels
located in Santa Monica, CA, Shutters on the Beach (198 keys) and
Hotel Casa Del Mar (129 keys). The two hotels are the only two
luxury hotels on the west side of Los Angeles that are located
directly on the beach. The loan transferred to special servicing at
the onset of the pandemic in 2020, but the borrower and lender
executed a modification and reinstatement agreement in December
2020 that cured the defaults.
The portfolio's TTM March 2023 NCF of $27.5 million was slightly
down from the YE 2022 NCF of $28.0 million, compared with the YE
2021 NCF of $11.3 million and the negative YE 2020 NCF of $9.0
million. TTM March 2023 NCF was 11.5% above Fitch's NCF at
issuance.
As of the TTM March 2023 STR Report, Shutters on the Beach reported
occupancy, ADR and RevPAR of 73.0%, $831.87, and $606.87,
respectively, compared with 59%, $716.81 and $422.99 as of TTM
December 2021, 41.7%, $603.06 and $251.55 as of TTM December 2020
and 80.4%, $707.55 and $568.58 as of TTM December 2019. As of the
TTM March 2023 STR Report, Casa Del Mar reported occupancy, ADR and
RevPAR of 68.9%, $851.32, and $586.93, respectively, compared with
55.1%, $737.68 and $406.49 as of TTM December 2021, 37.4%, $638.66
and $238.55 for TTM December 2020 and 78.9%, $704.45 and $555.60
for TTM December 2019.
The JW Marriott Phoenix Desert Ridge Resort & Spa is a 950-room,
full-service, high-quality destination resort hotel situated on
approximately 396 acres in the Sonoran Desert in Arizona. The hotel
was closed due to the pandemic between March and June of 2020. The
property reported TTM March 2023 NCF of $58.3 million, which is
59.4% above Fitch's NCF at issuance, as the hotel has reflected
improved performance, with higher room rates in 2022 and 2023
compared with issuance.
According to the TTM March 2023 STR report, occupancy, ADR and
RevPar were reported to be 62.2%, $323.63 and $201.36,
respectively, compared with 45.4%, $293.50 and $133.15 as of TTM
March 2022, and 69%, $253.03 and $174.60 as of TTM July 2019 at the
time of issuance. The hotel reported TTM March 2023 respective
occupancy, ADR and RevPAR penetration ratios of 97.4%, 82.1% and
80.0%, compared with 82.7%, 81.0% and 67.0% as of TTM March 2022.
Maturities: Each of the floating rate loans secured in the BX
2018-BILT and MSC 2018-SUN transactions were structured with a
two-year initial term with five, one-year extension options. The
loans for the Arizona Biltmore and Santa Monica Hotel Portfolio
recently exercised their fourth extension options and mature in May
2024 and July 2024, respectively. The extension options for these
two transactions were initially tied to LIBOR, but transitioned to
SOFR in 2023.
The loan for the JW Marriott Phoenix Desert Ridge Resort & Spa
(WFCM 2019-JWDR) is a seven-year, fixed-rate loan that matures in
September 2026.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to senior bonds are not likely due to the high level of
recoverability based on the high quality the properties as well as
the low leverage at the higher rating categories.
Downgrades to the junior bonds are possible if the cash flow
recovery is not deemed to be sustained. Potential headwinds for the
hotel sector, including high gas prices and airfares, reduced
flights, increased labor costs and staffing shortages, could temper
cash flow recovery and lead to potential Outlook revisions and/or
downgrades. Downgrades are more likely if loans default and value
declines are determined to be prolonged or permanent.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades are possible with sustained improvement in net cash flow
and occupancies that return to pre-pandemic levels. In considering
upgrades, Fitch may also consider the amount of leverage for each
transaction at each rating category, including debt per key,
relative to a loan's recovery, and refinanceability.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
CANYON CLO 2023-1: S&P Assigns Prelim BB- (sf) Rating on E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Canyon CLO
2023-1 Ltd./Canyon CLO 2023-1 LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Canyon CLO Advisors L.P.
The preliminary ratings are based on information as of July 27,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Canyon CLO 2023-1 Ltd./Canyon CLO 2023-1 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), $22.00 million: BBB- (sf)
-- Class E (deferrable), $12.00 million: BB- (sf)
-- Subordinated notes, $40.83 million: Not rated
CARLYLE US 2023-3: Fitch Assigns 'BB-(EXP)sf' Rating to E Notes
---------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Carlyle US CLO 2023-3, Ltd.
ENTITY/DEBT RATING
---------- ------
Carlyle US CLO 2023-3, Ltd
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT NR(EXP)sf Expected Rating
B LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D LT BBB-(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
Subordinated Notes LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Carlyle US CLO 2023-3, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by
Carlyle CLO Management L.L.C. Net proceeds from the issuance of the
secured and subordinated notes will provide financing on a
portfolio of approximately $400.00 million of primarily first lien,
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 25.3, versus a maximum covenant, in
accordance with the initial expected matrix point of 27.0. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from appropriate credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
97.09% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.58% versus a
minimum covenant, in accordance with the initial expected matrix
point of 72.4%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 47.5% of the portfolio balance in aggregate while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a five-year
reinvestment period and reinvestment criteria similar to other 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 tests.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings. The WAL used for the transaction stress portfolio
and analyses of matrices 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-1, 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-1 notes as
those notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'A+sf' for class C, '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 on
for its rating analysis, according to its applicable rating
methodologies, indicates that it is adequately reliable.
CD 2016-CD2: Fitch Affirms CCsf Rating on 4 Tranches
----------------------------------------------------
Fitch Ratings has downgraded five classes and affirmed 13 classes
of German American Capital Corp.'s CD 2016-CD2 Mortgage Trust,
commercial mortgage pass-through certificates, series 2016-CD2.
Fitch has also assigned a Negative Rating Outlook on classes C and
V1-C following the downgrade. The Under Criteria Observation (UCO)
has been resolved.
ENTITY/DEBT RATING PRIOR
----------- ------ -----
CD 2016-CD2
A-3 12515ABD1 LT AAAsf Affirmed AAAsf
A-4 12515ABE9 LT AAAsf Affirmed AAAsf
A-M 12515ABG4 LT AAAsf Affirmed AAAsf
A-SB 12515ABC3 LT AAAsf Affirmed AAAsf
B 12515ABH2 LT A-sf Downgrade AA-sf
C 12515ABJ8 LT BBB-sf Downgrade A-sf
D 12515AAN0 LT CCCsf Affirmed CCCsf
E 12515AAQ3 LT CCsf Affirmed CCsf
F 12515AAS9 LT CCsf Affirmed CCsf
V1-A 12515ABK5 LT AAAsf Affirmed AAAsf
V1-B 12515ABL3 LT A-sf Downgrade AA-sf
V1-C 12515ABW9 LT BBB-sf Downgrade A-sf
V1-D 12515ABQ2 LT CCCsf Affirmed CCCsf
X-A 12515ABF6 LT AAAsf Affirmed AAAsf
X-B 12515AAA8 LT A-sf Downgrade AA-sf
X-D 12515AAE0 LT CCCsf Affirmed CCCsf
X-E 12515AAG5 LT CCsf Affirmed CCsf
X-F 12515AAJ9 LT CCsf Affirmed CCsf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of Fitch's
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
The downgrades and assigned Outlooks reflect the impact of the
criteria and increased loss expectations for 229 West 43rd Street
Retail Condo due to an updated appraisal value 23% lower than the
previously reported value. Nine loans (49% of the pool) are
considered Fitch Loans of Concern (FLOCs) which include two loans
in special servicing (16.8% of the pool). Fitch's current ratings
incorporate a 'Bsf' rating case loss of 11%.
FLOCs/Largest Contributors to Loss: The largest contributor to
overall loss expectations and third largest loan, 229 West 43rd
Street Retail Condo (8.7% of the pool), is secured by a 245,132-sf
retail condominium located in Manhattan's Time Square district. The
loan transferred to special servicing in December 2019 for imminent
monetary default after the pandemic affected performance of tourism
and entertainment tenants. A receiver was appointed in March 2021
and foreclosure has been filed. Per the receiver's April 2023
report, the collateral remains 40.1% occupied with Bowlmor (31.6%
of the NRA), The Ribbon Worldwide (6.4%), Haru Sushi (2.2%), and
Los Tacos (0.7%).
The receiver is currently in litigation with The Ribbon Worldwide
and their guarantor over previously waived delinquent rents, which
exceed $2.0 million. The receiver has noted that the 2020/2021
property assessment was renegotiated, which is expected to generate
tax savings through 2024/2025. According to servicer updates,
negotiations are underway for the space previously occupied by
National Geographic, Gulliver's Gate and OHM (totaling 47.6% of
NRA).
It was noted at Fitch's prior review that BuzzFeed was planning on
relocating their headquarters to the property to occupy about
110,000-sf of space. The servicer has confirmed the tenant has
taken occupancy of non-collateral space on the 9th and 10th floors.
Fitch's 'Bsf' rating case loss of 94.8% (prior to concentration
add-ons) reflects a discount to the most recent appraised value
provided by the servicer.
The second largest contributor to modeled losses and largest loan
in the pool, 8 Times Square & 1460 Broadway (11.6%), is secured by
a 214,341-sf high end office property with retail component. It's
100% leased between WeWork (83% of NRA; lease expires 2034) and
Footlocker (17%; lease expires 2032). Both WeWork and Foot Locker
are currently open for business. The loan is a FLOC due to its
significant exposure to WeWork. Fitch's 'Bsf' rating case loss of
4% (prior to concentration add-ons) reflects a 8.5% cap rate and a
20% stress to the YE 2022 NOI to account for WeWork exposure.
The third largest contributor to modeled losses, 60 Madison Avenue
(6.4%), is secured by a 217,534-sf office building located in NYC.
The property is located in the Midtown South market in the Flatiron
District of Manhattan, New York City. Largest tenants include: Mass
Mutual (23.6%; expires March 2026) and The Atlantic Monthly Group
(15.5%; expires May 2026). The loan is a FLOC due to the
significance decline in occupancy following the loss of Knotel (20%
NRA) which declared bankruptcy and vacated in September 2021.
Occupancy has remained unchanged at 70% since YE 2021. Servicer
reported NOI DSCR was 2.13x at YE 2022 compared to 2.68x at YE
2021. Fitch's 'Bsf' rating case loss of 6.5% (prior to
concentration add-ons) reflects a 9.5% cap rate and a 10% stress to
the YE 2022 NOI.
Additional Specially Serviced Loans: The fourth largest loan,
Prudential Plaza (4.1%), recently transferred to special servicing
in June 2023 due to the borrowers' maturity extension request
beyond the current August 2025 loan maturity. It is secured by a
two-building office complex spanning a total of 2,243,970 sf
located in Chicago, IL. The loan has remained current as of the
June 2023 remittance. The YE 2022 occupancy and NOI DSCR were
reported at 82.5% and 1.68x, respectively. Fitch's 'Bsf' rating
case loss of 2.4% (prior to concentration add-ons) reflects a 10%
cap rate and a 10% stress to the YE 2022 NOI.
Increased Credit Enhancement: As of the June 2023 remittance, the
pool's aggregate balance has been reduced by 11.3% to $864.7
million from $975.4 million. Two loans (4.9%) are defeased. Eleven
loans, representing 62.5% of the pool, are full-term interest only
(IO). Seven loans, representing 27.5% of the pool, were structured
with a partial IO component; all have begun to amortize.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades would occur with an increase in pool-level losses from
underperforming or specially serviced loans. Downgrades to the
'AAAsf'-rated classes are not likely due to the expected paydown
from loan repayments and continued amortization, but may occur
should interest shortfalls affect these classes.
Further downgrades to the 'A-sf' and 'BBB-sf' rated classes may
occur if expected losses increase and/or if loans expected to pay
off at maturity exhibit worsening performance.
Further downgrades to classes rated 'CCCsf' and 'CCsf' would occur
with an increase in specially serviced loans, greater certainty of
losses on and/or losses are realized.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades would occur with stable to improved asset performance,
particularly on the FLOCs including better, higher appraised
valuation and/or better than anticipated recoveries for the
specially serviced loans, coupled with paydown and/or defeasance.
Upgrades to the 'A-sf' and 'BBB-sf' rated classes would likely
occur with significant improvement in CE and/or defeasance;
however, adverse selection and increased concentrations and/or
further underperformance of FLOCs could cause this trend to
reverse. Classes would not be upgraded above 'Asf' if there were
likelihood for interest shortfalls.
The 'CCsf' and 'CCCsf' rated classes are unlikely to be upgraded
absent significant performance improvement and substantially higher
recoveries than expected on the FLOCs.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
CEDAR FUNDING XVII: S&P Assigns BB- (sf) Rating on Class E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Cedar Funding XVII CLO
Ltd./Cedar Funding XVII CLO LLC's floating-rate debt.
The debt issuance is a CLO transaction backed primarily by broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans.
The ratings reflect S&P's assessment of:
-- The diversification of the collateral pool, which consists
primarily of broadly syndicated speculative-grade (rated 'BB+' and
lower) senior secured term loans.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Cedar Funding XVII CLO Ltd./Cedar Funding XVII CLO LLC
Class A notes, $216.00 million: AAA (sf)
Class A loans, $40.00 million: AAA (sf)
Class B notes, $44.00 million: AA (sf)
Class C notes (deferrable), $26.00 million: A (sf)
Class D-1A notes (deferrable), $4.00 million: BBB (sf)
Class D-1F notes (deferrable), $18.00 million: BBB (sf)
Class D-J notes (deferrable) $4.00 million: BBB-(sf)
Class E notes (deferrable) $12.00 million: BB- (sf)
Subordinated notes, $37.40 million: Not rated
CIRRUS FUNDING 2018-1: Moody's Ups $36MM E Notes Rating From Ba2
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Cirrus Funding 2018-1, Ltd.:
US$78,000,000 Class B-R Senior Secured Fixed Rate Notes due 2037
(the "Class B-R Notes"), Upgraded to Aaa (sf); previously on
January 25, 2021 Assigned Aa1 (sf)
US$30,000,000 Class C-R Mezzanine Secured Deferrable Fixed Rate
Notes due 2037 (the "Class C-R Notes"), Upgraded to Aa1 (sf);
previously on January 25, 2021 Assigned A1 (sf)
US$29,000,000 Class D-R Mezzanine Secured Deferrable Fixed Rate
Notes due 2037 (the "Class D-R Notes"), Upgraded to A1 (sf);
previously on January 25, 2021 Assigned Baa1 (sf)
US$36,000,000 Class E Junior Secured Deferrable Fixed Rate Notes
due 2037 (the "Class E Notes"), Upgraded to Baa3 (sf); previously
on January 25, 2021 Assigned Ba2 (sf)
Cirrus Funding 2018-1, Ltd., originally issued in November 2018 and
partially refinanced in January 2021 is a managed cash flow
collateralized bond obligation (CBO). The notes are collateralized
primarily by a portfolio of corporate bonds and loans. At least 30%
of the portfolio must consist of senior secured loans, senior
secured notes, and eligible investments, up to 70% of the portfolio
may consist of second lien loans, unsecured loans, bonds,
subordinated bonds, and unsecured bonds, and up to 5% of the
portfolio may consist of letters of credit. The transaction's
reinvestment period will end in January 2024.
RATINGS RATIONALE
These rating actions reflect the benefit of sustained par coverage
of the notes as indicated by the deal's overcollateralization (OC)
ratios. Based on Moody's calculation the deal currently has excess
par of approximately $1.5 million over initial target par of $600.0
million. The current OC ratios as calculated and modeled by Moody's
for Class A/B-R, Class C-R, Class D-R and Class E notes are
168.92%, 155.76%, 144.86% and 133.27%, respectively. Additionally,
the deal currently reports passing all its covenants. The notes
also benefit from the short period of time remaining before the end
of the deal's reinvestment period in January 2024, after which note
repayments are expected to commence.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
coupon/weighted average spread, and weighted average recovery rate,
are based on its published methodology and could differ from the
trustee's reported numbers. For modeling purposes, Moody's used the
following base-case assumptions:
Performing par and principal proceeds balance: $600,000,000
Diversity Score: 71
Weighted Average Rating Factor (WARF): 3068
Weighted Average Coupon (WAC): 4.49%
Weighted Average Recovery Rate (WARR): 41.25%
Weighted Average Life (WAL): 5.24 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, lower recoveries on defaulted assets.
Methodology Used for the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
CITIGROUP 2016-C3: Fitch Affirms 'BBsf' Rating on 2 Tranches
------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of Citigroup Commercial
Mortgage Trust, commercial mortgage pass-through certificates,
series 2016-C3 (CGCMT 2016-C3). The Rating Outlooks were revised to
Stable from Negative on classes B and X-B and remain Negative on
classes C, D and X-D. The criteria observation (UCO) has been
resolved.
ENTITY/DEBT RATING PRIOR
---------- ------ -----
CGCMT 2016-C3
A-3 17325GAC0 LT AAAsf Affirmed AAAsf
A-4 17325GAD8 LT AAAsf Affirmed AAAsf
A-AB 17325GAE6 LT AAAsf Affirmed AAAsf
A-S 17325GAF3 LT AAAsf Affirmed AAAsf
B 17325GAG1 LT AA-sf Affirmed AA-sf
C 17325GAH9 LT A-sf Affirmed A-sf
D 17325GAL0 LT BBsf Affirmed BBsf
E 17325GAN6 LT CCCsf Affirmed CCCsf
F 17325GAQ9 LT CCsf Affirmed CCsf
X-A 17325GAJ5 LT AAAsf Affirmed AAAsf
X-B 17325GAK2 LT AA-sf Affirmed AA-sf
X-D 17325GAU0 LT BBsf Affirmed BBsf
X-E 17325GAW6 LT CCCsf Affirmed CCCsf
X-F 17325GAY2 LT CCsf Affirmed CCsf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of the
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
The affirmations and Outlook revisions to Stable from Negative on
classes B and X-B reflect the impact of the criteria and relatively
stable performance of the overall pool since Fitch's prior rating
action.
Five loans (24.1% of pool) were designated as Fitch Loans of
Concern (FLOCs). No loans are currently specially serviced. Fitch's
current ratings incorporate a 'Bsf' rating case loss of 6.8%.
The Negative Outlooks on classes C, D and X-D reflect continued
performance and refinance concerns with the largest loan, Briarwood
Mall (10.3%), in addition to larger underperforming office loans,
particularly Hill7 Office (4.8%) and College Boulevard Portfolio
(4.1%), which have occupancy, tenancy and/or significant upcoming
rollover concerns.
Regional Mall FLOC: The largest contributor to loss expectations,
Briarwood Mall (10.3%), is secured by a 369,916-sf portion of a
978,034-sf super regional mall in Ann Arbor, MI, approximately 2.5
miles from the University of Michigan. The loan, which is sponsored
in a 50/50 joint venture between Simon Property Group and General
Motors Pension Trust, was designated a FLOC due to continued
occupancy declines and increasing refinance risk.
Net operating income (NOI) has continued to decline, with YE 2022
and YE 2021 NOI falling approximately 20% below YE 2020 and 33%
below YE 2019. Servicer-reported NOI debt service coverage ratio
(DSCR) for this interest-only (IO) loan was 2.04x at YE 2022, flat
from 2.06x at YE 2021 but down from 2.54x at YE 2020, 3.03x at YE
2019 and 3.51x at issuance.
The NOI declines are primarily due to tenant departures, with
collateral occupancy declining to 71% per the March 2023 rent roll
from 76% at YE 2020, 87% at YE 2019 and 95% at issuance. The
remaining non-collateral anchors are Macy's, JCPenney, and Von Maur
after Sears closed in the fourth quarter of 2018. In-line sales
have also declined, reporting at $482 psf ($387 psf excluding
Apple) for the TTM ended March 2022 compared with $543 psf ($358)
for TTM ended July 2020. Near-term rollover is granular and
includes approximately 30% NRA by YE 2024.
Fitch's 'Bsf' ratings case loss prior to concentration add-on of
41% is based on a 15% cap rate and a 7.5% haircut to the YE 2022
NOI and reflects a higher probability of default to account for the
likelihood of transfer to special servicing and/or maturity
default.
High Office Concentration: Loans secured by office properties
comprise 28.8% of the pool, including five (27.6%) in the top 15,
two (8.9%) of which were designated FLOCs. Hill7 Office (4.8%;
Seattle, WA), faces challenges with exposure to WeWork and the
largest tenant, Redfin (40% NRA), recently announcing plans to
sublease approximately 50% of its space. College Boulevard
Portfolio (4.1%; Overland Park, KS) has seen declines in
performance stemming from declines in occupancy since issuance,
with current occupancy at 76% as of September 2022 and 45% NRA
rolling by YE 2024.
Change in Credit Enhancement: As of the June 2023 distribution
date, the pool's aggregate balance has been reduced by 16.6% to
$630.7 million from $756.5 million at issuance. Since Fitch's prior
rating action, two hotel loans that were previously in special
servicing with a $12.8 million balance were disposed with a $2.8
million loss to the trust. Actual realized losses of $2.8 million
impacted the non-rated class G, and cumulative interest shortfalls
of $77,455 are currently impacting the non-rated class G.
Ten loans (44.5%) are full-term, IO. Seven loans (18.3%) had a
partial-term, IO component; all have begun to amortize. Ten loans
(14.2%) are fully defeased. All remaining loans mature in 2026.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades of classes rated in the 'AAAsf' category are not likely
due to increasing CE and expected continued amortization but could
occur if interest shortfalls impact these classes. Downgrades of
classes B, X-B and C could occur if pool loss expectations increase
significantly, additional loans become FLOCs and/or transfer to
special servicing or performance of the office FLOCs declines
further. Classes D and X-D would be downgraded if additional loans
become FLOCs, loans transfer to special servicing and/or
performance of Briarwood Mall deteriorates further. Classes E, X-E,
F and X-F would be downgraded as losses are realized and/or become
more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades of classes B and X-B may occur with significant
improvement in CE but would be limited based on sensitivity to
concentrations or the potential for future concentration. An
upgrade to class C is unlikely due to the high concentration of
loans secured by office properties but could occur If performance
of the office FLOCs improves significantly. Upgrades of classes D,
X-D, E, X-E, F and X-F are unlikely absent significant performance
improvement of Briarwood Mall. Classes would not be upgraded above
'Asf' if there is a likelihood for interest shortfalls.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
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.
COAST COMMERCIAL 2023-2HTL: S&P Assigns B (sf) Rating on HRR Certs
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to COAST Commercial
Mortgage Trust 2023-2HTL's commercial mortgage pass-through
certificates.
The certificate issuance is a CMBS transaction backed by a mortgage
loan secured by the borrower's fee simple and leasehold interests
in two full-service hotels: the 595-guestroom Hilton Fort
Lauderdale Marina and the 403-guestroom Westin Savannah. Since the
preliminary ratings were issued, the mortgage loan interest rate
decreased to the secured overnight financing rate (SOFR) + 4.05%
from SOFR + 4.10%. Our debt service coverage (DSC) on the mortgage
loan based on the 4.50% interest rate cap plus the spread, and our
net cash flow remains unchanged at 1.26x. S&P's DSC based on the
total debt and the 4.5% SOFR cap plus the spreads for the mortgage
and mezzanine loans is 1.06x, as opposed to 1.17x that was
published in the presale.
S&P said, "The ratings reflect our view of the collateral's
historical and projected performance, the sponsor's and managers'
experience, the trustee-provided liquidity, the loan terms, and the
transaction's structure. We determined that the loan has a
beginning and ending loan-to-value ratio of 87.1%, based on our
value of the properties backing the transaction."
Ratings Assigned
COAST Commercial Mortgage Trust 2023-2HTL
Class A, $78.3 million: AAA (sf)
Class B, $28.5 million: AA- (sf)
Class C, $21.2 million: A- (sf)
Class D, $28.0 million: BBB- (sf)
Class E, $44.3 million: BB- (sf)
Class F, $8.7 million: B+ (sf)
Class HRR interest, $11.0: B (sf)
HRR--Horizontal risk retention.
COLLEGIATE FUNDING 2005-B: Fitch Cuts Rating on Cl. B Notes to Bsf
------------------------------------------------------------------
Fitch Ratings has downgraded the outstanding notes of Collegiate
Funding Services Education Loan Trust (CFS) 2005-A and 2005-B. The
Rating Watch Negative has been removed from the class A-4 notes of
CFS 2005-B.
The Rating Outlooks for the class A-4 notes of CFS 2005-A and
2005-B are Negative. The Outlook for the class B notes of CFS
2005-A is Negative following the downgrade, while the Outlook for
the class B notes of CFS 2005-B is Stable following the downgrade.
ENTITY/DEBT RATING PRIOR
---------- ----- -----
Collegiate Funding Services
Education Loan Trust 2005-A
A-4 19458LBC3 LT BBBsf Downgrade AAsf
B 19458LBD1 LT BBBsf Downgrade A+sf
Collegiate Funding Services
Education Loan Trust 2005-B
A-4 19458LBH2 LT Asf Downgrade AAAsf
B 19458LBJ8 LT Bsf Downgrade A+sf
Fitch downgraded the class A-4 notes of CFS 2005-A to 'BBBsf' from
'AAsf' and the class A-4 notes of CFS 2005-B to 'Asf' from 'AAAsf'
due to increased maturity risk (the risk of not being able to repay
the principal due on the notes by legal final maturity) for the
notes in Fitch's cashflow modeling. The class A-4 notes failed
'BBsf' and 'BBBsf' maturity stresses in CFS 2005-A and 2005-B,
respectively. The model-implied ratings of the class A-4 notes are
two categories lower than the assigned ratings, as described by
Fitch's "Federal Family Education Loan Program (FFELP) Rating
Criteria," which gives credit to the legal final maturity dates of
the notes being 12 years away in 2035.
The class B notes of CFS 2005-A have been downgraded to 'BBBsf'
from 'A+sf', as this rating is constrained by the rating of the
class A-4 notes.
The class B notes of CFS 2005-B miss their legal final maturity
date under both credit and maturity stresses. In downgrading to
'Bsf' from 'A+sf', Fitch has considered qualitative factors such as
Navient's ability to call the notes upon reaching 10% pool factor
and the eventual full payment of principal in cashflow modeling.
The Outlook of the notes has been revised to Stable from Negative,
as the notes are floored at their current rating with a legal final
maturity over 10 years away.
The Negative Outlooks for the class A-4 notes of CFS 2005-A and
2005-B and the class B notes of CFS 2005-A reflect the possibility
of further negative rating pressure in the next one to two years if
maturity risk increases, particularly if the remaining loan term
does not move lower.
KEY RATING DRIVERS
U.S. Sovereign Risk: The trust collateral comprises 100% Federal
Family Education Loan Program (FFELP) loans, with guaranties
provided by eligible guarantors and reinsurance provided by the
U.S. Department of Education (ED) for at least 97% of principal and
accrued interest. The U.S. sovereign rating is currently
'AAA'/Rating Watch Negative.
Collateral Performance: For both transactions, after applying the
default timing curve per criteria, the effective default rate is
unchanged from the cumulative default rate. Fitch applies the
standard default timing curve in its credit stress cash flow
analysis. Additionally, defaults have remained in line with
expectations, while consolidation from the Public Service Loan
Forgiveness Program, which ended in October 2022, drove the
short-term inflation of CPR. Voluntary prepayments are expected to
return to historical levels. The claim reject rate is assumed to be
0.25% in the base case and 2.00% in the 'AAA' case.
CFS 2005-A: Based on transaction-specific performance to date,
Fitch assumes a cumulative default rate of 15.50% under the base
case scenario and a default rate of 46.50% under the 'AAA' credit
stress scenario. Fitch is maintaining the sustainable constant
default rate (sCDR) of 2.50% and the sustainable constant
prepayment rate (sCPR; voluntary and involuntary prepayments) of
7.00% in cash flow modeling.
The trailing-twelve-month (TTM) levels of deferment, forbearance,
and income-based repayment (IBR; prior to adjustment) are 2.70%
(2.97% at May 31, 2022), 8.18% (6.80%) and 16.77% (16.73%). These
assumptions are used as the starting point in cash flow modelling
and subsequent declines or increases are modelled as per criteria.
The 31-60 days past due (DPD) have increased and the 91-120 DPD
have decreased from one year ago and are currently 2.36% for 31 DPD
and 0.31% for 91 DPD compared to 1.89% and 0.84% at May 31, 2022
for 31 DPD and 91 DPD, respectively. The borrower benefit is
approximately 0.36%, based on information provided by the sponsor.
CFS 2005-B: Based on transaction-specific performance to date,
Fitch assumes a cumulative default rate of 15.25% under the base
case scenario and a default rate of 45.75% under the 'AAA' credit
stress scenario. Fitch is maintaining the sCDR of 2.50% and the
sCPR of 7.00% in cash flow modeling. The TTM levels of deferment,
forbearance, and IBR are 2.35% (2.38% at May 31, 2022), 8.96%
(7.46%) and 19.31% (18.03%). These assumptions are used as the
starting point in cash flow modelling and subsequent declines or
increases are modelled as per criteria.
The 31-60 DPD and the 91-120 DPD have increased from one year ago
and are currently 2.48% for 31 DPD and 0.74% for 91 DPD compared to
2.07% and 0.60% at May 31, 2022 for 31 DPD and 91 DPD,
respectively. The borrower benefit is approximately 0.27%, based on
information provided by the sponsor.
Basis and Interest Risk: Basis risk for these transactions arises
from any rate and reset frequency mismatch between interest rate
indices for Special Allowance
Payments (SAP) and the securities. As of the most recent
distribution date, all trust student loans are indexed to 30-day
Average SOFR plus the spread adjustment of 0.11448% and all notes
are indexed to 90-day Average SOFR + 0.26161%. Fitch applies its
standard basis and interest rate stresses to these two transactions
as per criteria.
Payment Structure: Credit enhancement (CE) is provided by excess
spread, overcollateralization (OC) and for the class A notes,
subordination provided by the class B notes. As of the June 2023
distribution date, reported total parity is 100.85% and 101.41%,
for CFS 2005-A and CFS 2005-B, respectively. Liquidity support is
provided by reserve accounts currently sized at their floors of
$1,340,886 for CFS 2005-A and $1,915,862 for CFS 2005-B. Neither
transaction is currently releasing cash.
Operational Capabilities: Day-to-day servicing is provided by
Navient Solutions, LLC. Fitch believes Navient to be an adequate
servicer, due to its extensive track record as one of the largest
servicers of FFELP loans.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
'AAAsf' rated tranches of most FFELP securitizations will likely
move in tandem with the U.S. sovereign rating given the strong
linkage to the U.S. sovereign, by nature of the reinsurance
provided by the Department of Education. Aside from the U.S.
sovereign rating, defaults, basis risk and loan extension risk
account for the majority of the risk embedded in FFELP student loan
transactions. This section provides insight into the model-implied
sensitivities the transaction faces when one assumption is
modified, while holding others equal.
Fitch conducts credit and maturity stress sensitivity analysis by
increasing or decreasing key assumptions by 25% and 50% over the
base case. The credit stress sensitivity is viewed by stressing
both the base case default rate and the basis spread. The maturity
stress sensitivity is viewed by stressing remaining term, IBR usage
and prepayments. The results 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.
Collegiate Funding Services Education Loan Trust 2005-A
Current Ratings: class A-4 'BBBsf'; class B 'BBBsf'
Current Model-Implied Ratings: class A-4 'Asf' (Credit
Stress)/'Bsf' (Maturity Stress); class B 'Asf' (Credit and Maturity
Stress)
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'BBBsf'; class B 'BBBsf';
-- Default increase 50%: class A 'BBBsf'; class B 'BBBsf';
-- Basis Spread increase 0.25%: class A 'CCCsf'; class B 'BBsf';
-- Basis Spread increase 0.50%: class A 'CCCsf'; class B 'Bsf'.
Maturity Stress Rating Sensitivity
-- CPR decrease 25%: class A 'CCCsf'; class B 'Bsf';
-- CPR decrease 50%: class A 'CCCsf'; class B 'BBsf';
-- IBR Usage increase 25%: class A 'CCCsf'; class B 'BBBsf';
-- IBR Usage increase 50%: class A 'CCCsf'; class B 'BBsf';
-- Remaining Term increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- Remaining Term increase 50%: class A 'CCCsf'; class B 'CCCsf'.
Collegiate Funding Services Education Loan Trust 2005-B
Current Ratings: class A-4 'Asf'; class B 'Bsf'
Current Model-Implied Ratings: class A-4 'AAAsf' (Credit Scenario)
/ 'BBsf' (Maturity Scenario); class B 'CCCsf' (Credit and Maturity
Stress)
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'Asf'; class B 'CCCsf';
-- Default increase 50%: class A 'Asf'; class B 'CCCsf';
-- Basis Spread increase 0.25%: class A 'Asf'; class B 'CCCsf';
-- Basis Spread increase 0.50%: class A 'CCCsf'; class B 'CCCsf'.
Maturity Stress Rating Sensitivity
-- CPR decrease 25%: class A 'Bsf'; class B 'CCCsf';
-- CPR decrease 50%: class A 'CCCsf'; class B 'CCCsf';
-- IBR Usage increase 25%: class A 'BBsf'; class B 'CCCsf';
-- IBR Usage increase 50%: class A 'Bsf'; class B 'CCCsf';
-- Remaining Term increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- Remaining Term increase 50%: class A 'CCCsf'; class B 'CCCsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Collegiate Funding Services Education Loan Trust 2005-A
Credit Stress Rating Sensitivity
-- Default decrease 25%: class A 'BBsf'; class B 'Asf';
-- Basis Spread decrease 0.25%: class A 'AAAsf'; class B 'AAAsf';
Maturity Stress Rating Sensitivity
-- CPR increase 25%: class A 'BBsf'; class B 'Asf';
-- IBR Usage decrease 25%: class A 'Bsf'; class B 'BBBsf';
-- Remaining Term decrease 25%: class A 'AAAsf'; class B 'AAAsf'.
Collegiate Funding Services Education Loan Trust 2005-B
Credit Stress Rating Sensitivity
-- Default decrease 25%: class A 'AAAsf'; class B 'CCCsf';
-- Basis Spread decrease 0.25%: class A 'AAAsf'; class B 'CCCsf';
Maturity Stress Rating Sensitivity
-- CPR increase 25%: class A 'BBBsf'; class B 'CCCsf';
-- IBR Usage decrease 25%: class A 'BBBsf'; class B 'CCCsf';
-- Remaining Term decrease 25%: class A 'AAAsf'; class B 'AAAsf'.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
COMM 2014-LC17: DBRS Confirms BB Rating on Class D Certs
--------------------------------------------------------
DBRS Limited confirmed the ratings on the following classes of the
Commercial Mortgage Pass-Through Certificates, Series 2014-LC17
issued by COMM 2014-LC17 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 AA (low) (sf)
-- Class C at A (high) (sf)
-- Class PEZ at A (high) (sf)
-- Class X-C at BB (high) (sf)
-- Class D at BB (sf)
-- Class E at B (low) (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 typically carry a trend in commercial
mortgage backed securities (CMBS) ratings. The rating confirmations
and Stable trends reflect the overall performance of the
transaction, which remains in line with DBRS Morningstar's
expectations since the last rating action.
As of the June 2023 remittance, 49 of the original 71 loans remain
in the pool, with an aggregate principal balance of $737.1 million,
reflecting a collateral reduction of 40.4% since issuance as a
result of loan repayments, scheduled amortization, and proceeds
from loan liquidations. Since the last rating action in November
2022, five loans have been fully defeased, bringing the total
defeased collateral to 13.4% of the pool. Five loans (8.8% of the
pool) are on the servicer’s watchlist; four (7.7% of the pool) of
which are being monitored for performance related concerns. There
are an additional three loans (2.7% of the pool) in special
servicing, which were also in special servicing at the time of the
last rating action.
To date, seven loans have been liquidated from the trust with a
cumulative realized loss of approximately $31.5 million. In its
analysis for this review, DBRS Morningstar maintained its
liquidation of the three loans in special servicing. The implied
losses total nearly $10 million, which would partially erode the
balance of Class G, which currently carries a rating of C (sf).
Interest shortfalls continue to accumulate on Class G.
The largest specially serviced loan, Paradise Valley (Prospectus
ID#26, 1.8% of the pool), is secured by an 87,000-square-foot
retail center located in Phoenix. The loan initially transferred to
the special servicer in August 2020 for imminent payment default
and more recently became real estate owned in December 2021.
Following a significant increase in vacancy, the borrower attempted
to reinstate and modify the loan, but ultimately decided to return
the loan to the trust through a nonjudicial foreclosure. The
property is currently going through renovations to the anchor
space, which was formerly occupied by The RoomStore (35.3% of the
net rentable area (NRA)), and parking lot, which should help
facilitate some leasing traction for an eventual sale. Per the
trailing three months (T-3) financials dated March 31, 2023, the
loan reported a debt service coverage ratio (DSCR) of 0.62 times
(x) and an occupancy rate of 45%. Based on the December 2022
appraisal, the property was valued at $12.6 million (reflecting a
loan-to-value (LTV) ratio of 110.6% based on total loan exposure),
a decline from $12.9 million as of February 2022 and $21.8 million
at issuance. In its analysis for this review, DBRS Morningstar
liquidated this loan from the trust with an implied loss of nearly
$5.0 million, or a loss severity in excess of 35.0%.
Excluding collateral that has been defeased, the pool is most
concentrated by loans that are secured by lodging and retail
properties, representing 26.8% and 23.9% of the pool balance,
respectively, while office properties account for 18.6%. Most of
the loans secured by office properties in this transaction continue
to perform as expected, based on the most recent financials
available. However, DBRS Morningstar has a cautious outlook on this
asset type as sustained upward pressure on vacancy rates in the
broader office market may challenge landlords' efforts to backfill
vacant space, and, in certain instances, contribute to value
declines, particularly for assets in noncore markets and/or with
disadvantages in location, building quality, or amenities offered.
Where applicable, DBRS Morningstar increased the probability of
default (POD) penalties, and, in certain cases, applied stressed
LTV ratios for loans that are secured by office properties. The
weighted-average expected loss for those loans was less than double
the weighted-average pool expected loss.
The largest loan on the servicer's watchlist, Aloft Cupertino
(Prospectus ID#6, 4.2% of the pool) is secured by a 123-key,
limited-service hotel in Cupertino, California. The subject is
located approximately a half mile from Apple's 1 Infinite Loop
office, which acts as one of the properties' primary demand
drivers. The loan was placed on the servicer's watchlist in July
2022 for a low DSCR following a period in special servicing. The
loan previously received a modification with terms that primarily
included retroactively defering principal and interest payments for
six months; converting the loan to interest-only (IO) thereafter
for 12 months; and deferring of furniture, fixtures, and equipment
reserve deposits through June 2022, with all deferred amounts to be
repaid prior to maturity in June 2024. Per the servicer, the
borrower has remained up to date on its repayments of the
previously deferred amounts.
Per the December 2022 operating statement, the subject reported a
T-12 occupancy, average daily rate, and revenue per available room
(RevPAR) figures of 73.8%, $173, and $127, respectively. This shows
a marked improvement over the T-12 ended August 31, 2021, STR
report, which noted figures of 41.7%, $89, and $37, respectively,
with a RevPAR penetration of 113%. According to the YE2022
financials, the loan reported a DSCR of 0.95x, as compared with the
YE2021, YE2020, and YE2019 figures of -0.13x, -0.18x, and 1.90x,
respectively. Although the loan had previously received a loan
modification and financial performance has increased from the lows
of the Coronavirus Disease (COVID-19) pandemic, it still remains
challenged and performance remains below expectations, which will
complicate take out financing efforts as the loan approaches
maturity in August 2024. As a result, DBRS Morningstar analyzed
this loan with an elevated POD for this review, increasing the
loans expected loss to more than double the weighted-average pool
expected loss.
Notes: All figures are in U.S. dollars unless otherwise noted.
COMM 2015-LC19: DBRS Confirms B Rating on Class F Certs
-------------------------------------------------------
DBRS Limited confirmed its ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2015-LC19 issued by COMM
2015-LC19 Mortgage Trust as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 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 (high) (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class PEZ at A (high) (sf)
-- Class X-C at BBB (high) (sf)
-- Class D at BBB (sf)
-- Class E at BB (sf)
-- Class F at B (sf)
-- Class G at B (low) (sf)
All trends are Stable.
The rating confirmations and Stable trends reflect DBRS
Morningstar's current outlook and loss expectations for the
transaction, which remains relatively unchanged from last review.
While pool performance is generally stable, there is a noteworthy
concentration of loans collateralized by office properties,
representing 17.7% of the current pool balance, including three
top-10 loans.
According to the June 2023 remittance, 51 of the original 59 loans
remain in the pool, with a collateral reduction of 14.2% since
issuance. There are 18 loans, representing 29.3% of the pool,
secured by collateral that has been fully defeased. Additionally,
nine loans, representing 8.6% of the pool, are on the servicer's
watchlist, the majority of which are being monitored for deferred
maintenance and occupancy declines. There is only one loan in
special servicing.
The specially serviced loan, 56-15 Northern Boulevard (Prospectus
ID#34; representing 0.6% of the pool) is secured by an anchored
retail property in Woodside, New York. The loan transferred to
special servicing in January 2020 for imminent monetary default and
is now a nonperforming matured balloon loan. The borrower has not
been complying with cash management and has not provided updated
financial reports. A February 2023 appraisal reported an as-is
value of $12.7 million, relatively in line with the issuance
appraised value of $13 million. In its analysis, DBRS Morningstar
liquidated the loan based on a haircut to the most recent value,
resulting in an implied loss severity of less than 10.0%.
Most of the office loans in the transaction continue to perform as
expected, based on the most recent financial reporting available.
However, DBRS Morningstar has a cautious outlook on office
properties as sustained vacancy rates across the broader office
markets may result in difficulty backfilling vacant space, and in
certain instances, contribute to value declines, particularly for
assets in noncore markets. With this review, DBRS Morningstar
identified three office loans, representing 13.7% of the pool
combined and all of which are in the top 10, as having exhibited
low occupancy and/or increased credit risk. In its analysis, DBRS
Morningstar increased the probability of default penalties and
stressed loan-to-value (LTV) adjustments. These adjustments
resulted in the expected loss on each of the loans to be twice the
pool level adjusted expected loss. The largest of these loans is
discussed in further detail below.
Central Plaza (Prospectus ID#4; representing 6.9% of the pool) is
secured by the borrower's fee-simple interest in four Class B
office buildings totaling 880,035 square feet in Los Angeles. The
property benefits from its location in the Koreatown neighborhood,
approximately four miles west of downtown Los Angeles, along
Wilshire Boulevard with easy access to the Hollywood Freeway (US
101) and Santa Monica Freeway (Interstate 10), in addition to
public transportation. The annualized net cash flow based on the
September 30, 2022, financials was $8.0 million, compared with $7.4
million at YE2021 and $8.3 million at issuance. While financial
performance remains in line with issuance, the property has
historically experienced higher-than-average vacancy. The property
is currently 54.0% occupied, down from 64.2% at issuance. According
to Reis, the Q1 2023 Mid-Wilshire submarket vacancy rate was 21.2%
for office space. In its analysis, DBRS Morningstar elevated the
probability of default and applied a stressed LTV adjustment.
Notes: All figures are in U.S. dollars unless otherwise noted.
COMM 2015-PC1: DBRS Confirms BB Rating on Class X-D Certs
---------------------------------------------------------
DBRS Limited confirmed its ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2015-PC1 issued by COMM 2015-PC1
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 (low) (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class X-C at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class X-D at BB (sf)
-- Class E at BB (low) (sf)
-- Class F at CCC (sf)
All classes have Stable trends, with the exception of Class F as
the rating assigned to this class does not typically carry a trend
in commercial mortgaged-backed securities (CMBS) ratings.
The rating confirmations reflect the overall stable performance of
the transaction, which remains in line with DBRS Morningstar's
expectations. The CCC (sf) rating on Class F initially reflected
the large volume of specially serviced loans in 2021 and the
propensity for interest shortfalls to affect that tranche. Since
then, outstanding shortfalls were repaid for Class F, and specially
serviced loans now represent 5.5% of the pool balance based on the
June 2023 remittance report. However, the transaction has a large
concentration of loans backed by office properties, representing
34.2% of the pool balance, and generally the office sector has been
challenged given the low investor appetite for the property type
and high vacancy rates in many submarkets because of the shift in
workplace dynamics. In the analysis for this review, loans backed
by office and other properties that were showing declines from
issuance or otherwise exhibiting increased risks from issuance were
analyzed with a stressed scenario to increase the expected loss as
applicable. As a result, the weighted-average expected loss for the
office loans was about 40% greater than the pool's average expected
loss. Given the office concentration along with several loans of
concern that are highlighted below, this supports the CCC (sf)
rating on Class F.
As of the June 2023 remittance, 67 of the original 80 loans
remained in the pool with a current trust balance of approximately
$1.0 billion, representing a collateral reduction of 28.3% since
issuance. Fourteen loans, representing 17.5% of the current pool
balance, are fully defeased. Eleven loans, representing 19.3% of
the pool, are on the servicer's watchlist, six of which were
flagged for low debt service coverage ratios (DSCRs) and/or
performance-related issues. Four loans, representing 5.5% of the
current pool balance, are in special servicing.
The largest office loan on the servicer's watchlist, 760 & 800
Westchester Avenue (Prospectus ID#7, 3.0% of the pool), is composed
of two Class A office buildings in Rye Brook, New York. The pari
passu loan has pieces secured in the Wells Fargo Commercial
Mortgage Trust 2015-NXS1 (rated by DBRS Morningstar) and COMM
2015-DC1 transactions.
The loan is structured with a five-year interest-only (IO) period
that extended to 2019 and is currently amortizing. The loan is on
the servicer's watchlist because of a low DSCR, with the YE2022
figure at 0.93 times (x) compared with the YE2021 DSCR of 1.03x,
YE2020 DSCR of 1.25x, and DBRS Morningstar DSCR of 1.16x. The
decline in net cash flow was driven by a decrease in the base
rental revenue and expense reimbursements despite occupancy having
been relatively stable, hovering near the mid- to high 80% range.
According to the December 2022 rent roll, the property was 86.5%
occupied with an average rental rate of $25.92 per square feet
(psf), compared with the YE2021 occupancy rate of 86.5% and YE2020
occupancy rate of 88.4%. Per Reis, office properties in the
Harrison Rye East submarket reported a Q1 2023 vacancy rate of
23.8% with an effective rental rate of $23.39 psf, compared with
the Q1 2020 vacancy rate of 19.9% and effective rental rate of
$22.27 psf. Aside from the decrease in revenue, the property
exhibited an increase in expenses. Given the decline in financial
performance and soft submarket conditions, DBRS Morningstar applied
a stressed loan-to-value ratio (LTV) and a probability of default
(POD) penalty in its analysis, resulting in an expected loss that
is around 60% greater than the pool average.
The 100 Pearl Street loan (Prospectus ID#11, 2.6% of the pool) is
secured by a Class A office property in Hartford, Connecticut,
located in the central business district (CBD). The loan is on the
watchlist because of a low DSCR and occupancy. A modification was
executed in August 2019 to convert the loan to IO and provide a
discounted payoff (DPO) option, which expires in July 2023.
Occupancy has dropped significantly in the last few years, with the
December 2022 rent roll reporting an occupancy rate of 67.1%
compared with the YE2021 occupancy rate of 78.8% and issuance
occupancy rate of 99.5%.
The largest tenants include Hartford Health (29.8% of the NRA,
lease expiry in January 2036) and Regus (5.7% of the NRA, lease
expiry in February 2032). Per the Q1 2023 Reis report, the Hartford
CBD submarket reported a vacancy rate of 25.5%, compared with the
Q1 2022 vacancy rate of 19.0%. Based on the financials for the
trailing 12-month (T-12) period ended December 31, 2022, the
property reported a DSCR of 0.94x, down from the YE2021 DSCR of
1.56x and DBRS Morningstar DSCR of 1.17x. Given the soft submarket,
sustained low performance, and the availability of a DPO, DBRS
Morningstar applied a stressed LTV and a POD penalty in its
analysis, resulting in an expected loss that was six times greater
than the pool average.
The largest loan in special servicing, Sentinel Hotel (Prospectus
ID#8, 2.6% of the pool), is secured by a 100-key, full-service
luxury hotel in downtown Portland, Oregon. The loan transferred to
special servicing in June 2020 for imminent default. Per the latest
servicer commentary, the lender consented to the borrower's equity
transfer request and property manager change and expects to return
the loan to the master servicer. According to the March 2023 STR
report, the occupancy rate, average daily rate, and revenue per
available room for the T-12 period were reported at 49.1%, $214.77,
and $105.47, respectively, an improvement over the YE2021 figures
of 38.8%, $221.99, and $86.08, respectively. The DSCR for the T-12
period ended December 31, 2022, was reported to be 0.62x, down from
the YE2021 DSCR of 0.89x and DBRS Morningstar DSCR of 1.69x,
indicating declines in performance prior to the Coronavirus Disease
(COVID-19) pandemic. An April 2023 appraisal valued the property at
$43.0 million, less than the October 2022 appraised value of $45.0
million but above the issuance appraised value of $36.5 million.
With this review, DBRS Morningstar analyzed the loan with an
elevated POD to increase the expected loss.
Notes: All figures are in U.S. dollars unless otherwise noted.
CPS AUTO 2023-C: DBRS Gives Prov. BB Rating on Class E Notes
------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the classes of notes to
be issued by CPS Auto Receivables Trust 2023-C (the Issuer) as
follows:
Class A Notes AAA (sf) Provis.-New
Class B Notes AA (sf) Provis.-New
Class C Notes A (sf) Provis.-New
Class D Notes BBB (sf) Provis.-New
Class E Notes BB (sf) Provis.-New
CREDIT RATING RATIONALE/DESCRIPTION
The provisional ratings are based on DBRS Morningstar's review of
the following analytical considerations:
(1) Transaction capital structure, proposed ratings, and form and
sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization
(OC), subordination, amounts held in the reserve fund, and excess
spread. Credit enhancement levels are sufficient to support the
DBRS Morningstar-projected cumulative net loss (CNL) assumption
under various stress scenarios.
-- The DBRS Morningstar CNL assumption is 15.85% based on the
expected pool composition.
-- The transaction assumptions consider DBRS Morningstar's
baseline macroeconomic scenarios for rated sovereign economies,
available in its commentary "Baseline Macroeconomic Scenarios for
Rated Sovereigns: June 2023 Update," published on June 30, 2023.
These baseline macroeconomic scenarios replace DBRS Morningstar's
moderate and adverse Coronavirus Disease (COVID-19) pandemic
scenarios, which were first published in April 2020.
(2) The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms under which
they have invested. For this transaction, the ratings address the
timely payment of interest on a monthly basis and the payment of
principal by the legal final maturity date.
(3) The consistent operational history of Consumer Portfolio
Services, Inc. (CPS or the Company) and the strength of the overall
Company and its management team.
-- The CPS senior management team has considerable experience and
a successful track record within the auto finance industry.
(4) The capabilities of CPS with regard to originations,
underwriting, and servicing.
-- DBRS Morningstar performed an operational review of CPS and
considers the Company to be an acceptable originator and servicer
of subprime automobile loan contracts with an acceptable backup
servicer.
(5) DBRS Morningstar exclusively used the static pool approach
because CPS has enough data to generate a sufficient amount of
static pool projected losses.
-- DBRS Morningstar was conservative in the loss forecast analysis
that it performed on the static pool data.
(6) The Company indicated that there is no material pending or
threatened litigation.
(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 CPS, that the trust has a valid
first-priority security interest in the assets, and the consistency
with DBRS Morningstar's "Legal Criteria for U.S. Structured
Finance."
CPS 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 Notes reflects 58.15% of initial hard
credit enhancement provided by the subordinated notes in the pool
(50.45%), the reserve account (1.00%), and OC (6.70%). The ratings
on the Class B, C, D, and E Notes reflect 45.30%, 28.95%, 17.70%,
and 7.70% of initial hard credit enhancement, respectively.
Additional credit support may be provided from excess spread
available in the structure.
DBRS Morningstar's credit rating on the securities listed below
addresses the credit risk associated with the identified financial
obligations in accordance with the relevant transaction documents.
DBRS Morningstar's credit rating does not address non-payment risk
associated with contractual payment obligations contemplated in the
applicable transaction document(s) that are not financial
obligations.
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar considers risk of default to be
the risk that an issuer will fail to satisfy the financial
obligations in accordance with the terms under which a long-term
obligation has been issued.
Notes: All figures are in U.S. dollars unless otherwise noted.
CSMC 2021-980M: Fitch Affirms 'B-sf' Rating on Class F Certs
------------------------------------------------------------
Fitch Ratings has affirmed seven classes of CSMC 2021-980M,
commercial mortgage pass-through certificates, series 2021-980M.
All Rating Outlooks are Stable.
ENTITY/DEBT RATING PRIOR
---------- ------ -----
CSMC 2021-980M
A 12659RAA7 LT AAAsf Affirmed AAAsf
B 12659RAE9 LT AA-sf Affirmed AA-sf
C 12659RAG4 LT A-sf Affirmed A-sf
D 12659RAJ8 LT BBB-sf Affirmed BBB-sf
E 12659RAL3 LT BB-sf Affirmed BB-sf
F 12659RAN9 LT B-sf Affirmed B-sf
X 12659RAC3 LT A-sf Affirmed A-sf
KEY RATING DRIVERS
The affirmations and Stable Outlooks reflect stable occupancy and
cash flows since issuance, and strong asset quality and location.
The transaction benefits from the loan's low, fixed interest rate
of 3.6%.
Fitch incorporated a higher Fitch capitalization rate of 7.5%, up
from 7.25% at the initial rating action, to reflect increased
office sector concerns and credit contraction in the wake of bank
sector stresses and worsening macroeconomic conditions that have
heightened loan refinance risk.
High Fitch Leverage: The $197.6 million total mortgage loan has
high Fitch leverage metrics, with total debt of $1,465 psf and a
Fitch stressed loan to value (LTV), debt service coverage ratio
(DSCR) and debt yield (DY) of 121.8%, 0.72x, and 6.2%,
respectively. Inclusive of the $40.0 million mezzanine loan, the
transaction has total debt of $1,762 psf, and a Fitch stressed LTV,
DSCR, and DY of 146.5%, 0.60x and 5.1%, respectively. Through
'B-sf', Fitch's LTV, DSCR, and DY would be 105.9%, 0.83x and 7.1%,
with cumulative rated proceeds of approximately $1,274 psf.
Strong Manhattan Location and Property Quality: The property is a
six-story mixed-use development with 134,843 sf of luxury retail,
upscale gallery, and office spaces, extending along Madison
Avenue's prime retail corridor for an entire city block between
76th and 77th streets, just one block from Central Park. It is also
within nearby walking distance to East Side subway lines that
provide access to Times Square, Grand Central Terminal and Bryant
Park. At the initial rating, Fitch assigned 980 Madison a property
quality grade of "A-".
Stable Occupancy and Committed Long-Term Tenancy: The property has
demonstrated stable historical occupancy, averaging 97.5% between
2016 and 2021; it is currently 92.3% occupied as of March 2023. The
property's major tenant, Gagosian Gallery (42% of NRA), has been in
occupancy for over 30 years and the property serves as the tenant's
global headquarters location. The tenant has extended its leases
and expanded or renovated its spaces several times since taking
occupancy in 1989. Most recently, in 2019, the tenant invested $5.0
million into its fifth-floor space at the property.
Long-Term Institutional Sponsorship: RFR Holding LLC (RFR) is a
fully-integrated real estate investment firm with a portfolio of
over 100 buildings consisting of office, hotel, retail and
residential properties that are located in key markets in the
United States and Germany. RFR is a privately controlled real
estate investment, development and management company founded in
1991 by Aby Rosen and Michael Fuchs. The sponsor has been a
long-term owner of the subject property for over 15 years, since
acquiring it in 2004. In 2014, the sponsor invested $8.0 million
($59 psf) in capital improvements to maintain the property's strong
positioning within the market.
Concentrated Tenancy and Lease Rollover. The property is exposed to
significant lease rollover, as all of the leases currently in place
at the property are scheduled to expire over the five-year loan
term. The largest rollover concentration is scheduled to occur in
2025, when leases accounting for 62.5% of the NRA are set to
expire. This includes leases to the property's two largest tenants,
Gagosian Gallery (42% of NRA), and JN Contemporary (6.5% of NRA).
Aside from Gagosian Gallery, which does not have any termination
options, no single tenant represents more than 7.9% of the NRA. The
loan is structured with a cash flow sweep that goes into effect 12
months prior to Gagosian Gallery's lease expiration in April 2025,
or when the debt yield for total debt falls below 5.25%. According
to the servicer, as of June 2023, the loan is currently in a
trigger period and cash management was implemented beginning with
the June 2023 payment.
Non-Traditional Gallery Tenancy. The property currently designates
a majority of its spaces on floors two through six (53.7% of the
NRA) as non-traditional gallery spaces, and the majority of these
are utilized as art galleries. All of the gallery tenants have been
in place at the property for at least eight years, with the
exception of three tenants that recently took occupancy since early
2019. Two of these new tenants executed their leases subsequent to
the onset of the coronavirus pandemic, at an average base rent of
$145.19 psf, and there were also two recent expansions by the
property's major gallery tenants, Gagosian Gallery and JN
Contemporary, since July 2020, at an average base rent of $145.82
psf.
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. Should the loan experience a material
and sustained performance decline, downgrades are possible.
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. Class A is rated at the highest
rating level and cannot be upgraded further.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
FANNIE MAE 2023-R06: S&P Assigns B-(sf) Rating on Cl. 1B-2X Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Fannie Mae Connecticut
Avenue Securities Trust 2023-R06'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 primarily prime borrowers.
The ratings reflect S&P's view of:
-- The credit enhancement provided by the subordinated reference
tranches and the associated structural deal mechanics;
-- The REMIC structure, which reduces the counterparty exposure to
Fannie Mae for periodic principal and interest payments but also
pledges the support of Fannie Mae (as a highly rated counterparty)
to cover any shortfalls on interest payments and make up for any
investment losses;
-- The issuer's aggregation experience and the alignment of
interests between the issuer and the noteholders in the
transaction's performance, which S&P believes enhances the notes'
strength;
-- The enhanced credit risk management and quality control (QC)
processes Fannie Mae uses in conjunction with the underlying R&W
framework; and
-- The potential impact that current and near-term macroeconomic
conditions may have on the performance of the mortgage borrowers in
the pool. S&P said, "On April 17, 2020, we updated our mortgage
outlook and corresponding archetypal foreclosure frequency levels
to account for the potential impact of the COVID-19 pandemic on the
overall credit quality of collateralized pools. While
pandemic-related performance concerns have since waned, we continue
to maintain our updated 'B' foreclosure frequency for the
archetypal pool at 3.25%, given our current outlook for the U.S.
economy. We expect the U.S. economic growth will slow rather than
fall into a recession. We now expect U.S. real GDP growth will slow
to under 1.0% in the second half of the year, half the rate
expected in the second quarter. Our baseline view is that we see
this necessary slowdown as a longer, gradual process rather than a
short, abrupt one. An eventual slowdown is necessary, and we see a
multi-quarter period of sub-potential growth ahead." Under this
view, monetary policy rates will be higher for longer and financial
conditions will be tighter for longer, easing back toward their
longer-term levels as the economy lands.
Ratings Assigned
Fannie Mae Connecticut Avenue Securities Trust 2023-R06
Class 1A-H(i), $19,227,812,018: NR
Class 1M-1, $279,538,000: BBB+ (sf)
Class 1M-1H(i), $14,713,475: NR
Class 1M-2A(ii), $77,114,000: BBB+ (sf)
Class 1M-AH(i), $4,058,821: NR
Class 1M-2B(ii), $77,114,000: BBB (sf)
Class 1M-BH(i), $4,058,821: NR
Class 1M-2C(ii), $77,114,000: BBB- (sf)
Class 1M-CH(i), $4,058,821: NR
Class 1M-2(ii), $231,342,000: BBB- (sf)
Class 1B-1A(ii), $74,577,000: BB (sf)
Class 1B-AH(i), $31,962,328: NR
Class 1B-1B(ii), $74,577,000: BB- (sf)
Class 1B-BH(i), $31,962,328: NR
Class 1B-1(ii), $149,154,000: BB- (sf)
Class 1B-2, $105,524,000: B- (sf)
Class 1B-2H(i), $56,821,642: NR
Class 1B-3H(i), $152,199,042: NR
Related combinable and recombinable notes exchangeable
classes(iii)
Class 1E-A1, $77,114,000: BBB+ (sf)
Class 1A-I1, $77,114,000(iv): BBB+ (sf)
Class 1E-A2, $77,114,000: BBB+ (sf)
Class 1A-I2, $77,114,000(iv): BBB+ (sf)
Class 1E-A3, $77,114,000: BBB+ (sf)
Class 1A-I3, $77,114,000(iv): BBB+ (sf)
Class 1E-A4, $77,114,000: BBB+ (sf)
Class 1A-I4, $77,114,000(iv): BBB+ (sf)
Class 1E-B1, $77,114,000: BBB (sf)
Class 1B-I1, $77,114,000(iv): BBB (sf)
Class 1E-B2, $77,114,000: BBB (sf)
Class 1B-I2, $77,114,000(iv): BBB (sf)
Class 1E-B3, $77,114,000: BBB (sf)
Class 1B-I3, $77,114,000(iv): BBB (sf)
Class 1E-B4, $77,114,000: BBB (sf)
Class 1B-I4, $77,114,000(iv): BBB (sf)
Class 1E-C1, $77,114,000: BBB- (sf)
Class 1C-I1, $77,114,000(iv): BBB- (sf)
Class 1E-C2, $77,114,000: BBB- (sf)
Class 1C-I2, $77,114,000(iv): BBB- (sf)
Class 1E-C3, $77,114,000: BBB- (sf)
Class 1C-I3, $77,114,000(iv): BBB- (sf)
Class 1E-C4, $77,114,000: BBB- (sf)
Class 1C-I4, $77,114,000(iv): BBB- (sf)
Class 1E-D1, $154,228,000: BBB (sf)
Class 1E-D2, $154,228,000: BBB (sf)
Class 1E-D3, $154,228,000: BBB (sf)
Class 1E-D4, $154,228,000: BBB (sf)
Class 1E-D5, $154,228,000: BBB (sf)
Class 1E-F1, $154,228,000: BBB- (sf)
Class 1E-F2, $154,228,000: BBB- (sf)
Class 1E-F3, $154,228,000: BBB- (sf)
Class 1E-F4, $154,228,000: BBB- (sf)
Class 1E-F5, $154,228,000: BBB- (sf)
Class 1-X1, $154,228,000(iv): BBB (sf)
Class 1-X2, $154,228,000(iv): BBB (sf)
Class 1-X3, $154,228,000(iv): BBB (sf)
Class 1-X4, $154,228,000(iv): BBB (sf)
Class 1-Y1, $154,228,000(iv): BBB- (sf)
Class 1-Y2, $154,228,000(iv): BBB- (sf)
Class 1-Y3, $154,228,000(iv): BBB- (sf)
Class 1-Y4, $154,228,000(iv): BBB- (sf)
Class 1-J1, $77,114,000: BBB- (sf)
Class 1-J2, $77,114,000: BBB- (sf)
Class 1-J3, $77,114,000: BBB- (sf)
Class 1-J4, $77,114,000: BBB- (sf)
Class 1-K1, $154,228,000: BBB- (sf)
Class 1-K2, $154,228,000: BBB- (sf)
Class 1-K3, $154,228,000: BBB- (sf)
Class 1-K4, $154,228,000: BBB- (sf)
Class 1M-2Y, $231,342,000: BBB- (sf)
Class 1M-2X, $231,342,000(iv): BBB- (sf)
Class 1B-1Y, $149,154,000: BB- (sf)
Class 1B-1X, $149,154,000(iv): BB- (sf)
Class 1B-2Y, $105,524,000: B- (sf)
Class 1B-2X, $105,524,000(iv): B- (sf)
(i)Reference tranche only and will not have corresponding notes.
Fannie Mae retains the risk of these tranches.
(ii)The class 1M-2 noteholders may exchange all or part of that
class for proportionate interests in the class 1M-2A, 1M-2B, and
1M-2C notes and vice versa. The class 1B-1 noteholders may exchange
all or part of that class for proportionate interests in the class
1B-1A and 1B-1B notes and vice versa. The class 1M-2A, 1M-2B,
1M-2C, 1B-1A, 1B-1B, and 1B-2 noteholders may exchange all or part
of those classes for proportionate interests in the classes of RCR
notes as specified in the offering documents.
(iii)See the offering documents for more detail on possible
combinations.
(iv)Notional amount.
NR--Not rated.
FRONTIER ISSUER 2023-1: Fitch Gives 'BB-(EXP)sf' Rating to C Notes
------------------------------------------------------------------
Fitch Ratings has issued a presale report for Frontier Issuer
LLC's, Secured Fiber Network Revenue Notes, Series 2023-1 and
2023-2.
Fitch expects to rate Frontier Issuer LLC, Series 2023-1 and 2023-2
as follows:
-- $250 million(a) 2023-1 class A-1-V 'Asf'; Outlook Stable;
-- $247.6 million 2023-1 class A-2 'Asf'; Outlook Stable;
-- $68.8 million 2023-1 class B 'BBBsf'; Outlook Stable;
-- $138.5 million 2023-1 class C 'BB-sf'; Outlook Stable;
-- $248.8 million 2023-2 class A-2 'Asf'; Outlook Stable;
-- $34.4 million 2023-2 class B 'BBBsf'; Outlook Stable;
-- $69.2 million 2023-2 class C 'BB-sf'; Outlook Stable.
The initial principal balance of the 2023-1 and 2023-2 securities
could be increased up to a maximum amount of $2,114,637,000.
Fitch's ratings reflect the maximum potential issuance amount of
$2,114,637,000, though figures cited throughout this press release
and related reports reflect the actual $1,057,318,000 issuance
currently being offered.
(a) This note is a Variable Funding Note (VFN) and has a maximum
commitment of $250 million at issuance; however, the maximum can be
increased to $500 million if the transaction is upsized to the
maximum amount of $2.11 billion. The note is expected to have a
balance of $0 at issuance.
TRANSACTION SUMMARY
The transaction is a securitization of contract payments derived
from an existing fiber-to-the-premises (FTTP) network. The
collateral assets include conduits, cables, network-level
equipment, access rights, customer contracts, transaction accounts
and a shared infrastructure service agreement for common assets.
Debt is secured by net revenue from operations and benefits from a
perfected security interest in the securitized assets.
The collateral network consists of the sponsor's retail fiber
network, including 621,000 fiber passings and 175,000 copper
passings across three issuer-defined submarkets located in the
greater Dallas market. The network supports broadband, phone, video
and non-switch (private network intranet) services for
approximately 286,000 residential and commercial fiber
subscribers.
Transaction proceeds will be utilized to repay indebtedness under
an existing credit facility, fund the applicable securitization
transaction reserves, pay transaction fees and for general
corporate purposes, which may include a distribution to the parent
for growth capex.
The ratings reflect a structured finance analysis of cash flows
from the ownership interest in the underlying fiber optic network,
rather than an assessment of the corporate default risk of the
ultimate parent, Frontier Communications Parent, Inc.
(BB-/Negative).
KEY RATING DRIVERS
Net Cash Flow and Leverage: Fitch's net cash flow (NCF) on the pool
is $213.3 million, inclusive of the cash flows associated with the
VFN, implying a 14.3% haircut to issuer NCF. The debt multiple
relative to Fitch's NCF on the rated classes is 5.0x, compared with
debt/issuer NCF leverage of 4.2x. However, debt/FNCF and
debt/issuer NCF multiples would reach 9.9x and 8.5x, respectively,
if the transaction were upsized to the maximum amount of
$2,114,637,000.
Credit Risk Factors: The major factors affecting Fitch's
determination of cash flow and maximum potential leverage include
the high quality of the underlying collateral networks, scale of
the customer base, market position and penetration, market
concentration, 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.
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;
-- 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.
The presale report includes a detailed explanation of additional
stresses and sensitivities on page 6, 7 and 8.
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 68(B): Fitch Assigns 'BBsf' Rating to Class E Notes
-----------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Golub
Capital Partners CLO 68(B), Ltd.
ENTITY/DEBT RATING PRIOR
----------- ------ -----
Golub Capital Partners CLO
68(B)
A LT NRsf New Rating NR(EXP)sf
B LT AAsf New Rating AA(EXP)sf
C LT Asf New Rating A(EXP)sf
D LT BBB-sf New Rating BBB-(EXP)sf
E LT BBsf New Rating BB(EXP)sf
Subordinated LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Golub Capital Partners CLO 68(B), Ltd., 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 $500 million of primarily first lien senior secured
loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 23.99, versus a maximum covenant, in accordance with
the initial expected matrix point of 25.5. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
100% first-lien senior secured loans. The weighted average recovery
rate (WARR) of the indicative portfolio is 78.14% versus a minimum
covenant, in accordance with the initial expected matrix point of
76.4%.
Portfolio Composition (Negative): The largest three industries may
comprise up to 57% 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 transaction documents permit 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's analysis was based on a stressed portfolio created by
making adjustments to the indicative portfolio to reflect
permissible concentration limits and collateral quality test
levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The 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 'BB+sf' and 'A+sf' for class B, between 'Bsf' and
'BBB+sf' for class C, between 'less than B-sf' and 'BB+sf' for
class D, and between 'less than B-sf' and 'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
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.
GOODLEAP SUSTAINABLE 2023-3: Fitch Gives BB-(EXP) Rating on C Debt
------------------------------------------------------------------
Fitch Ratings has assigned GoodLeap Sustainable Home Solutions
Trust 2023-3 (GoodLeap 2023-3) expected ratings.
The assignment of final ratings is contingent on the receipt of
final documents conforming to information already reviewed.
ENTITY/DEBT RATING
----------- ------
GoodLeap Sustainable Home
Solutions Trust 2023-3
A LT A(EXP)sf Expected Rating
B LT BBB(EXP)sf Expected Rating
C LT BB-(EXP)sf Expected Rating
TRANSACTION SUMMARY
The transaction is a securitization of 20-to-25-year consumer loans
primarily backed by solar equipment.
KEY RATING DRIVERS
Asset Performance Assumptions: Informed in particular by the 2018
and 2019 default vintages, Fitch used an annualized default rate
(ADR) of 1.2% and certain prepayment assumptions to develop its
base case default expectation. Fitch used a higher default
assumption for interest-only (IO loans, 9.4%) than for standard
amortizing and principal-only assets (9%), and a lower assumption
for home-efficiency assets (8.5%). The overall base case default
rate is 9.0% and Fitch also assumed a 25% base case recovery rate
for the IO/deferred and standard assets while not giving credit to
recoveries for the home-efficiency sub-pool. At 'Asf', the
aggregate default and recovery assumptions are 30.4% and 14.4%,
respectively.
Rating Sensitivity: Small changes in performance assumptions can
have material ratings impact, particularly in certain model
scenarios. To ensure robust ratings, Fitch analysis considers the
notes ability to repay under severe stresses, sensitivities, and
the effectiveness of amortization triggers. Fitch's driving model
scenario has back-loaded defaults and a high level of prepayments.
Standard, Reputable Counterparties; No Swap: The transaction
account is with Wilmington Trust (A/F1/Negative) and the servicer's
lockbox account is with KeyBank (A-/F1/Stable). Commingling risk is
mitigated by the daily transfer of collections, high ACH share at
closing and the ratings of KeyBank.
Established Lender but New Assets: GoodLeap has grown to be one of
the largest U.S. solar loan lenders. Underwriting is mostly
automated and in line with those of other U.S. ABS originators.
Other than the solar lending business, GoodLeap also originates
home efficiency loans and mortgages. Some loan servicing is
outsourced to Genpact (UK) Limited, the sub-servicer, while
GoodLeap has increased its role in direct servicing over time.
Servicing disruption risk is further mitigated by the appointment
of Vervent, Inc. as the backup servicer.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Additional performance data that imply ADRs in excess of 1.2% or
show lower-than-expected prepayment rates may contribute to a
revision of Outlook to Negative or downgrade.
Material adverse changes in policy support, the economics of
purchasing and financing PV panels and batteries, and/or
ground-breaking technological advances that make the existing
equipment obsolete may also affect the ratings negatively.
Increase of defaults (Class A / B / C)
+10%: 'A-sf' / 'BBB-sf' / 'B+sf'
+25%: 'BBB+sf' / 'BB+sf' / 'Bsf'
+50%: 'BBBsf' / 'BBsf' / 'B-sf'
Decrease of recoveries (Class A / B / C)
-- 10%: 'Asf' / 'BBBsf' / 'BB-sf'
-- 25%: 'A-sf' / 'BBB-sf' / 'BB-sf'
-- 50%: 'A-sf' / 'BBB-sf' / 'B+sf'
Increase of defaults/decrease of recoveries (Class A / B / C)
+10% / -10%: 'A-sf'/ 'BBB-sf' / 'B+sf'
+25% / -25%: 'BBB+sf' / 'BB+sf' / 'Bsf'
+50% / -50%: 'BBB-sf' / 'BB-sf' / 'CCCsf'
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch does not rate solar transactions 'AAAsf' due to limited data
history. The rating cap may be lifted should more robust
performance data is provided. Positive rating actions may also
result from data specific to the level of default after the
investment tax credit due date, more data on recoveries, and the
performance of IO loans.
Subject to those conditions, good transaction performance, credit
enhancement at the target OC levels and ADRs materially below 1.2%
would support an upgrade.
Decrease of defaults (Class A / B / C)
-- 10%: 'A+sf' / 'BBBsf' / 'BBsf'
-- 25%: 'AA-sf' / 'BBB+sf' / 'BB+sf'
-- 50%: 'AA+sf' / 'BBB+sf' / 'BBBsf'
Increase of recoveries (Class A / B / C)
+10%: 'Asf' / 'BBBsf' / 'BB-sf'
+25%: 'Asf' / 'BBBsf' / 'BB-sf'
+50%: 'Asf' / 'BBBsf' / 'BBsf'
Decrease of defaults/increase of recoveries (Class A / B / C)
-- 10% / +10%: 'A+sf' / 'BBB+sf' / 'BBsf'
-- 25% / +25%: 'AA-sf' / 'A-sf' / 'BB+sf'
-- 50% / +50%: 'AA+sf' / 'BBB+sf' / 'BBB+sf'
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Similar to other solar ABS originators, GoodLeap can provide
historical information only covering a small share of the whole up
to 25-year loan tenor. Fitch applied default and recovery stresses
at the high or median-high level of the criteria range. The
amortizing nature of the assets and the application of an annual
default rate to the static portfolio allowed us to determine
lifetime default assumptions.
In addition, Fitch considered proxy data from other originators and
borrower characteristics (including demographics and fairly high
FICO scores) to derive asset assumptions, as envisaged under the
Consumer ABS Rating Criteria. Taking into account this analytical
approach, the rating committee decided to cap the rating in the
'AAsf' rating category, in line with other solar ABS transactions.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
For more information on Fitch's ESG Relevance Scores,
GS MORTGAGE 2017-GS7: Fitch Affirms 'B-sf' Rating on H-RR Certs
---------------------------------------------------------------
Fitch Ratings has affirmed 15 classes of GS Mortgage Securities
Trust 2017-GS7 commercial mortgage pass-through certificates. The
under criteria observation (UCO) has been resolved.
ENTITY/DEBT RATING PRIOR
---------- ------ -----
GSMS 2017-GS7
A-2 36254CAT7 LT AAAsf Affirmed AAAsf
A-3 36254CAU4 LT AAAsf Affirmed AAAsf
A-4 36254CAV2 LT AAAsf Affirmed AAAsf
A-AB 36254CAW0 LT AAAsf Affirmed AAAsf
A-S 36254CAZ3 LT AAAsf Affirmed AAAsf
B 36254CBA7 LT AA-sf Affirmed AA-sf
C 36254CBB5 LT A-sf Affirmed A-sf
D 36254CAA8 LT BBB+sf Affirmed BBB+sf
E 36254CAE0 LT BBB-sf Affirmed BBB-sf
F-RR 36254CAG5 LT BBB-sf Affirmed BBB-sf
G-RR 36254CAJ9 LT BB-sf Affirmed BB-sf
H-RR 36254CAL4 LT B-sf Affirmed B-sf
X-A 36254CAX8 LT AAAsf Affirmed AAAsf
X-B 36254CAY6 LT A-sf Affirmed A-sf
X-D 36254CAC4 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of Fitch's
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
Stable Loss Expectations: Loss expectations for the pool remain
stable since Fitch's prior rating action. Six loans (24.6% of pool)
were flagged as Fitch Loans of Concern (FLOCs), including the
specially serviced Marriott Grand Cayman (3.1%), due to recent or
upcoming rollover concerns and/or declining performance. Fitch's
current ratings reflect a 'Bsf' rating case loss of 4.10%.
Specially Serviced Loan: Marriott Grand Cayman (3.1% of the pool)
loan is secured by a 295-key full-service hotel located in Grand
Cayman, Cayman Islands. The loan transferred to special servicing
in October 2022 due to a maturity default. The loan was recently
modified in June 2023 and terms of the modification include: an
extension of the loan term by three-years to July 6, 2026 at the
same interest rate (5.45%). In addition, the borrower deposited
$5.0MM ($16,949 per key) for capital expenditures and $99,900 for
immediate repairs at the property. Per the special servicer, the
loan is expected to be returned to the master servicer around the
third-quarter of 2023.
According to the March 2023 STR report, the property's occupancy
for the TTM ended March 2023 was 56.1%, ADR at $412, RevPAR at $231
and a RevPAR penetration index at 81.2%.
Fitch Loans of Concern: The largest contributor to overall expected
losses is the 5-15 West 125th Street (4.7%) loan, which is secured
by a 119,34-sf mixed use (retail/office/multi-family) building
located in Harlem, NY. The property's largest tenants include
WeWork (27.9% of NRA, leased through February 2037); NYS Department
of Transportation (DMV; 23.4%, March 2033); and TJX (18.1%,
November 2026).
The property's occupancy improved to 94% as of March 2023, compared
to 71% at YE 2022, 90% at YE 2021, 84% at YE 2020 and 99% at YE
2019. Occupancy for the commercial component previously declined to
69.9% from 87% at issuance due to a dark Bed, Bath, & Beyond
vacating ahead of a lease expiration in 2027. The vacant Bed, Bath,
& Beyond space was subsequently backfilled by the NYS DMV. The DMV
signed a lease for 10-years at $63.00 psf compared to Bed, Bath, &
Beyond's previous rent of $23.49 psf.
NOI DSCR for the property improved to 1.59x as of March 2023, from
0.85x at YE 2022, 0.62x at YE 2021 0.96x as of YE 2020, and 1.15x
at YE 2019.
Fitch's 'Bsf' case loss of 15% prior to a concentration adjustment
is based on a 8.50% cap rate to the YE 2022 NOI.
The next largest contributor to overall expected losses is the One
West 34th Street (1.9%) loan which is secured by a 210,358-sf
office property located at the corner of West 34th Street and Fifth
Avenue in Manhattan, across the street from the Empire State
Building. The property's largest tenants include CVS (7.0% of NRA;
leased through January 2034); Olivia Miller (6.1%; July 2024);
International Inspiration (4.0%; November 2026); Amazon.com
Services (3.4%; October 2026); and Global Coverage (3.0%; May
2030).
The property's performance improved slightly with the March 2023
NOI DSCR at 0.93x compared to YE 2022 at 0.87x and YE 2021 at
0.82x.The property was 86% occupied as of March 2023, 87% at YE
2022, 80% at YE 2021 and 83% at YE 2020.
Upcoming rollover includes 8.6% of the NRA (10 leases) in 2023,
20.7% (13 leases) in 2024 and 10.7% (10 leases) in 2025.
Fitch's 'Bsf' case loss of 25% prior to a concentration adjustment
is based on a 9.25% cap rate to the YE 2021 NOI factoring in the
property's strong Manhattan location and excellent access to public
and mass transit.
Minimal Change in Credit Enhancement: As of the July 2023
distribution date, the pool's aggregate principal balance has been
paid down by 4.4% to $1.03 billion from $1.08 billion at issuance.
One loan (2.8% of the pool) is fully defeased. Three loans (2.2% of
original pool balance) have paid off since issuance. All of the
loans in the pool mature between March 2027 and August 2027, with
the exception of the specially serviced Marriott Grand Cayman loan
which matures in July 2026. There have been no realized losses to
the trust since issuance.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Sensitivity factors that lead to downgrades include an increase in
pool level losses from underperforming or specially serviced loans.
Downgrades to the 'Asf', 'AAsf' and 'AAAsf' categories are not
likely due to the position in the capital structure, but may occur
at the 'AAsf' and 'AAAsf' categories should interest shortfalls
occur. Downgrades to the 'BBBsf' category would occur if a high
proportion of the pool defaults and expected losses increase
significantly. Downgrades to the 'Bsf' and 'BBsf' categories would
occur should loss expectations increase due to continued
performance declines for loans designated as FLOCs and/or loans
transfer to Special Servicing.
Fitch has identified both a baseline and a worse-than-expected,
adverse stagflation scenario based on fallout from the
Russia-Ukraine war whereby growth is sharply lower amid higher
inflation and interest rates; even if the adverse scenario should
play out, Fitch expects virtually no impact on ratings performance,
indicating very few rating or Rating Outlook changes. However, for
some transactions with concentrations in underperforming retail
exposure, the ratings impact may be mild to modest, indicating some
changes on sub-investment-grade notes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Sensitivity factors that lead to upgrades would include stable to
improved asset performance coupled with pay down and/or defeasance.
Upgrades to the 'Asf' and 'AAsf' categories would likely occur with
significant improvement in CE and/or defeasance; however, adverse
selection, increased concentrations and/or further underperformance
of the FLOCs could cause this trend to reverse.
Upgrades to the 'BBBsf' category would also consider these factors,
but would be limited based on sensitivity to concentrations or the
potential for future concentration. Classes would not be upgraded
above 'Asf' if there were likelihood for interest shortfalls.
Upgrades to the 'Bsf' and 'BBsf' categories are not likely until
the later years in a transaction and only if the performance of the
remaining pool is stable and there is sufficient CE to the
classes.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
IMSCI 2014-5: DBRS Confirms BB(low) Rating on G Certs
-----------------------------------------------------
DBRS Limited confirmed its ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2014-5 issued by Institutional
Mortgage Securities Canada Inc. (IMSCI) Series 2014-5 as follows:
-- Class A-2 at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AAA (sf)
-- Class X at AAA (sf)
-- Class D at A (high) (sf)
-- Class E at A (low) (sf)
-- Class F at BBB (low) (sf)
-- Class G at BB (low) (sf)
All trends are Stable. The rating confirmations reflect the overall
stable performance of the transaction since DBRS Morningstar's last
review in November 2022, as well as DBRS Morningstar's expectation
that majority of the loans will successfully repay at or within a
relatively short time following their scheduled maturity dates.
There are, however, two loans, representing 15.8% of the pool, on
the servicer’s watchlist that DBRS Morningstar is continuing to
monitor as the loans are performing below expectations and are
scheduled to mature in March 2024.
As of the June 2023 remittance, seven of the original 41 loans
remain in the trust, with an aggregate balance of $53.8 million,
representing a collateral reduction of 82.7% since issuance, as a
result of loan repayments and scheduled amortization. Two loans,
representing 15.8% of the pool, are on the servicer's watchlist
being monitored for declines in occupancy rates and/or debt service
coverage ratios (DSCRs). The pool is concentrated by property type
with retail properties representing 73.9% of the pool balance,
followed by multifamily properties representing 16.7% of the pool
balance.
The largest loan on the servicer's watchlist, Burnhamthorpe Square
(Prospectus ID#19; 9.3% of the current pool balance), is secured by
six multitenanted office buildings in Etobicoke, Ontario. This is a
pari passu loan with the other piece of the loan secured in the
Institutional Mortgage Securities Canada Inc., Series 2013-4 (IMSCI
2013-4) transaction, which is also rated by DBRS Morningstar. The
loan was added to the servicer's watchlist in August 2021 because
of a decreased DSCR after the former largest tenant, Canada Bread
Company (8.6% of net rentable area (NRA)), vacated upon lease
expiration in 2016, bringing the occupancy rate down to 68.4% as of
March 2021. According to the September 2022 rent roll, the property
was 66.0% occupied, with approximately seven tenants’ leases,
representing 11.9% of the NRA, scheduled to expire over the next 12
months, including that of the second-largest tenant, SGI Canada
Insurance (7.0% of the NRA, expiring December 2023). Based on the
most recent financials, the loan reported a YE2021 DSCR of 0.87
times (x) compared with the YE2019 DSCR of 1.86x and DBRS
Morningstar DSCR of 1.33x at issuance. Although the property has
experienced some recent leasing momentum, according to the
servicer's most recent commentary, there is continued uncertainty
related to end-user demand and investor appetite for this property
type, increasing the credit risk profile for this loan. The loan
initially had a scheduled maturity in July 2023; however, the
servicer has granted an extension through March 2024.
The second loan on the servicer's watchlist is Nelson Ridge Pooled
Loan (Prospectus ID#17; 6.5% of the current pool balance), a pari
passu loan that is secured by a multifamily property in Fort
McMurray, Alberta. The other piece of the loan is also secured in
the IMSCI 2013-4 transaction. The loan has been in special
servicing twice and, in both cases, it was returned to the master
servicer as a corrected loan, generally receiving forbearance,
modification, or amendments to either of those agreements as
required. The loan is actively under forbearance through November
2023, as the lender has agreed not to enforce any items of existing
default. In addition, it appears the loan's maturity was recently
extended to March 2024; however, the servicer has noted another
extension will likely be required.
While the local economy continues to be disrupted by the downturn
of the oil industry, the property occupancy rate has recently
increased to 92.0% as of March 2023 from 60.0% as of February 2019.
While occupancy has increased, the average rental rate has dropped
to $1,343/unit as of March 2023 from $1,433/unit as of February
2019. According to Canada Mortgage and Housing Corporation's
Historical Rental Market Statistics Summary, the subject was
performing slightly above its competitors as the Wood Buffalo
submarket reported an average rental rate of $1,301 and vacancy
rate of 12.7% as of October 2022. Given the sustained performance
declines, however, the DSCR is expected to remain below
expectations, hovering around break-even. As of the YE2021
financials (most recently received), the loan reported a DSCR of
0.68x when the property was 82.2% occupied. The loan sponsor,
Lanesborough Real Estate Investment Trust, which provides 100%
recourse, continues to fund debt service shortfalls out of pocket
and has been cooperative and proactive in working with the servicer
to resolve outstanding issues. The loan is also 100% guaranteed by
both 2668921 Manitoba Ltd. (Manitoba) and Shelter Canadian
Properties Ltd., the parent company of Manitoba.
Although the borrower's commitment to the watchlisted loans is
apparent and has been frequently demonstrated with principal
paydown, the sustained cash flows and/or low occupancy figures
continue to present increased refinance risks for these loans as
they reach maturity. DBRS Morningstar used a hypothetical
liquidation scenario for the loans on the servicer's watchlist
based on the probability of default adjustments for each of the
collateral properties, which suggested that any potential losses,
should a default and liquidation ultimately occur within the near
to moderate term, would be contained in the unrated Class H.
Notes: All figures are in Canadian dollars unless otherwise noted.
IVY HILL XXI: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Ivy Hill
Middle Market Credit Fund XXI Ltd./Ivy Hill Middle Market Credit
Fund XXI LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by middle market speculative-grade
(rated 'BB+' or lower) senior secured term loans. The transaction
is managed by Ivy Hill Asset Management L.P.
The preliminary ratings are based on information as of July 27,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Ivy Hill Middle Market Credit Fund XXI Ltd./
Ivy Hill Middle Market Credit Fund XXI LLC
Class A, $243.12 million: AAA (sf)
Class A loan, $30.00 million: AAA (sf)
Class B, $52.25 million: AA (sf)
Class C (deferrable), $38.00 million: A (sf)
Class D (deferrable), $26.13 million: BBB- (sf)
Class E (deferrable), $28.50 million: BB- (sf)
Subordinated notes, $58.11 million: Not rated
JP MORGAN 2017-4: Moody's Upgrades Rating on Cl. B-5 Certs to Ba1
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of five bonds
from three US residential mortgage-backed transactions (RMBS),
backed by fully-amortizing conforming and non-conforming fixed rate
mortgage loans.
Complete rating actions are as follows:
Issuer: J.P. Morgan Mortgage Trust 2017-2
Cl. B-5, Upgraded to Baa2 (sf); previously on Oct 30, 2019 Upgraded
to Baa3 (sf)
Issuer: J.P. Morgan Mortgage Trust 2017-3
Cl. B-4, Upgraded to Aa3 (sf); previously on Sep 26, 2022 Upgraded
to A1 (sf)
Issuer: J.P. Morgan Mortgage Trust 2017-4
Cl. B-3, Upgraded to Aa1 (sf); previously on Sep 26, 2022 Upgraded
to Aa2 (sf)
Cl. B-4, Upgraded to A1 (sf); previously on Sep 26, 2022 Upgraded
to A3 (sf)
Cl. B-5, Upgraded to Ba1 (sf); previously on Apr 3, 2019 Upgraded
to Ba3 (sf)
RATINGS RATIONALE
The rating upgrades reflect the increased levels of credit
enhancement available to the bonds, the recent performance, and
Moody's updated loss expectations on the underlying pool.
In Moody's analysis, Moody's considered the additional risk of
default on modified loans. Generally, Moody's apply a 7x multiple
to the Probability of Default (PD) for private label modified
mortgage loans and an 8x multiple to the PD for agency-eligible
modified mortgage loans. However, Moody's may apply a lower
multiple to the PD for loans that were granted short-term payment
relief as long as there were no other changes to the loan terms,
such as a reduced interest rate or an extended loan term, which can
be used to lower the monthly payment on the loan. For loans granted
short-term payment relief, servicers will generally defer the
missed payments, which could be added as a non-interest-bearing
balloon payment due at the end of the loan term. Alternatively,
servicers could extend the maturity on the loan to match the number
of missed payments.
Moody's updated loss expectations on the pools incorporate, amongst
other factors, Moody's assessment of the representations and
warranties frameworks of the transactions, the due diligence
findings of the third-party reviews received at the time of
issuance, and the strength of the transaction's originators and
servicer.
Principal Methodology
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
April 2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
JP MORGAN 2023-6: Fitch Assigns 'B-(EXP)' Rating to B-5 Certs
-------------------------------------------------------------
Fitch Ratings has assigned expected ratings to JP Morgan Mortgage
Trust 2023-6 (JPMMT 2023-6).
ENTITY/DEBT RATING
---------- ------
JPMMT 2023-6
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
A-2-A LT AAA(EXP)sf Expected Rating
A-2-X LT AAA(EXP)sf Expected Rating
A-3 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 AA+(EXP)sf Expected Rating
A-6-A LT AA+(EXP)sf Expected Rating
A-X-1 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 2023-6 (JPMMT 2023-6) as
indicated. The certificates are supported by 338 loans with a total
balance of approximately $411.32 million as of the cut-off 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 (49.0%) with the remaining 51.0% 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 or MAXEX (aggregator).
NewRez LLC (f/k/a New Penn Financial, LLC), d/b/a Shellpoint
Mortgage Servicing (Shellpoint), will act as interim servicer for
approximately 46.0% of the pool from the closing date until the
servicing transfer date, which is expected to occur on or about
Sept. 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 49.0% of the loans); the remaining 5.0% of
the loans are being serviced by LoanDepot.com, LLC. Nationstar
Mortgage LLC (Nationstar) will be the master servicer.
Most of the loans (99.2%) qualify as safe-harbor qualified mortgage
(SHQM), agency SHQM, or SHQM (average prime offer rate [APOR]); the
remaining 0.8% 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 6.5% 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
begun to moderate, with a decline in 3Q22. Driven by the strong
gains in 1H22, 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 prime quality loans with
maturities of up to 30 years. Most of the loans (99.2%) qualify as
SHQM, agency SHQM, or SHQM (APOR); the remaining 0.8% 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 seven months, according to
Fitch (five months per the transaction documents). The pool has a
WA original FICO score of 759, as determined by Fitch, which is
indicative of very high credit quality borrowers. Approximately
65.7%, 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 75.4%,
translating to a sustainable loan-to-value (sLTV) ratio of 79.5%,
representing moderate borrower equity in the property and reduced
default risk compared with a borrower with a CLTV over 80%.
Per the transaction documents, nonconforming loans comprise 95.9%
of the pool, while the remaining 4.1% represents conforming loans.
However in Fitch's analysis, Fitch considered HPQM GSE eligible
loans to be nonconforming; as a result Fitch viewed the pool as
having 96.0% nonconforming loans and 4.0% conforming loans. All of
the loans are designated as QM loans, with 56.6 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), townhouses and single-family attached
dwellings constitute 95.0% of the pool; condominiums make up 4.3%;
and multifamily homes make up 0.8%. The pool consists of loans with
the following loan purposes, as determined by Fitch: purchases
(82.1%), cashout refinances (9.7%) and rate-term refinances (8.2%).
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 $2.99 million.
Of the pool, 41.3% is concentrated in California. The largest MSA
concentration is in the Los Angeles-Long Beach-Santa Ana, CA MSA
(12.9%), followed by the San Francisco-Oakland-Fremont, CA MSA
(8.7%) and Phoenix-Mesa-Scottsdale, AZ MSA (7.0%). The top three
MSAs account for 29% of the pool. As a result, there was no
probability of default (PD) penalty applied for geographic
concentration.
Loan Count Concentration (Negative): The loan count of this pool
(338 loans) resulted in a loan count concentration penalty. The
loan count concentration penalty applies when the weighted average
number of loans is less than 300. The loan count concentration of
this pool resulted in a 1.02x penalty, which increased the loss
expectations by 14 basis points (bps) at the 'AAAsf' rating
category.
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 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
principal and interest (P&I) on loans that entered 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 2.50%
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 1.40% 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 39.2% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
DATA ADEQUACY
Fitch relied 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, Digital Risk, Opus, 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.
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
provided was 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 2023-6 has an ESG Relevance Score of '4+' for Transaction
Parties and Operational Risk. Operational risk is well controlled
for in JPMMT 2023-6, including strong transaction due diligence, an
'Above Average' aggregator, the majority of the pool is originated
by an 'Above Average' originator, and a large portion of the pool
is serviced by an 'RPS1-' servicer. All of these attributes result
in a reduction in expected losses. This has a positive impact on
the transaction's credit profile and is 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.
LCCM 2021-FL2: DBRS Confirms B(low) Rating on Class G Notes
-----------------------------------------------------------
DBRS, Inc. confirmed its ratings on all classes of notes issued by
LCCM 2021-FL2 Trust as follows:
-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (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 has remained in line with DBRS Morningstar's
expectations since issuance. In conjunction with this press
release, DBRS Morningstar has 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.
At issuance, the initial collateral consisted of 23 floating-rate
mortgages or pari passu participation interests in mortgage loans
secured by 27 mostly transitional properties, with a cut-off
balance totaling $607.5 million. As of the July 2023 remittance,
the pool comprises 23 loans secured by 50 properties with a
cumulative trust balance of $607.4 million. Most loans are in a
period of transition with plans to stabilize and improve the asset
value.
The transaction is managed and is structured with a 24-month
Reinvestment Period ending with the July 2023 Payment Date. The
current Cash Reinvestment Account has a current balance of $0.1
million as of the June 2023 remittance. Since the previous DBRS
Morningstar rating action in November 2022, two loans, representing
4.9% of the current trust balance, have been added to the
transaction. Since issuance, 15 loans, with a former cumulative
loan balance of $323.8 million, have successfully repaid from the
trust.
The transaction is concentrated by property type as six loans,
representing 34.7% of the current trust balance, are secured by
office properties. While all loans remain current, given the
decline in desirability for office product across tenants,
investors, and lenders alike, there is greater uncertainty
regarding the borrowers' exit strategies upon loan maturity. In the
analysis for this review, DBRS Morningstar evaluated these risks by
stressing the current property values or increasing the probability
of default for four loans, representing 33.5% of the current trust
balance, collateralized by both office and nonoffice property
types. That analysis suggested the rated bonds remain sufficiently
insulated (relative to the respective rating categories) against
potential loan delinquency and increased credit risk.
Beyond the office concentration noted above, the transaction also
comprises seven loans, representing 27.1% of the current trust
balance secured by multifamily properties and three loans,
representing 15.9% of the pool secured by mixed-use properties. In
comparison with March 2022 reporting, office properties represented
29.2% of the collateral, multifamily properties represented 21.1%
of the collateral and mixed-use properties represented 32.1% of the
collateral.
The loans are secured rather equally by properties in urban and
suburban markets. Six loans, representing 38.6% of the pool, are
secured by properties in urban markets, as defined by DBRS
Morningstar, with a DBRS Morningstar Market Rank of 6, 7, or 8. Ten
loans, representing 34.5% of the pool, are secured by properties in
suburban markets, as defined by DBRS Morningstar, with a DBRS
Morningstar Market Rank of 3, 4, or 5. The remaining seven loans,
representing 26.9% of the pool, are secured by properties with a
DBRS Morningstar Market Rank of 1 or 2, denoting rural and tertiary
markets, respectively. In comparison, as of March 2022, properties
in urban markets represented 59.4% of the collateral, suburban
markets represented 25.0% of the collateral, and properties in
tertiary markets represented 15.6% of the collateral.
Leverage across the pool has increased slightly from issuance
levels as the current weighted-average (WA) as-is appraised value
loan-to-value ratio (LTV) is 68.5%, with a current WA stabilized
LTV of 64.7%. In comparison, these figures were 65.9% and 64.1%,
respectively, at issuance. DBRS Morningstar recognizes that select
property values may be inflated as the majority of the individual
property appraisals were completed in 2021 and 2022 and may not
reflect the current rising interest rate or widening capitalization
rate environments.
Through June 2023, the collateral manager had advanced $66.3
million in loan future funding to 12 of the outstanding individual
borrowers to aid in property stabilization efforts. The majority of
this amount has been released to the borrowers of the Regions
Harbert Plaza ($19.6 million), Puerto Rico Industrial Portfolio
($17.6 million) and The Met ($11.5 million) loans. The Regions
Harbert Plaza loan is secured by an office property in Birmingham,
Alabama. The borrower used the advanced funds to complete its
capital improvement and lease up plans at the subject, with $12.1
million associated with the lease renewal of the largest tenant.
The Puerto Rico Industrial Portfolio loan is secured by five
industrial parks totaling 21 properties throughout Puerto Rico. The
borrower used the advanced funds to complete capital improvement
projects and to fund leasing cost across the portfolio. The loan
has no future funding remaining. The Met loan is secured by a
mixed-use property in Atlanta. The borrower has used advanced to
funds to date for capital improvement projects, leasing costs, and
loan carry costs. An additional $10.7 million of loan future
funding is allocated to the borrower for continued capex and
accretive leasing costs.
In total, an additional $98.4 million of loan future funding
allocated to 16 borrowers to further aid in property stabilization
efforts remains outstanding. Of this amount, $29.3 million is
allocated to the borrower of the Citigroup Center loan, which is
secured by an office tower in downtown Miami, Florida. The funds
are available to the borrower to fund costs associated with the
borrowers ongoing capital improvement and lease-up plan.
Additionally, $17.7 million is allocated to the borrower of the
Clark Tower loan, which is secured by an office property in
Memphis, Tennessee. Since loan closing, the borrower has not made a
draw request as the funds are suited for planned capital
improvement projects and leasing costs.
As of the June 2023 remittance, there are no delinquent loans or
loans in special servicing; however, five loans, representing 27.5%
of the current trust balance, are on the servicer's watchlist for a
variety of reasons, including pending loan maturity as well as low
debt service coverage ratios and occupancy rates. All affected
borrowers have outstanding maturity extension options on the
respective loans. While temporary declines in property performance
were expected by DBRS Morningstar in some cases at issuance as
borrowers worked toward completing their business plans, DBRS
Morningstar does recognize that select borrowers may face
additional headwinds because of their specific property type and
current economic challenges.
Three loans, representing 17.5% of the current pool balance, have
been modified. The largest modified loan, Regions Harbert Plaza,
represents 9.3% of the trust balance. The loan was first modified
in June 2021 with subsequent modifications in September 2022 and
March 2023. Each modification was necessary to extend loan maturity
as the borrower needed more time to complete its business plan. In
exchange for the current one-year maturity extension to March 2024,
the borrower was required to make a $1.25 million principal
curtailment and to deposit $1.0 million into a shortfall reserve.
The borrower is also required to make an additional $1.25 million
principal curtailment and $1.0 million shortfall reserve deposit in
September 2023 as well as purchase a new interest rate cap
agreement every three months through loan maturity, which is
budgeted at a total cost of $1.0 million. As of February 2023, the
property was 66.5% occupied with $7.5 million of loan future
funding available for capital improvement and accretive leasing
costs. Given the increased credit risk of the loan, DBRS
Morningstar adjusted its probability of default assumptions,
resulting in an increased loan expected loss approximately two
times the transaction’s WA expected loss.
Notes: All figures are in U.S. dollars unless otherwise noted.
MARYLAND TRUST 2006-IV: Moody's Cuts Rating on Ser. A Certs to Ba2
------------------------------------------------------------------
Moody's Investors Service has downgraded the Series A Investor
Certificates issued by Maryland Trust 2006-IV. The transaction
represents the securitization of a small pool of insurance policies
(primarily life insurance policies, single premium life annuities
and supplemental policies). The payouts from life insurance
policies provide cash flows for principal payments on the
certificates. Payments from annuity policies cover the premiums on
the life insurance policies associated with the corresponding
insured individuals.
The complete rating action is as follows:
Issuer: Maryland Trust 2006-IV
2007 Ser. A, Downgraded to Ba2 (sf); previously on May 31, 2018
Downgraded to Baa3 (sf)
RATING RATIONALE
The rating action reflects heightened risk of: 1) a lapse in a
number of policies occurring in the next five to six years, 2)
increased longevity of the Consenting Individuals (the insureds),
and 3) depletion of the Liquidity Reserve Account (reserve account)
to pay for higher premium amounts that may be required to keep Life
Insurance Policies (policies) in force. Additionally, based on the
annual policyholder statements, the total cost of insurance for the
policies in the pool has approximately doubled for the remaining
insureds since 2018. The reserve account balance has also declined
as a result of draws in 2022 due to additional premium payments
required to keep one of the policies in force.
Based on updated policy illustrations taking into account the
step-up premiums for the policies in the pool, a number of policies
would be subject to lapse over the next five to six years. Any
lapse would depend on the longevity of the insureds and available
balance in the reserve account. In the event that longevity of the
insureds were to prompt a lapse, additional premium payments would
be required to keep these policies in force, resulting in draws on
the reserve account.
PRINCIPAL METHODOLOGY
The principal methodology used in this rating was "US Life
Insurance Securitizations Surveillance Methodology" published in
June 2020.
Factors that would lead to an upgrade or downgrade of the rating:
Change in mortality or lapse risk as well as change in the
insurance financial strength ratings of the life insurance, annuity
or supplemental policy providers.
MORGAN STANLEY 2015-C27: DBRS Cuts Class H Certs Rating to C(sf)
----------------------------------------------------------------
DBRS Limited downgraded its ratings on four classes of Commercial
Mortgage Pass-Through Certificates, Series 2015-C27 issued by
Morgan Stanley Bank of America Merrill Lynch Trust 2015-C27 as
follows:
-- Class X-F to BB (low) (sf) from BB (high) (sf)
-- Class F to B (high) (sf) from BB (sf)
-- Class G to CCC (sf) from B (sf)
-- Class H to C (sf) from B (low) (sf)
In addition, DBRS Morningstar confirmed its rating on the following
classes:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class X-D at BBB (high) (sf)
-- Class D at BBB (sf)
-- Class X-E at BBB (sf)
-- Class E at BBB (low)
DBRS Morningstar discontinued and withdrew the rating on Class X-GH
as the lowest referenced obligation was downgraded to CCC or lower.
The trends on Classes D, E, F, X-D, X-E, and X-F were changed to
Negative from Stable. All other classes have Stable trends, except
for Classes G and H, which have ratings that generally do not carry
trends in commercial mortgage-backed securities (CMBS) ratings.
The rating downgrades and Negative trends primarily reflect ongoing
concerns with the largest loan in special servicing, Granite 190
(Prospectus ID#5, 5.6 % of the pool balance). The deterioration in
the risk profile for that loan has also supported previous rating
actions, including the placement of Negative trends on Classes G,
H, and X-GH in August and November 2022. The loan is secured an
office property in the Dallas suburb of Richardson, Texas. DBRS
Morningstar has been monitoring the loan closely because of
significant rollover risks related to the two largest tenants,
United Healthcare (UHC) and Parsons Services Company (Parsons).
Related to events with these two tenants, the loan recently
transferred to the special servicer for imminent default.
The largest tenant, UHC, initially occupied about 65.0% of the net
rentable area (NRA) but downsized to 56.1% of the NRA in 2021.
According to the servicer, the tenant is expected to downsize
further to about 43,000 square feet (sf) of space (occupying
approximately 14.0% of the NRA) at the June 2023 lease expiry,
signing for a three-year term through June 2026. During the renewal
period, UHC will pay a rental rate of $26.50 per square foot (psf)
and will receive three months of free rent. In addition, Parsons
exercised its early termination option to vacate the subject in
March 2023, paying a termination fee of about $928,000 that is
currently held in reserve with the servicer. A cash trap was
triggered with the departure of the two largest tenants and
according to the servicer, approximately $222,000 was held in the
cash management account as of June 2023.
The property is generally well located within the Dallas area, in
the northeast portion of the larger metropolitan area, where
significant commercial development has been concentrated over the
last decade or so around the President George Bush Turnpike, a
major regional transportation artery. The building is attractive
and proximate to similar development and other commercial draws in
the area. Relatively moderate leasing activity has been recorded
with two tenants totaling approximately 47,000 sf of space signed,
with rental rates ranging from $18.50 psf to $26.50 psf. The new
tenants have lease terms of approximately seven years, with end
dates that extend beyond the loan maturity. However, even with
these signings, the property's leased rate remains significantly
depressed, at approximately 32.0% according to the servicer's
update. According to Reis, office properties located in the
Plano/Allen submarket reported a Q1 2023 vacancy rate of 26.0% and
effective rental rate of $22.52 psf, compared with the Q1 2022
vacancy rate of 25.4% and effective rental rate of $21.22 psf.
Based on the most recent financials, the loan reported a YE2022
debt service coverage ratio (DSCR) of 1.26 times (x) but coverage
is expected to fall well below break-even at the leased rate of
32.0%. A resolution strategy has yet to be determined, but a
receiver was appointed in May 2023. Given the decline in
performance and the overall soft office submarket, the as-is
property value is likely well below the issuance value of $55.0
million. With this review, DBRS Morningstar analyzed the subject
loan with a liquidation scenario based on a significant haircut to
the issuance value, resulting in a loss severity in excess of
40.0%. The projected loss would erode the credit enhancement of the
lower-rated tranches, supporting the rating downgrades and Negative
trends with this review.
According to the June 2023 remittance report, 50 of the original 55
loans remain in the pool with an aggregate trust balance of $684.1
million, representing a collateral reduction of 16.8% since
issuance. Since the November 2022 review, the La Quinta
Russellville loan (Prospectus ID#35) was liquidated from the trust
with a realized loss of $2.1 million, which was contained to the
nonrated Class G. The pool is concentrated by property type with
retail, mixed-use, and multifamily properties representing 22.6%,
19.6%, and 18.4%, respectively. Defeasance collateral in the trust
represents 6.4% of the pool balance. There are two loans in special
servicing and six loans on the servicer's watchlist, representing
6.7% and 15.6% of the pool balance, respectively. The watchlisted
loans are primarily being monitored for a decline in DSCR and/or
occupancy, delinquent taxes, or deferred maintenance items.
The largest watchlisted loan, Crowne Plaza – Hollywood, FL
(Prospectus ID#2, 7.6% of the pool balance), is secured by a
311-key full-service hotel, located along Ocean Drive in Hallandale
Beach, Florida, and currently operates under the Hilton flag as a
DoubleTree hotel. The loan was previously in special servicing in
2020 because of challenges arising from the Coronavirus Disease
(COVID-19) pandemic but a forbearance agreement was ultimately
approved, and the loan returned to the master servicer. To date,
all forborne payments have been repaid. The loan is on the
servicer's watchlist because of a low DSCR, with the trailing
12-month (T-12) period ended March 31, 2023, figure at 1.19x,
compared with the YE2022 DSCR of 1.18x, YE2020 DSCR of 0.78x, and
Issuer's DSCR of 1.56x. Overall, departmental revenue is generally
in line with issuance expectations, but expenses have increased,
specifically real estate taxes and general and administrative
expenses. Based on the T-12 March 31, 2023, STR, Inc. report, the
subject reported an occupancy rate, average daily rate, and revenue
per available room (RevPAR) of 61.0%, $213.18, and $129.97,
respectively, which represents a RevPAR penetration of 58.7%.
Despite improvements from the lows of 2020, NCF is still below
issuance expectations and the subject continues to underperform
when compared with the competitive set. As such, DBRS Morningstar
analyzed this loan with an elevated probability of default,
resulting in an expected loss that is more than double the
weighted-average pool expected loss.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2015-UBS8: DBRS Cuts Class H Certs Rating to D
-------------------------------------------------------------
DBRS Limited downgraded the rating on one class of Commercial
Mortgage Pass-Through Certificates, Series 2015-UBS8, issued by
Morgan Stanley Capital I Trust 2015-UBS8 as follows:
-- Class H to D (sf) from C (sf)
In addition, the rating on Class H was simultaneously discontinued
and withdrawn.
The rating downgrade and discontinuation were due to a loss to the
trust that was reflected with the June 2023 remittance. The 2250
Point Boulevard loan (Prospectus ID#41) was liquidated from the
trust at a loss of approximately $5.0 million, which eroded the
entirety of the non-rated Class J and $1.6 million of Class G. For
more information on this transaction, please see the press release
dated May 8, 2023.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a
significant or relevant effect on the credit analysis.
A description of how DBRS Morningstar considers ESG factors within
the DBRS Morningstar analytical framework can be found in the DBRS
Morningstar Criteria: Approach to Environmental, Social, and
Governance Risk Factors in Credit Ratings at
https://www.dbrsmorningstar.com/research/416784 (July 4, 2023).
Classes X-A, X-B, and X-D are interest-only (IO) certificates that
reference a single rated tranche or multiple rated tranches. The IO
rating mirrors the lowest-rated applicable reference obligation
tranche adjusted upward by one notch if senior in the waterfall.
All credit ratings are subject to surveillance, which could result
in credit ratings being upgraded, downgraded, placed under review,
confirmed, or discontinued by DBRS Morningstar.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2017-C34: Fitch Affirms CCsf Rating on 2 Tranches
----------------------------------------------------------------
Fitch Ratings has affirmed 15 classes of Morgan Stanley Bank of
America Merrill Lynch Trust 2017-C34 commercial mortgage
pass-through certificates (MSBAM 2017-C34). The Rating Outlooks for
classes D and X-D have been revised to Stable from Negative. The
criteria observation (UCO) has been resolved.
ENTITY/DEBT RATING PRIOR
---------- ------ -----
MSBAM 2017-C34
A-2 61767EAB0 LT AAAsf Affirmed AAAsf
A-3 61767EAD6 LT AAAsf Affirmed AAAsf
A-4 61767EAE4 LT AAAsf Affirmed AAAsf
A-S 61767EAH7 LT AAAsf Affirmed AAAsf
A-SB 61767EAC8 LT AAAsf Affirmed AAAsf
B 61767EAJ3 LT AA-sf Affirmed AA-sf
C 61767EAK0 LT A-sf Affirmed A-sf
D 61767EAU8 LT BBsf Affirmed BBsf
E 61767EAW4 LT CCCsf Affirmed CCCsf
F 61767EAY0 LT CCsf Affirmed CCsf
X-A 61767EAF1 LT AAAsf Affirmed AAAsf
X-B 61767EAG9 LT A-sf Affirmed A-sf
X-D 61767EAL8 LT BBsf Affirmed BBsf
X-E 61767EAN4 LT CCCsf Affirmed CCCsf
X-F 61767EAQ7 LT CCsf Affirmed CCsf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of the
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
Stable Loss Expectations: Fitch's loss expectations for the pool
are generally in line with the prior rating action. Five loans
(20.2% of the pool) are flagged as Fitch Loans of Concern (FLOCs)
with one loan (4.5%) in special servicing. Fitch's current ratings
incorporate a rating case loss of 4.38%.
Fitch Loans of Concern: The largest contributor to overall loss
expectations is the OKC Outlets loan (4.5%), which is secured by a
394,240-sf outlet center located in Oklahoma City, OK. Major
tenants include Nike (3.6%; Lease expiry of January 2027), Forever
21 (3.1%; January 2025) and Old Navy (2.8%; November 2023). The
loan transferred to special servicing in May 2022 for maturity
default and was modified in April 2023. Terms of the modification
included a maturity extension through May 2024; principal paydown
of three million and a $1 million deposit to reserves.
Performance of the center continues to stabilize after reaching a
trough in 2020. YE 2022 NOI has improved 1% above 2021 and 34.5%
higher than YE 2020 but remains 7.2% below YE 2019 and 18.0% below
the originator's underwritten NOI at issuance. The property has
historically struggled with declining occupancy and cash flow and
downward trending sales prior to the pandemic. Collateral occupancy
was 86.0% as of March 2023 in-line with YE 2021 and YE 2020 but
below occupancy of 92.6% at YE 2019 and 94% at issuance. Comparable
inline tenant sales were $419 psf at YE 2022, compared to $441 psf
at YE 2021, $397 psf as of TTM June 2020 and $439 psf as of TTM
August 2019.
Fitch's 'Bsf' rating case loss of 22.3% prior to concentration
adjustments reflects a discount to a recent servicer provided
appraisal.
The Ocean Park Plaza loan (4.5%) is secured by a 99,601-sf, class
B, office property located in Santa Monica, CA. Occupancy declined
to 48% at YE 2022 from 72% in 2021 after the second and third
largest tenants, Matchcraft (16% of NRA, 18% of base rent), and
Ocean Park Casting (8% of NRA or 11% of base rent), vacated ahead
of their respective lease expirations in May 2022 and November
2023. Occupancy had previously declined due to Transplant Connect
(9.3% of NRA or 12% of base rent) vacating at lease expiration in
January 2021, causing occupancy to decline to 72% from 79% at
YE2020 and below 95% at issuance.
Costar reported a vacancy of 17.7% with an average asking rent of
$62.7 psf as of Q2 2023 for the Santa Monica office submarket where
the subject is located.
Fitch's 'Bsf' rating case loss of 14.1% prior to concentration
adjustments reflects an 10.0% cap rate applied to the YE 2022 NOI.
Fitch also ran an additional scenario that applies a 'Bsf'
sensitivity case loss of 13% on this loan which factors a higher
probability of default due to elevated vacancy at the property and
softness in the submarket.
The 444 West Ocean loans (2.6%) is secured by a 187,363-sf office
building in downtown Long Beach, CA. As of YE 2022, occupancy has
improved to 75% with the signing of several new leases after having
fallen to 63% in 2021. The NOI does not reflect the commencement of
new leases and has fallen to 1.21x at YE 2022 from 1.49x at YE
2021. Near-term rollover includes 13% of NRA scheduled to expire in
2023 with an additional 10% in 2024.
Fitch's 'Bsf' rating case loss of 9.7% prior to concentration
adjustments reflects a 10.0% cap rate applied to the YE 2022 NOI.
Fitch also ran an additional scenario that applies a 'Bsf'
sensitivity case loss of 30% on this loan which factors a higher
probability of default due to performance volatility and low DSCR.
Credit Enhancement: As of the July 2023 distribution date, the
pool's aggregate principal balance has paid down by 4.9% to $996.9
million from $1.05 billion at issuance. Five loans (8.6%) have been
fully defeased. Thirteen loans (44.2% of pool) are full-term
interest-only (IO). Two loans (4.8%) are scheduled to mature in May
2024 and the remaining 45 loans (95.2%) mature between June and
October 2027.
Pool Concentration: Based on property type, the largest
concentrations are office at 45.8% of the pool and retail at
25.0%.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades would occur with an increase in pool-level losses from
underperforming or specially serviced loans. Downgrades to classes
A-2, A-3, A-4, A-SB, A-S and X-A are not likely due to the
increasing credit enhancement (CE) and senior position in the
capital structure, but may occur should interest shortfalls affect
these classes. Downgrades to classes B, C and X-B may occur should
all of the FLOCs suffer losses, particularly the OKC Outlets, the
Ocean Park Plaza and the 444 West Ocean loan.
Downgrades to classes D, and X-D are possible should expected pool
losses increase significantly and/or should all of the FLOCs suffer
losses, should additional loans default or transfer to special
servicing and/or higher realized losses than expected on the
specially serviced loans. Downgrades to classes E, F, X-E and X-F
would occur as losses are realized and/or become more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades would occur with stable to improved asset performance,
particularly on the OKC Outlets, Ocean Park Plaza and the 444 West
Ocean loans, coupled with additional paydown and/or defeasance.
Upgrades to classes B, C and X-B would occur with significant
improvement in CE, defeasance, and/or performance stabilization of
FLOCs. Classes would not be upgraded above 'Asf' if there were
likelihood of interest shortfalls.
Upgrades to classes D and X-D may occur as performance of FLOCs
improve and stabilize resulting in fewer FLOCs and there is
sufficient CE to the classes. Upgrades to classes E, F, X-E and X-F
are not likely until the later years of the transaction and only if
the performance of the remaining pool is stable and there is
sufficient CE to the classes.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
MORGAN STANLEY 2018-H3: Fitch Affirms 'B-sf' Rating on G-RR Certs
-----------------------------------------------------------------
Fitch Ratings has affirmed 14 ratings of Morgan Stanley Capital I
Trust 2018-H3. Fitch has also revised the Rating Outlook on class
F-RR to Negative from Stable. The Outlook on class G-RR remains
Negative. The criteria observation (UCO) has been resolved.
ENTITY/DEBT RATING PRIOR
---------- ------- -----
MSC 2018-H3
A-3 61767YAX8 LT AAAsf Affirmed AAAsf
A-4 61767YAY6 LT AAAsf Affirmed AAAsf
A-5 61767YAZ3 LT AAAsf Affirmed AAAsf
A-S 61767YBC3 LT AAAsf Affirmed AAAsf
A-SB 61767YAW0 LT AAAsf Affirmed AAAsf
B 61767YBD1 LT AA-sf Affirmed AA-sf
C 61767YBE9 LT A-sf Affirmed A-sf
D 61767YAC4 LT BBB-sf Affirmed BBB-sf
E-RR 61767YAE0 LT BBB-sf Affirmed BBB-sf
F-RR 61767YAG5 LT BB-sf Affirmed BB-sf
G-RR 61767YAJ9 LT B-sf Affirmed B-sf
X-A 61767YBA7 LT AAAsf Affirmed AAAsf
X-B 61767YBB5 LT AA-sf Affirmed AA-sf
X-D 61767YAA8 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of the
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
The affirmations reflect the impact of the updated criteria and
generally stable loss expectations for the pool since the prior
rating action. Fitch identified 10 loans (24.1% of the pool) as
Fitch Loans of Concern (FLOCs), which includes one specially
serviced loan (1.2%). Fitch's current ratings incorporate a 'Bsf'
rating case loss of 4.7%.
The Negative Outlooks incorporate an additional stress on the
SunTrust Center loan that factors a heighted probability of default
given performance and refinance concerns, in addition to the
underperformance of the Crown Plaza Dulles Airport loan, which has
continued to have declining cash flow and low debt service coverage
ratio (DSCR).
FLOCs/Largest Contributors to Loss: The largest contributor to
modeled losses is the Crowne Plaza Dulles Airport loan (3.3% of the
pool), which is secured by a 324-key full-service hotel located in
Herndon, VA.
The property continues to underperform, with the servicer-reported
NOI DSCR declining to 0.43x at YE 2022 from 0.63x at YE 2021, and
1.70x at YE 2019. Property performance began declining prior to the
pandemic, with YE 2019 NOI falling 35% compared to issuance. YE
2022 NOI declined 32% from YE 2021 and remains 74% below the NOI
peak in 2018. While occupancy has rebounded to 62% as of March 2023
from 45% at YE 2021 and 28% at YE 2020, it remains below
pre-pandemic levels of 68% at YE 2019 and 66% at YE 2018.
The franchise agreement expires on May 1, 2028, which presents a
potential refinance risk at maturity. The loan is structured with a
Franchise Expiration Reserve, which will be collected 24 months
prior to the expiration of the franchise agreement. This reserve
will be equal to the difference of $10,000 per room, a total of
$3,240,000 and current amount in the FF&E reserve.
Fitch's 'Bsf' rating case loss of 36.9% prior to concentration
add-ons reflects a 11.25% cap rate on the YE 2021 NOI.
The second largest contributor to modeled losses is the SunTrust
Center loan (4.6% of the pool), which is secured by a 419,653-sf
suburban office property located in Glen Allen, VA, approximately
13 miles NW of the Richmond CBD. The largest tenant SunTrust Bank
(61% of NRA; lease expiration in March 2028) has vacated their
entire space during the first half of 2022. In 2019, SunTrust
merged with BB&T bank to become Truist Bank and they have decided
to consolidate office space. According to the servicer, there are
two separate tenants that have subleased SunTrust's vacant space.
Occupancy remains at 91.3% as of March 2023 and YE 2022 NOI DSCR
was 2.42x.
Fitch's 'Bsf' rating case loss of 7% prior to concentration
adjustments reflects a 10% cap rate and 30% stress to the YE 2022
NOI. Fitch also ran an additional scenario that applies a 'Bsf'
sensitivity case loss of 22.5% on this loan which factors a higher
probability of default due to anticipated refinance concerns as the
SunTrust lease expires within three months of the loan maturity.
Increasing CE: As of the June 2023 distribution date, the pool's
aggregate principal balance has paid down by 11.9% to $900.9
million from $1.024 billion at issuance. Since Fitch's prior rating
action in 2022, two loans matured and paid in full, contributing
$62.2 million in principal paydown. Of the remaining pool balance,
25 loans comprising 51.7% of the pool are full-term interest-only.
Two loans (2.7%) have been defeased. Two loans (4.4%) are scheduled
to mature in 2025, with the remainder of the pool (95.6%) scheduled
to mature in 2028.
Office Concentration: Loans secured by office properties comprise
35.2% of the pool, including three (24.9%) in the top 15. In its
analysis, Fitch increased the cap rates for several of these loans
and remains concerned with performance and refinance risk at loan
maturity.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Sensitivity factors that lead to downgrades include an increase in
pool-level losses from underperforming or specially serviced
loans/assets.
Downgrades to the 'AA-sf' through 'AAAsf' rated-classes are not
considered likely due to increasing CE and expected continued
amortization but could occur if interest shortfalls impact these
classes.
Downgrades to the 'A-sf' rated classes may occur should expected
losses for the pool increase substantially.
Downgrades to the 'BBB-sf', 'BB-sf' and 'B-sf' rated classes may
occur if FLOCs fail to stabilize and/or or additional loans
transfer to special servicing.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Sensitivity factors that could lead to upgrades include stable to
improved asset performance, coupled with additional paydown and/or
defeasance.
Upgrades to the 'AA-sf' and 'A-sf' classes may occur with
significant improvement in CE and/or defeasance, and with the
stabilization of performance on the FLOCs; however, adverse
selection and increased concentrations could cause this trend to
reverse.
Upgrades to classes rated 'BBB-sf' may occur as the number of FLOCs
are reduced, and there is sufficient CE to the classes. Classes
would not be upgraded above 'Asf' if there were any likelihood of
interest shortfalls.
Upgrades to 'B-sf' and 'BB-sf' rated classes are not likely until
the later years in a transaction and only if the performance of the
remaining pool is stable and there is sufficient CE to the
classes.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
MOUNTAIN VIEW 2014-1: S&P Cuts Class E Notes Rating to D
--------------------------------------------------------
S&P Global Ratings took actions on five classes of notes from
Mountain View CLO 2014-1 Ltd. and Catamaran CLO 2014-2 Ltd.
The rating actions follow its review of the transactions' July 2023
redemption reports and notices of optional redemptions provided.
S&P said, "We lowered our ratings on three junior CLO tranches to
'D (sf)'. While the proceeds from the optional redemptions for both
these transactions were sufficient to pay off their respective
senior notes in full, they were insufficient to pay the outstanding
interest and principal balance of their respective junior notes in
full (the class E and F notes from Mountain View CLO 2014-1 Ltd.
and the class E notes from Catamaran CLO 2014-2 Ltd.).
"At the same time, we discontinued our ratings on two CLO tranches,
and removed one of these two ratings from CreditWatch with positive
implications, following their full repayment of principal and
interest due on the July 2023 redemption date."
Ratings List
RATING
ISSUER NAME CLASS NAME TO FROM
Mountain View
CLO 2014-1 Ltd. D-R NR A+(sf)/Watch Pos
RATIONALE
Tranche has received full repayment of principal and interest due
on the July 2023 redemption date. Therefore, S&P is discontinuing
the rating and removing the CreditWatch positive status on this
class.
Mountain View
CLO 2014-1 Ltd. E D CCC (sf)
RATIONALE
With insufficient assets left in the portfolio to cover the unpaid
balance on the class E notes at the July 2023 redemption date, S&P
is downgrading this tranche to 'D (sf)' as there is virtual
certainty of non-payment.
Mountain View
CLO 2014-1 Ltd. F D CCC-(sf)
RATIONALE
With insufficient assets left in the portfolio to cover the unpaid
balance on the class F notes at the July 2023 redemption date, S&P
is downgrading this tranche to 'D (sf)' as there is virtual
certainty of non-payment.
Catamaran
CLO 2014-2 Ltd. D NR B-(sf)
RATIONALE
Tranche has received full repayment of principal and interest due
on the July 2023 redemption date. Therefore, S&P is discontinuing
the rating on this class.
Catamaran
CLO 2014-2 Ltd. E D CCC-(sf)
RATIONALE
With insufficient assets left in the portfolio to cover the unpaid
balance on the class E notes at the July 2023 redemption date, S&P
is downgrading this tranche to 'D (sf)' as there is virtual
certainty of non-payment.
NR--Not rated.
NATIXIS COMMERCIAL 2018-FL1: S&P Cuts WAN1 Certs Rating to 'B-'
---------------------------------------------------------------
S&P Global Ratings lowered its ratings on five classes of
commercial mortgage pass-through certificates from Natixis
Commercial Mortgage Securities Trust 2018-FL1, a U.S. CMBS
transaction. In addition, S&P affirmed its ratings on six other
classes from the transaction.
This U.S. large loan CMBS transaction is currently backed by three
uncrossed floating-rate, interest-only (IO) mortgage loans and one
real estate-owned (REO) retail asset. The remaining loans are
secured by retail, lodging, and office properties.
Rating Actions
S&P said, "The downgrades on the nonpooled classes WAN1 and WAN2
reflect our revised valuation of The Wanamaker Building mortgage
loan ($62.4 million, or 38.3% of the pooled trust balance), which
is lower than the valuation we derived in our last review in March
2021 due primarily to deteriorating occupancy and performance at
the central business district (CBD) office property. The downgrades
also consider that the loan was transferred to special servicing on
March 27, 2023, because of imminent maturity default. The
affirmations on pooled classes A, B, and C, as well as the
nonpooled classes NHP1, ORP1, and ORP2, reflect deleveraging of the
trust balance and our current credit view of the remaining assets,
which generally are unchanged from our last review.
"The lowered rating to 'CCC- (sf)' from 'B- (sf)' on class WAN2 and
affirmation of 'CCC (sf)' on class ORP2 reflect our view that the
susceptibility to liquidity interruption and risk of default and
loss is or remains elevated, based on our expected-case values of
the Wanamaker Building and Olathe Retail Portfolio loans,
respectively, and current market conditions. Further, according to
the July 2023 trustee remittance report, class WAN2 shorted $17,606
due to monthly special servicing fees and had accumulated interest
shortfalls totaling $35,976 outstanding for four consecutive
months. If the shortfalls remain outstanding for a prolonged
period, we may lower our rating on class WAN2 further to 'D (sf)'.
"We lowered our rating on the class X-FWB IO certificates based on
our criteria for rating IO securities, which states that the
ratings on the IO securities would not be higher than that of the
lowest-rated reference class. The notional amount of class X-FWB
references classes WAN1 and WAN2."
The downgrades on the class V-WAN and V-FWB exchangeable
certificates reflect the ratings of the certificates for which they
can be exchanged. Class V-WAN can be exchanged for classes WAN1 and
WAN2, and class V-FWB can be exchanged for class X-FWB.
Although the model-indicated ratings were higher than the classes'
current ratings, S&P affirmed its ratings on pooled class B and
nonpooled classes NHP1, ORP1, and ORP2 based on certain weighed
qualitative considerations. These include:
-- The transaction faces adverse selection because 93.3% of the
pooled trust balance is currently with the special servicer, one of
which (Promenade Shops at Centerra, 48.4% of pooled trust balance)
is REO. The remaining loan (6.7%), a corrected mortgage, was
previously with the special servicer for imminent maturity
default.
-- The eventual workout or liquidation of any of the specially
serviced assets or corrected mortgage loan could result in reduced
liquidity support or higher-than-expected losses.
-- S&P will continue to monitor the transaction's performance,
especially any developments around the performance, refinancing,
liquidation, or workouts of the specially serviced assets or
corrected mortgage loan. To the extent future developments differ
meaningfully from its underlying assumptions, S&P may take further
rating actions as it deems necessary.
Transaction Summary
As of the July 17, 2023, trustee remittance report, the collateral
pool included three floating-rate specially serviced or corrected
mortgage loans and one REO asset with a pooled trust balance of
$163.1 million and a trust balance of $194.9 million. In S&P's last
review (March 2021), the pool consisted of five loans, three of
which were specially serviced, with a pooled trust balance of
$280.7 million and a trust balance of $354.0 million. To date, the
pooled trust certificates have not incurred any principal losses.
Loan/Asset Details And Property-Level Analysis
Promenade Shops at Centerra REO asset (48.4% of the pooled trust
balance)
The Promenade Shops at Centerra REO asset has a $79.0 million
pooled and trust balance, down from $83.7 million in our last
review. Prior to the trust obtaining title to the asset, the loan
was IO, paid an annual floating interest rate indexed to one-month
LIBOR plus a 2.445% gross margin, and matured on March 9, 2021.
LIBOR ceased to be published after June 30, 2023. As a result, the
new reference rate, effective as of the August 2023 payment date,
is term secured overnight financing rate (SOFR) plus a 2.492%
alternate rate spread. It transferred to special servicing on June
5, 2020, due to payment default because the borrower was unwilling
to inject additional capital to support the loan. The special
servicer foreclosed on the loan in June 2021, and the property
became REO on July 28, 2021. As part of the foreclosure
proceedings, the $31.3 million mezzanine loan was extinguished.
According to the current special servicer, KeyBank Real Estate
Capital, CBRE Group Inc. has been engaged to manage and lease the
property. As of July 2023, aside from cumulative accrued unpaid
advance interest of $52,311, there are no other outstanding
advances on the asset.
The asset is a 493,160-sq.-ft. open-air lifestyle retail center in
Loveland, Colo., that includes 3,063 parking spaces. The property
was constructed from 2004 through 2006 and is on 76.2 acres.
Anchors at the property includes Macy's (non-collateral) and Dick's
Sporting Goods (collateral). The retail center is located off I-25,
approximately 46 miles north of the Denver CBD and 12 miles
southeast of Fort Collins.
Occupancy at the property was 92.3%, according to the December 2022
rent roll, up from 89.0% in our March 2021 review. S&P said, "The
2022 operating statements provided by the special servicer
indicated that the property is generally performing in line with
our assumed $7.5 million net cash flow (NCF) that we derived in our
last review. Using the same S&P Global Ratings' capitalization rate
of 9.75% we used in our last review, we arrived at a S&P Global
Ratings expected-case value of $76.7 million, or $156 per sq. ft.,
which is unchanged from our last review and 11.0% lower than the
most recent reported appraisal value of $86.2 million as of Dec.
20, 2022." This yielded an S&P Global Ratings loan-to-value (LTV)
ratio of 102.9% on the trust balance.
The Wanamaker Building loan (38.3% of the pooled trust balance)
The Wanamaker Building loan has a $124.0 million whole loan balance
that is split into an $84.5 million senior trust A-1 note, a $15.3
million senior nontrust A-2 note, and two subordinate nontrust B
notes totaling $24.2 million, unchanged from our last review. The
senior A-1 note is further bifurcated into a $62.4 million senior
pooled trust component and a $22.1 million subordinate nonpooled
trust component that supports the class WAN1 and WAN2 certificates.
The $62.4 million senior pooled trust and $11.3 million of the
senior nontrust A-2 note are pari passu to each other. The $22.1
million nonpooled trust component and $4.0 million of the nontrust
A-2 note are pari passu to each other. The A-1 and A-2 notes are
senior in right of payment to the subordinate B notes.
The IO whole loan pays interest at an annual floating rate indexed
to one-month LIBOR plus a 2.85% gross margin and matured on June 9,
2023. Since LIBOR cessation at the end of June 2023, the new
reference rate for the whole loan is one-month term SOFR plus a
2.897% alternate rate spread, effective as of the August 2023
payment date. The loan, which has a nonperforming matured balloon
payment status, transferred to special servicing on March 27, 2023,
due to imminent maturity default.
In addition, the borrower informed the special servicer, Situs
Holdings LLC, that cash flow at the property had significantly
deteriorated and is currently not sufficient to cover debt service
and operating expenses. Situs indicated that the borrower is
cooperating with the expected engagement of a receiver at the
property and is discussing various workout options, including a
potential loan modification or foreclosure.
The whole loan is secured by the borrower's leasehold interest and
the original fee owner's and tenants-in-common owner's fee interest
in a portion of the 1.4 million-sq.-ft. Wanamaker Building in
downtown Philadelphia. The loan collateral consists of 954,363 sq.
ft. of office space on floors 4-12 and a three-story subterranean
parking garage totaling 660 parking spaces. Floors 1-3 of the
building, which are not owned by the sponsor, are currently used as
retail space by a Macy's department store. The building, built in
1904 and extensively renovated in 1989, offers easy access to
public transportation and is designated a national historic
landmark. The sponsor, Rubenstein Partners, had invested about
$30.0 million in the property in 2019 to enhance its class A
quality by renovating the lobby and building out amenity spaces.
Since S&P's March 2021 review, the servicer reported that occupancy
dropped to 80.5% after former tenant, GSA Housing and Urban
Development (125,603 sq. ft., 13.2% of net rentable area), vacated
upon its May 2021 lease expiration date. Occupancy further declined
to 34.7%, according to the December 2022 rent roll, because two
major tenants, Children's Hospital of Philadelphia (306,348 sq.
ft., 32.1%) and GSA Army Corps of Engineers (113,446 sq. ft.,
11.9%), left in November 2022. The Children's Hospital of
Philadelphia had terminated its lease early in June 2022
(originally expiring in June 2027) and paid a termination fee of
$10.7 million. Since the loss of these tenants, the sponsor has not
been able to re-let the vacant spaces in a timely manner.
Situs stated that there is limited new leasing activity to backfill
the vacant spaces at this time as the leasing pipeline remains
generally muted. S&P expects occupancy to further decrease to 21.9%
because Levlane Advertising Inc. (14,145 sq. ft., 1.5%) recently
vacated upon its June 2023 lease expiration and Digitas (108,619
sq. ft., 11.4%) has indicated that it will also leave the property
at the end of its November 2023 lease expiration.
According to CoStar, the property is in the Market Street East
office submarket, which continues to experience lower demand due to
its lack of newer office buildings and struggles to attract and
retain tenants, despite having excellent commuter rail connections.
CoStar noted that tenants are relocating across the Schuylkill
River to the Market Street West office submarket, which has a
larger supply of newer and more modern office buildings. As a
result, vacancies have increased and asking rents remained stagnant
in the property's office submarket. As of year-to-date July 2023,
the four- and five-star office properties in the submarket had a
$32.85-per-sq.-ft. asking rent, 15.8% vacancy rate, and 23.6%
availability rate. This compares with the property's 65.3% vacancy
rate and $28.08-per-sq.-ft. gross rent, as calculated by S&P Global
Ratings using the December 2022 rent roll. Prior to the pandemic,
the four- and five-star office properties in the submarket had a
$33.35-per-sq.-ft. asking rent and 5.8% vacancy rate in 2019.
However, CoStar projects that the vacancy rate will continue to
climb, to 17.5% in 2024 and 18.0% in 2025, and that asking rents
will remain flat, at $31.80 per sq. ft. and $31.33 per sq. ft. for
the same periods.
S&P said, "Given the property's current depressed performance, we
utilized a stabilization approach in our current analysis to derive
our expected-case value. We assumed an 80.0% stabilized occupancy
rate after considering the weakened office submarket fundamentals
from lower demand and longer re-leasing timeframe from the
prevailing remote and hybrid work arrangements and low occupancy at
the property, down from an assumed 91.0% occupancy rate in our last
review. We assumed a $28.45-per-sq.-ft. gross rent, 56.1% operating
expense ratio, and two-year lease-up period to arrive at a
stabilized S&P Global Ratings NCF of approximately $8.4 million.
Using an 8.00% S&P Global Ratings capitalization rate and deducting
about $34.4 million to account for additional leasing costs and
lost revenue to lease up the property to our projected occupancy
rate within the next two years, as well as giving credit for the
approximately $17.9 million in loan reserves, we derived our
expected-case value of $88.1 million ($92 per sq. ft.). This
yielded an S&P Global Ratings LTV ratio of 83.6% on the pooled
trust, 113.3% on the trust, and 140.7% on the whole loan balance."
National Select Service Hotel Portfolio loan (6.7% of the pooled
trust balance)
The National Select Service Hotel Portfolio loan has a $15.7
million whole loan balance that is split into a $10.9 million
senior pooled component and a $4.8 million subordinate nonpooled
component that supports the class NHP1 and NHP2 certificates, down
from a $83.5 million whole loan, a $58.0 million senior pooled
balance, and a $25.5 million subordinate nonpooled balance in our
last review, due primarily to property releases and reserve
disbursements. The IO whole loan pays interest at an annual
floating rate indexed to one-month term SOFR plus a 3.303%
alternate rate spread (effective as of the August 2023 payment
date) and currently matures on Dec. 31, 2023. Prior to LIBOR
cessation, the reference rate was one-month LIBOR plus a 2.96%
gross margin. In addition, there is a $4.8 million mezzanine loan
balance per the master servicer, Wells Fargo Bank N.A., down from
$20.0 million in S&P's last review.
The whole loan, which has a current payment status, was transferred
to the special servicer on Sept. 16, 2020, because the borrower
requested COVID-19-related relief. The loan was modified effective
Aug. 9, 2020, and the terms included, among others, the borrower
providing $4.0 million in new working capital and extending the
final maturity date from April 9, 2023, to Dec. 31, 2023. The loan
was returned to the master servicer on April 22, 2021. According to
Wells Fargo, the loan was further modified on Feb. 2, 2023, to
allow the borrower to sell and release properties and delever the
loan balance at the greater of 100% of the net sales proceeds and
115% of the allocated loan amount. The loan is on the master
servicer's watchlist because in late 2022 the borrower discovered
mold damage at the Courtyard Atlanta Marietta Windy Hill/Ballpark
property, which is estimated at about $4.0 million to remediate.
The master servicer expected the mold issue to be resolved by
mid-May 2023.
The whole loan is currently secured by the borrower's fee-simple
interests in a portfolio of four limited-service Courtyard-flagged
lodging properties totaling 517 rooms in Marietta, Ga.; Norcross,
Ga.; Atlanta; and Beachwood, Ohio, down since our last review from
12 limited-service and extended-stay hotels totaling 1,461 rooms in
five U.S. states. The remaining portfolio properties, built in
1983, 1985, or 1986 and each renovated in 2013 or 2014, are managed
by Hospitality Ventures Management Group, and the franchise
agreement with Courtyard expires in March 2033.
For the remaining four hotels, since our last review, the servicer
reported a combined 59.5% occupancy rate, $115.48 average daily
rate (ADR), $68.70 revenue per available room (RevPAR), and $3.2
million NCF in 2022, up from 49.2%, $106.24, $52.24, and $2.5
million, respectively, in 2021. In 2019, prior to the pandemic,
these four hotels had an aggregated 69.3% occupancy rate, $113.26
ADR, $78.48 RevPAR, and $4.9 million NCF. S&P said, "Our current
property-level analysis assumed a 59.5% occupancy rate, $113.00
ADR, $67.22 RevPAR, and $2.9 million NCF for the four properties.
Using a 11.37% S&P Global Ratings capitalization rate (unchanged
from our last review) and deducting $3.9 million for property
improvement plan expenses, which we anticipate because of the age
and last renovation date of the properties, S&P arrived at a S&P
Global Ratings expected-case value of $21.6 million, or $41,773 per
guestroom. This resulted in a S&P Global Ratings' LTV ratio of
50.4% on the pooled trust balance and 72.5% on the whole loan
balance. If we include the mezzanine loan, our LTV ratio increases
to 94.7%."
Olathe Retail Portfolio loan (6.6% of the pooled trust balance)
The Olathe Retail Portfolio loan has a $37.5 million whole loan
balance that consists of a $21.3 million senior A note component
($10.8 million of which represents the senior pooled trust
balance), a $9.7 million junior A note component (of which $4.9
million is the nonpooled trust balance that supports the class
ORP1, ORP2, and ORP3 certificates)and a $6.5 million subordinate
non-trust B note, down from a $40.3 million whole loan balance in
our last review due primarily to a pre-contemplated principal
paydown. The $10.8 million senior pooled trust and $10.4 million
senior nontrust A note components are pari passu to each other and
senior to the junior A note components and B note. The $4.9 million
junior nonpooled trust and $4.7 million junior nontrust components
are pari passu to each other and senior to the B note. The nontrust
B note is subordinate to the A note components.
The IO whole loan, which has a nonperforming matured balloon
payment status, pays an annual floating interest rate indexed to
one-month LIBOR plus a 4.25% gross margin and matured on Jan. 9,
2020. LIBOR ceased to be published after June 30, 2023. As a
result, the new reference rate, effective as of the August 2023
payment date, is prime rate plus a spread of 0.61% on the senior
note and 3.94% on the junior note, for a whole loan rate of prime
rate plus a 1.193% spread. The loan transferred to special
servicing on May 13, 2020, due to maturity default. The borrower
was unable to exercise its extension options because the loan
failed the 8.00% debt yield requirement. The borrower was granted
two short-term forbearance periods to refinance and to date has not
paid off the loan. The special servicer filed foreclosure
proceedings in early 2021, which the borrower has filed
counterclaims contesting. According to the special servicer, Mount
Street US, a receiver has been appointed for the properties, both
of which are currently under contract for sale to a third party for
a price near the A note balance. The potential buyer has requested
a due diligence period extension, and the receiver is currently
negotiating a firm closing date. According to the July 2023 trustee
remittance report, the pooled trust component had $235,839 in
principal and interest and $1,350 in other expense advances as well
as $18,426 in cumulative accrued unpaid advance interest
outstanding.
The whole loan is secured by two retail properties totaling 172,627
sq. ft. that are roughly a mile from each other in Olathe, Kan.:
Olathe Pointe, a 144,149-sq.-ft. retail center that is anchored by
Whole Foods (21.8% of net rentable area, April 2035 expiration) and
Marshall's/Homegoods (35.4%, April 2026); and Olathe Gateway, a
28,478-sq.-ft. retail property.
S&P said, "Since our last review, the servicer reported stable
performance for the two properties, with a combined 95.0% occupancy
rate and $3.1 million NCF in 2022, compared with 98.0% occupancy
and $2.9 million NCF in 2021. In our current property-level
analysis, we used the same $2.0 million S&P Global Ratings NCF
(assuming an 11.6% vacancy rate) and 7.29% S&P Global Ratings
capitalization rate as we did in our last review to arrive at our
expected-case value of $31.8 million, or $184 per sq. ft. This is
the same as in our last review and 11.6% lower than the revised
appraised value of $35.9 million as of Nov. 30, 2022, and yielded
an S&P Global Ratings LTV ratio of 67.0% on the pooled trust
balance, 97.5% on the trust balance, and 118.0% on the whole loan
balance."
Ratings Lowered
Natixis Commercial Mortgage Securities Trust 2018-FL1
Class WAN1 to 'B- (sf)' from 'BB- (sf)'
Class WAN2 to 'CCC- (sf)' from 'B- (sf)'
Class X-FWB to 'CCC- (sf)' from 'B- (sf)'
Class V-WAN to 'CCC- (sf)' from 'B- (sf)'
Class V-FWB to 'CCC- (sf)' from 'B- (sf)'
Ratings Affirmed
Natixis Commercial Mortgage Securities Trust 2018-FL1
Class A: AAA (sf)
Class B: A (sf)
Class C: BBB- (sf)
Class NHP1: B (sf)
Class ORP1: B+ (sf)
Class ORP2: CCC (sf)
NAVESINK CLO 1: S&P Assigns BB-(sf) Rating on $12.25MM Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Navesink CLO 1
Ltd./Navesink CLO 1 LLC's fixed- and floating-rate notes. The
transaction is managed by ZAIS Leveraged Loan Master Manager LLC.
Since S&P released its preliminary ratings on June 16, 2023, the
transaction has been renamed Navesink CLO 1 Ltd./Navesink CLO 1 LLC
from ZAIS CLO 19 Ltd./ZAIS CLO 19 LLC.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term
loans.
The ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Navesink CLO 1 Ltd./Navesink CLO 1 LLC
Class A-1, $210.00 million: AAA (sf)
Class A-J, $17.50 million: AAA (sf)
Class B-1, $33.50 million: AA (sf)
Class B-F, $5.00 million: AA (sf)
Class C-1 (deferrable), $18.00 million: A (sf)
Class C-F (deferrable), $3.00 million: A (sf)
Class D-1 (deferrable), $14.00 million: BBB+ (sf)
Class D-J (deferrable), $3.50 million: BBB- (sf)
Class E (deferrable), $12.25 million: BB- (sf)
Subordinated notes, $28.875 million: Not rated
OHA CREDIT 12: S&P Assigns BB- (sf) Rating on Class E-R Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class B-R, C-R, D-R,
and E-R replacement notes from OHA Credit Funding 12 Ltd./OHA
Credit Funding 12 LLC, a CLO originally issued in August 2022 that
is managed by Oak Hill Advisors L.P. and was not rated by S&P
Global Ratings.
The replacement notes are being issued via a supplemental
indenture, which outlines the terms of the replacement notes.
According to the supplemental indenture:
-- The transaction is collateralized by at least 96.0% senior
secured loans, cash, and eligible investments, with a minimum of
80.0% of the loan borrowers required to be based in the U.S.
-- A maximum of 55.0% of the loans in the collateral pool can be
covenant-lite.
-- The replacement class B-R, C-R, D-R, and E-R notes are being
issued at a lower spread over three-month CME term secured
overnight financing rate (SOFR) than the original notes.
-- The stated maturity period is being extended by three years,
except in the case of class A-1-R, for which the stated maturity
period is being extended by two years.
-- The reinvestment period is being extended by approximately
three years, to July 20, 2028.
-- The non-call period is being extended by approximately two
years, to July 20, 2025.
-- The weighted average life test is being extended to nine years
from the refinancing date.
-- Of the identified underlying collateral obligations, 100.0%
have credit ratings (which may include confidential ratings,
private ratings, and credit estimates) assigned by S&P Global
Ratings.
-- Of the identified underlying collateral obligations, 97.93%
have recovery ratings (which may include confidential and private
ratings) assigned by S&P Global Ratings.
-- All or some of the notes issued by this CLO transaction contain
stated interest at SOFR plus a fixed margin.
S&P said, "We assigned our ratings to the replacement notes after
analyzing the changes to the transaction. Our review of this
transaction also included a cash flow analysis, based on the
portfolio and transaction data in the trustee report, to estimate
future performance. In line with our criteria, our cash flow
scenarios applied forward-looking assumptions on the expected
timing and pattern of defaults and the recoveries upon default
under various interest rate and macroeconomic scenarios. Our
analysis also considered the transaction's ability to pay timely
interest and/or ultimate principal to each of the rated tranches.
The results of the cash flow analysis (and other qualitative
factors, as applicable) demonstrated, in our view, that the
outstanding rated classes all have adequate credit enhancement
available at the rating levels associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
OHA Credit Funding 12 Ltd./OHA Credit Funding 12 LLC
Class X, $1.900 million: NR
Class A-1-R, $353.625 million: NR
Class A-2-R, $15.000 million: NR
Class B-R, $65.500 million: AA (sf)
Class C-R (deferrable), $37.375 million: A (sf)
Class D-R (deferrable), $33.600 million: BBB- (sf)
Class E-R (deferrable), $18.725 million: BB- (sf)
Subordinated notes, $41.500 million: NR
NR--Not rated.
ONE BAMLL 2015-ASTR: S&P Lowers Class E Certs Rating to 'B+ (sf)'
-----------------------------------------------------------------
S&P Global Ratings lowered its rating on the class E commercial
mortgage pass-through certificates from BAMLL Commercial Mortgage
Securities Trust 2015-ASTR, a U.S. CMBS transaction. At the same
time, S&P affirmed its ratings on six classes from the transaction.
This U.S. stand-alone (single-borrower) CMBS transaction is backed
by a fixed-rate, interest-only (IO) mortgage loan secured by the
borrower's leasehold interest in a 12-story, class A office
building at 51 Astor Place in the Greenwich Village office
submarket of lower Manhattan.
Rating Actions
S&P said, "The downgrade on class E reflects our revised valuation,
which is lower than the valuation we derived in our last review in
May 2018 due primarily to our belief that, despite its current and
historical performance, the property's vacancy rate could move to a
level in line with its deteriorated office submarket fundamentals
after the largest tenant, IBM, representing 37.3% of net rentable
area (NRA), vacates in December 2024. The tenant confirmed that it
plans to consolidate its New York City operations and relocate to 1
Madison Ave. In addition, we considered the potential further
stress on the property's occupancy level if the third-largest
tenant, 1stdibs.com Inc. (10.9%), which is currently marketing its
space for sublease, downsizes or exercises its termination option
effective as of December 2024. The affirmations on classes A, B, C,
and D account for the bonds' comparatively low debt per sq. ft.
($606.48 per sq. ft. through class D) and relative positions in the
payment waterfall, among other factors.
"The property has been 100% leased since our last review in May
2018. The servicer, Wells Fargo Bank N.A., reported that net cash
flow (NCF) at the property was stable to increasing: $19.2 million
in 2018, $23.0 million in 2019, $23.2 million in 2020, $26.5
million in 2021, $27.2 million in 2022, and $5.1 million as of the
three months ending March 31, 2023. However, using the June 30,
2023, rent roll, we expect the occupancy rate to fall to around
62.7% if the sponsor is not able to fully re-tenant IBM's space in
a timely manner. The occupancy rate may decline further if
1stdibs.com Inc. downsizes or terminates its lease. Moreover, the
servicer indicated that the fourth-largest tenant, CBAM Partners
LLC (6.6%), is currently dark but is expected to continue to pay
rent through its January 2026 lease expiration.
"As we previously mentioned, our current property-level analysis
considers the weakened office submarket conditions driven by the
prevailing hybrid work environment. As a result, we utilized a
15.0% vacancy rate (on par with the current office submarket
vacancy; see below), S&P Global Ratings' base rent of $91.91 per
sq. ft. and gross rent of $116.47 per sq. ft., 42.7% operating
expense ratio, and higher tenant improvement cost assumptions to
revise and lower our long-term sustainable NCF by 9.1% to $19.0
million from $20.9 million in our last review. Using the same S&P
Global Ratings' capitalization rate of 6.25% as in the last review,
we arrived at an expected-case value of $303.6 million, or $787 per
sq. ft.--a decline of 10.3% from our value of $338.4 million or
$877 per sq. ft. in our last review and 48.5% from the issuance
appraisal value of $590.0 million. This yielded an S&P Global
Ratings' loan-to-value (LTV) ratio of 90.1% on the trust balance,
up from 80.8% in our last review.
"Although the model-indicated ratings were lower than the classes'
current or revised ratings, we affirmed our ratings on classes A,
B, C, and D and tempered our downgrade on class E based on certain
weighed qualitative considerations." These include:
-- The potential that the property's actual future operating
performance could be higher than S&P's current revised
expectations. While IBM's space is currently marketed for lease
with no commitment yet according to CoStar, the loan is structured
with a rollover reserve sweep that commenced in June 2023 because
IBM did not renew its lease. The reserve amount is capped at the
sum of $65.00 per sq. ft. of IBM's leased space or $9.3 million.
According to the July 2023 investor reporting package reserve
report, there is $2.4 million in various reserve accounts.
-- The significant market value decline that would need to occur
before these classes experience principal losses.
-- The liquidity support provided in the form of servicer
advancing.
-- The relative position of the classes in the payment waterfall.
S&P said, "We will continue to monitor the tenancy and performance
of the property and the market conditions, and, if we receive
information that differs materially from our expectations, we may
revisit our analysis and further take rating actions as we deem
necessary.
"The affirmations on the class X-A and X-B IO certificates reflect
our criteria for rating IO securities, in which the rating on the
IO securities would not be higher than that of the lowest-rated
reference class. The notional amount of class X-A references class
A, and class X-B's notional amount references classes B and C."
Property-Level Analysis
The loan collateral consists of a 12-story, class A, LEED Gold
certified, 385,831-sq.-ft. office tower located at 51 Astor Place
in the NoHo neighborhood of lower Manhattan. The building was built
in 2013 by the sponsor, a joint venture between Edward J. Minskoff
Equities and Rockwood Capital, for $313.6 million ($813 per sq.
ft.). The building is between Third and Fourth Avenues on East
Ninth Street and Astor Place. Amenities include a private green
roof on the fifth floor, a tenant-accessible green roof on the top
floor, and an urban plaza.
The property is subject to a ground lease between the borrower as
lessee and The Cooper Union for the Advancement of Science and Art
as lessor from Jan. 31, 2008, to July 9, 2108 with no renewal
options. The ground lease specifies fixed base ground rent payments
of $11.6 million annually for 20 years from July 15, 2015, through
July 14, 2035. There is no ground rent due thereafter. The borrower
paid in advance the full amount due under the ground lease
agreement in the form of a promissory note to the lessor.
Additionally, the site has a deed restriction requiring the
property to contain no less than 40,000 sq. ft. of space for
education purposes. The property currently consists of 287,672 sq.
ft. of office space, 26,844 sq. ft. of retail space, and 71,315 sq.
ft. of educational space leased to St. John's University until July
31, 2030.
The property was fully leased since 2018. According to the June 30,
2023, rent roll, the five largest tenants comprise 79.9% of NRA and
include:
-- IBM (37.3% of NRA, 37.1% of in place gross rent, as calculated
by S&P Global Ratings, December 2024 lease expiration). According
to CoStar, the tenant has marketed its space for lease earlier this
year. There has been no commitment yet.
-- St. John's University (18.5%, 10.7%, July 2030). CoStar has
listed the tenant's space for sublease, although S&P observed that
St. John's University signage is still visible at one entrance of
the building as of July 20, 2023. According to the master servicer,
the tenant does not have termination options.
-- 1stdibs.com Inc. (10.9%, 10.9%, December 2029). The master
servicer stated that the tenant plans to downsize and sublease the
remaining 75.0% of its space. According to CoStar, its space is
currently being marketed for sublease. The tenant has a termination
option effective Dec. 31, 2024, with notice by September 2024.
-- CBAM Partners LLC (6.6%, 8.2%, January 2026). According to
Wells Fargo, the tenant is dark but continues to pay its rent
obligations. The tenant does not have any termination options.
Mail Media Inc. (6.6%, 7.6%, December 2024).
-- The property faces elevated rollover in 2024 (43.9% of NRA;
44.7% of S&P Global Ratings' in-place gross rent) from IBM and Mail
Media Inc. and 2026 (21.4%; 25.2%), mainly attributable to CBAM
Partners LLC, Tudor Investment Corp. (6.6%), and Perceptive
Advisors LLC (4.7%).
According to CoStar, the Greenwich Village office submarket, like
the general New York City office market, continues to experience
limited leasing activity as office utilization remains below
pre-pandemic levels. Vacancy and availability rates in the
submarket continue to climb and asking rents, one of the highest
among the New York City office submarkets, are stagnant since the
COVID-19 pandemic. As of year-to-date July 2023, the four- and
five-star office properties in the submarket had a $96.19 per sq.
ft. asking rent, 17.2% vacancy rate, and 32.0% availability rate.
S&P said, "This compares with a $101.93 per sq. ft. asking rent and
0.4% vacancy rate at issuance in 2015, $99.45 per sq. ft. asking
rent and 1.0% vacancy rate at the time of our last review in 2018
(hence, we used a 6.6% vacancy assumption in our analysis at that
time), and the property's current in-place vacancy rate of 0.0% and
S&P Global Ratings' gross rent of $116.47 per sq. ft." CoStar
projects vacancy to continue to increase to 20.2% in 2024 and 18.6%
in 2025 and asking rent to contract to $90.55 per sq. ft. and
$89.37 per sq. ft. for the same periods.
To account for the concentrated tenant roster at the property,
known tenancy movements, above market in-place gross rents, and
deteriorating market conditions, S&P assumed a higher vacancy rate
(15.0%) and tenant improvement costs in determining its long-term
sustainable NCF.
Transaction Summary
The 12-year, fixed rate, IO mortgage loan had an initial and
current balance of $273.5 million (as of the July 14, 2023, trustee
remittance report), pays an annual fixed interest rate of 4.26%,
and matures on July 10, 2027. In addition, there is an outstanding
$96.5 million IO mezzanine loan that is coterminous with the
mortgage loan. Including the mezzanine loan, the S&P Global Ratings
LTV ratio increases to 121.9%, based on our revised valuation.
The loan has a reported current payment status. Wells Fargo
reported a debt service coverage of 1.76x for the three months
ending March 31, 2023, and 2.30x as of year-end 2022. To date, the
trust has not incurred any principal losses. However, according to
the July 2023 trustee remittance report, class E had cumulative
interest shortfalls totaling $476.50 outstanding, which S&P deems
de minimis.
Rating Lowered
BAMLL Commercial Mortgage Securities Trust 2015-ASTR
Class E to 'B+ (sf)' from 'BB- (sf)'
Ratings Affirmed
BAMLL Commercial Mortgage Securities Trust 2015-ASTR
Class A: AAA (sf)
Class B: AA- (sf)
Class C: A- (sf)
Class D: BBB- (sf)
Class X-A: AAA (sf)
Class X-B: A- (sf)
OZLM LTD VII: Moody's Cuts Rating on $5.7MM Cl. E-R Notes to Caa3
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by OZLM VII, Ltd.:
US$30,900,000 Class B-R Senior Secured Deferrable Floating Rate
Notes due 2029, Upgraded to Aaa (sf); previously on October 21,
2022 Upgraded to Aa2 (sf)
US$37,900,000 Class C-R-R Senior Secured Deferrable Floating Rate
Notes due 2029, Upgraded to A3 (sf); previously on October 21, 2022
Upgraded to Baa2 (sf)
Moody's has also downgraded the rating on the following notes:
US$5,700,000 Class E-R Secured Deferrable Floating Rate Notes due
2029, Downgraded to Caa3 (sf); previously on August 14, 2020
Downgraded to Caa2 (sf)
OZLM VII, Ltd., originally issued in June 2014, partially
refinanced in April 2017 and fully refinanced in July 2018, is a
managed cashflow CLO. The notes are collateralized primarily by a
portfolio of broadly syndicated senior secured corporate loans. The
transaction's reinvestment period ended in July 2021.
RATINGS RATIONALE
The upgrade rating actions are primarily a result of deleveraging
of the senior notes and an increase in the transaction's
over-collateralization (OC) ratios since October 2022. The Class
A-1-R notes have been paid down by approximately 51.4% or $147.1
million since that time. Based on the trustee's July 2023
report[1], the OC ratios for the Class A, Class B and Class C notes
are reported at 146.60%, 130.82% and 115.56%, respectively, versus
October 2022[2] levels of 134.28%, 123.79% and 112.97%,
respectively. Moody's notes that the July 2023 trustee-reported OC
ratios do not reflect the July 2023 payment distribution, when
$53.4 million of principal proceeds were used to pay down the Class
A-1-R Notes.
The downgrade rating action on the Class E-R notes reflects the
specific risks to the junior notes posed by par loss and credit
deterioration observed in the underlying CLO portfolio. Based on
the trustee's July 2023 report[3], the OC ratio for the Class E-R
notes is reported at 103.37% versus October 2022[4] level of
103.79%.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $321,721,429
Defaulted par: $3,951,855
Diversity Score: 54
Weighted Average Rating Factor (WARF): 2486
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 2.89%
Weighted Average Recovery Rate (WARR): 46.94%
Weighted Average Life (WAL): 3.0 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, decrease in overall WAS or net interest
income, lower recoveries on defaulted assets.
Methodology Used for the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
PFP 2021-8: DBRS Confirms B(low) Rating on Class G Notes
--------------------------------------------------------
DBRS, Inc. confirmed its ratings on all classes of notes issued by
PFP 2021-8, Ltd. as follows:
-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (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 increased credit support to
the bonds as a result of successful loan repayment, resulting in a
collateral reduction of 24.3% since issuance. The increased credit
support to the bonds serves as a mitigant to potential adverse
selection in the transaction as 10 loans are secured by office
properties (22.2% of the current trust balance). While all loans
remain current, given the decline in desirability for office
product across tenants, investors, and lenders alike, there is
greater uncertainty regarding the borrowers' exit strategies upon
loan maturity. In the analysis for this review, DBRS Morningstar
evaluated these risks by stressing the current property values or
increasing the probability of default for all loans secured by
office properties. That analysis suggested rated bonds remain
sufficiently insulated (relative to the respective rating
categories) against potential loan delinquency and increased credit
risk. In conjunction with this press release, DBRS Morningstar has
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.
At issuance, the collateral consisted of 46 floating-rate mortgages
secured by 55 mostly transitional commercial real estate properties
totaling approximately $1.1 billion, excluding approximately $125.9
million of future funding commitments. Most loans were in a period
of transition with plans to stabilize and improve asset value. The
transaction is static and is structured with a Replenishment Period
through the September 2024 Payment Date, whereby the Issuer can use
principal proceeds to acquire related funded loan participations
into the trust subject to stated criteria. The transaction will pay
sequentially following the end of the Replenishment Period.
As of the June 2023 remittance, the pool comprises 36 loans secured
by 57 properties with a cumulative trust balance of $853.8 million.
Since issuance, eight loans with a former cumulative trust balance
of $215.7 million have been successfully repaid from the pool. As
of the June 2023 remittance, there was $5.0 million available in
the Permitted Funded Companion Participation Acquisition account.
Beyond the office concentration noted above, the transaction also
comprises 14 loans, representing 56.0% of the current trust balance
secured by multifamily properties and four loans, representing 9.1%
of the pool secured by hotel properties. In comparison with July
2022 reporting, multifamily properties represented 58.4% of the
collateral, office properties represented 19.9% of the collateral,
and hotel properties represented 7.7% of the collateral.
The loans are secured primarily by properties in urban and suburban
markets. Twenty-three loans, representing 58.8% of the pool, are
secured by properties in suburban markets, as defined by DBRS
Morningstar, with a DBRS Morningstar Market Rank of 3, 4, or 5.
Five loans, representing 20.9% of the pool, are secured by
properties in urban markets, as defined by DBRS Morningstar, with a
DBRS Morningstar Market Rank of 6, 7, or 8. The remaining eight
loans, representing 20.3% of the pool, are secured by properties
with a DBRS Morningstar Market Rank of 2, denoting a tertiary
market. In comparison, as of July 2022, properties in suburban
markets represented 56.3% of the collateral, urban markets
represented 16.5% of the collateral, and properties in tertiary
markets represented 27.2% of the collateral.
Leverage across the pool has remained relatively in line with
issuance levels as the current weighted-average (WA) as-is
appraised value loan-to-value (LTV) ratio is 68.2%, with a current
WA stabilized LTV ratio of 61.6%. In comparison, these figures were
68.7% and 57.3%, respectively, at issuance. DBRS Morningstar
recognizes that select property values may be inflated as the
majority of the individual property appraisals were completed in
2021 and 2022 and may not reflect the current rising interest rate
or widening capitalization rate environments.
Through June 2023, the collateral manager had advanced $47.3
million in loan future funding to 21 of the outstanding individual
borrowers to aid in property stabilization efforts. The majority of
this amount has been released to the borrowers of the Fort Collins
Portfolio ($11.7 million) and the NYC Multifamily Portfolio ($6.2
million) loans. Both properties are secured by portfolios of
multifamily properties. The Fort Collins Portfolio is backed by two
multifamily properties in Fort Collins, Colorado, while the NYC
Multifamily Portfolio is backed by three Class B properties in
Midtown Manhattan. The borrowers for each of the respective
properties used the advanced funds to complete their capital
improvement projects, which primarily consists of unit renovations.
The Fort Collins Portfolio loan is now fully funded while the NYC
Multifamily Portfolio has $3.2 million remaining for future
advances.
In total, an additional $59.4 million of loan future funding
allocated to 21 borrowers to further aid in property stabilization
efforts remains outstanding. Of this amount, $17.9 million is
allocated to the borrower of the River Center Office Campus loan,
which is secured by a six-building, Class A office property in Red
Bank, New Jersey.
The funds are available to the borrower to fund costs associated
with the borrower's ongoing capital improvement and lease-up plan.
The amount available remains unchanged from the previous year as
there has been minimal leasing activity at the property since loan
closing as the property was 68.4% occupied, according to the Q1
2023 collateral manager report. An additional update from the
collateral manager noted the remaining $17.9 million of available
future funding was placed into an interest bearing account in July
2023 as the Forced Funding Date passed, and it appears the borrower
still desires access to the funds. According to the Q1 2023
financials provided by the collateral manager, the loan reported an
annualized trailing three months ended March 31, 2022, net
operating income of $5.8 million, a decline from $6.2 million at Q1
2022. The loan has an initial maturity date of July 2024 and
includes two 12-month extension options.
As of the June 2023 remittance, there are no loans in special
servicing or on the servicer's watchlist. One loan, representing
1.0% of the pool balance, was reported as three months delinquent.
The loan is secured by a 66,092 square foot shopping center in
Billings, Montana. As of January 2023, the property was 85.07%
occupied, unchanged since issuance. DBRS Morningstar is awaiting
further information from the collateral manager regarding the
delinquency and strategy to bring the loan current. In its current
analysis, DBRS Morningstar did not update its original expected
loss assumption on the loan.
Notes: All figures are in U.S. dollars unless otherwise noted.
RR LTD 23: Fitch Assigns 'BB(EXP)sf' Rating to Class D-R Notes
--------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
RR 23 Ltd.
ENTITY/DEBT RATING
----------- ------
RR 23 Ltd.
A-1a-R LT AAA(EXP)sf Expected Rating
A-1b-R LT AAA(EXP)sf Expected Rating
A-2-R LT AA(EXP)sf Expected Rating
B-1-R LT A+(EXP)sf Expected Rating
B-2-R LT A(EXP)sf Expected Rating
C-1-R LT BBB(EXP)sf Expected Rating
C-2-R LT BBB-(EXP)sf Expected Rating
D-R LT BB(EXP)sf Expected Rating
E-R LT NR(EXP)sf Expected Rating
Subordinated LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
RR 23 Ltd. (the issuer) is an arbitrage cash flow collateralized
loan obligation (CLO) that will be managed by Redding Ridge Asset
Management LLC that originally closed in August 2022. The CLO's
secured notes are expected to be refinanced in whole on Aug. 29,
2023 from proceeds of new secured and subordinated notes. Net
proceeds from the issuance of the secured and subordinated notes
will provide financing on a portfolio of approximately $850 million
of primarily first-lien senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. Issuers rated in the 'B' rating category denote a
highly speculative credit quality. However, the notes benefit from
appropriate credit enhancement and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
99.41% first-lien senior secured loans and has a weighted average
recovery assumption of 74.53%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 37% of the portfolio balance in aggregate, while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other U.S.
CLOs. Fitch's analysis was based on a stressed portfolio created by
making adjustments to the indicative portfolio to reflect
permissible concentration limits and collateral quality test
levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The weighted average life (WAL) used for the transaction stress
portfolio is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-1a-R; between
'BBB+sf' and 'AA+sf' for class A-1b-R; between 'BB+sf' and 'A+sf'
for class A-2-R; between 'B+sf' and 'BBB+sf' for class B-1-R;
between 'B+sf' and 'BBB+sf' for class B-2-R; between less than
'B-sf' and 'BB+sf' for class C-1-R; between less than 'B-sf' and
'BB+sf' for class C-2-R; and between less than 'B-sf' and 'B+sf'
for class D-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1a-R and A-1b-R
notes, as these notes are in the highest rating category of
'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class A-2-R, 'A+sf' for class B-2-R,
'A+sf' for class C-1-R, 'A-sf' for class C-2-R; and 'BBB+sf' for
class D-R.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
RR LTD 23: Moody's Assigns (P)B3 Rating to $850,000 Cl. E-R Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to two
classes of CLO refinancing notes (the "Refinancing Notes") to be
issued by RR 23 LTD (the "Issuer").
Moody's rating action is as follows:
US$522,750,000 Class A-1a-R Senior Secured Floating Rate Notes due
2035, Assigned (P)Aaa (sf)
US$850,000 Class E-R Secured Deferrable Floating Rate Notes due
2035, Assigned (P)B3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least 96%
of the portfolio must consist of first lien senior secured loans
and eligible investments, and up to 4% of the portfolio may consist
of second lien loans, unsecured loans and permitted non-loan
assets.
Redding Ridge Asset Management LLC (the "Manager") will continue to
direct the selection, acquisition and disposition of the assets on
behalf of the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's extended five-year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes and seven
other classes of secured notes and one class of subordinated notes,
a variety of other changes to transaction features will occur in
connection with the refinancing. These include: extension of the
reinvestment period; extensions of the non-call period; changes to
certain collateral quality tests; changes to the
overcollateralization test levels; and changes to the base matrix
and modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2021.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Portfolio par: $850,000,000
Diversity Score: 55
Weighted Average Rating Factor (WARF): 2973
Weighted Average Spread (WAS): SOFR + 3.35%
Weighted Average Coupon (WAC): 7.25%
Weighted Average Recovery Rate (WARR): 47.50%
Weighted Average Life (WAL): 8.13 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 202.
Factors That Would Lead to an Upgrade or a Downgrade of the
Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
SIERRA TIMESHARE 2023-2: Fitch Assigns 'BB-sf' Rating to D Notes
----------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
notes issued by Sierra Timeshare 2023-2 Receivables Funding LLC
(Sierra Timeshare 2023-2).
ENTITY/DEBT RATING PRIOR
----------- ------ -----
Sierra Timeshare 2023-2
Receivables Funding 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 BB-sf New Rating BB-(EXP)sf
TRANSACTION SUMMARY
The notes are backed by a pool of fixed-rate timeshare loans
originated by Wyndham Vacation Resorts, Inc. (WVRI) and Wyndham
Resort Development Corporation (WRDC). Both entities are indirect,
wholly owned operating subsidiaries of Travel + Leisure Co. (T+L,
formerly Wyndham Destinations, Inc.) This is T+L's 46th public
Sierra transaction.
KEY RATING DRIVERS
Borrower Risk — Shifting Collateral Composition: Approximately
68.6% of Sierra 2023-2 consists of WVRI-originated loans; the
remainder of the pool is comprised of WRDC loans. Fitch has
determined that, on a like-for-like FICO basis, WRDC's receivables
perform better than WVRI's. The weighted average (WA) original FICO
score of the pool is 735, higher than 734 in Sierra 2023-1 and the
highest for the platform to date. Additionally, compared with the
prior transaction, the 2023-2 pool has overall stronger FICO
distribution and lower concentration in weaker performing WVRI
loans.
Forward-Looking Approach on CGD Proxy — Increasing CGDs: Similar
to other timeshare originators, T+L's delinquency and default
performance exhibited notable increases in the 2007-2008 vintages,
and stabilizing in 2009 and thereafter. However, more recent
vintages, from 2014 through 2019, have begun to show increasing
gross defaults versus prior vintages dating back to 2009, partially
driven by increased paid product exits (PPEs).
The 2020 and 2021 transactions are generally demonstrating
improving default trends relative to prior transactions. Fitch's
cumulative gross default (CGD) proxy for this pool is 22.00% (down
from 22.50% for 2023-1). Given the current economic environment,
Fitch used proxy vintages that reflect a recessionary period, along
with more recent vintage performance, specifically of 2007-2009 and
2016-2019 vintages.
Structural Analysis — Lower CE: The initial hard credit
enhancement (CE) for class A, B, C and D notes is 64.75%, 41.15%,
22.00% and 10.80%, respectively. CE is lower for all classes
relative to 2023-1 except for class C, mainly due to lower
overcollateralization (OC) and lower subordination as compared to
the prior transaction. Hard CE comprises OC, a reserve account and
subordination. Soft CE is also provided by excess spread and is
expected to be 6.82% per annum. Loss coverage for all notes is able
to support default multiples of 3.25x, 2.25x, 1.50x and 1.17x for
'AAAsf', 'Asf', 'BBBsf' and 'BB-sf', respectively.
Originator/Seller/Servicer Operational Review — Quality of
Origination/Servicing: T+L has demonstrated sufficient capabilities
as an originator and servicer of timeshare loans. This is evidenced
by the historical delinquency and loss performance of securitized
trusts and of the managed portfolio.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Unanticipated increases in the frequency of defaults could produce
CGD levels higher than the base case and would likely result in
declines of CE and remaining default coverage levels available to
the notes. Additionally, unanticipated increases in prepayment
activity could also result in a decline in coverage. Decreased
default coverage may make certain note ratings susceptible to
potential negative rating actions, depending on the extent of the
decline in coverage.
Therefore, Fitch conducts sensitivity analyses by stressing both a
transaction's initial base case CGD and prepayment assumptions and
examining the rating implications on all classes of issued notes.
The CGD sensitivity stresses the CGD proxy to the level necessary
to reduce each rating by one full category, to non-investment grade
(BBsf) and to 'CCCsf' based on the break-even loss coverage
provided by the CE structure. The CGD and prepayment sensitivities
include 1.5x and 2.0x increases to the prepayment assumptions,
representing moderate and severe stresses, respectively. These
analyses are intended to provide an indication of the rating
sensitivity of the notes to unexpected deterioration of a trust's
performance.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing CE levels and consideration
for potential upgrades. If CGD is 20% less than the projected
proxy, the expected ratings would be maintained for the class A
note at a stronger rating multiple. For class B, C and D notes, the
multiples would increase, resulting in potential upgrade of
approximately up to one rating category for each of the subordinate
classes.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
SIERRA TIMESHARE 2023-2: Moody's Assigns Ba2 Rating to Cl. D Notes
------------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to the
notes issued by Sierra Timeshare 2023-2 Receivables Funding LLC
(Sierra 2023-2). Sierra 2023-2 is backed by a pool of timeshare
loans originated by Wyndham Resort Development Corporation (WRDC),
Wyndham Vacation Resorts, Inc. (WVRI) and certain WVRI affiliates.
WVRI and WRDC are wholly owned subsidiaries of Wyndham Vacation
Ownership, Inc. (WVO). WVO, in turn, is a wholly owned subsidiary
of Travel + Leisure Co. (T+L, Ba3 stable). T+L is a global
timeshare company engaged in developing and acquiring vacation
ownership resorts, marketing and selling VOIs, offering consumer
financing in connection with such sales and providing property
management services to property owners' associations (POAs).
Wyndham Consumer Finance, Inc. (WCF) will act as the servicer of
the transaction and T+L will act as the performance guarantor.
Issuer: Sierra Timeshare 2023-2 Receivables Funding LLC
Class A Notes, Definitive Rating Assigned Aaa (sf)
Class B Notes, Definitive Rating Assigned A2 (sf)
Class C Notes, Definitive Rating Assigned Baa2 (sf)
Class D Notes, Definitive Rating Assigned Ba2 (sf)
RATINGS RATIONALE
The ratings are based on the quality of the underlying collateral
and its expected performance, the capital structure, and the
experience and expertise of WCF as servicer.
Moody's expected median cumulative net loss expectation for Sierra
2023-2 is 22.1% and the loss at a Aaa stress is 60%. Moody's based
its net loss expectations on an analysis of the credit quality of
the underlying collateral; the historical performance of similar
collateral, including securitization performance and managed
portfolio performance; the ability of WCF to perform the servicing
functions; and current expectations for the macroeconomic
environment during the life of the transaction.
At closing, the Class A notes, Class B notes, Class C notes and
Class D notes are expected to benefit from 64.75%, 41.15%, 22.00%
and 10.80% of hard credit enhancement, respectively. Hard credit
enhancement for the notes consists of a combination of
overcollateralization, a reserve account and subordination. The
notes may also benefit from excess spread.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "US Vacation
Timeshare Loan Securitizations Methodology" published in July
2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the Class B, C and D notes if, given current
expectations of portfolio losses, levels of credit enhancement are
consistent with higher ratings. This transaction has a pro-rata
structure with sequential pay triggers. Moody's expectation of pool
losses could decline as a result of better than expected
improvements in the economy, changes to servicing practices that
enhance collections or refinancing opportunities that result in
prepayments.
Down
Moody's could downgrade the ratings of the notes if pool losses
exceed its expectations and levels of credit enhancement are
consistent with lower ratings. Credit enhancement could decline if
excess spread is not sufficient to cover losses in a given month.
Moody's expectation of pool losses may increase, for example, due
to performance deterioration stemming from a downturn in the US
economy, deficient servicing, errors on the part of transaction
parties, inadequate transaction governance or fraud.
SLM STUDENT 2004-2: Fitch Lowers Rating on Class B Notes to 'BBsf'
------------------------------------------------------------------
Fitch Ratings has maintained the Rating Watch Negative (RWN) on the
class A-7 notes of SLM Student Loan Trust (SLM)2003-14, the class
A-4 notes of SLM 2005-4, and the class A-4 and A-5 notes of SLM
2005-5. Fitch placed these notes on RWN on May 26, 2023 following
the placement of the United States' 'AAA' Long-Term Foreign
Currency Issuer Default Rating (IDR) on RWN on May 24, 2023. The
notes are rated 'AAAsf'.
Fitch has also downgraded the class A-6 and B notes of SLM 2004-2,
along with the class B notes of SLM 2003-14 and 2005-5. Fitch
affirmed the class B notes of SLM 2005-4.
The Rating Outlooks for the outstanding notes of SLM 2004-2 remain
Negative, while the Outlooks for the class B notes of SLM 2003-14
and 2005-4 remain Stable. The Outlook for the class B notes of SLM
2005-5 is Stable following the downgrade.
ENTITY/DEBT RATING PRIOR
---------- ----- -----
SLM Student Loan Trust
2004-2
A-6 78442GLC8 LT AAsf Downgrade AAAsf
B 78442GLB0 LT BBsf Downgrade BBBsf
SLM Student Loan Trust
2005-4
A-4 78442GPH3 LT AAAsf Rating Watch AAAsf
Maintained
B 78442GPL4 LT Asf Affirmed Asf
SLM Student Loan Trust
2003-14
A-7 78442GKG0 LT AAAsf Rating Watch AAAsf
Maintained
B 78442GKP0 LT BBBsf Downgrade Asf
SLM Student Loan Trust
2005-5
A-4 78442GPQ3 LT AAAsf Rating Watch AAAsf
Maintained
A-5 78442GPR1 LT AAAsf Rating Watch AAAsf
Maintained
B 78442GPS9 LT BBBsf Downgrade Asf
TRANSACTION SUMMARY
SLM 2003-14 and 2005-5: The class A notes pass all credit and
maturity stresses in cashflow modeling with sufficient hard credit
enhancement (CE) under Fitch's assumptions at the current rating
level.
The downgrade of the class B notes for both transactions to 'BBBsf'
from 'Asf' reflects that they only pass credit stresses up to the
'BBBsf' level and face principal shortfalls at higher stresses.
SLM 2004-2: The class A-6 notes pass all credit stresses but fail
'AAsf' maturity stresses. Fitch downgraded the notes to 'AAsf' from
'AAAsf' due to the increased maturity risk (the risk of not being
able to repay the principal due on the notes by legal final
maturity) for the notes in Fitch's cashflow modeling.
The class B notes pass credit and maturity stresses up to 'Bsf'.
Fitch has downgraded the notes to 'BBsf' from 'BBBsf'.
The Negative Outlooks for the class A-6 and B notes reflect the
possibility of further negative rating pressure in the next one to
two years if maturity risk increases, particularly if the remaining
loan term does not move lower.
The model-implied ratings of the outstanding notes are one category
lower than the assigned ratings, as described by Fitch's Federal
Family Education Loan Program (FFELP) rating criteria, which gives
credit to the legal final maturity dates of the notes being 16
years away in 2039. Fitch believes notes with legal final maturity
dates after 2035 have lower maturity risk since nearly all IBR
loans are expected to be forgiven between 2036 and 2041.
SLM 2005-4: The class A-4 and B notes pass credit and maturity
stresses in cashflow modeling with sufficient hard CE under Fitch's
assumptions at the current rating level.
Fitch affirmed the class B notes at 'Asf'.
Fitch modeled customized servicing fees for SLM 2003-14, 2004-2,
and 2005-4 instead of Fitch's criteria-defined assumption of $3.25
per borrower, per month, due to higher contractual servicing fees
for these transactions.
KEY RATING DRIVERS
U.S. Sovereign Risk: The trust collateral comprises 100% FFELP
loans with guaranties provided by eligible guarantors and
reinsurance provided by the U.S. Department of Education (ED) for
at least 97% of principal and accrued interest. The U.S. sovereign
rating is currently 'AAA'/Rating Watch Negative.
Collateral Performance: For all transactions, after applying the
default timing curve per criteria, the effective default rate is
unchanged from the cumulative default rate. Fitch applies the
standard default timing curve in its credit stress cash flow
analysis. Additionally, defaults have remained in line with
expectations, while consolidation from the Public Service Loan
Forgiveness Program, which ended in October 2022, drove the
short-term inflation of CPR. Voluntary prepayments are expected to
return to historical levels. The claim reject rate is assumed to be
0.25% in the base case and 2.00% in the 'AAA' case.
SLM 2003-14: Based on transaction-specific performance to date,
Fitch assumes a cumulative default rate of 16.00% under the base
case scenario and a default rate of 48.00% under the 'AAA' credit
stress scenario. Fitch is maintaining the sustainable constant
default rate (sCDR) of 2.40% and the sustainable constant
prepayment rate (sCPR; voluntary and involuntary prepayments) of
8.00% in cash flow modeling. The trailing-twelve-month (TTM) levels
of deferment, forbearance, and income-based repayment (IBR; prior
to adjustment) are 2.24% (2.68% at June 30, 2022), 10.87% (9.00%)
and 23.75% (23.19%). These assumptions are used as the starting
point in cash flow modelling and subsequent declines or increases
are modelled as per criteria. The 31-60 days past due (DPD) and the
91-120 DPD have decreased from June 30, 2022 and are currently
2.90% for 31 DPD and 1.19% for 91 DPD compared to 2.91% and 1.55%
for 31 DPD and 91 DPD, respectively. The borrower benefit is
approximately 0.13%, based on information provided by the sponsor.
SLM 2004-2: Based on transaction-specific performance to date,
Fitch assumes a cumulative default rate of 14.50% under the base
case scenario and a default rate of 43.50% under the 'AAA' credit
stress scenario. Fitch is maintaining the sCDR of 2.10% and the
sCPR of 7.50% in cash flow modeling. The TTM levels of deferment,
forbearance, and IBR are 2.64% (2.74% at June 30, 2022), 10.94%
(8.79%) and 21.43% (21.02%). These assumptions are used as the
starting point in cash flow modelling and subsequent declines or
increases are modelled as per criteria. The 31-60 DPD and the
91-120 DPD have decreased from June 30, 2022 and are currently
2.15% for 31 DPD and 0.93% for 91 DPD compared to 2.90% and 1.03%
for 31 DPD and 91 DPD, respectively. The borrower benefit is
approximately 0.16%, based on information provided by the sponsor.
SLM 2005-4: Based on transaction-specific performance to date,
Fitch assumes a cumulative default rate of 13.00% under the base
case scenario and a default rate of 39.00% under the 'AAA' credit
stress scenario. Fitch is maintaining the sCDR of 2.00% and the
sCPR of 6.50% in cash flow modeling. The TTM levels of deferment,
forbearance, and IBR are 2.42% (2.66% at June 30, 2022), 9.85%
(7.97%) and 15.10% (14.79%). These assumptions are used as the
starting point in cash flow modelling and subsequent declines or
increases are modelled as per criteria. The 31-60 DPD and the
91-120 DPD have decreased from June 30, 2022 and are currently
2.00% for 31 DPD and 0.64% for 91 DPD compared to 2.90% and 0.76%
for 31 DPD and 91 DPD, respectively. The borrower benefit is
approximately 0.21%, based on information provided by the sponsor.
SLM 2005-5: Based on transaction-specific performance to date,
Fitch assumes a cumulative default rate of 17.50% under the base
case scenario and a default rate of 52.50% under the 'AAA' credit
stress scenario. Fitch is maintaining the sCDR of 2.70% and the
sCPR of 7.50% in cash flow modeling. The TTM levels of deferment,
forbearance, and IBR are 2.94% (3.16% at June 30, 2022), 11.74%
(9.70%) and 17.64% (17.37%). These assumptions are used as the
starting point in cash flow modelling and subsequent declines or
increases are modelled as per criteria. The 31-60 DPD and the
91-120 DPD have decreased from June 30, 2022 and are currently
2.77% for 31 DPD and 0.98% for 91 DPD compared to 3.50% and 1.46%
for 31 DPD and 91 DPD, respectively. The borrower benefit is
approximately 0.14%, based on information provided by the sponsor.
Basis and Interest Rate Risk: Basis risk for these transactions
arises from any rate and reset frequency mismatch between interest
rate indices for Special Allowance Payments (SAP) and the
securities. As of the April 2023 distribution date, approximately
84.50%, 88.40%, 99.60% and 99.76% of the student loans in SLM
2003-14, 2004-2, 2005-4 and 2005-5, respectively, are indexed to
90-day Average SOFR plus the spread adjustment of 0.26161%, and the
balance of the loans is indexed to the 91-day T-Bill rate. All the
notes are indexed to 90-day Average SOFR + 0.26161%, with the
exception of the Class A-6 notes of SLM 2004-2, which are indexed
to three-month EURIBOR. However, for these notes, the trust pays
the swap counterparty an interest rate indexed to 90-day Average
SOFR +0.26161%. Fitch applies its standard basis and interest rate
stresses to these transactions as per criteria.
Payment Structure: CE is provided by over-collateralization (OC),
excess spread and for the class A notes, subordination provided by
the class B notes. As of the April 2023 distribution date, reported
total parity is 100.00%, 100.00%, 99.98%, and 99.70% for SLM
2003-14, 2004-2, 2005-4 and 2005-5, respectively. Liquidity support
is provided by reserve accounts currently sized at their floors of
$3,383,397, $4,516,068, $3,773,732 and $3,353,244, for SLM 2003-14,
2004-2, 2005-4, 2005-5, respectively. SLM 2003-14 and 2004-2 will
continue to release cash as long as 100% total parity (excluding
the reserve account) is maintained.
SLM 2005-4 and 2005-5 will release cash once 100.0% total parity
(excluding the reserve account) is reached.
Operational Capabilities: Day-to-day servicing is provided by
Navient Solutions, LLC. Fitch believes Navient to be an adequate
servicer, due to its extensive track record as one of the largest
servicers of FFELP loans.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
'AAAsf' rated tranches of most FFELP securitizations will likely
move in tandem with the U.S. sovereign rating given the strong
linkage to the U.S. sovereign, by nature of the reinsurance
provided by the Department of Education. Aside from the U.S.
sovereign rating, defaults, basis risk and loan extension risk
account for the majority of the risk embedded in FFELP student loan
transactions.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. Fitch conducts credit and maturity stress
sensitivity analysis by increasing or decreasing key assumptions by
25% and 50% over the base case. The credit stress sensitivity is
viewed by stressing both the base case default rate and the basis
spread. The maturity stress sensitivity is viewed by stressing
remaining term, IBR usage and prepayments. The results 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.
SLM Student Loan Trust 2003-14
Current Ratings: class A-7 'AAAsf'; class B 'BBBsf'
Current Model-Implied Ratings: class A 'AAAsf' (Credit and Maturity
Stress); class B 'BBBsf' (Credit Stress) / 'Asf' (Maturity Stress)
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'AAAsf'; class B 'BBBsf';
-- Default increase 50%: class A 'AAAsf'; class B 'BBsf';
-- Basis spread increase 0.25%: class A 'AAAsf'; class B 'Bsf';
-- Basis spread increase 0.50%: class A 'AAsf'; class B 'CCCsf'.
Maturity Stress Rating Sensitivity
-- CPR decrease 25%: class A 'AAAsf'; class B 'BBBsf';
-- CPR decrease 50%: class A 'AAAsf'; class B 'BBBsf';
-- IBR usage increase 25%: class A 'AAAsf'; class B 'BBBsf';
-- IBR usage increase 50%: class A 'AAAsf'; class B 'BBBsf';
-- Remaining term increase 25%: class A 'AAAsf'; class B 'BBBsf';
-- Remaining term increase 50%: class A 'AAAsf'; class B 'BBBsf'.
SLM Student Loan Trust 2004-2
Current Ratings: class A-6 'AAsf'; class B 'BBsf'
Current Model-Implied Ratings: class A-6 'AAAsf' (Credit Stress) /
'Asf' (Maturity Stress); class B 'Bsf' (Credit and Maturity
Stress)
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'AAsf'; class B 'Bsf';
-- Default increase 50%: class A 'AAsf'; class B 'Bsf';
-- Basis spread increase 0.25%: class A 'AAsf'; class B 'CCCsf';
-- Basis spread increase 0.50%: class A 'Bsf'; class B 'CCCsf'.
Maturity Stress Rating Sensitivity
-- CPR decrease 25%: class A 'Asf'; class B 'Bsf';
-- CPR decrease 50%: class A 'Bsf'; class B 'CCCsf';
-- IBR usage increase 25%: class A 'Asf'; class B 'Bsf';
-- IBR usage increase 50%: class A 'BBBsf'; class B 'CCCsf';
-- Remaining term increase 25%: class A 'CCCsf'; class B 'CCCsf';
-- Remaining term increase 50%: class A 'CCCsf'; class B 'CCCsf'.
SLM Student Loan Trust 2005-4
Current Ratings: class A-4 'AAAsf'; class B 'Asf'
Current Model-Implied Ratings: class A 'AAAsf' (Credit and Maturity
Stress); class B 'AAsf' (Credit Stress) / 'AAAsf' (Maturity
Stress)
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'AAAsf'; class B 'Asf';
-- Default increase 50%: class A 'AAAsf'; class B 'Asf';
-- Basis spread increase 0.25%: class A 'AAAsf'; class B 'Asf';
-- Basis spread increase 0.50%: class A 'AAAsf'; class B 'BBsf'.
Maturity Stress Rating Sensitivity
-- CPR decrease 25%: class A 'AAAsf'; class B 'Asf';
-- CPR decrease 50%: class A 'AAAsf'; class B 'Asf';
-- IBR usage increase 25%: class A 'AAAsf'; class B 'Asf';
-- IBR usage increase 50%: class A 'AAAsf'; class B 'Asf';
-- Remaining term increase 25%: class A 'AAsf'; class B 'Asf';
-- Remaining term increase 50%: class A 'Bsf'; class B 'Asf'.
SLM Student Loan Trust 2005-5
Current Ratings: class A 'AAAsf'; class B 'BBBsf'
Current Model-Implied Ratings: class A 'AAAsf' (Credit and Maturity
Stress); class B 'BBBsf' (Credit Stress) / 'Asf' (Maturity Stress)
Credit Stress Rating Sensitivity
-- Default increase 25%: class A 'AAAsf'; class B 'BBBsf';
-- Default increase 50%: class A 'AAAsf'; class B 'BBBsf';
-- Basis spread increase 0.25%: class A 'AAAsf'; class B 'Bsf';
-- Basis spread increase 0.50%: class A 'AAAsf'; class B 'CCCsf'.
Maturity Stress Rating Sensitivity
-- CPR decrease 25%: class A 'AAAsf'; class B 'BBBsf';
-- CPR decrease 50%: class A 'AAAsf'; class B 'BBBsf';
-- IBR usage increase 25%: class A 'AAAsf'; class B 'BBBsf';
-- IBR usage increase 50%: class A 'AAAsf'; class B 'BBBsf';
-- Remaining term increase 25%: class A 'Asf'; class B 'Bsf';
-- Remaining term increase 50%: class A 'Bsf'; class B 'CCCsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
SLM Student Loan Trust 2003-14
No upgrade credit or maturity stress sensitivity is provided for
the class A-7 notes, as they are already at their highest possible
current and model-implied ratings.
Credit Stress Sensitivity
-- Default decrease 25%: class B 'BBBsf';
-- Basis Spread decrease 0.25%: class B 'Asf'.
Maturity Stress Sensitivity
-- CPR increase 25%: class B 'Asf';
-- IBR usage decrease 25%: class B 'Asf';
-- Remaining term decrease 25%: class B 'Asf'.
SLM Student Loan Trust 2004-2
Credit Stress Sensitivity
-- Default decrease 25%: class A 'AAAsf'; class B 'Bsf';
-- Basis Spread decrease 0.25%: class A 'AAAsf'; class B 'BBBsf'.
Maturity Stress Sensitivity
-- CPR increase 25%: class A 'Asf'; class B 'BBsf';
-- IBR usage decrease 25%: class A 'Asf'; class B 'BBsf';
-- Remaining term decrease 25%: class A 'AAAsf'; class B 'BBBsf'.
SLM Student Loan Trust 2005-4
No upgrade credit or maturity stress sensitivity is provided for
the class A-4 notes, as they are already at their highest possible
current and model-implied ratings.
Credit Stress Sensitivity
-- Default decrease 25%: class B 'AAsf';
-- Basis Spread decrease 0.25%: class B 'AAAsf'.
Maturity Stress Sensitivity
-- CPR increase 25%: class B 'AAAsf';
-- IBR usage decrease 25%: class B 'AAAsf';
-- Remaining term decrease 25%: class B 'AAAsf'.
SLM Student Loan Trust 2005-5
No upgrade credit or maturity stress sensitivity is provided for
the class A notes, as they are already at their highest possible
current and model-implied ratings.
Credit Stress Sensitivity
-- Default decrease 25%: class B 'Asf';
-- Basis Spread decrease 0.25%: class B 'Asf'.
Maturity Stress Sensitivity
-- CPR increase 25%: class B 'Asf';
-- IBR usage decrease 25%: class B 'Asf';
-- Remaining term decrease 25%: class B 'Asf'.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
SLM STUDENT 2008-2: S&P Raises Class B Notes Rating to 'BB (sf)'
----------------------------------------------------------------
S&P Global Ratings raised its rating on the class B notes from SLM
Student Loan Trust 2008-2 (SLM 2008-2) to 'BB (sf)' from 'CC (sf)'.
At the same time, S&P removed the rating from CreditWatch, where
S&P placed it with developing implications on April 26, 2023. SLM
2008-2 is a student loan ABS transaction backed by student loans
originated through the U.S. Department of Education's (ED) Federal
Family Education Loan Program (FFELP).
The upgrade reflects the strength of the collateral, the current
overcollateralization that is expected to build over time, the
pay-in-kind (PIK) nature of the interest on the notes, and the
strong liquidity position resulting from a maturity date in 2083,
which is well after the expected repayment of the pool of loans.
However, S&P has limited the rating on the class B notes to a 'BB
(sf)' rating, which reflects uncertainties that exist due to an
ongoing event of default (EOD) on the notes. The rating also
reflects the modest credit enhancement (primarily due to
overcollateralization) that is in place to protect against losses.
Losses
The ED reinsures at least 97% of the principal and interest on
defaulted loans serviced according to FFELP guidelines. Due to the
high level of recoveries from the ED on defaulted loans, defaults
effectively function similarly to prepayments. Thus, S&P expects
net losses to be minimal.
Liquidity
The class A-3 default was caused primarily by a decline in the pace
of amortization of the loans due to an increase in borrowers that
have qualified for income-based repayment (IBR) plans, which can
lower a borrower's monthly payment and extend the loan term by up
to 25 years. Class B does not face the same liquidity pressures
because its legal final maturity date is in 2083. The loans in the
pool are expected to be repaid through the guaranty recovery on
default, borrower repayment, or ED loan forgiveness well in advance
of the class B maturity date.
Class B Interest Payments
On April 26, 2023, S&P lowered its rating on SLM 2008-2's class A-3
notes to 'D (sf)' because the class was not repaid by its legal
final maturity date, which triggered an EOD under the transaction
documents. As a result of the class A EOD, the waterfall
changed--principal payments to the class A-3 notes were
reprioritized in front of interest to the class B notes--triggering
an additional EOD under the transaction documents because the class
B notes are not receiving payments for their current interest.
The transaction documents define the current interest payable to
the class B noteholders to comprise interest for the current
payment, as well as any cumulative interest shortfall, including
interest on the cumulative interest shortfall. As such, S&P views
the note as a PIK note. This transaction is similar to SLM 2008-3,
which also had an EOD occur on its senior class due to failure to
repay by the legal final maturity date, also triggering the
reprioritization of interest payments to class B, a note with PIK
features.
Comparison With 2008-3 Transaction
S&P previously ran various cash flow scenarios for SLM 2008-3,
which included additional scenarios to stress for high levels of
IBR. In a 'AA+' cash flow scenario, the class B notes received all
the interest (including interest on any shortfalls owed due to the
notes' PIK nature) and principal by their legal final maturity
date. The cash flow results show that class B was repaid all
interest and principal three to five years after class A was
repaid. The PIK feature had minimal impact on the cash flow,
primarily because:
-- The class B maturity date is well past the expected paydown of
the loan pool.
-- Net losses on the loan pool are expected to be minimal due to
the guaranty from the ED.
-- The size of class B, which is paying interest in kind, is small
relative to the size of the loan pool.
-- Most nonpaying loans accrue interest that is capitalized upon
entering repayment, so the collateral pool grows until repaid
either by the borrower or the ED through loan forgiveness or
recovery of default.
S&P said, "We believe the 2008-2 deal is similar to the 2008-3
deal. The coupons on the class A and B notes in SLM 2008-2 are
comparable to those in SLM 2008-3. However, the 2008-2 class A note
comprises a smaller portion (approximately 59%) of its capital
structure compared to the 2008-3 class A note (approximately 80%).
As such, the SLM 2008-2 class A note is expected to be repaid
sooner, and class B is expected to pay in kind for a shorter time
than SLM 2008-3 class B. We believe that modeling cash flow
scenarios for SLM 2008-2 would generate similar results to the SLM
2008-3 deal, which shows that all class B interest and principal
owed would be repaid well before its legal final maturity date, and
therefore we did not run a cash flow model for the SLM 2008-2
transaction.
"Our cash flow model cannot account for the various outcomes that
could be exercised in the future because of an ongoing EOD. Before
an EOD, the transaction documents define the payment priority, cap
the fees and expenses, and limit actions the trust can take that
can result in losses to the noteholders. After an EOD, numerous
alternatives are available to the trustee and noteholders that can
result in actions such as uncapping certain expenses paid before
payments to the noteholders and liquidating the collateral."
Uncertainty Relating To EOD
Based on the current pace of payments, the SLM 2008-2 class A-3
notes are expected to be repaid within three years, and
overcollateralization is expected to grow as the trust is no longer
allowed to release amounts. While the parties have not yet
exercised their remedies under the EOD provisions, they retain
those rights until an EOD is no longer declared. Noteholders may
have competing interests (which may change over time) as to how
they would like the EOD to be addressed.
The ongoing EOD and the parties' ongoing right to enact the
post-EOD remedies introduce uncertainty relating to the future
course of action, which did not exist prior to the EOD. The class B
note is the most subordinate bond and, as such, would be the first
class exposed to any losses if the parties take a course of action
with negative consequences to the timing or amount of the cash
flow.
SLM STUDENT 2008-5: S&P Lowers Class A-4 Notes Rating to 'D (sf)'
-----------------------------------------------------------------
S&P Global Ratings lowered its ratings on the class A-4 notes from
SLM Student Loan Trust 2008-5, 2008-6, and 2008-7 to 'D (sf)' from
'CC (sf)' and removed them from CreditWatch with negative
implications. The 'CC (sf)' ratings on the three class B notes from
the same three trusts remain on CreditWatch with developing
implications, where they were originally placed on May 19, 2023.
The notes are backed by student loans originated through the U.S.
Department of Education's (ED) Federal Family Education Loan
Program (FFELP).
CreditWatch developing is used for situations when S&P believes
that there is at least a one-in-two likelihood of a rating change
and where future events are unpredictable and differ so
significantly that the rating could be raised, lowered, or
affirmed.
S&P said, "Our review considered the transaction's collateral
performance and liquidity position, overall credit enhancement, and
capital and payment structures. We also considered secondary credit
factors, such as credit stability, peer comparisons, and
issuer-specific analyses."
Rationale
The downgrade of the class A-4 notes reflects the failure of the
notes to be repaid on their legal final maturity dates, which has
triggered an event of default (EOD) under the transaction
documents. Due to liquidity pressure, the loans in the pool have
not amortized at a pace that allows for the timely repayment of
these notes. The rating actions primarily reflect the impact of the
liquidity pressure on the class A-4 notes and not the credit
enhancement levels available to these classes for ultimate
principal repayment, subsequent to their legal final maturity
dates.
Under the transaction documents, a failure to pay a note on its
legal final maturity date is an EOD. Additionally, the interest to
the class B notes has been reprioritized behind principal payments
to the class A-4 notes. The transaction documents define the
current interest payable to the class B noteholders to include
interest for the current payment, as well as any cumulative
interest shortfall, including interest on the cumulative interest
shortfall. As such, S&P views the class B notes to be
payment-in-kind notes.
After an EOD, the trustee and/or noteholders have several courses
of action they can take, which may affect the amount and timing of
payments that are expected to be received by the class B notes. For
example, the allocation of payments per the pre-EOD waterfall could
be maintained, or the allocation of payments per the post-EOD
waterfall could occur, or the trust estate could be sold. In
addition, uncapped expenses could be allowed post-EOD. As such, the
class B notes remain on CreditWatch developing until the post-EOD
actions are determined.
The ED reinsures at least 97% of the principal and interest on
defaulted loans serviced, according to the FFELP guidelines. Due to
the high level of recoveries from the ED on defaulted loans,
defaults effectively function similarly to prepayments. Thus, S&P
expects net losses to be minimal.
CreditWatch
S&P will determine whether to raise, lower, or affirm its ratings
on the class B notes based on the trustee's and/or the noteholders'
actions after the EOD.
Ratings Lowered And Removed From CreditWatch Negative
SLM Student Loan Trust 2008-5
Class A-4 to 'D (sf)' from 'CC (sf)/Watch Neg'
SLM Student Loan Trust 2008-6
Class A-4 to 'D (sf)' from 'CC (sf)/Watch Neg'
SLM Student Loan Trust 2008-7
Class A-4 to 'D (sf)' from 'CC (sf)/Watch Neg'
Ratings Remaining On CreditWatch Developing
SLM Student Loan Trust 2008-5
Class B: 'CC (sf)/Watch Dev'
SLM Student Loan Trust 2008-6
Class B: 'CC (sf)/Watch Dev'
SLM Student Loan Trust 2008-7
Class B: 'CC (sf)/Watch Dev'
SYMPHONY CLO 34-PS: S&P Assigns Prelim BB-(sf) Rating on E-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class X,
A-R, B-1-R, B-2-R, C-R, D-R, and E-R replacement notes from
Symphony CLO 34-PS Ltd./Symphony CLO 34-PS LLC, a CLO that is
managed by Symphony Alternative Asset Management LLC.
The preliminary ratings are based on information as of July 21,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the July 27, 2023, refinancing date, the proceeds from the
replacement notes will be used to redeem the original notes. At
that time, S&P expects to assign ratings to the replacement notes.
However, if the refinancing doesn't occur, it may withdraw its
preliminary ratings on the replacement notes.
The replacement notes will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement notes.
According to the proposed supplemental indenture:
-- The replacement class X, A-R, B-1-R, B-2-R, C-R, D-R, and E-R
notes are expected to be issued at a lower cost of debt than the
original notes.
-- The replacement class B-1-R and B-2-R notes are expected to be
issued at a floating spread and fixed coupon, respectively,
replacing the current class B floating spread.
-- The stated maturity and reinvestment period will be extended by
two and three years, respectively.
-- The non-call period will be updated to July 24, 2025.
-- There will not be a new effective date, and the first payment
date following the July 27, 2023, first refinancing date will be
Oct. 24, 2023.
-- The class X notes are expected to be issued in connection with
this refinancing and paid down using interest proceeds during the
first 14 payment dates, beginning with the October 2023 payment
date.
-- 99.51% of the identified underlying collateral obligations have
credit ratings assigned by S&P Global Ratings.
-- 96.97% of the identified underlying collateral obligations have
recovery ratings assigned by S&P Global Ratings.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"All or some of the debt issued by this CLO transaction contain
stated interest at secured overnight financing rate (SOFR) plus a
fixed margin. We will continue to monitor reference rate reform and
consider changes specific to this transaction and its underlying
assets when appropriate."
Preliminary Ratings Assigned
Symphony CLO 34-PS Ltd./Symphony CLO 34-PS LLC
Class X, $2.40 million: AAA (sf)
Class A-R, $248.00 million: AAA (sf)
Class B-1-R, $36.00 million: AA (sf)
Class B-2-R $20.00 million: AA (sf)
Class C-R (deferrable), $23.00 million: A (sf)
Class D-R (deferrable), $23.20 million: BBB- (sf)
Class E-R (deferrable), $12.40 million: BB- (sf)
Subordinated notes, $31.00 million: Not rated
NR--Not rated.
SYMPHONY CLO 35: Fitch Affirms 'BB-sf' Rating on Class E Notes
--------------------------------------------------------------
Fitch Ratings has affirmed the ratings on the class B-1, B-2, C, D,
and E notes of Symphony CLO 35 Ltd. (Symphony 35) and the class A-R
and B-1R notes of Symphony CLO XVI Ltd. (Symphony XVI). The Rating
Outlooks on all rated tranches remain Stable.
ENTITY/DEBT RATING PRIOR
----------- ------ -----
Symphony CLO XVI, Ltd.
A-R 87165VAF6 LT AAAsf Affirmed AAAsf
B-1R 87165VAH2 LT AA+sf Affirmed AA+sf
Symphony CLO 35, Ltd.
B-1 871980AE8 LT AAsf Affirmed AAsf
B-2 871980AG3 LT AAsf Affirmed AAsf
C 871980AJ7 LT A+sf Affirmed A+sf
D 871980AL2 LT BBBsf Affirmed BBBsf
E 87169EAA1 LT BB-sf Affirmed BB-sf
TRANSACTION SUMMARY
Symphony 35 and Symphony XVI are broadly syndicated collateralized
loan obligations (CLOs) managed by Nuveen Asset Management LLC.
Symphony 35 closed in August 2022 and will exit its reinvestment
period in July 2025. Symphony XVI closed in July 2015, was reset in
September 2018, and partially refinanced in November 2020. Symphony
XVI will exit its reinvestment period in October 2023. Both CLOs
are secured primarily by first-lien, senior secured leveraged
loans.
KEY RATING DRIVERS
Asset Credit Quality, Asset Security, Portfolio Management and
Portfolio Composition
The affirmations are based on stable portfolio performance since
closing for Symphony 35 and the sufficient credit enhancement to
support the class A-R and B-1R notes despite portfolio
deterioration in Symphony XVI, which is reflected in Fitch cash
flow modelling. The credit quality of both performing portfolios as
of June 2023 reporting were at the 'B'/'B-' rating level. The Fitch
weighted average rating factors (WARF) increased to 25.4 from 24.4
at closing for Symphony 35, while the Fitch WARF for Symphony XVI
increased to 27.3 from 25.5 at the September 2022 review. In
addition, Fitch classified five issuers comprising 1.7% of the
total portfolio notional in Symphony XVI as defaulted. In addition,
the portfolio amount for Symphony XVI was 2.5% below its original
target par amount of $400 million, when adjusted for recovery
amounts for defaulted assets.
The portfolios for Symphony 35 and Symphony XVI consist of 273 and
265 obligors, respectively, and the largest 10 obligors of Symphony
35 and Symphony XVI represents 7.9% and 9.8%, respectively, of the
total portfolio. Exposure to issuers with a Negative Outlook and
Fitch's watchlist is 18.1% and 6.7%, respectively, for Symphony 35
and 22.9% and 11.0%, respectively, for Symphony XVI.
On average, first lien loans, cash and eligible investments
comprise 97.7% of the portfolios and there are 3.1% and 0.5% fixed
rate assets in the portfolios for Symphony 35 and Symphony XVI,
respectively. Fitch's weighted average recovery rate (WARR) of the
portfolios was 75.5% on average, compared to average 76.2% at
closing or last review.
Both transactions are passing all coverage tests, CQTs, and
concentration limitations, except for the weighted average coupon
(WAC) test for Symphony 35.
Cash Flow Analysis
For Symphony XVI, Fitch received notice that the transaction will
use three-month term SOFR as a new reference rate with ARRC's
recommended CSA, from July determination date. Accordingly, the
cash flow modelling analysis used for this review has incorporated
the new benchmark rate. The spreads on CLO notes were adjusted up
to reflect the 26.161 bps CSA.
Fitch conducted updated cash flow analyses based on newly run Fitch
Stressed Portfolio (FSP) since both transactions are still in their
reinvestment periods. The FSP analysis stressed the current
portfolio from the latest trustee report to account for permissible
concentration and CQT limits. The FSP analysis assumed weighted
average lives of 6.0 and 5.0 years for Symphony 35 and Symphony
XVI, respectively. Other FSP assumptions for both CLOs include 7.5%
non-senior secured assets, 7.5% CCC assets, 5% fixed rate assets
and Fitch-calculated portfolio weighted average spreads of 3.62%.
The rating actions are in line with the model implied ratings
(MIRs) as defined in Fitch's criteria, except for the class D notes
in Symphony 35. Fitch affirmed that class' notes at one notch below
their MIR due to minimal cushion at the MIR level based on growing
macroeconomic headwinds.
The Stable Outlooks reflect Fitch's expectation that the notes have
sufficient level of credit protection to withstand potential
deterioration in the credit quality of the portfolios in stress
scenarios commensurate with each class' rating.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
-- Downgrades may occur if realized and projected losses of the
portfolio are higher than what was assumed at closing and the
notes' credit enhancement do not compensate for the higher loss
expectation than initially assumed.
-- A 25% increase of the mean default rate across all ratings,
along with a 25% decrease of the recovery rate at all rating levels
for the current portfolio, would lead to downgrades of up to four
notches for Symphony 35 and up to three rating notches for Symphony
XVI, based on the MIRs.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
-- Except for tranches already at the highest 'AAAsf' rating,
upgrades may occur in the event of better-than-expected portfolio
credit quality and transaction performance.
-- A 25% reduction of the mean default rate across all ratings,
along with a 25% increase of the recovery rate at all rating levels
for the current portfolio, would lead to upgrades of up to five
rating notches for Symphony 35 and up to one rating notch for
Symphony XVI, based on the MIRs.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
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, 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.
TSTAT LTD 2022-1: Fitch Affirms 'B-sf' Rating on Class F Notes
--------------------------------------------------------------
Fitch Ratings has affirmed the ratings on class A-1, A-2, B, C,
D-1, D-2, E and F notes of TSTAT 2022-1, Ltd. (TSTAT 2022-1). The
Rating Outlooks on all rated tranches remain Stable.
ENTITY/DEBT RATING PRIOR
---------- ------ -----
TSTAT 2022-1, Ltd.
A-1 872899AA7 LT AAAsf Affirmed AAAsf
A-2 872899AC3 LT AAAsf Affirmed AAAsf
B 872899AE9 LT AA+sf Affirmed AA+sf
C 872899AG4 LT A+sf Affirmed A+sf
D-1 872899AJ8 LT BBB+sf Affirmed BBB+sf
D-2 872899AL3 LT BBB-sf Affirmed BBB-sf
E 87289RAA7 LT BB-sf Affirmed BB-sf
F 87289RAC3 LT B-sf Affirmed B-sf
TRANSACTION SUMMARY
TSTAT 2022-1 is a broadly syndicated collateralized loan obligation
(CLO) managed by Trinitas Capital Management, LLC. The transaction
is a static CLO that closed in August 2022 and 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 due to the portfolio's stable performance
since closing. Approximately 6.0% of the original class A note
balances have amortized since closing, slightly increasing credit
enhancement levels, and expected to redeem an additional 4.0% on
the July payment date.
As of June 2023 reporting, the credit quality of the portfolio has
remained at the 'B/B-' level, as the Fitch weighted average rating
factor (WARF) of the portfolio increased to 25.6 from 24.4 at
closing. The portfolio consists of 204 obligors, and the largest 10
obligors represent 8.7% of the portfolio. Exposure to issuers with
a Negative Outlook and Fitch's watchlist is 14.4% and 7.8%,
respectively. There have been no defaults in the portfolio.
All coverage tests are in compliance. First lien loans, cash and
eligible investments comprised 99.1% of the portfolio and there
were 1.6% fixed rate assets. Fitch's weighted average recovery rate
of the portfolio was 75.8%, compared to 75.3% at closing.
Cash Flow Analysis
Fitch conducted an updated cash flow analysis based on a stressed
portfolio that incorporated a one-notch downgrade on the Fitch
Issuer Default Rating Equivalency Rating for assets with a Negative
Outlook on the driving rating of the obligor. In addition, the
stressed analysis extended the weighted average lives (WAL) to the
current maximum covenant of 5.8 years to reflect the issuer's
ability to consent to maturity amendments.
The ratings are in line with their model-implied ratings (MIRs), as
defined in the CLOs and Corporate CDOs Rating Criteria, except for
the class E notes. The class E notes were affirmed one notch below
the MIRs due to the limited positive cushions at its MIR amid
recessionary macroeconomic headwinds.
The Stable Outlooks reflect Fitch's expectation that the notes have
sufficient level of credit protection to withstand potential
deterioration in the credit quality of the portfolios in stress
scenarios commensurate with each class' rating.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades may occur if realized and projected losses of the
portfolio are higher than what was assumed at closing and if the
notes' credit enhancement does 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 up to four
notches, based on MIRs.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Except for the tranches already at the highest 'AAAsf' rating,
upgrades may occur in the event of better-than-expected portfolio
credit quality and transaction performance.
A 25% reduction of the mean default rate across all ratings, along
with a 25% increase of the recovery rate at all rating levels for
the current portfolio, would lead to upgrades of up to two rating
categories, based on MIRs.
VENTURE CLO XIV: Moody's Cuts Rating on $31.75MM E-R Notes to B3
----------------------------------------------------------------
Moody's Investors Service has upgraded the rating on the following
notes issued by Venture XIV CLO, Limited:
US$55,500,000 Class C-R-R Mezzanine Secured Deferrable Floating
Rate Notes due 2029 (the "Class C-R-R Notes"), Upgraded to Aa2
(sf); previously on March 28, 2022 Upgraded to Aa3 (sf)
Moody's has also downgraded the rating on the following notes:
US$31,750,000 Class E-R Junior Secured Deferrable Floating Rate
Notes due 2029 (the "Class E-R Notes"), Downgraded to B3 (sf);
previously on August 3, 2020 Downgraded to B1 (sf)
Venture XIV CLO, Limited, originally issued in August 2013,
refinanced in August 2017, and partially refinanced in February
2020, is a managed cashflow CLO. The notes are collateralized
primarily by a portfolio of broadly syndicated senior secured
corporate loans. The transaction's reinvestment period ended in
August 2021.
RATINGS RATIONALE
The upgrade rating action on the Class C-R-R notes is primarily a
result of deleveraging of the senior notes and an increase in the
transaction's over-collateralization (OC) ratios since July 2022.
The Class A-R-R notes have been paid down by approximately 37.4% or
$124.1 million since then. Based on the trustee's June 2023 [1]
report, the OC ratios for the Class A-R-R/B-R-R notes and Class
C-R-R notes are at 146.63% and 121.42%, respectively, versus
reported June 2022 [2] levels of 135.92% and 119.04%,
respectively.
The downgrade rating action on the Class E-R notes reflects the
specific risks to the junior notes posed by par loss and credit
deterioration observed in the underlying CLO portfolio. Based on
the trustee's June 2023 [3] report, the OC ratio for the Class E-R
notes is 100.87%, failing the related Class E-R OC test requirement
of 103.50%, and has decreased since June 2022 when it was reported
[4] at 103.77%. Furthermore, the weighted average rating factor
(WARF) has been deteriorating and is reported at 2798 as of June
2023 [5] compared to 2705 in the June 2022 [6] report. Apart from
the WARF test, the deal is also failing its diversity score and
weighted average life (WAL) tests.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $390,558,165
Defaulted par: $24,430,183
Diversity Score: 67
Weighted Average Rating Factor (WARF): 2869
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.50%
Weighted Average Coupon (WAC): 10.0%
Weighted Average Recovery Rate (WARR): 47.3%
Weighted Average Life (WAL): 2.5 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, decrease in overall WAS or net interest
income, lower recoveries on defaulted assets.
Methodology Used for the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
WELLS FARGO 2015-C28: DBRS Confirms B Rating on Class E Certs
-------------------------------------------------------------
DBRS Limited confirmed its ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2015-C28 issued by Wells Fargo
Commercial Mortgage Trust 2015-C28 as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class PEX at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class X-E at B (high) (sf)
-- Class E at B (sf)
-- Class F at CCC (sf)
All trends are Stable, with the exception of Class F as the rating
assigned generally does not carry a trend in commercial
mortgage-backed securities (CMBS) ratings. The rating confirmations
reflect the overall stable performance of this transaction, which
remains in line with DBRS Morningstar's expectations since the last
rating action.
The CCC (sf) rating on Class F reflects the increased credit risk
posed to the trust from some of the office backed loans secured in
the pool, as well as the only loan in special servicing, Washington
Square (Prospectus ID#22, 1.3% of the current pool balance). To
date, four loans have been liquidated from the trust with a
cumulative realized loss of approximately $7.8 million. For this
review, DBRS Morningstar maintained its liquidation of Washington
Square with an implied loss of nearly $7.5 million, which would
partially erode the balance of the nonrated Class G, with interest
shortfalls continuing to accumulate.
The loan is secured by a student housing property whose performance
had been declining prior to the pandemic because of a drop in
enrollment at SUNY Schenectady County Community College. The loan
failed to repay at its February 2020 maturity, but a loan
modification was executed to extend the maturity to April 2023
after the borrower made an equity contribution to bring the loan
current, pay lender expenses, and fund a newly formed operational
shortfall reserve. Per the June 2023 remittance, the loan was
categorized as a nonperforming matured balloon with a workout
strategy of discounted payoff listed. According to the April 2022
appraisal, the property was valued at $9.6 million, which is above
the December 2022 value of $9.4 million, but ultimately below the
issuance value of $19.5 million. The terms of the loan modification
included a conversion to interest-only (IO) payments for the
remainder of the term and, upon loan maturity, a minimum payment of
$9.6 million from the borrower to repay the loan, which is
currently below the total loan balance of $13.2 million, but in
line with the April 2022 appraised value of $9.6 million. The
repayment amount is subject to the higher of net proceeds from a
fully marked sale or the appraised value upon refinance. The loan
is also equipped with a cooperation covenant where if the borrower
fails to comply with a consensual foreclosure, receivership, or
deed in lieu in the event of default, then the loan becomes a
full-recourse liability. In its analysis for this review, DBRS
Morningstar liquidated this loan from the trust with an implied
loss of nearly $7.5 million, or a loss severity above 40.0%.
As of the June 2023 remittance, 83 of the original 99 loans remain
in the trust, with an aggregate balance of $960.2 million,
representing a collateral reduction of 17.6% since issuance.
Thirteen loans, representing 8.4% of the pool, are fully defeased.
Fifteen loans, representing 15.8% of the pool, are on the
servicer's watchlist, primarily for declines in occupancy and/or
debt service coverage ratios (DSCRs), or deferred maintenance
items. Approximately 27.0% of the loans in the pool are backed by
office properties.
DBRS Morningstar has a cautious outlook on office given the
anticipated upward pressure on vacancy rates in the broader market,
challenging landlords' efforts to backfill vacant space and, in
certain instances, contributing to value declines, particularly for
assets in noncore markets and/or with disadvantages in location,
building quality, or amenities. Where applicable, DBRS Morningstar
generally stressed these loans to increase the expected loss
amounts given their proximity to maturity and generally increased
risks for the office sector in the current environment, including
loan-to-value (LTV) ratio adjustments to above 100% for five loans,
including three loans in the top 15, 3 Beaver Valley Road
(Prospectus ID#6, 4.3% of the current pool balance), 3800 Embassy
Parkway (Prospectus ID#16, 1.8% of the current pool balance), and
3700 Buffalo Speedway (Prospectus ID#18, 1.7% of the current pool
balance). All the adjusted office loans resulted in a
weighted-average (WA) expected loss that was nearly double the WA
pool expected loss.
The largest loan on the servicer's watchlist, 3 Beaver Valley Road,
is secured by a suburban office property totaling 264,503 square
feet (sf) in Wilmington, Delaware. At issuance, the property was
94.9% occupied by two tenants, Farmers Insurance Exchange (Farmers;
formerly occupied 80.1% of the net rentable area (NRA), lease
expiry in December 2024) and Solenis LLC (Solenis; formerly
occupied 14.8% of the NRA, lease expiry in January 2025). However,
Solenis exercised its early termination option and vacated the
premises in March 2020 and Farmers exercised its contraction option
of approximately 53,000 sf (20.0% of the NRA) effective in January
2022. Farmers paid a $1.4 million fee in May 2021 to reduce its
footprint at the property. The loan was added to the servicer's
watchlist in June 2022 following a decline in performance metrics
because of the subject's dropping occupancy rate.
Per the most recent servicer reporting, the YE2022 occupancy rate
at the property was 60.0% with a DSCR of 0.82 times (x), compared
with YE2021 figures of 80.1% and 1.36x, respectively, and issuance
figures of 94.9% and 1.56x. According to the most recent servicer
commentary, the master servicer approved a tenant lease occupying
23,000 sf effective January 2023 with a rent commencement date in
July 2023, improving occupancy to an implied rate of roughly 70%.
Given the rent abatement period of six months, however, financial
improvement will likely not appear until 2024 reporting. Based on
an online listing by Colliers, approximately 126,000 sf (47.9% of
the NRA) is available for leasing at the subject. This surpasses
the current vacancy at the property, signaling Farmers is
downsizing further. According to Reis, office properties in the
Non-CBD submarket of Wilmington reported a Q1 2023 vacancy rate of
21.5%, compared with a Q1 2022 vacancy rate of 19.2%. The loan has
$8.2 million of funds currently held across all reserves, including
$1.0 million held in tenant reserves and $7.1 million held in other
reserves, which likely includes the lease termination fee paid by
Farmers.
Given the softening submarket, year-over-year decline in occupancy
and NCF, and the generally unfavorable conditions of the office
market, DBRS Morningstar analyzed this loan with an elevated
probability of default and applied a stressed LTV ratio, resulting
in an expected loss more than 4x the pool's WA expected loss.
Notes: All figures are in U.S. dollars unless otherwise noted.
WELLS FARGO 2015-C31: Fitch Affirms CCC Rating on Class F Certs
---------------------------------------------------------------
Fitch Ratings has upgraded four classes and affirmed nine classes
of Wells Fargo Commercial Mortgage Trust, series 2015-C31,
commercial mortgage pass-through certificates. In addition, the
Rating Outlooks for two classes are Positive following upgrades to
those classes and the Rating Outlooks for three classes were
revised to Negative from Stable. The under criteria observation
(UCO) has been resolved.
ENTITY/DEBT RATING PRIOR
---------- ------ -----
WFCM 2015-C31
A-3 94989WAR8 LT AAAsf Affirmed AAAsf
A-4 94989WAS6 LT AAAsf Affirmed AAAsf
A-S 94989WAU1 LT AAAsf Affirmed AAAsf
A-SB 94989WAT4 LT AAAsf Affirmed AAAsf
B 94989WAY3 LT AAsf Upgrade AA-sf
C 94989WAZ0 LT A+sf Upgrade A-sf
D 94989WBB2 LT BBB-sf Affirmed BBB-sf
E 94989WAD9 LT B-sf Affirmed B-sf
F 94989WAF4 LT CCCsf Affirmed CCCsf
PEX 94989WBA4 LT A+sf Upgrade A-sf
X-A 94989WAV9 LT AAAsf Affirmed AAAsf
X-B 94989WAW7 LT AAsf Upgrade AA-sf
X-D 94989WAX5 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of Fitch's
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
Improved Credit Enhancement; Increased Defeasance: The upgrades and
Positive Outlooks reflect increased CE to the top of the capital
structure from paydown and defeasance. As of June 2023, the pool
balance has been reduced by 13.9% since issuance. Twenty loans
(22.8%) are defeased, of which six loans (6.3%) were defeased since
the prior rating action. Eight loans (23.5%) are full-term, IO and
40 loans (48.2%) are partial-term IO. Eighty-eight loans (99.6%)
mature between July and November 2025 and one loan (0.4%) matures
in 2026.
Fitch's current ratings incorporate a 'Bsf' rating case loss of
7.77%. Seventeen loans (28.7% of the pool) have been designated as
Fitch Loans of Concern (FLOCs), including one loan (7.0%) in
special servicing.
FLOCs/Largest Contributors to Loss: The Negative Outlooks on
classes D, X-D and E reflect continuing concerns with several loans
in the pool. The largest contributor to overall loss expectations
is the specially serviced Sheraton Lincoln Harbor Hotel loan
(7.0%), which is secured by a 358-key full-service hotel in
Weehawken, NJ about 1/2 mile south of the Lincoln Tunnel. The
property was built in 1991 and is the oldest hotel in its
competitive set. The loan was transferred to special servicing in
January 2021 for imminent default. The sponsor cooperated with a
consensual foreclosure action in March 2021, and a receiver was
appointed in April 2021. Per the special servicer, the receiver
listed the property for sale in 2022 and early 2023, but no
acceptable bids were received. The property has been taken off the
market and the receiver will continue to operate the property until
more favorable market conditions are available to relaunch
marketing.
As of YE 2022, the servicer-reported occupancy, ADR and RevPAR were
81%, $174 and $141, respectively. Per the latest March 2023 STR
report provided to Fitch, property occupancy, ADR and RevPAR were
85%, $174 and $148, respectively, compared with 72%, $207 and $149
for its competitive set. Fitch's 'Bsf' rating case loss (prior to
concentration adjustments) of 46.3% reflects a stressed value per
key of $176,536.
The second largest contributor to expected losses is the CityPlace
I loan (5.2%), secured by an 884,366-sf office building in
Hartford, CT. The loan is considered a FLOC due to declining
occupancy following the largest tenant significantly reducing its
space at the office property. Per the March 2023 rent roll, the
largest tenants included United Healthcare (42.5% NRA; July 2023),
Bank of America (7.5% NRA; July 2023), and PricewaterhouseCoopers
(5.2% NRA; January 2026). Per the master servicer, United
Healthcare reduced its footprint to 6.6% of NRA with a triple net
lease for five years and Bank of America and PricewaterhouseCoopers
reduced their footprints to 5.7% and 2.7% of NRA, respectively.
Per the March 2023 rent roll, occupancy was stable at 86% but it's
expected to decline by approximately 30%. As of YE 2021, occupancy
was 85% and 90% at issuance. NOI debt service coverage ratio (DSCR)
improved to 1.85x as of YE 2022 from 1.74x YE 2021 and 1.51x as of
YE 2020 but is below 2.24x at issuance. Per the master servicer,
there's been some leasing activity with one new lease (2.6% of NRA)
signed as of the March 2023 rent roll. As of 2Q23, the CoStar
Hartford office submarket has a vacancy of 10.1% and an average
annual market rent of $20.29 psf.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 33% reflects a 35% haircut to the YE 2022 NOI and a higher
probability of default on this loan to account for refinancing
concerns at its September 2025 maturity.
The third largest contributor to losses is the Patrick Henry Mall
loan (2.7%), which is secured by a 432,401-sf portion of a
716,558-sf regional mall located in Newport News, VA. The loan is
considered a FLOC due to continued declines in performance, sales
and upcoming rollover. The largest tenant is JCPenney (19.7% total
collateral, expiration May 2025); the tenant renewed in 2020 for
five years and there are four renewal options remaining. Other
major tenants include Dick's Sporting Goods (11.6% NRA, January
2027), Forever 21 (4.9% NRA, January 2023). Per the master
servicer, Forever 21 is in the process of renewing. Macy's and
Dillard's are non-collateral anchors with lease expirations in
2063. The mall was 98% occupied as of December 2022 compared to 97%
as of June 2022.
Total mall sales excluding Dick's Sporting Goods as of YE 2022 were
$278 psf versus $307 psf. Fitch calculated inline sales (
WELLS FARGO 2015-NXS1: DBRS Confirms B Rating on Class F Certs
--------------------------------------------------------------
DBRS Limited confirmed the ratings on all classes of the Commercial
Mortgage Pass-Through Certificates, Series 2015-NXS1 issued by
Wells Fargo Commercial Mortgage Trust 2015-NXS1 as follows:
-- Class A-2 at AAA (sf)
-- 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 (sf)
-- Class X-B at A (sf)
-- Class C at A (sf)
-- Class PEX at A (sf)
-- Class D at BBB (low) (sf)
-- Class X-E at BB (sf)
-- Class E at BB (low) (sf)
-- Class X-F at B (high) (sf)
-- Class F at B (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance
since last review, with some minimal performance improvements for
various loans on the servicer's watchlist. Per the June 2023
remittance, 60 of the original 68 loans remain in the pool with an
aggregate principal balance of $711.8 million, representing a
collateral reduction of 34.2% since issuance. Ten loans,
representing 12.8% of the pool, are fully defeased. In addition, 10
loans, representing 21.1% of the current pool balance, are on the
servicer's watchlist and two loans, representing 5.7% of the
current pool balance, are currently in special servicing. The
smallest loan in special servicing, 9990 Richmond Avenue (2.6% of
the current pool balance), became real estate owned in August 2021.
The liquidation scenario analyzed for this review resulted in
implied losses of more than $14.0 million, an increase of
approximately $1.0 million from last review, with projected losses
eroding the first-loss Class G certificate by approximately 30.0%.
The pool is concentrated by property type, with office and retail
properties comprising of 39.2% and 23.5% of the pool, respectively.
The majority of office properties in the transaction maintained
healthy credit metrics since the last review with a
weighted-average (WA) debt service coverage ratio of 2.09 times
(x). In general, the office sector has been challenged, given the
low investor appetite for the property type and high vacancy rates
in many submarkets as a result of the shift in workplace dynamics.
In the analysis for this review, loans backed by office and other
properties that were showing declines from issuance or otherwise
exhibiting increased risks from issuance were analyzed with
stressed scenarios to increase expected losses (ELs) as applicable.
As a result, office properties exhibited a WA EL that was 42%
greater than the pool average.
The largest loan in special servicing, Hotel Andra (Prospectus
ID#13, 3.2% of the pool), is secured by a 119-key boutique hotel in
downtown Seattle. The loan has been with the special servicer since
April 2020 when the hotel was closed because of the Coronavirus
Disease (COVID-19) pandemic and remains more than 90 days
delinquent as of June 2023. In July 2021, the hotel was re-opened,
and a forbearance agreement was ultimately granted by the special
servicer and was recently executed. The terms of the forbearance
include a retroactive principal and interest deferral period and a
waiver of monthly furniture, fixtures, and equipment (FF&E) reserve
deposits. As part of the forbearance agreement, the borrower will
also contribute $9.5 million to an FF&E reserve, which will be used
to complete various renovations. According to the most recent
servicer commentary, the borrower is in compliance with all terms
of the forbearance agreement, but the loan continues to report
delinquent. A new franchise agreement with Accor S.A. (Accor) was
recently approved, and the servicer reports that a property budget
has also been approved, with the loan being prepped for a return to
the master servicer in the near term.
At issuance in 2015, the property was appraised for $54.8 million
with a loan-to-value ratio (LTV) of 69.3%; however, the value fell
to a low of $40.0 million as of the first appraisal obtained by the
special servicer, dated October 2020. The value has incrementally
improved over the years since. As of the most recent appraisal of
$50.0 million dated November 2022, the as-is value is nearing the
issuance figure, representing an LTV of 76.0%. The value
improvements have followed performance improvements for the hotel,
which recently reported positive cash flows for the first time
since 2019. The property's rebound has been slowed by challenges
within the downtown Seattle area, including increasing crime and
homelessness rates that have slowed return to office efforts and
affected tourism. According to a March 2022 article by The
Guardian, violent crime had risen by 20.0% to a 14-year high
throughout 2021 and early 2022. The uptick in homelessness and
violent crime became an issue during the pandemic when public
housing programs came to a halt, leading to a 50.0% increase in
homeless tents citywide, believed to be led primarily by residents
affected by drug addiction.
According to the December 2022 STR, Inc. report, growth in revenue
per available room (RevPAR) to $137 exceeded the pre-pandemic
figure of $129 for the first time in 2022. The recovery of RevPAR
figures is a direct result of the dissipating effects of the
pandemic, a new franchise agreement secured with Accor, and
extensive capital expenditures currently in process to be completed
in June 2024. According to the hotel's website, the renovations
affect every room of the hotel, and serve to add a modern touch and
premium features to every room.
Given the recent value improvement, the sponsor's significant
investment as part of the forbearance agreement, and the reported
RevPAR figures showing performance exceeded pre-pandemic levels in
2022, DBRS Morningstar has an increasingly optimistic view for this
asset and, as such, maintained the baseline EL in the analysis for
this review.
Notes: All figures are in U.S. dollars unless otherwise noted.
WELLS FARGO 2015-P2: Fitch Lowers Rating on Class E Certs to 'Bsf'
------------------------------------------------------------------
Fitch Ratings has upgraded three classes, downgraded two classes
and affirmed seven classes of Wells Fargo Commercial Mortgage
Trust, commercial mortgage pass-through certificates, series
2015-P2 (WFCM 2015-P2). A Negative Outlook was assigned to class E
following the downgrade, and the Rating Outlook for classes B, C,
and X-B are Stable following the upgrade. In addition, the Rating
Outlooks for classes D and X-D were revised to Negative from
Stable. The criteria observation (UCO) has been resolved.
ENTITY/DEBT RATING PRIOR
---------- ------ -----
WFCM 2015-P2
A-3 95000AAT4 LT AAAsf Affirmed AAAsf
A-4 95000AAU1 LT AAAsf Affirmed AAAsf
A-S 95000AAW7 LT AAAsf Affirmed AAAsf
A-SB 95000AAV9 LT AAAsf Affirmed AAAsf
B 95000AAZ0 LT AA+sf Upgrade AA-sf
C 95000ABA4 LT Asf Upgrade A-sf
D 95000AAC1 LT BBB-sf Affirmed BBB-sf
E 95000AAE7 LT Bsf Downgrade BB-sf
F 95000AAG2 LT CCCsf Downgrade B-sf
X-A 95000AAX5 LT AAAsf Affirmed AAAsf
X-B 95000AAY3 LT AA+sf Upgrade AA-sf
X-D 95000AAA5 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of Fitch's
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
Fitch's current ratings incorporate a 'Bsf' rating case loss of
8.6%. Eight loans are considered Fitch Loans of Concern (FLOCs;
27.3% of pool), including one specially serviced loan (2%).
The downgrades reflect a greater certainty of loss stemming from
continued underperformance and high loss expectations on the
largest loan, Empire Mall (8.8%), in addition to the
underperforming Adler Office loan (4.9%) and the specially serviced
Columbine Place loan (2%). The Negative Outlooks reflect possible
downgrades should performance of the larger office and retail FLOCs
in the top 15 deteriorate further given significant tenancy,
occupancy and/or upcoming tenant rollover concerns.
The upgrades to classes B, C and X-B reflect the impact of the
updated criteria and increased CE. To test the viability of the
upgrades, Fitch ran an additional stress scenario that resulted in
a 'Bsf' sensitivity case loss of 10.3%, which assumed a higher
probability of default on three retail FLOCs (7.4%), Westgate
Shopping Center (2.8%), Merritt Creek Farm Shopping Center (2.7%)
and Huntington Park Shopping Center (2.4%), with significant
upcoming tenant rollover and refinance concerns.
FLOCs/Largest Contributors to Loss: The largest contributor to
overall loss expectations, Empire Mall (8.8%), is secured by a
1,023,176-sf superregional mall in Sioux Falls, SD. The loan, which
is sponsored by Simon, was designated a FLOC due to refinance
concerns given the tertiary location and performance concerns.
The largest collateral tenants include JCPenney, which leases 13%
NRA through April 2026, and Hy-Vee food stores, which leases 8.5%
NRA through December 2026. Sears and Yonkers closed in 2018.
Macy's, which was on a ground lease is no longer part of the
collateral but continues to shadow anchor the mall. Dillard's is in
the process of backfilling the former Yonkers box with a scheduled
opening in the spring of 2024. Near-term rollover is granular and
includes approximately 20% of the NRA by YE 2024.
Servicer- reported occupancy and NOI debt service coverage ratio
(DSCR) were 68% and 1.49x, respectively, at YE 2022 compared with
76% and 1.42x at YE 2021. Including Dillard's, occupancy will
increase to approximately 77%. The most recently reported in-line
sales for tenants less than 10,000 sf were $441 psf as of YE 2021,
a rebound from trough sales of $327 psf in 2020 and higher than
historical levels and from issuance.
Fitch's 'Bsf' ratings case loss prior to concentration add-on of
41% reflects a 20% cap rate and a 5% stress to the YE 2021 NOI.
Fitch increased the probability of default to reflect increasing
maturity default risk due to the regional mall property type,
tertiary location and performance declines.
The second largest contributor to overall loss expectations is the
Adler Office (5.3%), which is secured by a 388,305-sf office
property in Doral, FL in the Miami metro area. The largest tenants
in the property are Florida Dept of Revenue (10.1% of NRA; through
August 2023), Amped Fitness (4.6%; July 2031), and William Naranjo
Corp (6.3%; June 2025). Occupancy fell to 81% as of March 2023 from
82% in December 2022 and 92% in December 2021 as a number of
tenants vacated upon lease expiration.
The servicer-reported NOI DSCR as of the March 2023 was 1.35x
compared with 1.33x at YE 2022, 1.59x at YE 2021 and 2.14x at YE
2020. Near-term rollover includes 24.9% of the collateral NRA in
2023, 14.9% in 2024, and 17.6% in 2025. Fitch's 'Bsf' rating Case
Loss prior to concentration add-on of 25% reflects a 10% cap rate
and 15% stress on the YE 2022 NOI to account for declining
occupancy and upcoming rollover.
The third largest contributor to loss expectations is the specially
serviced, Columbine Place Loan (2%), which is secured by a
149,694-sf office building in downtown Denver, Colorado.
Performance continues to deteriorate from issuance as YE 2022
occupancy declined to 43% from 62% at YE 2021 and 80% in 2020. YE
2022 NOI is negative and is expected to trend lower due to
increased vacancy.
The servicer reported NOI DSCR as of YE 2022 was -0.76x compared
with 1.68x at YE 2021 and 1.92x at YE 2020. Two of the largest
tenants, which have connections to the oil and gas industry, have
vacated at the end of 2021. Beatty & Wozniak (16.1% of NRA) is a
law firm focused on energy and natural resource law and National
Oilwell Varco (15.5%) is a provider of equipment used in oil/gas
drilling and production. According to the servicer, Borrower and
Lender are finalizing terms for a friendly foreclosure.
Fitch's 'Bsf' ratings case loss prior to concentration add-on of
47% reflects a stressed cap rate of 10.25% to account for the
office property quality and a 50% stress to the YE 2021 NOI due to
continued underperformance into 2022.
Increasing CE: CE has increased since the prior rating action due
to amortization, loans disposing, and defeasance. The pool balance
has been paid down by 27.5% since issuance. No losses have been
realized losses to date and 12.9% of the pool is defeased. Interest
shortfalls are currently affecting the non-rated class G. Of the
remaining pool balance, 15 loans comprising 20.2% of the pool are
full interest-only through the term of the loan.
Property Type Concentration: The highest concentration is retail
(32.8%), followed by hotel (16.3%), multifamily (13.8%), and
industrial (10.4%).
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 and specially
serviced loans/assets.
-- Downgrades to the 'AAAsf' and 'AA+sf' rated classes are not
likely due to the continued expected amortization and sufficient CE
relative to loss expectations, but may occur should interest
shortfalls affect these classes.
-- Downgrades to the 'Asf' and 'BBB-sf' rated classes would occur
should expected losses for the pool increase substantially, with
continued underperformance of the FLOCs and/or the transfer of
loans to special servicing.
-- Downgrades to the 'Bsf' and 'CCCsf' rated class would occur
should loss expectations increase as FLOC performance declines or
fails to stabilize and/or with greater certainty of losses.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
-- Sensitivity factors that could lead to upgrades include stable
to improved asset performance, coupled with additional paydown
and/or defeasance.
--Upgrades to the 'AA+sf' and 'Asf' classes may occur with
significant improvement in CE and/or defeasance, and with the
stabilization of performance on the FLOCs; however, adverse
selection and increased concentrations could cause this trend to
reverse.
--Upgrades to classes rated 'BBB-sf' may occur as the number of
FLOCs are reduced, and there is sufficient CE to the classes. Class
would not be upgraded above 'Asf' if there were any likelihood of
interest shortfalls.
-- Upgrades to 'Bsf' and 'CCCsf' rated classes are not likely
until the later years in a transaction and only if the performance
of the remaining pool is stable and there is sufficient CE to the
classes.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
WELLS FARGO 2016-C36: Fitch Affirms CCCsf Rating on 4 Tranches
--------------------------------------------------------------
Fitch Ratings has upgraded one and affirmed 14 classes of Wells
Fargo Commercial Mortgage Trust 2016-C36 (WFCM 2016-C36) commercial
mortgage pass-through certificates. Additionally, the Rating
Outlook remains Negative on classes D, E-1 and X-D. The under
criteria observation (UCO) has been resolved.
ENTITY/DEBT RATING PRIOR
----------- ------ -----
WFCM 2016-C36
A-3 95000MBN0 LT AAAsf Affirmed AAAsf
A-4 95000MBP5 LT AAAsf Affirmed AAAsf
A-S 95000MBR1 LT AA+sf Upgrade AAsf
A-SB 95000MBQ3 LT AAAsf Affirmed AAAsf
B 95000MBU4 LT Asf Affirmed Asf
C 95000MBV2 LT BBBsf Affirmed BBBsf
D 95000MAC5 LT BB-sf Affirmed BB-sf
E 95000MAJ0 LT CCCsf Affirmed CCCsf
E-1 95000MAE1 LT B-sf Affirmed B-sf
E-2 95000MAG6 LT CCCsf Affirmed CCCsf
EF 95000MAS0 LT CCCsf Affirmed CCCsf
F 95000MAQ4 LT CCCsf Affirmed CCCsf
X-A 95000MBS9 LT AAAsf Affirmed AAAsf
X-B 95000MBT7 LT Asf Affirmed Asf
X-D 95000MAA9 LT BB-sf Affirmed BB-sf
Class X-A, X-B and X-D are interest-only (IO).
The class E-1 and E-2 certificates may be exchanged for a related
amount of class E certificates, and the class E certificates may be
exchanged for a ratable portion of class E-1 and E-2 certificates.
Additionally, a holder of class E-1, E-2, F-1 and F-2 certificates
may exchange such classes of certificates (on an aggregate basis)
for a related amount of class EF certificates, and a holder of
class EF certificates may exchange that class EF for a ratable
portion of each class of the class E-1, E-2, F-1 and F-2
certificates.
A holder of class E-1, E-2, F-1, F-2, G-1 and G-2 certificates may
exchange such classes of certificates (on an aggregate basis) for a
related amount of class EFG certificates, and a holder of class EFG
certificates may exchange that class EFG for a ratable portion of
each class of the class E-1, E-2, F-1, F-2, G-1 and G-2
certificates.
Fitch does not rate classes F-1, F-2, G-1, G-2, G, EFG, H-1, H-2
and H.
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of Fitch's
updated "U.S. and Canadian Multiborrower CMBS Rating Criteria,"
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
The majority of the pool continues to exhibit generally stable
performance since the prior rating action. Fitch's current ratings
incorporate a 'Bsf' rating case loss of 7.6%. Fitch identified 11
loans (30.9% of the pool) as Fitch Loans of Concern (FLOC), which
includes two loans (2.6%) in special servicing. The Negative
Outlooks on classes D, E-1, and X-D reflect performance concerns on
the Gurnee Mills (10.4% of the pool), Plaza America I & II (9.0%)
and Mall at Turtle Creek (1.7%) loans.
The upgrade of class A-S reflects the new criteria and increased
CE. To test the viability of the upgrade, Fitch ran an additional
sensitivity scenario that applies potential outsized losses on the
Plaza America I & II and Mall at Turtle Creek loans, resulting in a
'B' sensitivity case loss of 9.6%.
Largest Contributors to Loss Expectations: The largest contributor
to loss expectations is Gurnee Mills (10.4% of the pool), which is
secured by a 1.7 million-sf portion of a 1.9 million-sf regional
mall located in Gurnee, IL. Non-collateral anchors include
Burlington Coat Factory, Marcus-Cinema, and Value City Furniture,
and collateral anchors include Macy's, Bass Pro Shops, and Kohl's.
Occupancy declined to 76.4% from 80% at YE 2022, primarily due to
Bed, Bath, and Beyond (3.3% of the NRA) vacating at their January
2023 lease expiration, remaining below the reported 88% occupancy
at issuance. The collateral faces near-term rollover with 5.3% of
the NRA expiring in 2023 and 8.2% in 2024.
Fitch's 'Bsf' rating case loss of 29% prior to concentration
add-ons reflects a 12% cap rate and a 15% stress to the YE 2022
NOI, and an increased probability of default due to the loan's
heightened maturity default risk.
The second largest contributor to loss, Mall at Turtle Creek
(1.7%), is secured by 329,398-sf of inline space within a regional
mall located in Jonesboro, AK. The property experienced significant
damage from a tornado in March 2020. Non-collateral anchors, JC
Penney, Dillard's and Target, were not impacted by the tornado;
however, a majority of the collateral sustained significant damage.
After the loan was transferred to special servicing in August 2020,
some of the insurance proceeds were released to the borrower for
the demolition of areas deemed unsafe by local officials, according
to the servicer.
Per the most recent updates from the servicer, the borrower is
unwilling to reconstruct the property and carry the loan. The trust
settled to take title to the property in December 2022 and received
insurance proceeds while the special servicer is working through
required site work with non-collateral anchors in order to maximize
recovery through a sale of the site.
Fitch's 'Bsf' rating case loss of 89% incorporates a stress to the
estimated land value. Given the value of the Mall at Turtle Creek
has been reduce to its land value and concerns of accruing
expenses, Fitch applied an outsized loss of 105%.
The third largest contributor to losses, Plaza America I & II
(9.0%), is secured by two suburban office properties totaling
516,396-sf located in Reston, VA. The loan was identified as a FLOC
after the servicer confirmed the largest tenant, Software AG (12%
of the NRA), will not be renewing at its February 2024 lease
expiration. Occupancy was reported at 83.4% at YE 2022, however,
with the expected departure, it is expected to decline to about
71%. Eight tenants comprising 9.4% of the NRA have lease
expirations in 2023 and 11 tenants (10.7%) roll in 2024. The
subject's vacancy rate of 18.6% is lower than the Reston office
submarket of 21.9% per CoStar.
Fitch's analysis includes a 20% stress to the YE 2022 NOI and a 10%
cap rate, resulting in a 'Bsf' rating case loss of 7.7% prior to
concentration add-ons. Due to performance declines and heightened
maturity default, a higher probability of default was applied where
losses could increase to 26.5%.
Changes to Credit Enhancement: As of the June 2023 distribution
date, the pool's aggregate balance has been reduced by 18.4% to
$719.3 million from $858.2 million. There are 13 loans (9.1% of the
pool) that have been fully defeased. Twelve loans (36.2% of the
pool) are full-term, IO; and 44 loans (63.8%) are currently
amortizing.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to classes A3 through A-SB and the associated IO class
X-A are not likely given the high CE and payment priority but may
occur should interest shortfalls affect these classes or if
expected losses increase significantly.
Downgrades to classes A-S, B, and C may occur should expected pool
losses increase significantly from further performance declines on
the FLOCs, including Gurnee Mills.
Downgrades to classes D, E-1, and X-D would also consider these
factors as well as more loans transfer to special servicing, loans
are considered likely to default at maturity in 2026 and/or loans
experience higher than expected realized losses.
The distressed classes could be further downgraded as losses are
realized or become more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Factors that could lead to upgrades include stable to improved
performance coupled with pay down and/or defeasance. An upgrade to
classes A-S and B would occur with significant improvement in CE
and/or defeasance; however, adverse selection, increased
concentrations and further performance deterioration from FLOCs
could cause this trend to reverse. In addition, upgrades to 'AAAsf'
will consider defeasance: Fitch is currently evaluating the
treatment of defeased collateral in light of the Rating Watch
Negative placement of the U.S. Sovereign rating by Fitch.
Upgrades to classes C and D would also consider those factors,
limited by the sensitivity to concentrations or the potential for
future concentrations. Classes would not be upgraded above 'Asf'
for likelihood of interest shortfalls. Upgrades to classes E-1 and
E-2 are not likely until the later years in the transaction and
only if performance of the remaining pool is stable with sufficient
CE.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
WELLS FARGO 2017-C40: Fitch Affirms 'B-sf' Rating on Class F Notes
------------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of Wells Fargo Commercial
Mortgage Trust 2017-C40, Series 2017-C40 (WFCM 2017-C40). The
Rating Outlooks for classes D, E, F and X-D have been revised to
Negative from Stable. The under criteria observation (UCO) has been
resolved.
ENTITY/DEBT RATING PRIOR
----------- ------ -----
WFCM 2017-C40
A-2 95000YAV7 LT AAAsf Affirmed AAAsf
A-3 95000YAX3 LT AAAsf Affirmed AAAsf
A-4 95000YAY1 LT AAAsf Affirmed AAAsf
A-S 95000YBB0 LT AAAsf Affirmed AAAsf
A-SB 95000YAW5 LT AAAsf Affirmed AAAsf
B 95000YBC8 LT AA-sf Affirmed AA-sf
C 95000YBD6 LT A-sf Affirmed A-sf
D 95000YAC9 LT BBB-sf Affirmed BBB-sf
E 95000YAE5 LT BBsf Affirmed BBsf
F 95000YAG0 LT B-sf Affirmed B-sf
G 95000YAJ4 LT CCCsf Affirmed CCCsf
X-A 95000YAZ8 LT AAAsf Affirmed AAAsf
X-B 95000YBA2 LT AA-sf Affirmed AA-sf
X-D 95000YAA3 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of the
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
Stable Loss Expectations: Fitch's loss expectation for the pool is
generally in line with the prior rating action. Four loans (21.9%
of the pool) are flagged as Fitch Loans of Concern (FLOCs). All
loans in the pool are performing with no loans currently in special
servicing. Fitch's current ratings incorporate a rating case loss
of 4.76%. The Negative Outlooks incorporate an additional stress on
the 225 & 223 Park Ave South loan that factors a heightened risk of
default given the lease termination and expected departure of the
largest tenant.
Fitch Loans of Concern: The largest FLOC in the pool is 225 & 233
Park Avenue South (9.1%), a 675,756-sf office building located in
Park Avenue South in Manhattan, NY. The largest tenant Facebook
(39.5% of NRA or 45.0% of base rent) exercised a termination option
to vacate its space at the property in March 2024, ahead of their
scheduled lease expiration in October 2027. According to the master
servicer, Facebook will pay a termination fee of $33 million in two
installments in January 2023 and January 2024. Facebook is expected
to remain in occupancy and continue to pay rent until March 2024.
Additionally, the property's third largest tenant STV Incorporated
(19.7% of NRA) has an upcoming lease expiration in May 2024. The
tenant has one, ten-year lease renewal option. Property occupancy
was 98.6% as of the April 2023 rent roll, compared to 97.7% at YE
2021 and 98.5% at YE 2020. NOI DSCR was 3.9x as of March 2023,
compared to 3.7x at YE 2022 and 3.3x at YE 2021.
Fitch's 'Bsf' rating case loss of 5% prior to concentration
adjustments reflects an 8.75% cap rate and 40% stress to the YE
2022 NOI. Fitch also ran an additional scenario that applies a
'Bsf' sensitivity case loss of 13% on this loan which factors a
higher probability of default due to the expected departure of the
largest tenant and anticipated challenges to re-lease the large
block of vacant space.
The largest contributor to loss expectations, the Mall of Louisiana
(7.2%) loan, which is secured by a 1.5 million sf super regional
mall located in Baton Rouge, LA. Collateral tenants include an AMC
Theater (9.6% of NRA), Dick's Sporting Goods (9.5%), Main Event
Entertainment (6.2%) and Nordstrom Rack (3.9%) and non-collateral
anchor tenants are Macy's, JCPenney and Dillard's. Non-collateral
anchor tenant, Sears, closed in May 2021 with no leasing prospects
reported. The March 2023 rent roll reflected collateral occupancy
of 87% compared with 88% at YE 2022, 77% at YE 2021 and 89% at YE
2020. NOI DSCR was 1.49x as of March 2023, compared to 1.57x at YE
2022, 1.48x at YE 2021 and 2.00x at YE 2020.
Inline sales have declined from YE 2021 but have exceeded levels
from issuance. Per the YE 2022 sales report, comparable inline
sales for tenants less than 10,000 sf (excluding Apple) were $483
psf, compared to $539 psf at YE 2021, $335 psf at YE 2020, $454 psf
at YE 2019 and $461 psf at issuance. While the subject is located
in a secondary market, it is considered the dominant mall with
limited competition in the area supported by strong demographics
and proximity to several demand drivers.
Fitch's 'Bsf' rating case loss of 9% prior to concentration
adjustments reflects a 12.5% cap rate and 5% stress to the YE 2021
NOI.
The next largest contributor to loss expectations is the Hilton
Garden Inn Chicago/North Loop loan (2.7% of the pool), which is
secured by a select-service hotel located on E Wacker Place in
Chicago's North Loop area with proximity to public transportation
and Chicago's CBD with several restaurants, hotels and commercial
offices in the immediate vicinity. This loan had previously
transferred to special servicing in April 2020 for imminent default
due to the effects of the pandemic, but returned to master
servicing in June 2022 after the loan was modified.
The hotel has exhibited a strong recovery out of the pandemic with
the TTM occupancy of 75.1% and RevPAR of $142.1 stabilizing in line
with Fitch's underwritten level of 75.3% and $130 at issuance,
according to a STR report as of March 2023; however, YE2022 NOI
remains 19% below YE 20219 NOI. The hotel outperforms its
competitive set, ranked 1st, 2nd out of 7 hotels with respect to
RevPAR.
Fitch's 'Bsf' rating case loss of 23% prior to concentration
adjustments reflects a 11.5% cap rate and no additional stress to
the YE 2022 NOI which equates to a value of $147,000 per key.
Minimal Change in Credit Enhancement: As of the July 2023
distribution, the pool's aggregate balance has been paid down by
7.0% to $656.0 million from $705.4 million at issuance. Nine loans
(9.4%) have been fully defeased. Thirteen loans representing 45.6%
of the pool are interest only (IO) for the full term. Nineteen
loans representing 30.1% of the pool were structured with partial
IO terms. The vast majority of loans are scheduled to mature in
2027, though there is one loan (1.7% of the pool) maturing in
2024.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to 'AAAsf' and 'AAsf' category rated classes are not
expected, but could occur if deal-level expected losses increase
significantly and/or interest shortfalls affect these classes. For
'AAAsf' rated bonds, additional stresses applied to defeased
collateral if the U.S. sovereign rating is lower than 'AAA' could
also contribute to downgrades.
Downgrades to 'Asf' and 'BBBsf' category rated classes could occur
if deal-level losses increase significantly on non-defeased loans
in the transactions and with outsized losses on larger FLOCs.
Downgrades to 'BBsf' and 'Bsf' category rated classes are possible
with higher expected losses from continued performance of the FLOCs
and/or with greater certainty of losses on FLOCs.
Downgrades to distressed ratings would occur as losses become more
certain and/or as losses are incurred.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to 'AAsf' and 'Asf' category rated classes are not
expected, but possible with significantly increased CE from
paydowns, coupled with stable-to-improved pool-level loss
expectations and performance stabilization of FLOCs. Upgrades of
these classes to 'AAAsf' will also consider the concentration of
defeased loans in the transaction.
Upgrades to the 'BBBsf, 'BBsf' and 'Bsf' category rated classes
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 distressed ratings are not expected, but possible with
significantly higher values on FLOCs.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
WSTN 2023-MAUI: DBRS Gives Prov. BB Rating on Class HRR Certs
-------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the following classes of
Commercial Mortgage Pass-Through Certificates, Series 2023-MAUI
(the Certificates) to be issued by WSTN Trust 2023-MAUI (WSTN
2023-MAUI).
-- Class A at AAA (sf)
-- Class X-CP at BB (high) (sf)
-- Class X-NCP at BB (high) (sf)
-- Class B at AA (low) (sf)
-- Class C at A (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (high) (sf)
-- Class HRR at BB (sf)
The WSTN 2023-MAUI transaction is secured by the borrower's
leasehold interest in a 771 key full-service resort and spa located
on the island of Maui. Built in 1971, the Westin Maui Resort and
Spa, Kaanapali offers 700 feet of direct ocean frontage on the
Kaanapali Beach with an outer island location. DBRS Morningstar has
a positive view on the collateral and contends the NCF on the
Westin Maui Resort and Spa, Kaanapali is sustainable and will
continue to grow over the term of the loan considering the hotel's
prime beachfront location, the significant capital invested into
the property with continued near-term investment, and the
collateral's strong financial performance.
The resort offers two guest room buildings, the Hokupa'a Tower and
the Ocean Tower, both of which offer a unique guest room experience
with different price points depending on the size and distinctive
interior finishes. The resort features six outdoor resort-style
pools overlooking Kaanapali Beach, a 270-foot water slide, six F&B
outlets, 68,000 sf of indoor and outdoor event space catered for
various events, an award-winning, full-service spa with nine
treatment rooms, a fitness center, 20,000 sf of retail space, and
preferred access at the Kaanapali Golf Courses and Lanai Club
Lounge for guests staying in the Hokupa'a Tower. DBRS Morningstar
believes the resort will continue to attract targeted guest groups
by fulfilling their various needs and providing them with unique
experiences within the multitude of activities it offers. In
addition to room and F&B revenue, the resort has also consistently
generated approximately 12% of its total revenue in ancillary
income from resort fees, its spa and fitness offerings, parking,
and private events over the past few years including 2020 amid the
Coronavirus Disease (COVID-19) pandemic. DBRS Morningstar views the
diversification of operations as a credit positive because the
resort's cash flow will be less susceptible to revenue swings than
more limited service hotels, making it more resilient during
economic downturns. The sponsor has invested heavily in the
property since acquiring the collateral in 2017, and the
improvements have bolstered the property's position within the
hospitality segment on Maui. In 2021, the sponsor completed a $121
million capital improvement plan, which included the full
renovation of the Hokupa'a Tower, repositioned public areas and
amenities throughout the property, re-concepted the lobby,
re-concepted F&B offerings, enhanced the pool areas/aquatic
amenities, improved meeting and event space, upgraded the spa and
fitness facilities, fully renovated and expanded the retail
corridor and built an entirely new 430-space parking structure. To
further sustain the upkeep of the property and align guest room
finishes, the sponsor is in the process of investing approximately
$29 million to renovate the Ocean Tower with an expected completion
by the end of 2023. Renovations will include a refresh of all hard
and soft goods in the guest rooms at the Ocean Tower and the
redevelopment of the Westin Family Kids Club, vacant retail, and
office space in Ocean Tower. Upon completion of the renovation, the
redeveloped space will include a 12,000-sf social space environment
that will feature a variety of entertainment for guests such as
duckpin bowling lanes, an assortment of arcade games, and virtual
golf suites. DBRS Morningstar views the value-add renovation as a
key element for the collateral to enhance the hotel's performance
and maintain is status as a competitive asset within the Maui
market.
Like most beachfront developments in Hawaii, the collateral is
encumbered by a ground lease. The ground lease is scheduled to
expire on December 31, 2086, and contains rent provisions that
escalate at five-year intervals. Terms for the lease require the
greater of (i) annual minimum rent of $4.5 million between January
1, 2019, and December 31, 2026 or (ii) percentage rent equal to the
sum of the percentages of gross revenues: 6.0% of rooms revenue,
4.0% of F&B revenue, 10.0% of other revenue, and 25.0% of
concessions. On January 1, 2027, and every five-year period
afterwards, minimum rent resets to 80.0% of the average of the
combined annual minimum rent and percentage rent paid during the
three calendar years immediately preceding the reset. Additionally,
on January 1, 2027, percentage rent resets to percentages that will
be mutually agreed upon by Campbell Hawaii Investor LLC (lessor)
and WM Lessee LLC (lessee).
DBRS Morningstar's credit ratings on the Certificates address the
credit risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations are listed at the end of this press release.
DBRS Morningstar's credit ratings do not address nonpayment risk
associated with contractual payment obligations contemplated in the
applicable transaction document(s) that are not financial
obligations (for example, Yield Maintenance Premium).
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar considers risk of default to be
the risk that an issuer will fail to satisfy the financial
obligations in accordance with the terms under which a long-term
obligation has been issued.
Notes: All figures are in U.S. dollars unless otherwise noted.
WSTN TRUST 2023-MAUI: S&P Assigns BB (sf) Rating on Cl. HRR Certs
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to WSTN Trust 2023-MAUI's
commercial mortgage pass-through certificates.
The certificates issuance is a U.S. CMBS securitization backed by a
first-lien mortgage on the borrower's leasehold interest in The
Westin Maui Resort & Spa, a 771-guestroom, full-service,
oceanfront, luxury resort hotel, located in Lahaina, Hawaii. The
sponsor operates the property based on 769 total guestrooms with
two rooms removed from the property's sellable inventory.
The ratings reflect our view of the collateral's historical and
projected performance, the sponsor's and manager's experience, the
trustee-provided liquidity, the mortgage loan's terms, and the
transaction's structure, among other factors.
Ratings Assigned
WSTN Trust 2023-MAUI
Class A, $244,810,000: AAA (sf)
Class X-CP, $515,000,000(i): BB (sf)
Class X-NCP, $515,000,000(i): BB (sf)
Class B, $75,140,000: AA- (sf)
Class C, $55,070,000: A- (sf)
Class D, $72,770,000: BBB- (sf)
Class E, $41,110,000: BB (sf)
Class HRR(ii), $26,100,000: BB (sf)
(i)Notional balance. The notional amount of the class X-CP
certificates and the class X-NCP certificates will equal the
aggregate certificate balance of the class A, B, C, D, E, and HRR
certificates.
(ii)Non-offered eligible horizontal residual interest.
[*] Fitch Takes Actions on 13 US CMBS 2016 Vintage Transactions
---------------------------------------------------------------
Fitch Ratings, on July 27, 2023, upgraded 14, downgraded three and
affirmed 148 classes from 13 U.S. CMBS 2016 vintage conduit
transactions.
The Rating Outlooks were revised to Negative from Stable for two
classes, and to Stable from Positive for two other classes. Stable
Outlooks were assigned to 17 classes following their upgrades
and/or downgrades. The Rating Outlooks remain Negative on 17
classes. Fitch has removed all classes from these transactions from
Under Criteria Observation (UCO).
ENTITY/DEBT RATING PRIOR
---------- ------ -----
MSC 2016-UBS11
A-3 61767FAZ4 LT AAAsf Affirmed AAAsf
A-4 61767FBA8 LT AAAsf Affirmed AAAsf
A-S 61767FBD2 LT AAAsf Affirmed AAAsf
A-SB 61767FAY7 LT AAAsf Affirmed AAAsf
B 61767FBE0 LT AA+sf Upgrade AAsf
C 61767FBF7 LT Asf Affirmed Asf
D 61767FAJ0 LT BBB-sf Affirmed BBB-sf
E 61767FAL5 LT Bsf Affirmed Bsf
F 61767FAN1 LT CCCsf Affirmed CCCsf
X-A 61767FBB6 LT AAAsf Affirmed AAAsf
X-B 61767FBC4 LT Asf Affirmed Asf
X-D 61767FAA9 LT BBB-sf Affirmed BBB-sf
X-E 61767FAC5 LT Bsf Affirmed Bsf
X-F 61767FAE1 LT CCCsf Affirmed CCCsf
CFCRE 2016-C4
A-3 12531YAM0 LT AAAsf Affirmed AAAsf
A-4 12531YAN8 LT AAAsf Affirmed AAAsf
A-HR 12531YAP3 LT AAAsf Affirmed AAAsf
A-M 12531YAU2 LT AAAsf Affirmed AAAsf
A-SB 12531YAL2 LT AAAsf Affirmed AAAsf
B 12531YAV0 LT AA+sf Upgrade AA-sf
C 12531YAW8 LT A+sf Upgrade A-sf
D 12531YAE8 LT BBB-sf Affirmed BBB-sf
E 12531YAF5 LT BBsf Upgrade BB-sf
F 12531YAG3 LT Bsf Upgrade B-sf
X-A 12531YAQ1 LT AAAsf Affirmed AAAsf
X-B 12531YAS7 LT AA+sf Upgrade AA-sf
X-E 12531YAB4 LT BBsf Upgrade BB-sf
X-F 12531YAC2 LT Bsf Upgrade B-sf
X-HR 12531YAR9 LT AAAsf Affirmed AAAsf
CGCMT 2016-P4
A-2 29429EAB7 LT AAAsf Affirmed AAAsf
A-3 29429EAC5 LT AAAsf Affirmed AAAsf
A-4 29429EAD3 LT AAAsf Affirmed AAAsf
A-AB 29429EAE1 LT AAAsf Affirmed AAAsf
A-S 29429EAH4 LT AAAsf Affirmed AAAsf
B 29429EAJ0 LT AA-sf Affirmed AA-sf
C 29429EAK7 LT A-sf Affirmed A-sf
D 29429EAL5 LT BBB-sf Affirmed BBB-sf
E 29429EAN1 LT CCCsf Affirmed CCCsf
F 29429EAQ4 LT CCsf Affirmed CCsf
X-A 29429EAF8 LT AAAsf Affirmed AAAsf
X-B 29429EAG6 LT AA-sf Affirmed AA-sf
X-C 29429EAW1 LT BBB-sf Affirmed BBB-sf
CGCMT 2016-GC36
A-3 17324TAC3 LT AAAsf Affirmed AAAsf
A-4 17324TAD1 LT AAAsf Affirmed AAAsf
A-S 17324TAJ8 LT AAsf Affirmed AAsf
B 17324TAK5 LT Asf Affirmed Asf
C 17324TAM1 LT BBB-sf Affirmed BBB-sf
D 17324TAN9 LT CCCsf Affirmed CCCsf
E 17324TAQ2 LT CCsf Affirmed CCsf
EC 17324TAL3 LT BBB-sf Affirmed BBB-sf
F 17324TAS8 LT Csf Affirmed Csf
X-A 17324TAG4 LT AAsf Affirmed AAsf
X-D 17324TAY5 LT CCCsf Affirmed CCCsf
MSBAM 2016-C31
A-4 61766RAY2 LT AAAsf Affirmed AAAsf
A-5 61766RAZ9 LT AAAsf Affirmed AAAsf
A-S 61766RBC9 LT AA+sf Upgrade AA-sf
A-SB 61766RAW6 LT AAAsf Affirmed AAAsf
B 61766RBD7 LT Asf Affirmed Asf
C 61766RBE5 LT BBBsf Affirmed BBBsf
D 61766RAJ5 LT B-sf Affirmed B-sf
E 61766RAL0 LT CCsf Affirmed CCsf
F 61766RAN6 LT Csf Affirmed Csf
X-A 61766RBA3 LT AAAsf Affirmed AAAsf
X-B 61766RBB1 LT Asf Affirmed Asf
X-D 61766RAA4 LT B-sf Affirmed B-sf
X-E 61766RAC0 LT CCsf Affirmed CCsf
X-F 61766RAE6 LT Csf Affirmed Csf
CSAIL 2016-C6
A-4 12636MAD0 LT AAAsf Affirmed AAAsf
A-5 12636MAE8 LT AAAsf Affirmed AAAsf
A-S 12636MAJ7 LT AAAsf Affirmed AAAsf
A-SB 12636MAF5 LT AAAsf Affirmed AAAsf
B 12636MAK4 LT AA-sf Affirmed AA-sf
C 12636MAL2 LT A-sf Affirmed A-sf
D 12636MAV0 LT BBsf Downgrade BBB-sf
E 12636MAX6 LT B-sf Affirmed B-sf
F 12636MAZ1 LT CCCsf Affirmed CCCsf
X-A 12636MAG3 LT AAAsf Affirmed AAAsf
X-B 12636MAH1 LT AA-sf Affirmed AA-sf
X-E 12636MAP3 LT B-sf Affirmed B-sf
X-F 12636MAR9 LT CCCsf Affirmed CCCsf
SGCMS 2016-C5
A-2 78419CAB0 LT AAAsf Affirmed AAAsf
A-3 78419CAC8 LT AAAsf Affirmed AAAsf
A-4 78419CAD6 LT AAAsf Affirmed AAAsf
A-M 78419CAF1 LT AAAsf Affirmed AAAsf
A-SB 78419CAE4 LT AAAsf Affirmed AAAsf
B 78419CAK0 LT AA-sf Affirmed AA-sf
C 78419CAL8 LT A-sf Affirmed A-sf
D 78419CAV6 LT BBB-sf Affirmed BBB-sf
E 78419CAX2 LT B-sf Affirmed B-sf
F 78419CAZ7 LT CCCsf Affirmed CCCsf
X-A 78419CAG9 LT AAAsf Affirmed AAAsf
X-B 78419CAH7 LT AA-sf Affirmed AA-sf
X-E 78419CAP9 LT B-sf Affirmed B-sf
X-F 78419CAR5 LT CCCsf Affirmed CCCsf
WFCM 2016-BNK1
A-2 95000GAX2 LT AAAsf Affirmed AAAsf
A-3 95000GAY0 LT AAAsf Affirmed AAAsf
A-S 95000GBA1 LT AAsf Affirmed AAsf
A-SB 95000GAZ7 LT AAAsf Affirmed AAAsf
B 95000GBD5 LT Asf Affirmed Asf
C 95000GBE3 LT BBBsf Affirmed BBBsf
D 95000GAJ3 LT B-sf Affirmed B-sf
E 95000GAL8 LT CCsf Affirmed CCsf
F 95000GAN4 LT Csf Affirmed Csf
X-A 95000GBB9 LT AAAsf Affirmed AAAsf
X-B 95000GBC7 LT BBBsf Affirmed BBBsf
X-D 95000GAA2 LT B-sf Affirmed B-sf
X-E 95000GAC8 LT CCsf Affirmed CCsf
X-F 95000GAE4 LT Csf Affirmed Csf
WFCM 2016-C35
A-3 95000FAS5 LT AAAsf Affirmed AAAsf
A-4 95000FAT3 LT AAAsf Affirmed AAAsf
A-4FL 95000FBA3 LT AAAsf Affirmed AAAsf
A-4FX 95000FBC9 LT AAAsf Affirmed AAAsf
A-S 95000FAV8 LT AAAsf Affirmed AAAsf
A-SB 95000FAU0 LT AAAsf Affirmed AAAsf
B 95000FAY2 LT AAsf Upgrade AA-sf
C 95000FAZ9 LT A-sf Affirmed A-sf
D 95000FAC0 LT BBB-sf Affirmed BBB-sf
E 95000FAE6 LT Bsf Affirmed Bsf
F 95000FAG1 LT CCCsf Affirmed CCCsf
X-A 95000FAW6 LT AAAsf Affirmed AAAsf
X-D 95000FAA4 LT BBB-sf Affirmed BBB-sf
CGCMT 2016-P3
A-2 29429CAB1 LT AAAsf Affirmed AAAsf
A-3 29429CAC9 LT AAAsf Affirmed AAAsf
A-4 29429CAD7 LT AAAsf Affirmed AAAsf
A-AB 29429CAE5 LT AAAsf Affirmed AAAsf
A-S 29429CAF2 LT AAAsf Affirmed AAAsf
B 29429CAG0 LT AA-sf Affirmed AA-sf
C 29429CAH8 LT BBBsf Downgrade A-sf
D 29429CAM7 LT BB-sf Affirmed BB-sf
E 29429CAP0 LT CCCsf Affirmed CCCsf
EC 29429CAL9 LT BBBsf Downgrade A-sf
F 29429CAR6 LT CCsf Affirmed CCsf
X-A 29429CAJ4 LT AAAsf Affirmed AAAsf
X-B 29429CAK1 LT AA-sf Affirmed AA-sf
X-D 29429CAV7 LT BB-sf Affirmed BB-sf
GSMS 2016-GS2
A-3 36252TAQ8 LT AAAsf Affirmed AAAsf
A-4 36252TAR6 LT AAAsf Affirmed AAAsf
A-AB 36252TAS4 LT AAAsf Affirmed AAAsf
A-S 36252TAV7 LT AAAsf Affirmed AAAsf
B 36252TAW5 LT AAsf Upgrade AA-sf
C 36252TAY1 LT Asf Upgrade A-sf
D 36252TAA3 LT BBB-sf Affirmed BBB-sf
E 36252TAE5 LT BB-sf Affirmed BB-sf
F 36252TAG0 LT Bsf Affirmed Bsf
PEZ 36252TAX3 LT Asf Upgrade A-sf
X-A 36252TAT2 LT AAAsf Affirmed AAAsf
X-B 36252TAU9 LT AAsf Upgrade AA-sf
X-D 36252TAC9 LT BBB-sf Affirmed BBB-sf
ACM 2016-1
A-S 04624UAG6 LT AAAsf Affirmed AAAsf
X-A 04624UAE1 LT AAAsf Affirmed AAAsf
CGCMT 2016-GC37
A-3 17290XAS9 LT AAAsf Affirmed AAAsf
A-4 17290XAT7 LT AAAsf Affirmed AAAsf
A-AB 17290XAU4 LT AAAsf Affirmed AAAsf
A-S 17290XAV2 LT AAAsf Affirmed AAAsf
B 17290XAW0 LT AA-sf Affirmed AA-sf
C 17290XAX8 LT A-sf Affirmed A-sf
D 17290XAA8 LT BBsf Affirmed BBsf
E 17290XAC4 LT B-sf Affirmed B-sf
EC 17290XBA7 LT A-sf Affirmed A-sf
F 17290XAE0 LT CCCsf Affirmed CCCsf
X-A 17290XAY6 LT AAAsf Affirmed AAAsf
X-B 17290XAZ3 LT AA-sf Affirmed AA-sf
X-D 17290XAL4 LT BBsf Affirmed BBsf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of Fitch's
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch prior rating
action of these transactions between January and April 2023.
Performance and 'Bsf' Loss Expectations: Deal-level 'Bsf' rating
case losses range from 1.3% to 9.5%. These transactions have
concentrations of Fitch Loans of Concern (FLOCs) averaging 23.1%
(ranging from 0.0% to 35.7%) and specially serviced loans averaging
3.8% (ranging from 0% to 12%) as of the June 2023 reporting
period.
Downgrades reflect the impact of the criteria and higher expected
losses on FLOCs, most notably larger top 15 loans and specially
serviced assets in the transactions. The two transactions with
downgrades, CGCMT 2016-P3 and CSAIL 2016-C6, have concentrations of
FLOCs in excess of 29%, primarily consisting of underperforming
office, retail and hospitality properties.
Upgrades reflect the impact of the criteria on 14 classes in five
transactions with increased CE and stable performance since Fitch's
prior rating action. These upgrades also considered improved
performance since issuance and/or these classes' resiliency to
withstand an additional sensitivity scenario that incorporated
higher stress sensitivities on underperforming FLOCs.
Seven of the upgraded classes were from the CFCRE 2016-C4
transaction, which has a FLOC concentration of 18.9%, and a
weighted average Fitch-stressed loan to value (LTV) and debt
service coverage ratio (DSCR) of 72.4% and 1.57x, respectively.
Four of the upgraded classes were from the GSMS 2016-GS2
transaction, which has a FLOC concentration of 3.9%, and a weighted
average Fitch-stressed LTV and DSCR of 85.1% and 1.46x,
respectively. Additionally, one class each in the MSBAM 2016-C31,
MSC 2016-UBS11 and WFCM 2016-C35 were upgraded.
The Negative Outlooks in the following eight transactions reflect
office, retail and/or hospitality concentrations and performance
concerns and/or an additional sensitivity scenario that applies
higher default and/or loss expectations on the loans noted below.
CGCMT 2016-P3: Empire Mall (9.2%) and 79 Madison Avenue (6.9%);
CGCMT 2016-GC36: South Plains Mall (2.9%) and Stafford Park
(2.6%);
CGCMT 2016-P4: Opry Mills (11%), Esplanade I (5.7%), Marriott
Midwest Portfolio (4.3%) and 401 South State Street (4.5%);
CSAIL 2016-C6: Quaker Bridge Mall (12.5%), West LA Office - 2730
Wilshire (4.4%) and Landmark Centre (1.7%);
MSBAM 2016-C31: SpringHill Suites - Seattle (5.1%) and Simon
Premium Outlets (4.5%);
SGCMS 2016-C5: Peachtree Mall (3.2%);
WFCM 2016-BNK1: One Stamford Forum (7.4%), Pinnacle II (4.9%) and
Simon Premium Outlets (4%);
WFCM2016-C35: Pinnacle II (2.3%) and Mall at Turtle Creek (2%).
Change to Credit Enhancement: As of the June 2023 distribution
date, the aggregate pool balance has been reduced on average 21.2%
(ranging from 7% to 73.6%). Losses ranging from 0.1% to 2.8% of the
original pool balance have been incurred to date on seven
transactions.
Defeasance: On average, the transactions have a 10.2% concentration
of defeasance; with largest concentrations in the following
transactions: MSC 2016-UBS11 (17.7%), WFCM 2016-C35 (16.0%), CSAIL
2016-C6 (15.8%), CGCMT 2016-GC37 (15.0%) and CGCMT 2016-P3
(12.9%).
Fitch is currently evaluating the treatment of defeased loans in
CMBS transactions and may consider higher stress assumptions on
government obligations that have a rating lower than 'AAA'. The
U.S. sovereign rating remains at 'AAA'/Rating Watch Negative.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The Negative Outlooks reflect possible future downgrades stemming
from concerns with potential further declines in performance that
could result in higher expected losses on FLOCs. If expected losses
do increase, downgrades to these classes are anticipated.
Downgrades to 'AAAsf' and 'AAsf' category rated classes could occur
if deal-level expected losses increase significantly and/or
interest shortfalls occur. For 'AAAsf' rated bonds, additional
stresses applied to defeased collateral if the U.S. sovereign
rating is lower than 'AAA' could also contribute to downgrades.
Downgrades to 'Asf' and 'BBBsf' category rated classes could occur
if deal-level losses increase significantly on non-defeased loans
in the transactions and with outsized losses on larger FLOCs.
Downgrades to 'BBsf' and 'Bsf' category rated classes are possible
with higher expected losses from continued performance of the FLOCs
and with greater certainty of near-term losses on specially
serviced assets and other FLOCs.
Downgrades to distressed ratings of 'CCCsf' through 'Csf' would
occur as losses become more certain and/or as losses are incurred.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to 'AAsf' and 'Asf' category rated classes are possible
with significantly increased CE from paydowns, coupled with
stable-to-improved pool-level loss expectations and performance
stabilization of FLOCs. Upgrades of these classes to 'AAAsf' will
also consider the concentration of defeased loans in the
transaction.
Upgrades to the 'BBBsf' category rated classes 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 'BBsf' and 'Bsf' category rated classes are not likely
until the later years in a transaction and only if the performance
of the remaining pool is stable and there is sufficient CE to the
classes.
Upgrades to distressed ratings of 'CCCsf' through 'Csf' are not
expected but possible with better than expected recoveries on
specially serviced loans or significantly higher values on FLOCs.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
[*] Fitch Takes Actions on 6 Canadian CMBS Transactions
-------------------------------------------------------
Fitch Ratings, on July 27, 2023, has upgraded two and affirmed 36
classes from six Canadian CMBS conduit transactions from the 2013
and 2014 vintages.
In addition, the Rating Outlooks for five classes were revised to
Stable from Positive, reflecting the expectation of future
affirmations given increasing concentrations and refinance risk.
These classes are in IMSCI 2013-4, MCAP 2014-1, CMLS 2014-1 and
IMSCI 2013-3. One Rating Outlook was revised to Positive from
Stable in REALT 2014-1.
In total, eight classes' Outlooks are Positive, reflecting
primarily the expectation of increased credit enhancement (CE) from
additional paydown from amortization and loan payoffs. The Outlook
for one class remains Negative in CMLS 2014-1, reflecting
concentration concerns, upcoming loan maturities in 2024 and
limited CE. Fitch has removed all classes from these transactions
from Under Criteria Observation (UCO).
ENTITY/DEBT RATING PRIOR
---------- ------ -----
IMSCI 2013-4
A-2 45779BBU2 LT AAAsf Affirmed AAAsf
B 45779BBW8 LT AAAsf Affirmed AAAsf
C 45779BBX6 LT Asf Affirmed Asf
D 45779BBY4 LT BBsf Affirmed BBsf
E 45779BBZ1 LT Bsf Affirmed Bsf
F 45779BBH1 LT B-sf Upgrade CCCsf
G 45779BBJ7 LT CCCsf Upgrade CCsf
MCAP CMBS Issuer
Corporation 2014-1
D 55280LAJ7 LT AAAsf Affirmed AAAsf
E 55280LAE8 LT AAAsf Affirmed AAAsf
F 55280LAF5 LT BBBsf Affirmed BBBsf
G 55280LAG3 LT Bsf Affirmed Bsf
Real Estate Asset Liquidity
Trust 2014-1
A 75585RLT0 LT AAAsf Affirmed AAAsf
B 75585RLU7 LT AAAsf Affirmed AAAsf
C 75585RLV5 LT AAsf Affirmed AAsf
D 75585RLW3 LT BBBsf Affirmed BBBsf
E 75585RLX1 LT BBB-sf Affirmed BBB-sf
F 75585RLQ6 LT BBsf Affirmed BBsf
G 75585RLR4 LT Bsf Affirmed Bsf
CMLS Issuer Corporation
2014-1
A-1 125824AA0 LT AAAsf Affirmed AAAsf
A-2 125824AB8 LT AAAsf Affirmed AAAsf
B 125824AC6 LT AAsf Affirmed AAsf
C 125824AD4 LT Asf Affirmed Asf
D 125824AE2 LT BBBsf Affirmed BBBsf
E 125824AF9 LT BBB-sf Affirmed BBB-sf
F 125824AG7 LT BBsf Affirmed BBsf
G 125824AH5 LT B-sf Affirmed B-sf
Institutional Mortgage
Securities Canada Inc.
2014-5
A-2 45779BCB3 LT AAAsf Affirmed AAAsf
B 45779BCC1 LT AAAsf Affirmed AAAsf
C 45779BCD9 LT AAsf Affirmed AAsf
D 45779BCE7 LT Asf Affirmed Asf
E 45779BCF4 LT BBB-sf Affirmed BBB-sf
F 45779BCG2 LT BBsf Affirmed BBsf
G 45779BCH0 LT Bsf Affirmed Bsf
IMSCI 2013-3
C 45779BBC2 LT AAAsf Affirmed AAAsf
D 45779BBD0 LT Asf Affirmed Asf
E 45779BBE8 LT BBsf Affirmed BBsf
F 45779BAV1 LT CCCsf Affirmed CCCsf
G 45779BAW9 LT Dsf Affirmed Dsf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of Fitch's
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action of these transactions between March and April 2023.
Performance and 'Bsf' Loss Expectations: Deal-level 'Bsf' rating
case losses range from 1.9% to 13.5%. These transactions have
concentrations of Fitch Loans of Concern (FLOCs) ranging from 0% to
100% and no specially serviced loans.
Upgrades of two classes in IMSCI 2013-4 reflect the impact of the
criteria as well as increased CE and improved recovery expectations
since Fitch's prior rating action.
Change to Credit Enhancement: As of the July 2023 distribution
date, the transactions' pool balances have been reduced
significantly, ranging from 39.5% to 94.6% since issuance. Losses
ranging from 1.4% to 2.1% of the original pool balance have been
incurred to date in MCAP 2014-1 and IMSCI 2013-3, respectively.
Defeasance: The REAL-T 2014-1 transaction includes one defeased
loan, representing 11.5% of the remaining pool balance. Fitch is
currently evaluating the treatment of defeased loans in CMBS
transactions and may consider higher stress assumptions on
government obligations that have a rating lower than 'AAA'.
Canada's sovereign rating remains at 'AA+'/Outlook Stable.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The Negative Outlook reflects possible future downgrade stemming
from concerns with the all of the remaining loans in the CMLS
2014-1 transaction maturing in 2024 and the potential for at least
one of the 25 remaining loans to be unable to refinance at
maturity.
Downgrades to 'AAAsf' and 'AAsf' category rated classes are not
expected, but could occur if deal-level expected losses increase
significantly and/or interest shortfalls occur.
Downgrades to 'Asf' and 'BBBsf' category rated classes could occur
if deal-level losses increase significantly on non-defeased loans
in the transactions including outsized losses on larger FLOCs.
Downgrades to 'BBsf' and 'Bsf' category rated classes are possible
with higher expected losses from FLOCs and/or if loans are unable
to refinance and default at maturity.
Downgrades to distressed ratings of 'CCCsf' through 'Csf' would
occur as losses become more certain and/or as losses are incurred
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to 'AAsf' and 'Asf' category rated classes are possible
with increased credit enhancement resulting from amortization and
paydowns, coupled with stable-to-improved pool-level loss
expectations and performance stabilization of FLOCs. Classes would
not be upgraded above 'Asf' if there is likelihood for interest
shortfalls.
Upgrades to the 'BBBsf', 'BBsf', and 'Bsf' category rated classes
would be limited based on sensitivity to concentrations of the
pools, including maturity dates.
Upgrades to distressed ratings of 'CCCsf' through 'Csf' are not
expected but possible with better than expected values on FLOCs.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
*********
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