/raid1/www/Hosts/bankrupt/TCR_Public/231022.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, October 22, 2023, Vol. 27, No. 294
Headlines
1988 CLO 1: Fitch Affirms 'BB-sf' Rating on Class E Notes
AIMCO CLO 20: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
ASHFORD HOSPITALITY 2018-KEYS: DBRS Cuts F Certs Rating to CCC
ATLANTIC AVENUE 2023-1: S&P Assigns BB- (sf) Rating on Cl. E Notes
BALBOA BAY 2023-2: S&P Assigns Prelim BB- (sf) Rating on E Notes
BALLYROCK CLO 20: S&P Assigns 'BB-(sf)' Rating on Class D-R Notes
BANK 2021-BNK32: DBRS Confirms BB(high) Rating on Class G Certs
BANK OF AMERICA 2017-BNK3: DBRS Confirms B(high) Rating on F Certs
BBAM US II: S&P Assigns Prelim BB- (sf) Rating on Class D Notes
BBCMS MORTGAGE 2023-C21: Fitch Gives 'B-(EXP)' Rating on G-RR Certs
BCC MIDDLE 2023-2: S&P Assigns Prelim BB- (sf) Rating to E Notes
BENCHMARK 2019-B13: Fitch Affirms B-sf Rating on Class G-RR Certs
BRAVO RESIDENTIAL 2023-RPL1: DBRS Finalizes B(high) on B2 Notes
BREAN ASSET 2023-SRM1: DBRS Finalizes B Rating on Class M5 Notes
BRIDGECREST 2023-1: S&P Assigns Prelim 'BB(sf)' Rating on E Notes
CARVANA AUTO 2023-N3: DBRS Finalizes BB(high) Rating on $31MM Notes
CD 2019-CD8: Fitch Lowers Rating on Class G-RR Debt to CCCsf
CG-CCRE COMMERCIAL 2014-FL2: S&P Affirms 'CCC' Rating on D Notes
CHASE HOME 2023-RPL2: DBRS Finalizes B(high) Rating on B-2 Certs
CITIGROUP 2018-C5: Fitch Affirms 'B-sf' Rating on Class G-RR Certs
COMM 2013-CCRE7: DBRS Confirms BB Rating on Class E Certs
COMM 2015-CCRE27: DBRS Confirms B Rating on Class X-E Certs
COMMERCIAL MORTGAGE 2001-CMLB1: Moody's Lowers Cl. X Certs to Ca
CONNECTICUT AVENUE 2023-R07: Moody's Assigns Ba2 to 3 Tranches
CPS AUTO 2022-C: S&P Affirms BB (sf) Rating on Class E Notes
DRYDEN 102: S&P Assigns BB- (sf) Rating on $12MM Class E Notes
GRANITE PARK 2023-1: Moody's Assigns B3 Rating to Class F Notes
GS MORTGAGE 2019-GC42: DBRS Confirms BB Rating on Class F-RR Certs
GS MORTGAGE 2023-PJ5: Fitch Gives 'B-(EXP)sf' on Class B-5 Certs
GUGGENHEIM CLO 2022-2: Fitch Affirms 'BB-sf' Rating on Cl. E Notes
JP MORGAN 2023-7: DBRS Finalizes BB Rating on Class B-4 Certs
JP MORGAN 2023-9: Fitch Assigns 'B-(EXP)sf' Rating on Cl. B-5 Certs
KEY COMMERCIAL 2019-S2: DBRS Confirms B Rating on Class F Certs
KRR STATIC II: Fitch Affirms 'BB-sf' Rating on Class E Notes
MAGNETITE XXXIX: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
MANUFACTURED HOUSING 2000-2: S&P Cuts A-5/A-6 Trust Rating to 'D'
MARINER FINANCE 2023-A: S&P Assigns BB-(sf) Rating on Cl. E Notes
MF1 2022-FL8: DBRS Confirms B(low) Rating on Class H Notes
MF1 2023-FL12 LLC: DBRS Gives Prov. B(low) Rating on 3 Classes
MFA 2023-INV2: DBRS Finalizes B Rating on Class B-2 Certs
MORGAN STANLEY 2017-H1: DBRS Confirms CCC Rating on H-RR Certs
MORGAN STANLEY 2018-L1: DBRS Confirms B Rating on H-RR Certs
ORION CLO 2023-1: S&P Assigns BB- (sf) Rating on Class E Notes
ORL TRUST 2023-GLKS: S&P Assigns Prelim BB(sf) Rating on E Certs
READY CAPITAL 2022-FL8: DBRS Confirms B(low) Rating on G Notes
START II LTD: Fitch Hikes Rating on Class C Notes to 'BBsf'
STWD 2022-FL3: DBRS Confirms B(low) Rating on Class G Notes
SYMPHONY CLO 39: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
TOWD POINT 2019-5: Moody's Hikes Rating on Cl. B4 Notes to Caa2
TRIMARAN CAVU 2023-2: S&P Assigns Prelim BB-(sf) Rating on E Notes
UBS-CITIGROUP 2011-C1: Moody's Cuts Rating on Cl. CX-B Certs to C
VOYA 2022-3: Fitch Assigns 'BB-(EXP)sf' Rating on Class E-R Notes
WELLINGTON MANAGEMENT I: S&P Assigns Prelim 'BB-' Rating on E Notes
WFRBS COMMERCIAL 2013-C15: Moody's Cuts Rating on C Certs to Caa3
WFRBS COMMERCIAL 2014-LC14: Fitch Lowers Rating on E Certs to 'Bsf'
[*] DBRS Confirms 18 Credit Ratings From 7 American Trust Deals
[*] DBRS Confirms 38 Credit Ratings From 9 Flagship Trust Deals
[*] DBRS Reviews 393 Classes From 37 US RMBS Transactions
[*] S&P Places 60 Ratings on 47 Classes From 11 Deals on Watch Neg.
[*] S&P Places 810 Ratings From 174 U.S. Deals on Watch Positive
[*] S&P Takes Various Actions on 335 Bonds From 23 Tobacco Trusts
*********
1988 CLO 1: Fitch Affirms 'BB-sf' Rating on Class E Notes
---------------------------------------------------------
Fitch Ratings has affirmed the ratings on the class A loans and
class A, B-1, B-2, C, D and E notes of 1988 CLO 1 Ltd. The Rating
Outlooks on all rated tranches remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
1988 CLO 1 Ltd.
A 653937AA0 LT AAAsf Affirmed AAAsf
A Loans LT AAAsf Affirmed AAAsf
B-1 653937AC6 LT AAsf Affirmed AAsf
B-2 653937AJ1 LT AAsf Affirmed AAsf
C 653937AE2 LT Asf Affirmed Asf
D 653937AG7 LT BBB-sf Affirmed BBB-sf
E 653938AA8 LT BB-sf Affirmed BB-sf
TRANSACTION SUMMARY
1988 CLO 1 Ltd. is a broadly syndicated collateralized loan
obligation (CLO) managed by 1988 Asset Management, LLC. The
transaction closed in November 2022 and will exit its reinvestment
period in January 2027. The CLO is secured primarily by first-lien,
senior secured leveraged loans.
KEY RATING DRIVERS
STABLE COLLATERAL PERFORMANCE
The affirmations are driven by the portfolios' stable performance
since closing. The credit quality of the portfolio as of the most
recent monthly trustee report has remained at the 'B+'/'B' rating
level. The Fitch weighted average rating factor (WARF) of the
portfolio is 20.4, compared to 20.7 at closing.
The portfolio remains fairly diversified with 227 obligors, and the
largest 10 obligors represent 9.1% of the portfolio. There are no
reported defaulted assets. Exposure to issuers with a Negative
Outlook and Fitch's watchlist is 10.8% and 1.2%, respectively.
First lien loans, cash and eligible investments comprise 100.0% of
the portfolio. Fitch's weighted average recovery rate (WARR) of the
portfolio is 78.0%, compared with 77.8% at closing.
All coverage tests, collateral quality tests (CQTs), and
concentration limitations are in compliance.
CASH FLOW ANALYSIS
Fitch conducted an updated cash flow analysis based on a newly run
Fitch Stressed Portfolio (FSP) since the transaction is still in
its reinvestment period. The FSP analysis stressed the current
portfolio from the latest trustee report to account for permissible
concentration and CQT limits. Weighted average spread, WARF and
WARR levels were stressed to the current Fitch test matrix points.
The FSP analysis assumed weighted average life of 6.75 years. In
addition, assumptions of both 0% and 5% fixed rate assets were
tested as part of the FSP's cash flow modelling.
The ratings for all the rated notes are in line with their
respective model-implied ratings (MIRs), as defined in the CLOs and
Corporate CDOs Rating Criteria.
The Stable Outlooks reflect Fitch's expectation that the notes have
a 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 two
notches, 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 seven
notches, based on the MIRs.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third-party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
securities and markets authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
AIMCO CLO 20: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to AIMCO CLO 20
Ltd./AIMCO CLO 20 LLC's floating- and fixed-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 Allstate Investment Management Co., a
subsidiary of Allstate Corp.
The preliminary ratings are based on information as of Oct. 17,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool, which consists
primarily of broadly syndicated speculative-grade (rated 'BB+' and
lower) senior secured term loans.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
AIMCO CLO 20 Ltd./AIMCO CLO 20 LLC
Class A, $304.000 million: AAA (sf)
Class B-1, $49.850 million: AA (sf)
Class B-2, $7.150 million: AA (sf)
Class C-1 (deferrable), $20.925 million: A (sf)
Class C-2 (deferrable), $7.575 million: A (sf)
Class D (deferrable), $28.500 million: BBB- (sf)
Class E (deferrable), $16.150 million: BB- (sf)
Subordinated notes, $43.250 million: Not rated
ASHFORD HOSPITALITY 2018-KEYS: DBRS Cuts F Certs Rating to CCC
--------------------------------------------------------------
DBRS Limited downgraded its credit rating on one class of the
Commercial Mortgage Pass-Through Certificates, Series 2018-KEYS
issued by Ashford Hospitality Trust 2018-KEYS as follows:
-- Class F to CCC (sf) from B (low) (sf)
In addition, DBRS Morningstar confirmed its credit ratings on the
following classes:
-- Class A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (low) (sf)
DBRS Morningstar also discontinued and withdrew its credit rating
on Class X-EXT, which is past its stated maturity date of June 2023
and as confirmed with the September 2023 remittance, is no longer
receiving interest payments. DBRS Morningstar changed the trends on
Class D and Class E to Negative from Stable; all other classes,
except Class F, have Stable trends. Class F now has a rating that
generally does not carry a trend in commercial mortgage-backed
securities (CMBS) ratings. Simultaneously, DBRS Morningstar removed
the Under Review with Negative Implications designation of the
rated classes, where they were placed in June 2023.
The downgrade of the Class F and the Negative trends for Class D
and Class E reflect the increased risks for the transaction as a
result of the decline in performance of the underlying collateral,
as detailed below. While the performance trends and other recent
developments for the underlying collateral suggest an increased
risk of loss for those classes, the analysis conducted for this
review suggests that the capital structure provides the remaining
classes sufficient insulation against losses, supporting the rating
confirmations and the Stable trends.
The subject transaction is collateralized by the debt on a
portfolio of hotel properties. The senior mortgage loan proceeds of
$982.0 million, along with the mezzanine debt of $288.2 million,
refinanced the existing debt of $1.1 billion, funded $14.1 million
of upfront reserves and $25.6 million in closing costs, and
facilitated a $163.4 million cash-equity distribution. The senior
debt is split into six floating-rate interest-only (IO) loans,
which are not cross collateralized or cross defaulted. In total,
the six loans (known as Pools A, B, C, D, E and F) are
collateralized by 34 hotel properties across 16 states with the
largest concentration by allocated loan balance in California. The
six loans had an initial 24-month term with five one-year extension
options. Earlier this year, the sponsor, Ashford Hospitality Trust,
Inc. (Ashford), indicated that it would be unable to pay off the
six loans by the June 2023 maturity and subsequently all the loans
were transferred into special servicing in April 2023.
The sponsor did have the fourth extension option available;
however, the terms required a debt yield that was at least 25 basis
points higher than the issuance debt yield of 12.9%. That threshold
was not met for any of the six loans and in July 2023, Ashford
issued a press release stating that they had agreed to make the
necessary paydowns for Pools C, D and E in the amounts of $62
million, $26 million and $41 million, respectively, in order to
meet the debt yield requirements. The one-year extension option for
those Pools have been executed, bringing the loan maturity dates
out to June 2024 with one final extension option remaining.
However, as noted in the July press release, Ashford stated that it
was not willing to contribute to paydowns for the other three Pools
(A, B and F), with an estimated $255 million in total that would
have been required to meet the debt yield threshold. Ashford stated
a loan modification was being pursued, but noted that nothing had
been agreed upon as of the July 2023 press release, and the special
servicer has confirmed that status has continued into September
2023. With the September 2023 remittance, Pool C has returned to
the master servicer with Pools D and E expected to be returned in
the near term. Pools A, B and F will remain with the special
servicer; the workout strategy remains listed as to be determined;
however, DBRS Morningstar believes a foreclosure or deed-in-lieu of
foreclosure is likely, based on Ashford's public statements to
date.
At issuance, the 34 lodging properties were valued at $1.7 billion,
but the March 2021 appraisals previously obtained by the special
servicer showed a value decline to $1.3 billion. DBRS Morningstar
previously derived a value of $1.2 billion in 2020 based on a
stressed cash flow approach, reflecting concerns regarding the
hospitality sector during the height of the Coronavirus Disease
(COVID-19) pandemic. Given three of the six Pools will remain in
special servicing with a liquidation scenario likely, and the other
three Pools requiring significant principal paydowns for the
extension requirements to be met, DBRS Morningstar conducted a
recoverability analysis for this review, based on a significant
haircut to the 2021 appraised values. That analysis suggested loss
severities in excess of 15% for Pool A, 20% for Pool B and 10% for
Pool F. DBRS Morningstar's estimated liquidated losses are
comfortably contained to the Class F certificate, supporting the
downgrade of the credit rating, with the implied reduction in
credit support for Class D and Class E contributing to the Negative
trends assigned to those two classes.
As of the year-end (YE) 2022 financials, Pools A, B and F reported
debt service coverage ratios (DSCR) of 1.52x, 0.83x and 1.97x,
respectively, as compared to the YE2021 figures of 1.84x, 0.44x and
0.71x, respectively. Performance has generally continued to improve
from the pandemic-driven lows, but remains well below pre-2020
levels. The trailing 12 month financials for the period ended June
30, 2023, that were provided for Pools C, D and E showed
year-over-year growth, but performance for those collateral sets
also continues to lag the metrics considered in 2020 when the DBRS
Morningstar ratings were assigned. These factors also support the
Negative trends on Class D and Class E.
According to the provided May 2023 STR reports, Pools A, B and F
reported WA occupancy, average daily rate (ADR) and revenue per
available room (RevPAR) figures of 69%, $161 and $111,
respectively. As compared to issuance figures, the same Pools
reported WA figures of 78%, $158 and $123, respectively. The WA
RevPAR penetration rate for the specially serviced pools as of May
2023 was 118%, encouraging but also notably down from 122% at
issuance. The declines were most pronounced for Pools A and B
(declines of 8% and 20%, respectively) while Pool F has seen a
moderate increase in RevPAR penetration rates from issuance,
softening the decline on a WA basis. These figures suggest that
there is limited room for revenue growth for those hotels within
their respective markets, supporting the haircuts to the 2021
valuations in the analysis for this review.
Notes: All figures are in U.S. dollars unless otherwise noted.
ATLANTIC AVENUE 2023-1: S&P Assigns BB- (sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its ratings to Atlantic Avenue 2023-1
Ltd./Atlantic Avenue 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 Atlantic Avenue Management L.P.
The ratings reflect:
-- S&P's view of the collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Atlantic Avenue 2023-1 Ltd./Atlantic Avenue 2023-1 LLC
Class A, $244.00 million: AAA (sf)
Class B, $60.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D-1 (deferrable), $12.00 million: BBB- (sf)
Class D-2 (deferrable), $10.00 million: BBB- (sf)
Class E (deferrable), $12.60 million: BB- (sf)
Subordinated notes, $38.52 million: Not rated
BALBOA BAY 2023-2: S&P Assigns Prelim BB- (sf) Rating on E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Balboa Bay
Loan Funding 2023-2 Ltd./Balboa Bay Loan Funding 2023-2 LLC's
floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Pacific Investment Management Company
LLC.
The preliminary ratings are based on information as of Oct. 18,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The 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
Balboa Bay Loan Funding 2023-2 Ltd./
Balboa Bay Loan Funding 2023-2 LLC
Class A-1, $252.00 million: AAA (sf)
Class A-2, $12.00 million: AAA (sf)
Class B, $40.00 million: AA (sf)
Class C, $24.00 million: A+ (sf)
Class D, $20.00 million: BBB (sf)
Class E, $16.00 million: BB- (sf)
Subordinated notes, $42.75 million: Not rated
BALLYROCK CLO 20: S&P Assigns 'BB-(sf)' Rating on Class D-R Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-2A-R, B-R,
C-R, and D-R replacement debt from Ballyrock CLO 20 Ltd./Ballyrock
CLO 20 LLC, a CLO originally issued in 2022 that is managed by
Ballyrock Investment Advisors LLC. At the same time, S&P withdrew
its ratings on the original class A-2A, B, C, and D debt following
payment in full on the Oct. 16, 2023, refinancing date. S&P also
affirmed its ratings on the class A-1A loans and class A-1A, A-1B,
and A-2B debt, which were not refinanced.
The replacement debt were issued via a supplemental indenture,
which outlines the terms of the replacement debt. According to the
supplemental indenture:
-- The non-call period was extended by approximately one year to
Oct. 15, 2024.
-- The reinvestment period, legal final maturity date, and
weighted average life test were not extended.
-- No additional assets were purchased on the Oct. 16, 2023,
refinancing date, and the target initial par amount remained at
500,000,000. There is no additional effective date or ramp-up
period, and the first payment date following the refinancing is
Jan. 15, 2024.
-- No additional subordinated notes were issued on the refinancing
date.
Replacement And Original Debt Issuances
Replacement debt
Class A-2A-R, $38.25 million: Three-month CME term SOFR + 2.20%
Class B-R, $27.50 million: Three-month CME term SOFR + 2.60%
Class C-R, $30.00 million: Three-month CME term SOFR + 4.15%
Class D-R, $19.00 million: Three-month CME term SOFR + 7.25%
Original debt
Class A-1A, $20.00 million: 4.322%
Class A-1A loans, $300.00 million: Three-month CME term SOFR +
1.60%(i)
Class A-1B, $9.25 million: 5.133%
Class A-2A, $38.25 million: Three-month CME term SOFR + 3.05%
Class A-2B, $10.00 million: 5.483%
Class B-R, $27.50 million: Three-month CME term SOFR + 3.80%
Class C-R, $30.00 million: Three-month CME term SOFR + 5.11%
Class D-R, $19.00 million: Three-month CME term SOFR + 8.19%
Subordinated notes, $42.50 million: Not applicable
Note: (i)The class A-1A loans are being repriced with the lower
spread, which was originally priced at three-month CME term SOFR +
1.65%.
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.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Ballyrock CLO 20 Ltd./Ballyrock CLO 20 LLC
Class A-2A-R, $38.25 million: 'AA (sf)'
Class B-R, $27.50 million: 'A (sf)'
Class C-R, $30.00 million: 'BBB- (sf)'
Class D-R, $19.00 million: 'BB- (sf)'
Ratings Affirmed
Ballyrock CLO 20 Ltd./Ballyrock CLO 20 LLC
Class A-1A loans, $300.00 million: 'AAA (sf)'
Class A-1A, $20.00 million: 'AAA (sf)'
Class A-1B, $9.25 million: 'AAA (sf)'
Class A-2B, $10.00 million: 'AA (sf)'
Ratings Withdrawn
Ballyrock CLO 20 Ltd./Ballyrock CLO 20 LLC
Class A-2A to NR from 'AAA (sf)'
Class B to NR from 'A (sf)'
Class C to NR from 'BBB- (sf)'
Class D to NR from 'BB- (sf)'
Other Outstanding Class
Ballyrock CLO 20 Ltd./Ballyrock CLO 20 LLC
Subordinated notes, $42.50 million: NR
NR--Not rated.
BANK 2021-BNK32: DBRS Confirms BB(high) Rating on Class G Certs
---------------------------------------------------------------
DBRS Limited confirmed its ratings on all classes of Commercial
Mortgage Pass Through Certificates, Series 2021-BNK32 issued by
BANK 2021-BNK32 as follows:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-4-1 at AAA (sf)
-- Class A-4-2 at AAA (sf)
-- Class A-4-X1 at AAA (sf)
-- Class A-4-X2 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-5-1 at AAA (sf)
-- Class A-5-2 at AAA (sf)
-- Class A-5-X1 at AAA (sf)
-- Class A-5-X2 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-S-1 at AAA (sf)
-- Class A-S-2 at AAA (sf)
-- Class A-S-X1 at AAA (sf)
-- Class A-S-X2 at AAA (sf)
-- Class B at AAA (sf)
-- Class B-1 at AAA (sf)
-- Class B-2 at AAA (sf)
-- Class B-X1 at AAA (sf)
-- Class B-X2 at AAA (sf)
-- Class C at AA (high) (sf)
-- Class C-1 at AA (high) (sf)
-- Class C-2 at AA (high) (sf)
-- Class C-X1 at AA (high) (sf)
-- Class C-X2 at AA (high) (sf)
-- Class X-D at A (sf)
-- Class D at A (high) (sf)
-- Class E at A (low) (sf)
-- Class X-F at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class X-G at BBB (low) (sf)
-- Class G at BB (high) (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of
the pool in the two years since issuance, with a small
concentration of loans on the servicer's watchlist and no loans in
special servicing or delinquent as of the September 2023
remittance. Cash flows overall are stable, with the 15 largest
loans in the pool generally reporting increased cash flows over the
issuance figures.
The transaction consists of 64 loans secured by 106 properties with
a current trust balance of $901.6 million, representing a minimal
collateral reduction of 0.4% since issuance, per the August 2023
remittance report. Amortization will be limited through the life of
the deal as 38 loans, representing 78.8% of the pool balance, are
interest only (IO) for their full term. An additional eight loans,
representing 10.7% of the pool balance, have partial IO periods
that remain in place. The lack of amortization is partially offset
by the pool's favorable leverage metrics with DBRS Morningstar
weighted-average issuance and balloon loan-to-value (LTV) ratios of
51.0% and 49.6%, respectively; however, the pool also exhibits
heavy leverage barbelling as a result of the very low LTVs being
concentrated among the shadow-rated loans and co-operative loans.
By property type, the pool is most concentrated by loans backed by
office and retail properties, which represent 25.5% and 20.8%,
respectively. Another 19 loans, representing 8.3% of the pool, are
backed by residential co-operative properties.
The pool's office concentration is noteworthy given the low
investor appetite for this property type and the high vacancy rates
in many submarkets as a result of the shift in workplace dynamics.
Despite this, the office loans in this pool are generally
performing in line with DBRS Morningstar's expectations. The pool's
office exposure is concentrated in four of the top 10 loans, which
represent 25.1% of the pool. The largest of these is Pathline Park
9 & 10 (Prospectus ID#1; 10.0% of the pool), which is secured by an
office building in Sunnyvale, California. The property is 100.0%
occupied by Proofpoint Inc. on a lease through 2031 with no
termination options.
The second- and third-largest office loans are 605 Third Avenue
(Prospectus ID#4; 7.9% of the pool), and 530 Seventh Avenue Fee
(Prospectus ID#5; 6.1% of the pool). 605 Third Avenue is secured by
a class A office property in Midtown East Manhattan with stable
occupancy and minimal near term rollover while 530 Seventh Avenue
Fee is backed by the ground interest under an office property
located approximately seven blocks to the west near Times Square.
Both loans benefit from a low A-note LTVs of 33.7% and 39.0%,
respectively, based on the DBRS Morningstar value derived at
issuance and debt service coverage ratios of more than 3.00 times.
Both loans were assigned investment-grade shadow ratings by DBRS
Morningstar at issuance and, with this review, the shadow ratings
were maintained given the loans' low leverage points and stable
performance.
Notes: All figures are in U.S. dollars unless otherwise noted.
BANK OF AMERICA 2017-BNK3: DBRS Confirms B(high) Rating on F Certs
------------------------------------------------------------------
DBRS Limited confirmed its credit ratings on the Commercial
Mortgage Pass-Through Certificates, Series 2017-BNK3 issued by Bank
of America Merrill Lynch Commercial Mortgage Trust 2017-BNK3 as
follows:
-- Class A-3 at AAA (sf)
-- Class A-4 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 (high) (sf)
-- Class C at A (sf)
-- Class X-D at BBB (high) (sf)
-- Class D at BBB (sf)
-- Class E at BB (high) (sf)
-- Class F at B (high) (sf)
All trends are Stable.
The credit rating confirmations reflect the overall stable
performance of the transaction, which remains in line with DBRS
Morningstar's expectations since the prior rating action. Overall,
the pool continues to exhibit healthy credit metrics, as evidenced
by the weighted-average debt service coverage ratio (DSCR), which
was above 2.25 times (x) based on the YE2022 financial reporting.
The transaction also benefits from five years of amortization since
issuance, as well as some defeasance, loan repayments, and one loan
that is shadow-rated investment grade, as further described below.
Per the September 2023 reporting, 61 of the original 63 loans
remain in the pool with an aggregate principal balance of $879.4
million, representing collateral reduction of 10.1% since issuance.
Five loans, representing 4.4% of the pool, have been fully
defeased. No loans are delinquent or in special servicing. There
are 14 loans, representing 20.6% of the pool, on the servicer's
watchlist; however, only 10 of these loans, representing 14.7% of
the pool, are being monitored for credit-related reasons. In
addition, the largest loan on the watchlist, Komo Plaza (Prospectus
ID#2; 7.9% of the pool), is being monitored because of an upcoming
lease expiration in December 2023 tied to the property's largest
tenant, Sinclair Broadcasting (42.3% of the net rentable area
(NRA)); however, the servicer has confirmed that the tenant has
provided notice of renewal. With the September 2023 reporting, the
former second-largest watchlisted loan, Storbox Self Storage
(Prospectus ID#6; 4.7% of the pool), which has historically been
monitored for occupancy declines, was removed from the watchlist,
most recently reporting a YE2022 DSCR of 2.67x.
The 85 Tenth Avenue loan (Prospectus ID#4; 5.7% of the pool) is
secured by a 632,584-square-foot (sf), Class A office property on
the west side of Manhattan. Built in 1913 and most recently
renovated in 2009, the 11-story structure was acquired by the
sponsors in 2007 for $440.0 million. Since acquisition, the sponsor
has invested $22.0 million toward capital improvements.
Historically, the subject has been well occupied. The largest
tenants at issuance were Google (28.9% of the NRA at issuance,
expires in February 2026), the General Services Administration
(GSA) (28.1% of the NRA, expired September 2020), and Level 3
Communications (17.9% of the NRA at issuance, various lease
expirations between June 2017 and January 2023). GSA vacated upon
lease expiration, prompting the initiation of a cash sweep in
November 2020. As of the September 2023 reporting, reserve accounts
had a balance of $5.6 million. Likewise, Level 3 Communications
began vacating the property beginning with its first lease
expiration in June 2017 and, according to the most recent rent
roll, the tenant is no longer at the property. Furthermore, in
March 2021, Moet Hennessy USA Inc. (formerly 8.9% of the NRA)
vacated after it negotiated a new lease at 7 World Trade Center.
Historical lease rollover has been partially offset by Google's
gradual expansion at the property. At issuance, it was noted that
Google had as-of-right expansion options totaling 178,000 sf.
Google had exercised expansion options totaling approximately
119,000 sf, according to the March 2023 rent roll, and currently
occupies 47.2% of the NRA. There has been positive leasing momentum
at the property, with Clear, a biometric screening company, leasing
120,000 sf on a 15-year term. The tenant received 16 months of free
rent and a monthly rent abatement of $83,333 through 2027.
Nonetheless, occupancy and cash flow have trended downward in
recent years with the most recent reporting reflecting an occupancy
rate of 79.5%, significantly lower than the issuance figure of
99.6%. Likewise, the property generated $20.6 million of as of
YE2022, 43.1% lower than the issuance figure of $36.2 million.
Furthermore, rollover risk is elevated given Google's leases are
scheduled to expire in February 2026, 10 months prior to loan
maturity. Although Google has two five-year renewal options, future
leasing decisions could be influenced by the success of
remote/hybrid work as firms re-evaluate their physical footprints.
In January 2023, Google announced layoffs for 12,000 workers, which
could be indicative of its limited commitment to physical office
space going forward. At issuance, DBRS Morningstar assigned this
loan an investment-grade shadow rating because of the property's
high-quality tenancy and the senior position of the A-notes.
However, given the trajectory of operating performance and risks
associated with the large single-tenant exposure, as noted above,
DBRS Morningstar removed the loan's investment-grade shadow rating
with this review. In addition, DBRS Morningstar applied a stressed
loan-to-value (LTV) ratio and increased probability of default
(POD) assumption in its analysis, resulting in an expected loss
that is more than double the pool average.
The 191 Peachtree loan (Prospectus ID#7; 4.6% of the pool) is
secured by a 1.2 million-sf office property in Atlanta's central
business district. According to recent news articles, the largest
tenant, Deloitte & Touche (Deloitte; 21.3% of the NRA), will not be
renewing its lease, which currently expires in May 2024. Deloitte
is reportedly moving to the Promenade Tower and will be reducing
its footprint in Atlanta's business district by approximately
50.0%. With this departure, occupancy is expected to drop to
approximately 65.0% from the current occupancy rate of 86.0%. The
loan is structured with a cash flow sweep that triggers 18 months
before Deloitte's lease expiration until the balance reaches
approximately $11.8 million (or $50.0 per sf on Deloitte's intended
vacant space). DBRS Morningstar has reached out to the servicer to
request an update on the cash flow sweep. Overall, performance has
been strong with the YE2022 DSCR reported at 2.91x, compared with
the YE2021 DSCR of 2.87x. According to Reis, office properties in
the Downtown submarket reported a Q2 2023 vacancy rate of 13.8%,
compared with the Q2 2022 vacancy rate of 20.5%. Although there are
mitigating factors with the improvement in the submarket
fundamentals and cash management provisions, refinance risk is
elevated considering Deloitte's lease expires two years prior to
loan maturity in November 2026. In its analysis, DBRS Morningstar
applied a stressed LTV ratio and increased POD assumption resulting
in an expected loss that is approximately 2.7x the pool average.
With this review, DBRS Morningstar confirmed that the performance
of one loan—Potomac Mills (Prospectus ID#14; 2.4% of the
pool)—remains consistent with investment-grade characteristics.
This assessment continues to be supported by the loan's strong
credit metrics, experienced sponsorship, and the underlying
collateral's historically stable performance.
Notes: All figures are in U.S. dollars unless otherwise noted.
BBAM US II: S&P Assigns Prelim BB- (sf) Rating on Class D Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to BBAM US CLO
II Ltd./BBAM US CLO II 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 RBC Global Asset Management (U.S.)
Inc., an indirect wholly owned subsidiary of Royal Bank of Canada.
The preliminary ratings are based on information as of Oct. 12,
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
BBAM US CLO II Ltd. / BBAM US CLO LLC
Class A-1L loans(i), $250.00 million: AAA (sf)
Class A-1L notes(i), $0.00 million: AAA (sf)
Class A-2, $53.00 million: AA (sf)
Class B (deferrable), $25.00 million: A+ (sf)
Class C-1 (deferrable), $19.20 million: BBB (sf)
Class C-2 (deferrable), $4.80 million: BBB- (sf)
Class D (deferrable), $12.00 million: BB- (sf)
Subordinated notes, $35.02 million: Not rated
(i)All or a portion of the class A-1L loans can be converted into
class A-1L notes. Any conversion of loans to notes will result in
the reduction of such amount from the class A-1L loans and a
proportionate increase in class A-1L notes. No notes may be
converted to loans. Upon all loans being converted to notes, the
class A-1L loans will cease to be outstanding.
BBCMS MORTGAGE 2023-C21: Fitch Gives 'B-(EXP)' Rating on G-RR Certs
-------------------------------------------------------------------
Fitch Ratings has assigned the following ratings and Rating
Outlooks to BBCMS Mortgage Trust 2023-C21, Commercial Mortgage
Pass-Through Certificates, Series 2023-C21.
- $1,970,000 class A-1 'AAAsf'; Outlook Stable;
- $100,130,000 class A-2 'AAAsf'; Outlook Stable;
- $59,700,000 class A-3 'AAAsf'; Outlook Stable;
- $310,590,000a class A-5 'AAAsf'; Outlook Stable;
- $475,482,000b class X-A 'AAAsf'; Outlook Stable;
- $3,092,000 class A-SB 'AAAsf'; Outlook Stable;
- $84,058,000 class A-S 'AAAsf'; Outlook Stable;
- $29,718,000 class B 'AA-sf'; Outlook Stable;
- $24,623,000 class C 'A-sf'; Outlook Stable;
- $7,642,000cd class D-RR 'BBB+sf'; Outlook Stable;
- $13,585,000cd class E-RR 'BBB-sf'; Outlook Stable;
- $12,736,000cd class F-RR 'BB-sf'; Outlook Stable;
- $8,491,000cd class G-RR 'B-sf'; Outlook Stable.
Fitch does not expect to rate the following class:
- $22,925,690cd class H-RR;
a) Since Fitch published its expected ratings on Sept. 11, 2023,
the balance for class A-5 was finalized. At the time the expected
ratings were published, the initial certificate balances of classes
A-4 and A-5 were expected to be $310,590,000 in aggregate, subject
to a 5% variance. The classes above reflect the final ratings and
deal structure.
b) Notional amount and interest-only.
c) Privately placed and pursuant to Rule 144A.
d) Represents the "eligible horizontal interest" comprising at
least 5.0% of the pool.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 25 loans secured by 152
commercial properties having an aggregate principal balance of
$679,260,690 as of the cut-off date. The loans were contributed to
the trust by Barclays Capital Real Estate Inc., 3650 Real Estate
Investment Trust 2 LLC, Citi Real Estate Funding Inc., Bank of
Montreal, and German American Capital Corporation. The master
servicer is expected to be Midland Loan Services, a Division of PNC
Bank, National Association and the special servicer is expected to
be 3650 REIT Loan Servicing LLC.
Fitch has withdrawn the expected rating of 'AAAsf(Exp)' for class
A-4 because the class was cancelled and will not be issued. The
classes above reflect the final ratings and deal structure.
KEY RATING DRIVERS
Leverage In line with Recent Transactions: The pool's Fitch
loan-to-value ratio (LTV) of 89.3% is in line with the YTD 2023
average of 88.4% and below the 2022 average of 99.3%. The pool's
Fitch net cash flow (NCF) debt yield (DY) of 10.9% is higher than
the YTD 2023 and 2022 averages of 10.8% and 9.9%, respectively.
Excluding credit opinion loans, the pool's Fitch LTV and DY are
96.3% and 10.3%, respectively, in line with the YTD 2023 LTV and DY
averages of 95.2% and 10.5%, respectively.
Investment-Grade Credit Opinion Loans: The pool includes three
loans, representing 18.9% of the total cutoff balance, that
received investment-grade credit opinions. This is below the YTD
2023 average of 20.3% and above the 2022 average of 14.4%. The
Fashion Valley Mall loan (9.2% of the pool) received a standalone
credit opinion of 'AAAsf'. The CX - 250 Water Street loan (7.8%)
received a standalone credit rating of 'BBBsf'. The Back Bay Office
loan (1.8%) received a standalone credit opinion of 'AAAsf'.
Limited Amortization: Based on the scheduled balances at maturity,
the pool is scheduled pay down by 0.8%, which is below both the
2023 YTD and 2022 averages of 1.8% and 3.3%, respectively. The pool
has 22 interest-only loans, or 92.2% of the pool by balance, which
is higher than both the 2023 YTD and 2022 averages of 81.0% and
77.5%, respectively.
Higher Pool Concentration: The pool is more concentrated than
recently rated Fitch transactions. The top 10 loans in the pool
make up 69.0% of the pool, which is greater than the 2023 YTD and
2022 average of 63.2% and 55.2%, respectively. The pool's effective
loan count of 21.1 is greater than the 2023 YTD average of 20.5 and
below the 2022 average of 25.9.
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 below indicates the
model-implied rating sensitivity to changes in one variable, Fitch
NCF:
- Original Rating:
'AAAsf'/'AA-sf'/'A-sf'/'BBB+sf'/'BBB-sf'/'BB-sf'/'B-sf';
- 10% Decline to Fitch NCF:
'AA-sf'/'A-sf'/'BBBsf'/'BBB-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 below indicates the
model-implied rating sensitivity to changes to in one variable,
Fitch NCF:
- Original Rating:
'AAAsf'/'AA-sf'/'A-sf'/'BBB+sf'/'BBB-sf'/'BB-sf'/'B-sf';
- 10% Increase to Fitch NCF:
'AAAsf'/'AA+sf'/'Asf'/'A-sf'/'BBBsf'/'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.
BCC MIDDLE 2023-2: S&P Assigns Prelim BB- (sf) Rating to E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to BCC Middle
Market CLO 2023-2 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 Bain Capital Credit L.P.
The preliminary ratings are based on information as of Oct. 19,
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 portfolio 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 2023-2 LLC
Class A-1, $234.00 million: AAA (sf)
Class A-2, $14.00 million: AAA (sf)
Class B, $24.00 million: AA (sf)
Class C (deferrable), $32.00 million: A (sf)
Class D (deferrable), $24.00 million: BBB- (sf)
Class E (deferrable), $24.00 million: BB- (sf)
Subordinated notes, $44.57 million: Not rated
BENCHMARK 2019-B13: Fitch Affirms B-sf Rating on Class G-RR Certs
-----------------------------------------------------------------
Fitch Ratings has affirmed 16 classes of Benchmark 2019-B13
Mortgage Trust commercial mortgage pass-through certificates,
Series 2019-B13. The Ratings Outlooks for class E, F, G-RR, X-D,
and X-F were revised to Negative from Stable. The Under Criteria
Observation (UCO) has been resolved.
Entity/Debt Rating Prior
----------- ------ -----
BMARK 2019-B13
A-1 08162DAA6 LT AAAsf Affirmed AAAsf
A-2 08162DAB4 LT AAAsf Affirmed AAAsf
A-3 08162DAD0 LT AAAsf Affirmed AAAsf
A-4 08162DAE8 LT AAAsf Affirmed AAAsf
A-M 08162DAG3 LT AAAsf Affirmed AAAsf
A-SB 08162DAC2 LT AAAsf Affirmed AAAsf
B 08162DAH1 LT AA-sf Affirmed AA-sf
C 08162DAJ7 LT A-sf Affirmed A-sf
D 08162DAR9 LT BBBsf Affirmed BBBsf
E 08162DAT5 LT BBB-sf Affirmed BBB-sf
F 08162DAV0 LT BB-sf Affirmed BB-sf
G-RR 08162DAX6 LT B-sf Affirmed B-sf
X-A 08162DAF5 LT AAAsf Affirmed AAAsf
X-B 08162DAK4 LT A-sf Affirmed A-sf
X-D 08162DAM0 LT BBB-sf Affirmed BBB-sf
X-F 08162DAP3 LT BB-sf Affirmed BB-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.
The affirmations reflect the impact of the criteria and generally
stable performance of the pool since the prior rating action.
Fitch's current ratings incorporate a 'Bsf' rating case loss of
4.80%. Fitch identified 13 loans (30.3% of the pool) as Fitch Loans
of Concern (FLOCs), which includes two loans (2.6%) in special
servicing.
The Negative Outlooks on classes E, F, G-RR, X-D and X-F reflect
the exposure to office FLOCs with near-term maturities, namely 900
& 990 Stewart Avenue (4.8% of the pool), Northpoint Tower (2.7%)
and 2975 Breckinridge Boulevard (0.5%). Downgrades are considered
possible should these office FLOCs experience performance declines
and/or fail to repay at maturity.
Largest FLOCs: The Sunset North loan (8.0% of the pool) is secured
by a 464,061-sf suburban office property located in Bellevue, WA.
The largest tenants include Intellectual Ventures (33.1% of the
NRA), ArenaNet (20.9%) and WeWork (16.9%). Overall collateral
performance has remained stable since issuance with occupancy of
99% and NOI DSCR of 3.05x as of TTM June 2023. According to the
June 2023 rent roll, there is minimal near-term rollover in 2023
and 2024.
According to CoStar, the subject is located in the I-90 Corridor
submarket and Seattle MSA, which have exhibited high vacancy rates
of 29.6% and 13.0%, respectively, and even higher availability
rates of 44.9% and 17.6%. The collateral has a vacancy rate of
about 1% and average in-place rents of $32 psf.
Due to the exposure to WeWork and high submarket vacancy and
availability, Fitch's analysis reflects a 10% cap rate and a 20%
stress to the TTM June 2023 NOI, resulting in a 'Bsf' rating case
loss of 5.9% (prior to concentration add-ons).
The CityHyde Park loan (4.8%) is secured by a mixed-use property
located in Chicago, IL. The property features 180 multifamily units
and 111,000-sf of ground floor retail space. The retail space is
anchored by Whole Foods (27.6% of the retail space) and also
features Marshalls (23.6%) and Michaels Stores (16.5%).
As of June 2023, the retail portion was fully occupied while the
multifamily portion was 90% occupied. The loan reported a lower
DSCR of 1.34x as of YTD June 2023 compared to 1.27x as of YE 2022.
The loan was identified as a FLOC due to the lower DSCR. Fitch's
analysis includes a 10% stress to the YE 2022 NOI, resulting in a
'Bsf' rating case loss of a 7.6% loss (prior to concentration
add-ons).
Refinance Risk; Near-Term Maturities: The pool has exposure to six
loans (11.3% of the pool) with loan maturities in 2024, four of
which are office loans (9.0%). Of the maturing office loans, the
probability of default was increased for the 900 & 990 Stewart
Avenue (4.8%), Northpoint Tower (2.7%) and 2975 Breckinridge
Boulevard (0.50%) loans due to their heightened maturity default
risk.
Minimal Changes to CE: As of the September 2023 remittance report,
the pool's aggregate balance has been reduced by 1.5% to $937.9
million from $951.7 million at issuance. No loans have defeased.
There are 23 loans (68.5% of the pool) that are full-term,
interest-only (IO); 10 loans (23.8%) that are currently amortizing;
and seven loans (7.7%) that remain in their partial IO periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- An increase in pool-level losses from underperforming or
specially serviced loans, namely 900 & 990 Stewart Avenue (4.8% of
the pool), Northpoint Tower (2.7%) and 2975 Breckinridge
Boulevard;
- Downgrades to the senior classes (A-1 through A-M) are not
considered likely due to expected continued amortization, but may
occur if losses increase substantially or if there is a likelihood
for interest shortfalls;
- Downgrades to classes B, C, D, and E would likely occur if
multiple larger FLOCs transfer to special servicing and/or pool
expected losses increase significantly;
- Downgrades to classes F and G-RR and would occur with additional
transfer of loans to special servicing, or if performance of the
FLOCs further deteriorate.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Stable to improved asset performance on FLOCs, coupled with
paydown and/or defeasance. Classes would not be upgraded above
'Asf' if there is a likelihood of interest shortfalls;
- Upgrades to classes B and C would occur with large improvements
in CE and/or defeasance and with the stabilization of performance
of the FLOCs/Specially Serviced Assets, namely 900 & 990 Stewart
Avenue (4.8% of the pool), Northpoint Tower (2.7%) and 2975
Breckinridge Boulevard;
- Upgrades to classes D and E would also consider these factors but
would be limited based on sensitivity to concentrations or the
potential for future concentrations;
- Upgrades to classes F and G-RR 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.
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.
BRAVO RESIDENTIAL 2023-RPL1: DBRS Finalizes B(high) on B2 Notes
---------------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the
following Mortgage-Backed Notes, Series 2023-RPL1 issued by BRAVO
Residential Funding Trust 2023-RPL1 (the Trust):
-- $342.3 million Class A-1 at AAA (sf)
-- $34.4 million Class A-2 at AA (high) (sf)
-- $376.7 million Class A-3 at AA (high) (sf)
-- $405.1 million Class A-4 at A (high) (sf)
-- $425.8 million Class A-5 at BBB (high) (sf)
-- $28.4 million Class M-1 at A (high) (sf)
-- $20.7 million Class M-2 at BBB (high) (sf)
-- $14.0 million Class B-1 at BB (high) (sf)
-- $11.5 million Class B-2 at B (high) (sf)
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
The AAA (sf) credit rating on the Class A-1 Notes reflects 31.35%
of credit enhancement provided by subordinated notes. The AA (high)
(sf), A (high) (sf), BBB (high) (sf), BB (high) (sf), and B (high)
(sf) credit ratings reflect 24.45%, 18.75%, 14.60%, 11.80%, and
9.50% of credit enhancement, respectively.
This transaction is a securitization of a portfolio of seasoned
reperforming, first-lien, residential mortgages funded by the
issuance of the Notes. The Notes are 7,781 loans with a total
principal balance of $498,581,961 as of the Cut-Off Date (August
31, 2023).
The portfolio is approximately 192 months seasoned on a
weighted-average (WA) basis and contains 69.8% modified loans. The
modifications happened more than two years ago for 64.9% of the
modified loans. Within the pool, 3,848 mortgages have
non-interest-bearing deferred amounts, which equate to
approximately 7.6% of the total principal balance.
As of the Cut-Off Date, 89.3% of the pool is current, including 64
loans (1.2%) that are current and in active bankruptcy, while 10.7%
of the pool is 30 days delinquent, including 20 loans (0.4%) in
active bankruptcy loans under the Mortgage Bankers Association
(MBA) delinquency method. Approximately 40.4%, 59.7%, and 74.7% of
the mortgage loans by balance have been current for the past 24,
12, and six months, respectively, under the MBA delinquency
method.
The majority of the pool (93.3%) is not subject to the Consumer
Financial Protection Bureau Ability-to-Repay (ATR)/Qualified
Mortgage (QM) rules. The remaining 6.7% of the pool may be subject
to the ATR rules but a designation was not provided. As such, DBRS
Morningstar assumed these loans to be non-QM in its analysis.
PIF Residential Funding V Ltd., an affiliate of Loan Funding
Structure III LLC (the Sponsor), will acquire the loans and
contribute them to the Trust. The Sponsor or one of its
majority-owned affiliates will acquire and retain a 5% eligible
vertical interest in the offered Notes, consisting of 5% of each
class to satisfy the credit risk retention requirements.
The mortgage loans will be serviced by Nationstar Mortgage LLC
doing business as (dba) Rushmore Servicing (Rushmore; 55.0%), Fay
Servicing, LLC (Fay; 26.4%) and Select Portfolio Servicing, Inc.
(SPS; 18.6%). For this transaction, the aggregate servicing fee
paid from the Trust will be 0.40%. In August 2023, Mr. Cooper Group
Inc. (the parent of Nationstar Mortgage LLC dba Mr. Cooper)
acquired investment management firm Roosevelt Management Company,
LLC and its affiliated subsidiaries including Rushmore Loan
Management Services (ie, Rushmore is now part of Mr. Cooper).
There will not be any advancing of delinquent principal or interest
on any mortgages by the Servicers or any other party to the
transaction; however, the Servicers are obligated to make advances
in respect of homeowner association fees, taxes, and insurance as
well as reasonable costs and expenses incurred in the course of
servicing and disposing of properties.
When the aggregate pool balance is reduced to less than 10% of the
balance as of the Cut-Off Date, the holder of the Trust
certificates may purchase all of the mortgage loans and real estate
owned (REO) properties from the Issuer at a price equal to the sum
of principal balance of the mortgage loans; accrued and unpaid
interest thereon; the fair market value of REO properties net of
liquidation expenses; unpaid servicing advances; and any fees,
expenses, or other amounts owed to the transaction parties
(optional termination).
The transaction employs a sequential-pay cash flow structure.
Principal proceeds and excess interest can be used to cover
interest shortfalls on the Notes, but such shortfalls on the Class
M-1 and more subordinate Notes will not be paid from principal
proceeds until the Class A-1 and A-2 Notes are retired. The Class
A1 Notes are entitled to receive Net WAC shortfall amounts that
would otherwise be used to pay current interest or any interest
shortfall amount to the Class B-3, Class B-4, or Class B-5 Notes
reverse sequentially.
Notes: All figures are in U.S. dollars unless otherwise noted.
BREAN ASSET 2023-SRM1: DBRS Finalizes B Rating on Class M5 Notes
----------------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the
following Mortgage-Backed Notes, Series 2023-SRM1 issued by Brean
Asset Backed Securities Trust 2023-SRM1:
-- $109.3 million Class A at AAA (sf)
-- $11.5 million Class M1 at AA (sf)
-- $11.5 million Class M2 at A (sf)
-- $15.7 million Class M3 at BBB (sf)
-- $15.8 million Class M4 at BB (sf)
-- $15.7 million Class M5 at B (sf)
The AAA (sf) credit rating reflects credit enhancement of 46.3% for
Class A, AA (sf) credit rating reflects credit enhancement of 40.7%
for Class M1, A (sf) credit rating reflects credit enhancement of
35.1% for Class M2, BBB (sf) credit rating reflects credit
enhancement of 27.3% for Class M3, BB (sf) credit rating reflects
credit enhancement of 19.6% for Class M4, and B (sf) credit rating
reflects credit enhancement of 11.9% for Class M5.
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
Lenders typically offer reverse mortgage loans to people who are at
least 62 years old. Through reverse mortgage loans, borrowers have
access to home equity through a lump sum amount or a stream of
payments without periodically repaying principal or interest,
allowing the loan balance to accumulate over a period of time until
a maturity event occurs. Loan repayment is required (1) if the
borrower dies, (2) if the borrower sells the related residence, (3)
if the borrower no longer occupies the related residence for a
period (usually a year), (4) if it is no longer the borrower's
primary residence, (5) if a tax or insurance default occurs, or (6)
if the borrower fails to properly maintain the related residence.
In addition, borrowers must be current on any homeowner's
association dues, if applicable. Reverse mortgages are typically
nonrecourse; borrowers don't have to provide additional assets in
cases where the outstanding loan amount exceeds the property's
value (the crossover point). As a result, liquidation proceeds will
fall below the loan amount in cases where the outstanding balance
reaches the crossover point, contributing to higher loss severities
for these loans.
As of the August 31, 2023, cut-off date, the collateral has
approximately $203.70 million in current unpaid principal balance
(UPB) from 189 active and 46 inactive reverse mortgage loans
secured by first liens on single-family residential properties,
condominiums, multifamily (two- to four-family) properties, and
co-operatives. The loans were all originated in 2006 and 2007 and
were originally securitized in the SASCO 2007-RM1 transaction. All
loans in this pool are floating-rate assets with an 8.79%
weighted-average coupon.
As of the cut-off date, the loans in this transaction are both
performing and nonperforming (i.e., active and inactive). There are
189 performing loans, representing 79.85% of the total UPB. As for
the 46 nonperforming loans, 19 loans are referred for foreclosure
or in foreclosure (9.62% of the balance), eight are in default
(2.50%), seven are liquidated/held for sale (3.21%), and 12 are
called due following recent maturity (4.82%). None of the loans are
insured by the United States Department of Housing and Urban
Development (HUD); therefore, inactive loans (including the
currently inactive loans) do not benefit from the typical insurance
claim that HUD-insured loans experience.
The transaction uses a structure in which cash distributions are
made sequentially to each rated note until the rated amounts with
respect to such notes are paid off. No subordinate note shall
receive any payments until the balance of senior notes has been
reduced to zero.
Notes: All figures are in U.S. dollars unless otherwise noted.
BRIDGECREST 2023-1: S&P Assigns Prelim 'BB(sf)' Rating on E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Bridgecrest
Lending Auto Securitization Trust 2023-1's automobile
receivables-backed notes.
The note issuance is an ABS securitization backed by subprime auto
loan receivables.
The preliminary ratings are based on information as of Oct. 12,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The availability of approximately 61.02%, 55.63%, 45.47%,
36.66%, and 32.95% credit support (hard credit enhancement and a
haircut to excess spread) for the class A (collectively, A-1, A-2,
and A-3), B, C, D, and E notes, respectively, based on stressed
break-even cash flow scenarios. These credit support levels provide
at least 2.37x, 2.12x, 1.72x, 1.38x, and 1.25x coverage of its
expected cumulative net loss (ECNL) of 25.50% for the class A, B,
C, D, and E notes, respectively.
-- The expectation that under a moderate ('BBB') stress scenario
(1.38x S&P's expected loss level), all else being equal, its
preliminary 'A-1+'/'AAA (sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)', and
'BB (sf)' ratings on the class A, B, C, D, and E notes,
respectively, will be within 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 that it believes are appropriate for the assigned
preliminary ratings.
-- The collateral characteristics of the subprime automobile
loans, S&P's view of the credit risk of the collateral, and its
updated macroeconomic forecast and forward-looking view of the auto
finance sector.
-- The series' bank accounts at Wells Fargo Bank N.A. (Wells
Fargo), which do not constrain the preliminary ratings.
-- S&P's operational risk assessment of Bridgecrest Acceptance
Corp. (BAC) as servicer, along with our view of the originator's
underwriting and the backup servicing arrangement with
Computershare Trust Co. N.A.
-- S&P's assessment of the transaction's potential exposure to
environmental, social, and governance credit factors that are in
line with our sector benchmark.
-- The transaction's payment and legal structure.
Preliminary Ratings Assigned
Bridgecrest Lending Auto Securitization Trust 2023-1
Class A-1, $66.00 million: A-1+ (sf)
Class A-2, $126.30 million: AAA (sf)
Class A-3, $126.20 million: AAA (sf)
Class B, $60.55 million: AA (sf)
Class C, $81.55 million: A (sf)
Class D, $94.50 million: BBB (sf)
Class E, $43.40 million: BB (sf)
CARVANA AUTO 2023-N3: DBRS Finalizes BB(high) Rating on $31MM Notes
-------------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of notes issued by Carvana Auto Receivables Trust 2023-N3
(the Issuer) as follows:
-- $143,374,000 at AAA (sf)
-- $36,590,000 at AA (high) (sf)
-- $32,857,000 at A (high) (sf)
-- $38,084,000 at BBB (high) (sf)
-- $31,661,000 at BB (high) (sf)
CREDIT RATING RATIONALE/DESCRIPTION
The 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,
subordination, a fully funded 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.
(2) The ability of the transaction to withstand stressed cash flow
assumptions and repay investors according to the terms in which
they have invested. For this transaction, the ratings address the
payment of timely interest on a monthly basis and principal by the
legal final maturity date.
(3) The transaction parties' capabilities with regard to
originations, underwriting, and servicing.
-- DBRS Morningstar performed an operational review of Carvana,
LLC (Carvana) and Bridgecrest Credit Company, LLC and considers the
entities to be an acceptable originator and servicer, respectively,
of auto loans.
(4) The operational history of Carvana and the strength of the
overall company and its management team.
-- Company management has considerable experience in the consumer
lending business.
-- Carvana has a technology-driven platform that focuses on
providing the customer with high-level experience, selection, and
value. Its website and smartphone app provide the consumer with
vehicle search and discovery (currently showing more than 37,000
vehicles online); the ability to trade or sell vehicles almost
instantaneously; and real-time, personalized financing. Carvana has
developed underwriting policies and procedures for use across the
lending platform that leverages technology where appropriate to
validate customer identity, income, employment, residency,
creditworthiness, and proper insurance coverage.
-- Carvana has developed multiple proprietary risk models to
support various aspects of its vertically integrated automotive
lending business. All proprietary risk models used in Carvana's
lending business are regularly monitored and tested. The risk
models are updated from time to time to adjust for new performance
data, changes in customer and economic trends, and additional
sources of third-party data.
(5) The credit quality of the collateral, which includes
Carvana-originated loans with Deal Scores of 49 or lower.
-- As of the September 3, 2023 cut-off date, the collateral pool
for the transaction is primarily composed of receivables due from
nonprime obligors with a weighted-average (WA) FICO score of 574,
WA annual percentage rate of 21.95%, and WA loan-to-value ratio of
101.83%. Approximately 42.66%, 33.31%, and 24.03% of the pool
include loans with Carvana Deal Scores greater than or equal to 30,
between 10 and 29, and between 0 and 9, respectively. Additionally,
0.82% of the collateral balance is composed of obligors with FICO
scores greater than 750, 34.17% consists of FICO scores between 601
to 750, and 65.01% is from obligors with FICO scores less than or
equal to 600 or with no FICO score.
-- DBRS Morningstar analyzed the performance of Carvana's auto
loan and retail installment contract originations and static pool
vintage loss data broken down by Deal Score to determine a
projected CNL expectation for the CRVNA 2023-N3 pool.
(6) The DBRS Morningstar CNL assumption is 15.15% based on the
cut-off date 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.
(7) Carvana's financial condition as reported in its annual report
on Form 10-K filed as of February 23, 2023.
(8) The legal structure and presence of legal opinions, which will
address the true sale of the assets to the Issuer, the
nonconsolidation of the special-purpose vehicle with Carvana, that
the trust has a valid first-priority security interest in the
assets, and consistency with the DBRS Morningstar "Legal Criteria
for U.S. Structured Finance."
The rating on the Class A Notes reflects 53.25% of initial hard
credit enhancement provided by the subordinated notes in the pool
(46.60%), the reserve account (1.25%), and OC (5.40%). The ratings
on the Class B, C, D, and E Notes reflect 41.00%, 30.00%, 17.25%,
and 6.65% 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 referenced
herein 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 notes are the related Accrued Note Interest and the related
Note Balance.
DBRS Morningstar's credit rating does not address non-payment risk
associated with contractual payment obligations 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. The DBRS Morningstar short-term debt
rating scale provides an opinion on the risk that an issuer will
not meet its short-term financial obligations in a timely manner.
Notes: All figures are in U.S. dollars unless otherwise noted.
CD 2019-CD8: Fitch Lowers Rating on Class G-RR Debt to CCCsf
------------------------------------------------------------
Fitch Ratings has downgraded one and affirmed 15 classes of CD
2019-CD8 Mortgage Trust. In addition, Fitch has revised the Rating
Outlook to Negative from Stable on four of the affirmed classes.
The Under Criteria Observation (UCO) has been resolved.
Entity/Debt Rating Prior
----------- ------ -----
CD 2019-CD8
A-1 12515BAA6 LT AAAsf Affirmed AAAsf
A-2 12515BAB4 LT AAAsf Affirmed AAAsf
A-3 12515BAD0 LT AAAsf Affirmed AAAsf
A-4 12515BAE8 LT AAAsf Affirmed AAAsf
A-M 12515BAG3 LT AAAsf Affirmed AAAsf
A-SB 12515BAC2 LT AAAsf Affirmed AAAsf
B 12515BAH1 LT AA-sf Affirmed AA-sf
C 12515BAJ7 LT A-sf Affirmed A-sf
D 12515BAR9 LT BBBsf Affirmed BBBsf
E 12515BAT5 LT BBB-sf Affirmed BBB-sf
F 12515BAV0 LT BB-sf Affirmed BB-sf
G-RR 12515BAX6 LT CCCsf Downgrade B-sf
X-A 12515BAF5 LT AAAsf Affirmed AAAsf
X-B 12515BAK4 LT A-sf Affirmed A-sf
X-D 12515BAM0 LT BBB-sf Affirmed BBB-sf
X-F 12515BAP3 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.
Fitch's current ratings incorporate a 'Bsf' rating case loss of
5.8%. Seven loans (28.5% of the pool) are considered Fitch Loans of
Concern (FLOCs), one (2.3%) of which is in special servicing.
The downgrade reflects a greater certainty of loss to the class,
the impact of the updated criteria and increased pool loss
expectations since the prior rating action. The Negative Outlooks
are driven primarily by performance concerns on the larger FLOCs,
including the specially serviced loan, 63 Spring Street (2.3%), and
Hilton Penn's Landing (8.7%).
FLOCs/Largest Contributors to Loss: The largest contributor to
overall loss expectations is the specially serviced 63 Spring
Street loan, which is secured by a mixed-use retail and multifamily
property located in Manhattan, near the neighborhoods of SoHo and
Nolita. The collateral consists of four residential units and
approximately 1,100 sf of ground floor retail.
The loan transferred to special servicing in June 2020 for payment
default. The borrower originally requested a loan modification, but
never proposed a resolution. Foreclosure was filed in February
2022. According to the servicer, the loan is being evaluated for a
potential note sale and a receiver was appointed in June 2023,
which is in the process of transitioning the property.
As of the July 2023 rent roll, the retail portion of the property
was 100% leased by two tenants, Baked Fourteenth (4.3% of retail
NRA leased through August 2027) and Blank Street Inc. (95.6% of
retail NRA; with 69.6% expiring in June 2028 and 26% expiring in
January 2025; pays only percentage rent). Blank Street assumed the
larger 800 sf (69.6% of retail NRA) retail space, with a lease that
commenced in July 2023 through June 2028, that was formerly
occupied by L'Occitane. In addition, Blank Street occupies 300 sf
retail space that was formerly occupied by Brodo.
All four of the multifamily units were occupied as of July 2023, up
from 50% occupancy in January 2022 and 0% occupancy in January
2021. The building also receives approximately $115,000 annually in
the form of cell tower revenue and billboard revenue. The property
had been 100% occupied at the time of issuance.
Fitch's 'Bsf' rating case loss (prior to concentration add-ons) is
51.7%, which reflects the most recently available appraisal and
factors the higher loan exposure since the prior rating action.
The second largest contributor to loss is the Hilton Penn's Landing
loan (8.7%), which is secured by the leasehold interest in a
350-key full-service hotel located in Philadelphia, PA. The loan
has been designated a FLOC due to declining occupancy and cash flow
as a result of the pandemic. The loan was brought current and
returned to the master servicer in March 2022 after having
transferred to special servicing in December 2020 due to payment
default. The loan has remained current over the past 12 months, as
of September 2023.
The improvements are subject to a ground lease with the
Redevelopment Authority of Philadelphia, the City of Philadelphia
and the Commonwealth of Pennsylvania. The ground lease expires in
October 2029, with two options to extend the term for 55 years.
The servicer-reported YE 2022 NOI debt service coverage ratio
(DSCR) was 1.55x compared with 0.65x at YE 2021 and negative YE
2020 financials. TTM December 2022 property occupancy, ADR and
RevPAR were 59.9%, $211.37 and $126.61, up from 39.5%, $149.18 and
$58.94 at YE 2020, but still generally below 85.9%, $200.63 and
$172.35 reported at YE 2019.
Fitch's 'Bsf' loss of 11.9% (prior to concentration adjustments)
utilized an 11.25% cap and the YE 2022 NOI.
The third largest contributor to loss is the Woodlands Mall loan
(8.7%), which is secured by the 758,000-sf portion of a 1.47
million sf super regional mall located in The Woodlands, TX, about
30 miles north of the Houston CBD. The non-collateral anchors are
Macy's, Dillard's, JC Penney, and Nordstrom. The largest collateral
tenants include Forever 21 (11.3% of collateral NRA leased through
January 2024), Dick's Sporting Goods (11%; January 2027) and Barnes
& Noble (4%; January 2025).
Property performance has improved since the onset of the pandemic.
Collateral occupancy was 98% in March 2023, compared with 97% at YE
2021 and 94.9% at YE 2020. The servicer-reported YE 2022 NOI DSCR
remained strong at 3.79x, compared with YE 2021 of 3.45x and 3.43x
at YE 2020. Comparable inline tenant sales for tenants less than
10,000 sf are $811 psf ($652 psf excluding Apple) as of TTM March
2023, $787 psf ($547 psf) as of TTM March 2022, $458 psf ($425 psf)
as of TTM March 2021, $457 psf ($407 psf) at YE 2020 and $708 psf
($569 psf) as of TTM May 2019 at the time of issuance. The decline
in sales in 2021 is mainly attributed to the effects of the
pandemic on mall foot traffic.
Fitch's 'Bsf' loss of 6.6% (prior to concentration adjustments)
utilized a 12.0% cap and 7.5% stress on the YE 2022 NOI.
Minimal Change in CE: As of the September 2023 distribution date,
the pool's aggregate principal balance has paid down by 1.0% to
$803.1 million from $811.1 million at issuance. Of the current
pool, 23 loans (77.2%) are full-term IO, and seven loans (12.9%)
have a partial-term IO period. Since issuance, no loans have been
disposed from the pool and two loans (1.9%) are fully defeased.
Cumulative interest shortfalls totaling $940,284 are currently
affecting class J-RR. The pool has experienced no realized losses
since issuance.
Credit Opinion Loans: Three loans, totaling 16.4% of the pool, were
given investment-grade credit opinions at issuance.
The Moffett Towers II - Buildings 3 & 4 (4.3%) and Crescent Club
(3.4%) loans remain as credit opinion loans, while the Woodlands
Mall loan (8.7%) is no longer considered to have credit
characteristics consistent with an investment-grade credit
opinion.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to classes A-1, A-2, A-3, A-4, A-SB, A-M, and X-A are
not expected due to the continued expected amortization and
sufficient CE relative to loss expectations, but may occur should
interest shortfalls affect these classes. Downgrades to class B, C,
X-B, D, E, and X-D may occur should the FLOCs, particularly the
specially serviced loan, 63 Spring Street, and the Hilton Penn's
Landing, experience continued performance deterioration and/or
additional loans expected to refinance transfer to special
servicing or defaults. Downgrades to classes F, X-F, and G-RR 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 classes B, C, X-B, D, E, and X-D may occur with
significant improvement in CE and/or defeasance, as well as with
the stabilization of performance on the FLOCs, particularly the
specially serviced loan, 63 Spring Street, and the Hilton Penn's
Landing. Upgrades to classes F and X-F are considered unlikely and
would be limited based on concentrations or the potential for
future concentration. Classes would not be upgraded above 'Asf' if
interest shortfalls were likely. An upgrade to the distressed class
G-RR is not likely unless resolution of the specially serviced loan
is better than expected and/or recoveries on the FLOCs are
significantly better than expected, 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.
CG-CCRE COMMERCIAL 2014-FL2: S&P Affirms 'CCC' Rating on D Notes
----------------------------------------------------------------
S&P Global Ratings lowered its ratings on three classes of
commercial mortgage pass-through certificates from CG-CCRE
Commercial Mortgage Trust 2014-FL2, a U.S. CMBS transaction. At the
same time, S&P affirmed its ratings on four other classes from the
transaction.
This U.S. large-loan commercial mortgage-backed securities (CMBS)
transaction is currently backed by two uncrossed mortgage loans
secured by the borrowers' fee simple interests in a portion (1.24
million sq. ft.) of South Towne Center, a 1.28 million-sq.-ft.
regional mall and adjacent power center in Sandy, Utah, and a
portion (759,750 sq. ft.) of Colonie Center, a 1.33 million-sq.-ft.
super-regional mall in Albany, N.Y.
Rating Actions
The downgrades on classes A, B, and C reflect:
-- S&P's revised combined valuation, which is lower than the
aggregated valuation we derived in its last review in June 2022,
due primarily to lower-than-expected ongoing net cash flows (NCFs)
at the underlying retail properties;
-- S&P's belief that the borrowers will likely continue to
experience difficulty refinancing the two remaining loans at their
final maturities in December 2023 and November 2025 based on the
most recent available performance data, sub-1.00x reported debt
service coverages (DSCs), updated appraisal values, and current
market conditions; and
-- S&P's concerns with the borrowers' ability to make their debt
service payments timely if the properties' NCFs do not further
improve. The South Towne Center loan is on the master servicer's
watchlist due to a low reported DSC, which was 0.53x as of the
trailing-12-months ended June 30, 2023, and 0.73x as of year-end
2022. The Colonie Center loan, while currently not on the master
servicer's watchlist, had a reported DSC of 0.52x for the six
months ended June 30, 2023, and 1.01x as of year-end 2022.
Specifically, the downgrade on class C to 'CCC (sf)' and
affirmations of class D at 'CCC (sf)' and classes COL1, COL2, and
STC1 at 'CCC- (sf)' reflect S&P's view that these classes are/or
continue to be susceptible to reduced liquidity support, and that
the risk of default and loss is/or remains elevated based on its
revised lower expected-case values, current market conditions, and
their position in the payment waterfall.
The model-indicated rating for class A was higher due to the
class's balance being reduced by 82.4% to $49.8 million since
issuance from loan payoffs and amortization. S&P said, "However, we
lowered our rating on class A because we qualitatively considered
that the transaction faces adverse selection and may experience
liquidity constraints. The two remaining loans failed to refinance
upon their initial final maturity dates in 2019. As we discussed
earlier, we believe it is unlikely that the borrowers will be able
to refinance the two remaining loans without contributing
significant equity." While the performances of both malls appear to
have stabilized, they are well below pre-COVID-19 levels. Both
loans have sub-1.00x reported DSCs.
Transaction Summary
As of the Sept. 15, 2023, trustee remittance report, the
transaction consists of two uncrossed mortgage loans with a pooled
trust balance of $177.5 million and a trust balance of $243.5
million (including the non-pooled loan components), compared to two
loans with a pooled trust balance of $179.5 million and a trust
balance of $246.6 million in our last review in June 2022. At
issuance, the transaction comprised six loans with a pooled trust
balance of $410.2 million and a trust balance of $512.0 million. To
date, the pooled trust incurred a de minimis realized loss of $14.
Details on the two remaining loans are below.
Loan Details And Property-Level Analysis
South Towne Center loan (60.7% of the pooled trust balance)
The South Towne Center loan, the larger of the two remaining loans
in the pool, has a whole loan balance of $139.4 million that is
divided into a $107.7 million senior pooled trust component (60.7%
of the pooled trust balance) and a $31.7 million subordinate
non-pooled trust component that supports the class STC1, STC2, and
STC3 certificates. Classes STC2 and STC3 are not rated by S&P
Global Ratings. At loan origination, the equity interest in the
borrower of the whole loan secured $20.0 million in mezzanine debt.
However, it is our understanding that the mezzanine debt was
extinguished as part of the 2021 loan modification. The
interest-only (IO) whole loan, which has a current payment status,
pays a floating interest rate currently indexed to an alternate
index rate plus gross margin (2.49718% [pooled] and 4.6168%
[non-pooled]) per year, and originally matured on Nov. 9, 2019. The
loan previously transferred to special servicing on Oct. 30, 2019,
due to imminent maturity default. According to the special
servicer, KeyBank Real Estate Capital (KeyBank), the loan was
assumed and modified on May 13, 2021, and returned to the master
servicer, also KeyBank, on Aug. 24, 2021. As part of the loan
modification, a new sponsor assumed the loan and provided a new
guarantor. In addition, the loan's maturity date was extended to
Nov. 9, 2023, and the borrower has two additional one-year
extension options (revised final maturity date is on Nov. 9, 2025),
and the 166,000-sq.-ft. anchor space formerly occupied by Dillard's
(now partially occupied by tenants, Round One and Home Goods) was
contributed as additional collateral for the loan. According to
KeyBank, it is currently reviewing the borrower's request to
exercise its option to extend the loan's maturity to Nov. 9, 2024.
The South Towne Center loan is secured by the borrower's fee simple
interest in 1.24 million sq. ft. (up from 1.07 million sq. ft. at
issuance after including the anchor space formerly occupied by
Dillard's as collateral) of a 1.28 million-sq.-ft. super-regional
mall and adjacent power center in Sandy, Utah.
According to the July 31, 2023, rent roll, the collateral was 87.7%
occupied, up marginally from 83.2% in S&P's June 2022 review. The
five largest tenants comprising 43.1% of the collateral's net
rentable area (NRA) included:
-- Target (14.8% of NRA; May 2026 lease expiration);
-- JCPenney (8.1%; March 2024);
-- Automotive Addiction (8.1%; June 2024);
-- Utah Arts Alliance (8.1%; June 2023. The tenant still appears
in mall directory as of October 2023); and
-- Round One Entertainment (4.0%; July 2028).
The mall faces concentrated tenant rollover in the near term:
-- 15.9% of NRA in 2023 and 24.0% in 2024.
S&P said, "The servicer reported that NCF was $5.0 million as of
the trailing-12-months ended June 30, 2023, up 7.8% from $4.6
million in 2022; however, it is still below the pre-pandemic levels
of $11.1 million in 2019 and our assumed NCF of $6.9 million. As a
result, we revised and lowered our long-term sustainable NCF by
23.6% from our last review to $5.3 million. In our current
analysis, we utilized an in-place vacancy of 15.8%, S&P Global
Ratings' base rent of $9.14 per sq. ft. and gross rent of $9.75 per
sq. ft. and operating expense ratio of 53.7%. We then divided our
NCF by a 10.00% S&P Global Ratings' capitalization rate (unchanged
from our last review), resulting in our expected-case value of
$52.9 million, down 23.6% from $69.3 million in our last review and
59.1% lower than the updated January 2022 appraisal value of $129.4
million. This yielded an S&P Global Ratings' loan-to-value (LTV)
ratio of 263.5% on the whole loan balance."
Colonie Center loan (39.3% of the pooled trust balance)
The Colonie Center loan, the smaller of the two loans remaining in
the pool, currently has a whole loan balance of $104.1 million that
is split into a $69.7 million senior pooled trust component (39.3%
of pooled trust balance) and a $34.4 million subordinate non-pooled
trust component that supports the class COL1, COL2, COL3, and COL4
certificates. Classes COL3 and COL4 are not rated by S&P Global
Ratings. The whole loan, which previously paid floating interest
rate, currently pays a fixed interest rate of 3.05% per year after
it was modified in 2021, and originally matured on Aug. 9, 2019.
The whole loan was transferred to special servicing on July 26,
2019, for imminent default because the borrower was unable to pay
off the loan at maturity. According to the special servicer,
KeyBank, the whole loan, which has a reported current payment
status, was modified effective Feb. 9, 2021, and was returned to
the master servicer on June 1, 2021, as a corrected mortgage loan.
In addition to converting to fixed interest rate, the modification
terms included extending the loan's final maturity date to Dec. 9,
2023, and converting it to amortizing from IO.
The Colonie Center whole loan is secured by the borrower's fee
simple interest in 759,750 sq. ft. of a 1.33 million-sq.-ft.
super-regional mall in Albany, N.Y.
The collateral's occupancy rate was 97.5%, according to the March
31, 2023, rent roll, which is relatively flat from 97.8% in our
last review. The five-largest collateral tenants, which made up
53.7% of collateral NRA, included:
-- Boscov's (29.8% of NRA; October 2028 lease expiration);
Christmas Tree Shop (7.5%; December 2028. According to various
media reports, the tenant has permanently closed its store at this
location);
-- Regal Cinemas (7.3%; May 2028);
-- Nordstrom Rack (4.6%; September 2025); and
-- Barnes & Noble Booksellers (4.6%; January 2033).
S&P noted that the non-collateral anchor space formerly occupied by
Sears (275,811 sq. ft.) is partially leased to Whole Foods. The
property faces staggered tenant rollover (less than 10.0% of NRA)
until 2028, when 50.0% of NRA rolls.
The servicer reported that the annualized six months ended June 30,
2023, NCF was $5.4 million, down 23.7% from $7.1 million in 2022.
S&P Said, "The mall is also performing below the pre-pandemic
levels of $10.2 million in 2019 and our assumed NCF of $6.8 million
in the June 2022 review. Consequently, we revised and lowered our
long-term sustainable NCF to $5.9 million, down 13.3% from our last
review. Our current analysis used in-place vacancy of 2.5%, S&P
Global Ratings' base rent of $15.68 per sq. ft. and gross rent of
$19.53 per sq. ft., and an operating expense ratio of 60.6%. We
then divided our NCF by a 9.25% S&P Global Ratings' capitalization
rate (unchanged from the last review), resulting in our
expected-case value of $64.3 million, which is 13.3% lower than our
last review value of $74.1 million and 34.1% below the October 2020
appraisal value of $97.6 million. This yielded an S&P Global
Ratings' LTV ratio of 161.9% on the whole loan balance."
Ratings Lowered
CG-CCRE Commercial Mortgage Trust 2014-FL2
Class A to 'A+ (sf)' from 'AA (sf)'
Class B to 'B+ (sf)' from 'BB+ (sf)'
Class C to 'CCC (sf)' from 'B- (sf)'
Ratings Affirmed
CG-CCRE Commercial Mortgage Trust 2014-FL2
Class D: CCC (sf)
Class COL1: CCC- (sf)
Class COL2: CCC- (sf)
Class STC1: CCC- (sf)
CHASE HOME 2023-RPL2: DBRS Finalizes B(high) Rating on B-2 Certs
----------------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the Mortgage
Certificates, Series 2023-RPL2 (the Certificates) issued by Chase
Home Lending Mortgage Trust 2023-RPL2 (CHASE 2023-RPL2 or the
Trust):
-- $376.8 million Class A-1-A at AAA (sf)
-- $27.8 million Class A-1-B at AAA (sf)
-- $404.6 million Class A-1 at AAA (sf)
-- $22.6 million Class A-2 at AA (low) (sf)
-- $13.0 million Class M-1 at A (low) (sf)
-- $10.1 million Class M-2 at BBB (low) (sf)
-- $6.8 million Class B-1 at BB (low) (sf)
-- $3.5 million Class B-2 at B (high) (sf)
The AAA (sf) credit rating on the Class A-1-A, Class A-1-B, and
Class A-1 Certificates reflects 14.10% of credit enhancement,
provided by subordinated notes in the transaction. The AA (low)
(sf), A (low) (sf), BBB (low) (sf), BB (low) (sf), and B (high)
(sf) credit ratings reflect 9.30%, 6.55%, 4.40%, 2.95%, and 2.20%
of credit enhancement, respectively.
Other than the classes specified above, DBRS Morningstar does not
rate any other classes in this transaction.
This transaction is a securitization of a portfolio of primarily
seasoned performing and reperforming first-lien residential
mortgages and funded by the issuance of mortgage certificates (the
Certificates). The Certificates are backed by 2,149 loans with a
total principal balance of $495,814,766 as of the Cut-Off Date
(August 31, 2023).
JPMorgan Chase Bank, N.A. (JPMCB) will serve as the Sponsor and
Mortgage Loan Seller of the transaction. JPMCB will act as the
Representing Party, Servicer, and Custodian. DBRS Morningstar rates
JPMCB's Long-Term Issuer Rating and Long-Term Senior Debt at AA and
its Short-Term Instruments rating R-1 (high), all with Stable
trends.
The loans are approximately 207 months seasoned on average. As of
the Cut-Off Date, 99.7% of the pool is current under the Mortgage
Bankers Association (MBA) delinquency method, and 0.3% is in
bankruptcy. All the bankruptcy loans are currently performing.
Approximately 98.7% and 77.0% of the mortgage loans have been zero
times (x) 30 days delinquent for the past 12 months and 24 months,
respectively, under the MBA delinquency method.
Within the portfolio, 99.0% of the loans are modified. The
modifications happened more than two years ago for 92.9% of the
modified loans. Within the pool, 968 mortgages have
non-interest-bearing deferred amounts, which equates to 11.8% of
the total principal balance. Unless specified otherwise, all
statistics on the mortgage loans in the related report are based on
the current balance, including the applicable non-interest-bearing
deferred amounts.
One of the Sponsor's majority-owned affiliates will acquire and
retain a 5% vertical interest in the transaction, consisting of an
uncertificated interest in the issuing entity, to satisfy the
credit risk retention requirements. Such uncertificated interest
represents the right to receive at least 5% of the amounts
collected on the mortgage loans (net of fees, expenses, and
reimbursements).
There will not be any advancing of delinquent principal or interest
on any mortgage by the Servicer or any other party to the
transaction; however, the Servicer is generally obligated to make
advances in respect of taxes, and insurance as well as reasonable
costs and expenses incurred in the course of servicing and
disposing of properties.
For this transaction, the servicing fee payable for the mortgage
loans is composed of three separate components: the base servicing
fee, the delinquent servicing fee, and the additional servicing
fee. These fees vary based on the delinquency status of the related
loan and will be paid from interest collections before distribution
to the securities.
On any Distribution Date when the aggregate unpaid principal
balance (UPB) of the mortgage loans is less than 10% of the
aggregate Cut-Off Date UPB, the Servicer (and its successors and
assigns) will have the option to purchase all of the mortgage loans
at a purchase price equal to the sum of the UPB of the mortgage
loans, accrued interest, the appraised value of the real estate
owned properties, and any unpaid expenses and reimbursement
amounts.
The transaction employs a sequential-pay cash flow structure.
Principal proceeds can be used to cover interest shortfalls on the
Certificates, but such shortfalls on Class M-1 and more subordinate
bonds will not be paid from principal proceeds until Class A-1-A,
A-1-B, and A-2 are retired.
Notes: All figures are in U.S. dollars unless otherwise noted.
CITIGROUP 2018-C5: Fitch Affirms 'B-sf' Rating on Class G-RR Certs
------------------------------------------------------------------
Fitch Ratings has affirmed 13 classes and revised the Rating
Outlooks on two classes of Citigroup Commercial Mortgage Trust
(CGCMT) 2018-C5 commercial mortgage pass-through certificates,
series 2018-C5. The Rating Outlook has been revised to Negative
from Stable on classes E-RR and F-RR. The under criteria
observation (UCO) has been resolved.
Entity/Debt Rating Prior
----------- ------ -----
CGCMT 2018-C5
A-3 17291DAC7 LT AAAsf Affirmed AAAsf
A-4 17291DAD5 LT AAAsf Affirmed AAAsf
A-AB 17291DAE3 LT AAAsf Affirmed AAAsf
A-S 17291DAF0 LT AAAsf Affirmed AAAsf
B 17291DAG8 LT AA-sf Affirmed AA-sf
C 17291DAH6 LT A-sf Affirmed A-sf
D 17291DAJ2 LT BBB-sf Affirmed BBB-sf
E-RR 17291DAL7 LT BBB-sf Affirmed BBB-sf
F-RR 17291DAN3 LT BB-sf Affirmed BB-sf
G-RR 17291DAQ6 LT B-sf Affirmed B-sf
X-A 17291DAU7 LT AAAsf Affirmed AAAsf
X-B 17291DAV5 LT AA-sf Affirmed AA-sf
X-D 17291DAW3 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.
The affirmations reflect the impact of the updated criteria and
stable pool performance since the prior rating action. The Negative
Outlooks are based on performance concerns and an additional
sensitivity scenario that incorporated an increased probability of
default on the 636 11th Avenue (11.7% of the pool), Oak Portfolio
(2.6%) and Champlain Mill (1.9%) loans. Five loans (22.1%) are
considered Fitch Loans of Concern (FLOCs). Fitch's current ratings
incorporate a 'Bsf' rating case loss of 3.9%.
FLOCs: The largest FLOC and second largest contributor to losses,
636 11th Avenue, is secured by a 564,004-sf office building along
the east side of 11th Avenue between West 46th and West 47th
Streets in the Hell's Kitchen neighborhood of Manhattan. The
property was 100% occupied by The Ogilvy Group, Inc. on a lease
through June 2029. Fitch noted the tenant vacated the property in
2021 at the last rating action. No additional updates have since
been received. Ogilvy continues to pay its rental obligations, and
the loan has remained current.
The loan is structured with a springing cash flow sweep if the
tenant goes bankrupt, fails to renew 18 months prior to lease
expiration, goes dark (except during the initial nine years of the
loan if the tenant maintains an investment-grade rating and its
lease is in full force and effect), vacates or abandons 40% or more
of its space. The parent entity, WPP Plc, has historically
maintained an investment-grade rating. Fitch's 'Bsf' rating case
loss (prior to concentration adjustments) of 4.3% reflects a 9.25%
cap rate and a 10% stress at YE 2022 NOI. Fitch also considered a
scenario that factors in an increased probability of default on the
loan, which contributed to the Negative Outlooks.
The second largest FLOC and largest contributor to losses, 650
South Exeter Street (4.5%), is secured by a 206,335-sf mixed used
property with office and parking components located in Baltimore,
MD. The loan was flagged as a FLOC due to continued low occupancy
and DSCR following the loss of two largest tenants. Laureate
Education Inc. (50% NRA and 60% base rent; original exp. June 30,
2027) vacated in June 2022 after exercising its termination right
in 2021. The second largest tenant, Morgan Stanley Smith Barney
(18% NRA and 23% rent), vacated at its September 2022 lease
expiration. The property was 13% occupied as of March 2023 down
from 32% at YE 2022 and 83% at YE 2021. The DSCR was reported at
-0.28x as of March 2023, down from 2.20x at YE 2022. Fitch's 'Bsf'
rating case loss (prior to concentration adjustments) of 25.6%
factors in an increased probability of default, a 9.5% cap rate and
a 7.5% stress to the YE 2022 NOI.
Increased CE: As of the September 2023 distribution date, the pool
has paid down by 16.7% to $556.4 million from $668.2 million at
issuance. Five loans (15.2%), including two top 15 loans (11.8%),
are defeased. There are 14 loans (56%) that are full-term interest
only and 12 loans (29.5%) structured with a partial interest-only
period, all of which have exited their interest-only period.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades would be triggered by an increase in pool-level losses
from underperforming and/or transfer of loans to special servicing.
In addition, downgrades to classes with Negative Outlooks are
expected with higher than expected losses on FLOCs, most notably
636 11th Avenue.
Downgrades to classes rated 'AAAsf' and 'AA-sf' are not expected
due to their increasing CE and continued expected amortization, but
could occur if interest shortfalls affect these classes or if
expected losses increase significantly.
Downgrades to classes rated 'A-sf' and 'BBB-sf' would occur should
expected losses for the pool increase significantly, and/or
performing FLOCs begin to experience performance decline beyond
expectations.
Classes rated 'BB-sf' and 'Bsf' would be downgraded with a greater
certainty of losses and/or as losses are realized.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to 'AA-sf' to 'A-sf' rated classes would only occur with
significant improvement in CE and/or defeasance, and the
performance stabilization of FLOCs, including 636 11th Avenue, Oak
Portfolio and Champlain Mill.
Upgrades to 'BBB-sf' rated classes may occur as the number of FLOCs
are reduced and/or loss expectations improve. Classes would not be
upgraded above 'Asf' if there were likelihood of interest
shortfalls.
Upgrades to 'BB-sf' and 'B-sf' rated classes are not likely until
the later years of the transaction and only if the performance of
the remaining pool stabilizes 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.
COMM 2013-CCRE7: DBRS Confirms BB Rating on Class E Certs
---------------------------------------------------------
DBRS, Inc. downgraded its credit ratings on two classes of
Commercial Mortgage Pass-Through Certificates, Series 2013-CCRE7
issued by COMM 2013-CCRE7 Mortgage Trust as follows:
-- Class F to CCC (sf) from B (sf)
-- Class G to C (sf) from CCC (sf)
In addition, DBRS Morningstar confirmed its credit ratings on the
following classes:
-- Class D at BBB (sf)
-- Class E at BB (sf)
The trends on Classes D and E remain Stable, while Classes F and G
have credit ratings that typically do not carry trends in
commercial mortgage-backed securities (CMBS) ratings. The
downgrades follow DBRS Morningstar's increased loss projections for
the remaining assets, attributed to recent maturity defaults and
declining property values. Since the last credit rating action in
November 2022, 40 loans have repaid from the trust, leaving the
remaining pool very concentrated with only two loans still
outstanding. Both loans are in special servicing, with foreclosure
proceedings under way. In addition to the increased loss
expectations, DBRS Morningstar notes the propensity for interest
shortfalls to accumulate given that the two loans are delinquent.
Interest payments were shorted on both the Class G and nonrated
Class H certificates with the September 2023 remittance.
The larger of the two remaining loans is Lakeland Square Mall
(Prospectus ID#2, 69.2% of the pool). The collateral includes
535,937 square feet (sf) of in-line and anchor space in an
883,290-sf regional mall in Lakeland, Florida, 35 miles east of
Tampa. Two noncollateral anchor pads, previously leased to Sears
and Burlington, are vacant. Another noncollateral anchor pad
previously occupied by Macy's has been released to Resale America,
which has an upcoming expiration in December 2023. Remaining anchor
tenants include Dillard's (noncollateral) and JCPenney (19.4% of
the net rentable area (NRA), lease through November 2025). The
in-line space was 74.6% occupied according to a March 2023 rent
roll, and total collateral occupancy was 77.5%, down from 93.1% at
YE2022 following the departure of Burlington at its March 2023
lease expiration. Leases representing 15.4% of the NRA have already
expired or will expire within the next 12 months.
The loan transferred to special servicing in May 2023 after it
failed to repay at the April 2023 maturity. According to recent
servicer commentary, the sponsor, an affiliate of Brookfield
Property Partners, is no longer committed to the property and the
appointment of a receiver and the initiation of foreclosure
proceedings are in process. An updated appraisal has not yet been
made available, but DBRS Morningstar expects the as-is value has
likely declined significantly given the lower occupancy rate and
the lower investor demand for regional malls, particularly those in
secondary markets such as the subject. Based on similarly
positioned regional malls for which updated appraisals have been
received in the last few years, DBRS Morningstar estimated
liquidation scenarios based on haircuts between 50% and 70% of the
issuance value for the mall, with loss severities ranging between
approximately 25% and 60%.
The smaller remaining loan is 20 Church Street (Prospectus ID#8,
30.8% of the pool). The loan is secured by a 23-story office
building in the central business district of Hartford, Connecticut.
Property occupancy has been steady at 79.1% as of the July 2023
rent roll, relatively unchanged from 2022 and 2021 but down from
87% at YE2020. The largest tenant, CareCentrix (18.3% of the NRA)
has an upcoming lease expiration in December 2023. Leases
representing an additional 1.9% of the NRA are scheduled to expire
in the next 12 months. Reis reports that the Hartford central
business district office submarket experienced an average vacancy
rate of 25.4% for Q2 2023.
The loan transferred to special servicing in March 2022 for payment
default and is now past its April 2023 maturity. A modification
proposal ultimately fell through, and the special servicer is
pursuing receivership and foreclosure. A March 2023 appraisal
valued the property at $17.4 million, down from the May 2022
appraised value of $34.3 million and the issuance appraised value
of $35.0 million. DBRS Morningstar's projected loss severity, which
is in excess of 55%, is based on a stress to the most recent
appraised value.
The lower end of DBRS Morningstar's projected liquidated losses are
anticipated to fully reduce the balance to the unrated Class H
certificate and partially reduce the Class G certificate. The
higher end of the liquidated loss estimate, based on a higher
haircut to the issuance value for Lakeland Square Mall, would fully
erode both the Class G and Class F certificates. DBRS Morningstar
notes that loss projections may increase should the property values
decline further or the loans languish in special servicing with
servicing advances accumulating. Given the property locations,
condition, and the general lack of liquidity for these asset types,
DBRS Morningstar believes the resolution periods could be
extended.
Notes: All figures are in U.S. dollars unless otherwise noted.
COMM 2015-CCRE27: DBRS Confirms B Rating on Class X-E Certs
-----------------------------------------------------------
DBRS Limited confirmed its credit ratings on all classes of
Commercial Mortgage Pass-Through Certificates, Series 2015-CCRE27
issued by COMM 2015-CCRE27 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 (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
-- Class X-C at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class X-D at BB (low) (sf)
-- Class F at B (high) (sf)
-- Class X-E at B (sf)
-- Class G at B (low) (sf)
All trends are Stable.
The credit rating confirmations reflect DBRS Morningstar's outlook
and loss expectations for the transaction, which remain relatively
unchanged from the last review. However, there are some challenges
for the pool, including a moderate concentration of specially
serviced loans, representing 11.5% of the pool balance. In
addition, loans secured by office properties, represent nearly
18.0% of the pool balance. The office sector has faced challenges
in recent years given increased vacancy rates in many submarkets as
a result of changes in workplace dynamics. There are mitigating
factors, including a sizable unrated first loss piece totaling
$29.1 million. The transaction also benefits from defeasance
collateral, totaling 29.7% of the current pool balance. Overall,
the pool continues to exhibit healthy credit metrics, as evidenced
by the weighted-average debt service coverage ratio (DSCR), which
was approximately 2.0 times (x) based on the YE2022 financials.
As of the September 2023 remittance, 60 of the original 65 loans
remain in the pool with an aggregate principal balance of $777.9
million, reflecting collateral reduction of 16.5% from issuance.
There are 12 loans, representing 16.5% of the pool, on the
servicer's watchlist that are primarily being monitored for
declines in occupancy and/or DSCR. Of the six loans in special
servicing, the Evergreen Square loan (Prospectus ID#39, 0.8% of the
pool), which is secured by an anchored shopping center in Peoria,
Illinois, is real estate owned. Occupancy continues to be
significantly depressed and based on the March 2023 appraisal, the
property was valued at $1.6 million, a steep decline from the
issuance value of $9.9 million. For this review, the loan was
analyzed with a liquidation scenario, resulting in a loss severity
approaching 100.0%.
The largest loan in special servicing, Midwest Shopping Center
Portfolio (Prospectus ID#6, 4.2% of the pool), is secured by six
anchored retail properties totaling 889,413 square feet. The
properties are located across four states: Iowa, Illinois,
Oklahoma, and Missouri. The loan transferred to the special
servicer in July 2020 for imminent monetary default and was last
paid through May 2023. A receiver was appointed for two properties
and the special servicer is working through foreclosure, but the
proceedings have stalled because of legal challenges tied to the
guarantor.
The borrower has not been responsive to multiple requests for
updated rent rolls and financials; however, the most recent rent
rolls provided in April 2020 indicated a consolidated occupancy
rate of 81.9%. In addition, leases representing approximately 61.0%
of net rentable area (NRA) are scheduled to roll prior to loan
maturity in 2025, significantly increasing refinance risk. As of
July 2023, the portfolio was valued at $46.4 million, 18.2% lower
than the issuance appraised value of $54.6 million. Based on the
lack of financial reporting, uncertainty surrounding the sponsor's
legal challenges, and the collateral's decline in value, DBRS
Morningstar assessed the loan with an increased probability of
default (POD) penalty and a stressed loan-to-value (LTV) ratio,
which resulted in an expected loss that was almost double the pool
average.
The largest loan in the pool, 11 Madison Avenue (Prospectus ID#1,
9.0% of the pool), is secured by the fee, leasehold, and
reversionary interest in the condominium units of 11 Madison
Avenue, a Class A, 29-story, 2.3 million-square-foot office tower
in Manhattan's Midtown South submarket. The subject loan amount of
$70.0 million is part of a whole loan of $1.1 billion that is
secured across several transactions, including a
single-asset/single-borrower (SASB) transaction, MAD 2015-11MD
Mortgage Trust, that is also rated by DBRS Morningstar.
In March 2023, DBRS Morningstar placed all classes of MAD 2015-11MD
Mortgage Trust Under Review with Negative Implications following
the announcement that the collateral property's largest tenant,
Credit Suisse AG (Credit Suisse), would be acquired by UBS AG
(UBS). DBRS Morningstar noted that these events could negatively
affect the credit for the SASB transaction given the uncertainty
regarding the tenant's lease, which represents approximately half
of the collateral property's NRA. Credit Suisse's acquisition by
UBS closed on June 12, 2023, and to date nothing has been confirmed
regarding the Credit Suisse lease for the collateral property.
However, news outlets have reported that UBS is exploring
possibilities for distributing team operations between the subject
property and UBS's offices at 1285 Avenue of the Americas, although
additional reports indicate that the subject property may house
UBS's investment banking and trading operations. There were also
reports of UBS planning to cut more than half of Credit Suisse's
workplace over three rounds, beginning in July 2023 through October
2023.
Credit Suisse is the largest tenant at the property, in place on a
lease expiring in May 2037. The servicer reported the property was
97.0% occupied as of March 2023. Credit Suisse recently gave back a
floor of space representing approximately 3.5% of the NRA in
exchange for a termination fee of $6.1 million, which was deposited
into a reserve account. Other major tenants at the property include
Sony (24.5% of the NRA, lease expiry in January 2031) and Yelp
(8.1% of the NRA, lease expiry in April 2025). Yelp previously
announced its plans to reduce its office footprint across several
cities, including the subject property, and based on an online
leasing brochure, the entirety of Yelp's space was listed for lease
in May 2025. According to financial reporting for the trailing
12-month period ended June 30, 2023, the property generated net
cash flow of $132.2 million (DSCR of 2.89x), marginally higher than
the YE2022 figure of $130.2 million (DSCR of 2.84x). Credit Suisse
has two remaining termination options, available in 2027 and 2032,
exercisable for up to a full floor of space. Given the uncertainty
surrounding the impact of the proposed layoffs on the subject
property and the status of the Credit Suisse lease and/or UBS's
obligations given the acquisition, DBRS Morningstar removed the
loan's investment-grade shadow rating and assessed the loan with an
increased POD penalty and a stressed LTV ratio, which resulted in
an expected loss that was approximately 2.7x the pool average.
Notes: All figures are in U.S. dollars unless otherwise noted.
COMMERCIAL MORTGAGE 2001-CMLB1: Moody's Lowers Cl. X Certs to Ca
----------------------------------------------------------------
Moody's Investors Service has downgraded the rating on the
interest-only class (IO) in Commercial Mortgage Leased-Backed
Certificates 2000-CMLB1 (CMLBC 2001-CMLB1).
Cl. X*, Downgraded to Ca (sf); previously on Jun 20, 2023
Downgraded to Caa3 (sf)
* Reflects Interest-Only Class
RATINGS RATIONALE
The rating on the IO Class was downgraded due to the decline in the
credit quality from principal paydowns of higher quality referenced
class. The transaction has paid down 98% since securitization and
48% from Moody's last review. The IO class is the only outstanding
Moody's-rated class in this transaction.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:
An IO class may be subject to ratings upgrades if there is an
improvement in the credit quality of its referenced classes,
subject to the limits and provisions of the updated IO
methodology.
An IO class may be subject to ratings downgrades if there is (i) a
decline in the credit quality of the reference classes and/or (ii)
paydowns of higher quality reference classes, subject to the limits
and provisions of the updated IO methodology.
The ratings of Credit Tenant Lease (CTL) deals (reference classes)
are primarily based on the senior unsecured debt rating (or the
corporate family rating) of the tenants leasing the real estate
collateral supporting the bonds. Other factors that are also
considered are Moody's dark value of the collateral (value based on
the property being vacant or dark), which is used to determine a
recovery rate upon a loan's default and the rating of the residual
insurance provider, if applicable. Factors that may cause an
upgrade of the ratings include an upgrade in the rating of the
corporate tenant or significant loan paydowns or amortization which
results in a lower loan to dark value ratio. Factors that may cause
a downgrade of the ratings include a downgrade in the rating of the
corporate tenant or the residual insurance provider.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in this rating were "Moody's Approach to
Rating Credit Tenant Lease and Comparable Lease Financings"
published in June 2020.
DEAL PERFORMANCE
As of the September 2023 distribution date, the transaction's
aggregate certificate balance has decreased by 98% to $7.9 million
from $476.3 million at securitization. The certificates are
collateralized by eight mortgage loans. Five of the loans,
representing 41% of the pool, are CTL loans secured by properties
leased to five corporate credit tenants. Three loans, representing
59% of the pool, have defeased and are collateralized with U.S.
Government securities.
The non-defeased CTL pool consists of five loans secured by
properties leased to five tenants. The largest exposure is Kohls
Corporation ($1.68 million – 21.4% of the pool; senior unsecured
rating: Ba3 -- negative outlook). Three of the five corporate
tenants (14% of the pool) have a Moody's investment grade rating.
The bottom-dollar weighted average rating factor (WARF) for this
pool (including defeasance) is 572. WARF is a measure of the
overall quality of a pool of diverse credits. The bottom-dollar
WARF is a measure of default probability.
CONNECTICUT AVENUE 2023-R07: Moody's Assigns Ba2 to 3 Tranches
--------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to 62
classes of credit risk transfer (CRT) residential mortgage-backed
securities (RMBS) to be issued by Connecticut Avenue Securities
Trust 2023-R07, and sponsored by Federal National Mortgage
Association (Fannie Mae).
The securities reference a pool of mortgage loans acquired by
Fannie Mae, and originated and serviced by multiple entities.
The complete rating actions are as follows:
Issuer: Connecticut Avenue Securities Trust 2023-R07
Cl. 2M-1, Definitive Rating Assigned A3 (sf)
Cl. 2M-2A, Definitive Rating Assigned Baa1 (sf)
Cl. 2M-2B, Definitive Rating Assigned Baa2 (sf)
Cl. 2M-2C, Definitive Rating Assigned Baa3 (sf)
Cl. 2M-2, Definitive Rating Assigned Baa2 (sf)
Cl. 2B-1A, Definitive Rating Assigned Ba1 (sf)
Cl. 2B-1B, Definitive Rating Assigned Ba3 (sf)
Cl. 2B-1, Definitive Rating Assigned Ba2 (sf)
Cl. 2E-A1, Definitive Rating Assigned Baa1 (sf)
Cl. 2A-I1*, Definitive Rating Assigned Baa1 (sf)
Cl. 2E-A2, Definitive Rating Assigned Baa1 (sf)
Cl. 2A-I2*, Definitive Rating Assigned Baa1 (sf)
Cl. 2E-A3, Definitive Rating Assigned Baa1 (sf)
Cl. 2A-I3*, Definitive Rating Assigned Baa1 (sf)
Cl. 2E-A4, Definitive Rating Assigned Baa1 (sf)
Cl. 2A-I4*, Definitive Rating Assigned Baa1 (sf)
Cl. 2E-B1, Definitive Rating Assigned Baa2 (sf)
Cl. 2B-I1*, Definitive Rating Assigned Baa2 (sf)
Cl. 2E-B2, Definitive Rating Assigned Baa2 (sf)
Cl. 2B-I2*, Definitive Rating Assigned Baa2 (sf)
Cl. 2E-B3, Definitive Rating Assigned Baa2 (sf)
Cl. 2B-I3*, Definitive Rating Assigned Baa2 (sf)
Cl. 2E-B4, Definitive Rating Assigned Baa2 (sf)
Cl. 2B-I4*, Definitive Rating Assigned Baa2 (sf)
Cl. 2E-C1, Definitive Rating Assigned Baa3 (sf)
Cl. 2C-I1*, Definitive Rating Assigned Baa3 (sf)
Cl. 2E-C2, Definitive Rating Assigned Baa3 (sf)
Cl. 2C-I2*, Definitive Rating Assigned Baa3 (sf)
Cl. 2E-C3, Definitive Rating Assigned Baa3 (sf)
Cl. 2C-I3*, Definitive Rating Assigned Baa3 (sf)
Cl. 2E-C4, Definitive Rating Assigned Baa3 (sf)
Cl. 2C-I4*, Definitive Rating Assigned Baa3 (sf)
Cl. 2E-D1, Definitive Rating Assigned Baa2 (sf)
Cl. 2E-D2, Definitive Rating Assigned Baa2 (sf)
Cl. 2E-D3, Definitive Rating Assigned Baa2 (sf)
Cl. 2E-D4, Definitive Rating Assigned Baa2 (sf)
Cl. 2E-D5, Definitive Rating Assigned Baa2 (sf)
Cl. 2E-F1, Definitive Rating Assigned Baa3 (sf)
Cl. 2E-F2, Definitive Rating Assigned Baa3 (sf)
Cl. 2E-F3, Definitive Rating Assigned Baa3 (sf)
Cl. 2E-F4, Definitive Rating Assigned Baa3 (sf)
Cl. 2E-F5, Definitive Rating Assigned Baa3 (sf)
Cl. 2-X1*, Definitive Rating Assigned Baa2 (sf)
Cl. 2-X2*, Definitive Rating Assigned Baa2 (sf)
Cl. 2-X3*, Definitive Rating Assigned Baa2 (sf)
Cl. 2-X4*, Definitive Rating Assigned Baa2 (sf)
Cl. 2-Y1*, Definitive Rating Assigned Baa3 (sf)
Cl. 2-Y2*, Definitive Rating Assigned Baa3 (sf)
Cl. 2-Y3*, Definitive Rating Assigned Baa3 (sf)
Cl. 2-Y4*, Definitive Rating Assigned Baa3 (sf)
Cl. 2-J1, Definitive Rating Assigned Baa3 (sf)
Cl. 2-J2, Definitive Rating Assigned Baa3 (sf)
Cl. 2-J3, Definitive Rating Assigned Baa3 (sf)
Cl. 2-J4, Definitive Rating Assigned Baa3 (sf)
Cl. 2-K1, Definitive Rating Assigned Baa3 (sf)
Cl. 2-K2, Definitive Rating Assigned Baa3 (sf)
Cl. 2-K3, Definitive Rating Assigned Baa3 (sf)
Cl. 2-K4, Definitive Rating Assigned Baa3 (sf)
Cl. 2M-2Y, Definitive Rating Assigned Baa2 (sf)
Cl. 2M-2X*, Definitive Rating Assigned Baa2 (sf)
Cl. 2B-1Y, Definitive Rating Assigned Ba2 (sf)
Cl. 2B-1X*, Definitive Rating Assigned Ba2 (sf)
*Reflects Interest-Only Classes
After the provisional ratings were assigned, Fannie Mae changed the
balances for the 2B-1A, 2B-1B, 2B-1, 2B-AH, 2B-BH, and 2B-1H
classes by increasing the retention percentage.
RATINGS RATIONALE
The ratings are based on the credit quality of the mortgage loans,
the structural features of the transaction, the GSE's oversight of
originators and servicers, and the third-party review.
Moody's expected loss for this pool in a baseline scenario-mean is
1.12%, in a baseline scenario-median is 0.90% and reaches 5.12% at
a stress level consistent with Moody's Aaa ratings.
Moody's made a qualitative adjustment to the model output based on
analysis on historical performance and benchmarking against
comparable portfolios to arrive at the final EL.
PRINCIPAL METHODOLOGY
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating US RMBS Using
the MILAN Framework" published in August 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 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 original 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.
CPS AUTO 2022-C: S&P Affirms BB (sf) Rating on Class E Notes
------------------------------------------------------------
S&P Global Ratings raised its ratings on 15 classes of notes from
CPS Auto Receivables Trust 2019-A, 2019-B, 2019-C, 2019-D, 2020-B,
2021-A, 2021-C, 2022-A, and 2022-C. At the same time, S&P affirmed
its ratings on eight classes. These transactions are ABS backed by
subprime retail auto loan receivables originated and serviced by
Consumer Portfolio Services Inc (CPS).
S&P said, "The rating actions reflect each transaction's collateral
performance to date, our expectations regarding its future
collateral performance, our revised cumulative net loss (CNL)
expectations for each transaction, the transactions' structures and
credit enhancement levels, and other credit factors, including
credit stability and payment priorities under various scenarios,
and sector- and issuer-specific analyses, including our most recent
macroeconomic outlook, which incorporates a baseline forecast for
U.S. GDP and unemployment. Considering these factors, we believe
the notes' creditworthiness is consistent with the raised and
affirmed ratings.
"The performance of series 2019-A, 2019-B, 2019-C, 2019-D, 2020-B,
2021-A, and 2021-C is trending better than our revised CNL
expectations. As such, we lowered our expected CNL for these
transactions. The performance for series 2022-A is in line with our
revised CNL expectations, while 2022-C's is trending worse than our
initial expected CNL. As a result, we maintained our expected CNL
for series 2022-A and increased our expected CNL for series
2022-C."
Table 1
Collateral Performance (%)(i)
Pool Current 60+ day
Series Mo. factor CNL CRR delinq.
2019-A 56 8.82 9.61 52.74 8.51
2019-B 53 11.17 9.37 53.28 8.83
2019-C 50 12.59 9.31 54.04 9.53
2019-D 47 14.75 8.61 55.96 10.08
2020-B 40 19.94 7.06 55.51 8.92
2021-A 32 26.51 6.11 55.81 7.88
2021-C 26 40.72 7.86 47.16 8.03
2022-A 20 55.65 7.64 37.98 7.10
2022-C 14 71.12 5.26 35.35 6.86
(i)As of the September 2023 distribution date.
Mo.--Month.
CNL--Cumulative net loss.
CRR--Cumulative recovery rate.
Delinq.--Delinquencies.
Table 2
CNL Expectations (%)
Original Prior Revised
lifetime lifetime lifetime
Series CNL exp. CNL exp. CNL exp.
2019-A 18.25 11.50(i) Up to 10.00
2019-B 19.00 11.50(i) Up to 10.00
2019-C 19.00 12.00(i) Up to 10.25
2019-D 19.00 12.25(i) Up to 10.00
2020-B 22.00 12.25(i) 10.00
2021-A 20.75 12.50(i) 10.25
2021-C 19.25 16.00(ii) 14.25
2022-A 17.50 19.50(ii) 19.50
2022-C 17.50 N/A 21.00
(i)Revised in July 2022. (ii)Revised in May 2023.
CNL exp.--Cumulative net loss expectations.
N/A--Not applicable.
Each transaction has a sequential principal payment structure in
which the notes are paid principal by seniority that is expected to
increase the credit enhancement for the more senior notes as the
pool amortizes. Each transaction also has credit enhancement in the
form of a nonamortizing reserve account, overcollateralization,
subordination for the more senior classes, and excess spread. As of
the September 2023 distribution date, each transaction is at the
specified target overcollateralization level and specified reserve
level. The affirmed and raised ratings reflect our view that the
total credit support as a percentage of the current pool balance as
of the collection period ended Aug. 31, 2023, compared with our
expected remaining losses, is commensurate with each raised or
affirmed rating.
Table 3
Hard Credit Support(i)(ii)
Total hard Current total hard
credit support credit support
Series Class at issuance (%) (% of current)
2019-A E 5.00 39.70
2019-B E 4.60 56.86
2019-B F 1.75 31.34
2019-C E 3.55 46.06
2019-C F 1.25 27.80
2019-D E 3.15 36.61
2019-D F 1.25 23.73
2020-B D 20.15 94.42
2020-B E 10.05 43.77
2021-A D 14.50 64.49
2021-A E 6.90 35.82
2021-C C 26.80 77.48
2021-C D 12.10 41.38
2021-C E 4.00 21.49
2022-A B 39.05 78.08
2022-A C 24.10 51.21
2022-A D 13.00 31.27
2022-A E 5.00 16.89
2022-C A 55.20 80.42
2022-C B 42.85 63.06
2022-C C 29.50 44.29
2022-C D 19.90 30.79
2022-C E 12.00 19.68
(i)As of the September 2023 performance date.
(ii)Calculated as a percentage of the total gross receivable pool
balance, which consists of a reserve account,
overcollateralization, and, if applicable, subordination. Excess
spread can also provide additional enhancement, though it is not
included in the hard credit support calculation.
S&P said, "We analyzed the current hard credit enhancement versus
the remaining expected CNL expectations for the classes where hard
credit enhancement alone--without credit to the expected excess
spread--was sufficient, in our view, to upgrade or affirm the
ratings at 'AAA (sf)'. For the other classes, we incorporated a
cash flow analysis to assess the loss coverage levels, giving
credit to stressed excess spread. Our various cash flow scenarios
included forward-looking assumptions on recoveries, the timing of
losses, and voluntary absolute prepayment speeds that we believe
are appropriate, given each transaction's performance to date and
our current economic outlook.
"We also conducted sensitivity analyses to determine the impact
that a moderate ('BBB') stress level scenario would have on our
ratings if losses trended higher than our revised base-case loss
expectations. The results demonstrated that the raised and affirmed
ratings on the classes all meet our credit stability limits at
their respective levels.
"We will continue to monitor the performance of the outstanding
transactions to ensure that the credit enhancement remains
sufficient, in our view, to cover our CNL expectations under our
stress scenarios for each rated classes."
RATINGS RAISED
CPS Auto Receivables Trust
Rating
Series Class To From
2019-A E AAA (sf) BBB+ (sf)
2019-B E AAA (sf) A+ (sf)
2019-B F AAA (sf) BBB+ (sf)
2019-C E AAA (sf) A- (sf)
2019-C F AAA (sf) BBB (sf)
2019-D E AAA (sf) BBB+ (sf)
2019-D F AA- (sf) BB+ (sf)
2020-B E AA (sf) A (sf)
2021-A D AAA (sf) A+ (sf)
2021-A E A+ (sf) BBB+ (sf)
2021-C D AA (sf) A (sf)
2021-C E A- (sf) BBB (sf)
2022-A C AA (sf) A+ (sf)
2022-A D BBB+ (sf) BBB (sf)
2022-C B AA+ (sf) AA (sf)
RATINGS AFFIRMED
CPS Auto Receivables Trust
Series Class Rating
2020-B D AAA (sf)
2021-C C AAA (sf)
2022-A B AAA (sf)
2022-A E BB- (sf)
2022-C A AAA (sf)
2022-C C A (sf)
2022-C D BBB (sf)
2022-C E BB (sf)
DRYDEN 102: S&P Assigns BB- (sf) Rating on $12MM Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to Dryden 102 CLO
Ltd./Dryden 102 CLO 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 PGIM Inc.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Dryden 102 CLO Ltd./Dryden 102 CLO LLC
Class A-1, $246.00 million: AAA (sf)
Class A-2, $14.00 million: Not rated
Class B, $44.00 million: AA+ (sf)
Class C (deferrable), $24.00 million: A+ (sf)
Class D (deferrable), $24.00 million: BBB- (sf)
Class E (deferrable), $12.00 million: BB- (sf)
Subordinated notes, $36.00 million: Not rated
GRANITE PARK 2023-1: Moody's Assigns B3 Rating to Class F Notes
---------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to the
inaugural Equipment Contract Backed Notes, GP Series 2023-1, Class
A-1, Class A-2, Class A-3, Class B, Class C, Class D, Class E and
Class F notes (Series 2023-1 notes or the notes) issued by Granite
Park Equipment Leasing 2023-1 LLC (the Issuer). Stonebriar
Commercial Finance LLC (Stonebriar) is the originator and the
servicer of the assets backing this transaction. The Issuer is a
Delaware limited liability company which makes investments with
respect to certain loans, leases and other contracts originated by
Stonebriar or its affiliates, and the securitization of such
contracts. The underlying assets securitized primarily consist of
aircraft, marine vessels, and other equipment.
The complete rating actions are as follows:
Issuer: Granite Park Equipment Leasing 2023-1 LLC
Class A-1 Notes, Definitive Rating Assigned P-1 (sf)
Class A-2 Notes, Definitive Rating Assigned Aaa (sf)
Class A-3 Notes, Definitive Rating Assigned Aaa (sf)
Class B Notes, Definitive Rating Assigned Aa2 (sf)
Class C Notes, Definitive Rating Assigned A1 (sf)
Class D Notes, Definitive Rating Assigned Baa1 (sf)
Class E Notes, Definitive Rating Assigned Ba3 (sf)
Class F Notes, Definitive Rating Assigned B3 (sf)
RATINGS RATIONALE
The definitive ratings are based on; (1) the experience of
Stonebriar's management team as originator and servicer; (2) U.S.
Bank National Association (long-term deposits Aa3/ long-term CR
assessment A1(cr), short-term deposits P-1, BCA a2) as backup
servicer for the contracts; (3) the weak credit quality and high
concentration of the obligors backing the contracts in the pool;
(4) the assessed value of the collateral backing the contracts in
the pool; (5) the inclusion of about 65% non-direct interests in
the asset underlying the contract included in the pool; (6) the
credit enhancement, including overcollateralization, subordination,
excess spread and a non-declining reserve account and (7) the
sequential pay structure. Moody's also considered sensitivities to
various factors such as default rates and recovery rates in Moody's
analysis.
Additionally, Moody's base its P-1 (sf) rating of the Class A-1
notes on the cash flows that Moody's expect the underlying
receivables to generate during the collection periods prior to the
Class A-1 notes' legal final maturity date.
At closing the Class A, Class B, Class C, Class D, Class E and
Class F notes benefit from 36.00%, 27.50%, 21.25%, 14.50%, 8.75%,
and 5.50% of hard credit enhancement, respectively. Hard credit
enhancement for the notes consists of a combination of initial
overcollateralization of 2.00% which will build to a target of
5.00% of the outstanding pool balance with a floor of 2.50% of the
initial pool balance, a 1.00% fully funded reserve account with a
floor of 1.00%, and subordination. The notes will also benefit from
excess spread.
The equipment contracts that back the notes were extended primarily
to middle market obligors and are secured by various types of
equipment including aircraft, marine vessels, manufacturing and
assembly equipment.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Equipment
Lease and Loan Securitizations methodology" published in September
2023.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the ratings on the subordinate notes if
levels of credit protection are greater than necessary to protect
investors against current expectations of loss. Moody's updated
expectations of loss may be better than its original expectations
because of lower frequency of default or improved credit quality of
the underlying obligors or lower than expected depreciation in the
value of the equipment that secure the obligor's promise of
payment. As the primary drivers of performance, positive changes in
the US macro economy and the performance of various sectors where
the obligors operate could also affect the ratings.
Down
Moody's could downgrade the notes if levels of credit protection
are insufficient to protect investors against current expectations
of portfolio losses. Losses could rise above Moody's original
expectations as a result of a higher number of obligor defaults,
weaker credit quality of the obligors, or greater than expected
deterioration in the value of the equipment that secure the
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud. Additionally, Moody's could downgrade the Class A-1
short term rating following a significant slowdown in principal
collections that could result from, among other reasons, high
delinquencies or a servicer disruption that impacts obligor's
payments.
GS MORTGAGE 2019-GC42: DBRS Confirms BB Rating on Class F-RR Certs
------------------------------------------------------------------
DBRS Limited confirmed its ratings on the following classes of
Commercial Mortgage Pass-Through Certificates, Series 2019-GC42
issued by GS Mortgage Securities Trust 2019-GC42:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (high) (sf)
-- Class X-D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F-RR at BB (sf)
-- Class G-RR at B (high) (sf)
All trends are Stable.
The credit rating confirmations reflect the overall stable
performance of the transaction as illustrated by the pool's
weighted-average debt service coverage ratio (DSCR) of 2.64 times
(x). As of the September 2023 remittance, all of the original 36
loans remain in the trust, with an aggregate principal balance of
$1.05 billion. Collateral reduction since issuance has been
negligible. One loan, representing 4.8% of the current pool
balance, is fully defeased. Only four loans are on the servicer's
watchlist, representing 8.4% of the pool; two loans (representing
only 3.3% of the pool) are being monitored for low DSCRs. There is
one loan in special servicing, representing 2.3% of the pool.
The transaction is concentrated by property type, as loans backed
by office properties represent 36.7% of the pool, including five of
the top 10 largest loans. Although there is general stress for that
property type in today's market, DBRS Morningstar notes that the
office loans in this pool generally are performing as expected and,
in several cases, benefit from stable long-term tenancy from
investment-grade-rated tenants. All five office loans within the
top 10 are reporting DSCRs above 2.50x as well as stable
year-over-year occupancy rates and cash flows.
The sole loan in special servicing, 222 Kearny Street (Prospectus
ID#21, 2.3%), is secured by a 148,000-square-foot (sf) office
building in San Francisco. The loan transferred to the special
servicer in July 2023 as a result of imminent monetary default
following occupancy and cash flow declines. The special servicer
reports ongoing discussions with the borrower, but the loan is
delinquent, and the workout strategy is listed as to be determined.
As of the August 2023 rent roll, the property's occupancy rate fell
to 64.6%, down from 91.0% at issuance; there are six tenants,
representing 34.6% of net rentable area (NRA), with scheduled lease
expirations through the end of 2024. Per a Reis report, the Union
Square submarket reported Q2 2023 vacancy rate of 16% and an
effective rent of $55.40 per sf (psf). Given the low in-place
occupancy coupled with the soft submarket and general challenges
affecting the office landscape, the property's value has likely
declined from issuance when it was appraised at $74.7 million. For
this review, DBRS Morningstar analyzed this loan with a liquidation
scenario based on a stressed haircut to the issuance value,
resulting in a loss amount approaching $6.7 million, which is
well-contained in the first loss piece of the bond stack.
The largest loan on servicer's watchlist, Millenium Park Plaza
(Prospectus ID#14, 2.9% of the current pool balance), is secured by
a 557-unit apartment complex in Chicago. The subject features an
extensive amenity package and is well located along Michigan Avenue
in downtown Chicago. The property also features 85,017 sf of
office/telecommunications space and 18,450 sf of
ground-floor/mezzanine-level retail space. This loan was added to
the servicer's watchlist in March 2022 because of a decrease in the
DSCR that was tied to a decline in the occupancy allocated to the
commercial portion of the property. Per the most recent servicer
reporting, the March 2023 weighted-average occupancy rate at the
property was 80.0% with a DSCR of 1.35x, compared with YE2020
figures of 85.3% and 1.56x, and issuance figures of 99.2% and
2.01x, respectively. Rollover risk is also high with more than 42%
of the commercial leases rolling through the next year. Given the
declining cash flows and higher rollover risk with the commercial
space, the loan was analyzed with a stressed scenario to increase
the expected loss for this review.
There are four loans, representing 14.8% of the pool balance, that
are shadow-rated investment grade. These loans include the two
office loans in the pool, Moffet Towers II Buildings 3 & 4
(Prospectus ID#1, 6.2% of the pool) and 30 Hudson Yards (Prospectus
ID#23, 1.9% of the pool), which are backed by office properties
leased to investment-grade-rated tenants. Moffet Towers II
Buildings 3 & 4 is fully leased to Meta Platforms through 2034,
five years beyond the loan's anticipated repayment date, and the
lease is structured with two seven-year extension options. Based on
the YE2022 financials, the loan reported a healthy DSCR of 3.09x.
The 30 Hudson Yards property is in midtown Manhattan, New York, and
is fully leased to Warner Media through January 2034, five years
beyond the loan term. Based on the YE2022 financials, the loan
reported a DSCR of 2.91x. The above-mentioned loans, along with the
Woodlands Mall loan (Prospectus ID#6, 4.8% of the pool) and Grand
Canal Shoppes loan (Prospectus ID#24, 1.9% of the pool) continue to
be shadow-rated by DBRS Morningstar as the loan performance trends
remain consistent with investment-grade loan characteristics.
Notes: All figures are in U.S. dollars unless otherwise noted.
GS MORTGAGE 2023-PJ5: Fitch Gives 'B-(EXP)sf' on Class B-5 Certs
----------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed
certificates issued by GS Mortgage-Backed Securities Trust 2023-PJ5
(GSMBS 2023-PJ5).
Entity/Debt Rating
----------- ------
GSMBS 2023-PJ5
A-1 LT AA+(EXP)sf Expected Rating
A-1-X LT AA+(EXP)sf Expected Rating
A-10 LT AAA(EXP)sf Expected Rating
A-11 LT AAA(EXP)sf Expected Rating
A-11-X LT AAA(EXP)sf Expected Rating
A-12 LT AAA(EXP)sf Expected Rating
A-13 LT AAA(EXP)sf Expected Rating
A-13-X LT AAA(EXP)sf Expected Rating
A-14 LT AAA(EXP)sf Expected Rating
A-15 LT AAA(EXP)sf Expected Rating
A-15-X LT AAA(EXP)sf Expected Rating
A-16 LT AAA(EXP)sf Expected Rating
A-16L LT AAA(EXP)sf Expected Rating
A-17 LT AAA(EXP)sf Expected Rating
A-17-X LT AAA(EXP)sf Expected Rating
A-18 LT AAA(EXP)sf Expected Rating
A-19 LT AAA(EXP)sf Expected Rating
A-19-X LT AAA(EXP)sf Expected Rating
A-2 LT AA+(EXP)sf Expected Rating
A-20 LT AAA(EXP)sf Expected Rating
A-21 LT AAA(EXP)sf Expected Rating
A-21-X LT AAA(EXP)sf Expected Rating
A-22 LT AAA(EXP)sf Expected Rating
A-22L LT AAA(EXP)sf Expected Rating
A-23 LT AA+(EXP)sf Expected Rating
A-23-X LT AA+(EXP)sf Expected Rating
A-24 LT AA+(EXP)sf Expected Rating
A-3 LT AAA(EXP)sf Expected Rating
A-3-X LT AAA(EXP)sf Expected Rating
A-3A LT AAA(EXP)sf Expected Rating
A-3L LT AAA(EXP)sf Expected Rating
A-4 LT AAA(EXP)sf Expected Rating
A-4A LT AAA(EXP)sf Expected Rating
A-4L LT AAA(EXP)sf Expected Rating
A-5 LT AAA(EXP)sf Expected Rating
A-5X LT AAA(EXP)sf Expected Rating
A-6 LT AAA(EXP)sf Expected Rating
A-7 LT AAA(EXP)sf Expected Rating
A-7-X LT AAA(EXP)sf Expected Rating
A-8 LT AAA(EXP)sf Expected Rating
A-9 LT AAA(EXP)sf Expected Rating
A-9-X LT AAA(EXP)sf Expected Rating
A-X 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
The notes are supported by 268 prime loans with a total balance of
approximately $328 million as of the cutoff date. The transaction
is expected to close on Oct. 31, 2023.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 7% above a long-term sustainable level (vs. 7.6% on
a national level as of 1Q23, down 0.2% since last quarter). Housing
affordability is the worst it has been in decades driven by both
high interest rates and elevated home prices. Home prices have
increased 0.9% YoY nationally as of July 2023 despite modest
regional declines, but are still being supported by limited
inventory.
High-Quality Mortgage Pool (Positive): The collateral consists of
30-year, fixed-rate mortgage (FRM) fully amortizing loans seasoned
at approximately six months in aggregate (calculated as the
difference between the cut-off date and origination date). The
average loan balance is $1,224,499. The collateral comprises
primarily prime-jumbo loans and 32 agency conforming loans.
Borrowers in this pool have strong credit profiles (a 761 model
FICO) but lower than what Fitch has observed for earlier vintage
prime-jumbo securitizations.
The sustainable loan to value ratio (sLTV) is 77.6% and the
mark-to-market (MTM) combined LTV ratio (CLTV) is 71.8%. Fitch
treated 100% of the loans as full documentation collateral, and all
the loans are qualified mortgages (QMs). Of the pool, 83.5% are
loans for which the borrower maintains a primary residence, while
16.5% are for second homes. Additionally, 53.6% of the loans were
originated through a retail channel or a correspondent's retail
channel.
Loan Concentration (Negative): Fitch adjusted the expected losses
due concentration concerns due to small loan counts. Fitch
increased the losses at the 'AAAsf' level by 123 bps, due to the
low loan count. The loan count is 268, with a weighted average
number (WAN) of 213. As a loan pool becomes more concentrated,
there is a greater risk the pool will exhibit default
characteristics.
Shifting-Interest Deal Structure (Mixed): The mortgage cash flow
and loss allocation are based on a senior-subordinate,
shifting-interest structure, whereby the subordinate classes
receive only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years. The lockout
feature helps to maintain subordination for a longer period should
losses occur later in the life of the deal. The applicable credit
support percentage feature redirects subordinate principal to
classes of higher seniority if specified credit enhancement (CE)
levels are not maintained.
Due to the leakage to the subordinate bonds, the shifting-interest
structure requires more CE. While there is only minimal leakage to
the subordinate bonds early in the life of the transaction, the
structure is more vulnerable to defaults occurring at a later stage
compared to a sequential or modified-sequential structure.
To help mitigate tail risk, which arises as the pool seasons and
fewer loans are outstanding, a subordination floor of 3.30% of the
original balance will be maintained for the senior notes, and a
subordination floor of 2.30% of the original balance will be
maintained for the subordinate notes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper market value declines (MVDs) at
the national level. The analysis assumes MVDs of 10.0%, 20.0% and
30.0%, in addition to the model projected 39.5% at 'AAA'. The
analysis indicates that there is some potential rating migration
with higher MVDs for all rated classes, compared with the model
projection. Specifically, a 10% additional decline in home prices
would lower all rated classes by one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by AMC. The third-party due diligence described in Form
15E focused on a review of credit, regulatory compliance and
property valuation for each loan and is consistent with Fitch
criteria for RMBS loans. Fitch considered this information in its
analysis and, as a result, Fitch made the following adjustment(s)
to its analysis: a 5% reduction to each loan's probability of
default. This adjustment resulted in a 33bps reduction to the
'AAAsf' expected loss.
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.
GUGGENHEIM CLO 2022-2: Fitch Affirms 'BB-sf' Rating on Cl. E Notes
------------------------------------------------------------------
Fitch Ratings has affirmed the ratings on the class A-1b, A-2, B, C
and D notes of Guggenheim CLO 2022-1 STAT, Ltd. (Guggenheim 2022-1
STAT) and the class A-2, B, C, D and E notes of Guggenheim CLO
2022-2, Ltd. (Guggenheim 2022-2). The Rating Outlooks on all rated
tranches remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
Guggenheim CLO
2022-2, Ltd.
A-2 40172PAC6 LT AAAsf Affirmed AAAsf
B 40172PAE2 LT AAsf Affirmed AAsf
C 40172PAG7 LT Asf Affirmed Asf
D 40172PAJ1 LT BBB-sf Affirmed BBB-sf
E 40172YAC7 LT BB-sf Affirmed BB-sf
Guggenheim CLO
2022-1 STAT, Ltd.
A-1b 40172JAB2 LT AAAsf Affirmed AAAsf
A-2 40172JAC0 LT AA+sf Affirmed AA+sf
B 40172JAD8 LT Asf Affirmed Asf
C 40172JAE6 LT BBB+sf Affirmed BBB+sf
D 40172KAA1 LT BB-sf Affirmed BB-sf
TRANSACTION SUMMARY
Guggenheim CLO 2022-1 STAT and Guggenheim 2022-2 are broadly
syndicated collateralized loan obligations (CLOs) managed by
Guggenheim Partners Investment Management, LLC. Guggenheim 2022-1
STAT is a static CLO that closed in November of 2022. Guggenheim
2022-2 closed in January of 2023 and will exit its reinvestment
period in January of 2027. Both CLOs are secured primarily by
first-lien, senior secured leveraged loans.
KEY RATING DRIVERS
Stable Asset Performance
The affirmations are supported by sufficient credit enhancement
(CE) levels against relevant rating stress loss levels. As of the
latest trustee reporting, the credit quality of both portfolios
remains at the 'B/B-' rating level since closing. The Fitch
weighted average rating factor (WARF) for Guggenheim 2022-1 STAT
and Guggenheim CLO 2022-2 portfolios were 26.2 and 26.3,
respectively, compared to 24.8 and 25.3, respectively, at closing.
To date, approximately 8.9% of the class A-1a notes of Guggenheim
2022-1 STAT have amortized.
The portfolio for Guggenheim 2022-1 STAT consists of 187 obligors,
and the largest 10 obligors represent 10.6% of the portfolio.
Guggenheim 2022-2 has 202 obligors, with the largest 10 obligors
comprising 10.2% of the portfolio. There are no defaults in either
portfolio. Exposure to issuers with a Negative Outlook and Fitch's
watchlist is 18.0% and 7.2%, respectively, for Guggenheim 2022-1
STAT and 25.1% and 8.2%, respectively, for Guggenheim 2022-2.
On average, first lien loans, cash and eligible investments
comprise 98.3% of the portfolios. Fitch's weighted average recovery
rate (WARR) of the Guggenheim 2022-1 STAT and Guggenheim 2022-2
portfolios was 74.4% and 73.1%, respectively, compared to 74.8% and
72.9%, respectively, at closing.
All coverage tests, collateral quality tests (CQTs), and
concentration limitations are in compliance for both transactions.
Cash Flow Analysis
For Guggenheim 2022-1 STAT, Fitch conducted an updated cash flow
analysis based on both the current portfolio and 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 life (WAL) to the
current maximum WAL covenant of 4.97 years to reflect the issuers'
ability to consent to maturity amendments.
For Guggenheim 2022-2, Fitch conducted updated cash flow analysis
based on newly run Fitch Stressed Portfolio (FSP) since the
transaction is still in its reinvestment period. The FSP analysis
stressed the current portfolios from the latest trustee reports to
account for permissible concentration and CQT limits. Weighted
average spread, WARF and WARR levels were stressed to the current
Fitch test matrix points. The FSP analysis assumed weighted average
life of 6.54 years. Fixed rate assets were also assumed at 5.0%.
The ratings are in line with their respective model-implied ratings
(MIRs), as defined in Fitch's CLOs and Corporate CDOs Rating
Criteria, except for Class B notes of Guggenheim 2022-1 STAT. The
aforementioned note was affirmed one notch below the MIR, due to
limited positive cushions at the respective MIR rating level amid
an anticipated recessionary macroeconomic environment.
The Stable Outlooks reflect Fitch's expectation that the notes have
sufficient level of credit protection to withstand potential
deterioration in the credit quality of the portfolios in stress
scenarios commensurate with each class' rating.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Downgrades may occur if realized and projected losses of the
portfolio are higher than what was assumed at closing and the
notes' CE 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 five
notches for Guggenheim 2022-1 STAT and at least three notches for
Guggenheim 2022-2, based on MIRs.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Upgrades may occur in the event of better-than-expected portfolio
credit quality and transaction performance.
- A 25% reduction of the mean default rate across all ratings,
along with a 25% increase of the recovery rate at all rating levels
for the current portfolio, would lead to upgrades of up to five
rating notches for both transactions, based on MIRs, except for the
'AAAsf'-rated debt, which is at the highest level on Fitch's scale
and cannot be upgraded.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third-party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
securities and markets authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
JP MORGAN 2023-7: DBRS Finalizes BB Rating on Class B-4 Certs
-------------------------------------------------------------
DBRS, Inc. finalized the following provisional ratings on the
Mortgage Pass-Through Certificates, Series 2023-7 issued by J.P.
Morgan Mortgage Trust 2023-7 (JPMMT 2023-7):
-- $270.8 million Class A-2 at AAA (sf)
-- $270.8 million Class A-3 at AAA (sf)
-- $270.8 million Class A-3-X at AAA (sf)
-- $203.1 million Class A-4 at AAA (sf)
-- $203.1 million Class A-4-A at AAA (sf)
-- $203.1 million Class A-4-X at AAA (sf)
-- $67.7 million Class A-5 at AAA (sf)
-- $67.7 million Class A-5-A at AAA (sf)
-- $67.7 million Class A-5-X at AAA (sf)
-- $21.8 million Class A-6 at AAA (sf)
-- $21.8 million Class A-6-A at AAA (sf)
-- $21.8 million Class A-6-X at AAA (sf)
-- $292.6 million Class A-X-1 at AAA (sf)
-- $9.9 million Class B-1 at AA (low) (sf)
-- $6.8 million Class B-2 at A (low) (sf)
-- $4.5 million Class B-3 at BBB (low) (sf)
-- $2.1 million Class B-4 at BB (sf)
-- $1.4 million Class B-5 at B (low) (sf)
Classes A-3-X, A-4-X, A-5-X, A-6-X, and A-X-1 are interest-only
(IO) certificates. The class balances represent notional amounts.
Classes A-2, A-3, A-3-X, A-4, A-5, and A-6 are exchangeable
certificates. These classes can be exchanged for combinations of
depositable certificates as specified in the offering documents.
Classes A-2, A-3, A-4, A-4-A, A-5, and A-5-A are super senior
certificates. These classes benefit from additional protection from
the senior support certificates (Class A-6 and A-6-A certificates)
with respect to loss allocation.
The AAA (sf) ratings on the Certificates reflect 8.15% of credit
enhancement provided by subordinated certificates. The AA (low)
(sf), A (low) (sf), BBB (low) (sf), BB (sf), and B (low) (sf)
ratings reflect 5.05%, 2.90%, 1.50%, 0.85%, and 0.40% of credit
enhancement, respectively.
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
This transaction is a securitization of a portfolio of first-lien,
fixed-rate prime residential mortgages funded by the issuance of
the Certificates. The Certificates are backed by 309 loans with a
total principal balance of $318,577,659 as of the Cut-Off Date
(September 1, 2023).
The pool consists of fully amortizing fixed-rate mortgages with
original terms to maturity of primarily 30 years and a
weighted-average loan age of five months. Approximately 90.7% of
the loans are traditional, nonagency, prime jumbo mortgage loans.
The remaining 9.3% of the pool are conforming mortgage loans that
were underwritten using an automated underwriting system designated
by Fannie Mae or Freddie Mac and were eligible for purchase by such
agencies. Details on the underwriting of conforming loans can be
found in the Key Probability of Default Drivers section of the
related Presale Report. In addition, all of the loans in the pool
were originated in accordance with the new general qualified
mortgage rule.
United Wholesale Mortgage, LLC originated 45.8% of the pool.
Various other originators, each comprising less than 15%,
originated the remainder of the loans. The mortgage loans will be
serviced or subserviced, as applicable, by Cenlar FSB (47.1%), JP
Morgan Chase Bank (JPMCB; 40.8%), and loanDepot.com, LLC (10.5%).
For the JPMCB-serviced loans, Shellpoint Mortgage Servicing will
act as interim servicer until the loans transfer to JPMCB on the
servicing transfer date (December 1, 2023).
For this transaction, generally, the servicing fee payable for
mortgage loans is made up of three separate components: the base
servicing fee, the delinquent servicing fee, and the additional
servicing fee. These fees vary, based on the delinquency status of
the related loan, and will be paid from interest collections before
distribution to the securities.
Nationstar Mortgage LLC will act as the Master Servicer. Citibank,
N.A. (rated AA (low) with a Stable trend by DBRS Morningstar) will
act as Securities Administrator and Delaware Trustee. Computershare
Trust Company, N.A. will act as Custodian. Pentalpha Surveillance
LLC will serve as the Representations and Warranties Reviewer.
The transaction employs a senior-subordinate, shifting-interest
cash flow structure that is enhanced from a precrisis structure.
Notes: All figures are in U.S. dollars unless otherwise noted.
JP MORGAN 2023-9: Fitch Assigns 'B-(EXP)sf' Rating on Cl. B-5 Certs
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings to JP Morgan Mortgage
Trust 2023-9 (JPMMT 2023-9).
Entity/Debt Rating
----------- ------
JPMMT 2023-9
A-2 LT AAA(EXP)sf Expected Rating
A-3 LT AAA(EXP)sf Expected Rating
A-3-X LT AAA(EXP)sf Expected Rating
A-4 LT AAA(EXP)sf Expected Rating
A-4-A LT AAA(EXP)sf Expected Rating
A-4-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-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-6-X 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 2023-9 (JPMMT 2023-9) as
indicated above. The certificates are supported by 479 loans with a
total balance of approximately $468.55 million as of the cutoff
date. The pool consists of prime-quality fixed-rate mortgages
(FRMs) from various mortgage originators.
The pool consists of loans mainly originated by United Wholesale
Mortgage, LLC (60.9%) with the remaining 39.1% of the loans
originated by various originators, each contributing less than 10%
to the pool. The loan-level representations and warranties (R&Ws)
are provided by the various originators, as well as MAXEX and
Redwood (the aggregators).
NewRez LLC (fka New Penn Financial, LLC), dba Shellpoint Mortgage
Servicing (Shellpoint), will act as interim servicer for
approximately 29.1% of the pool from the closing date until the
servicing transfer date, which is expected to occur on or about
Dec. 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 the loans. The other servicers in the transaction are United
Wholesale Mortgage, LLC (servicing 60.9% of loans), loanDepot.com,
LLC (6.4%), PennyMac Corp (2.3%) and PennyMac Loan Services, LLC
(1.3%). Nationstar Mortgage LLC (Nationstar) will be the master
servicer.
Most of the loans (99.7%) qualify as safe-harbor qualified mortgage
(SHQM) or SHQM average prime offer rate (APOR); the remaining 0.3%
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, it views the home price values of
this pool as 7.1% above a long-term sustainable level (versus 7.6%
on a national level as of 1Q23, down 0.2% since last quarter). The
rapid gain in home prices through the pandemic has seen signs of
moderating with a decline observed in 3Q22. Following the strong
gains seen in 1H22, home prices decreased 0.2% YOY nationally as of
April 2023.
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 (99.7%) qualify as
SHQM or SHQM (APOR); the remaining 0.3% 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 762, as determined by Fitch, which is
indicative of very high credit-quality borrowers. Approximately
68.4% of the loans, as determined by Fitch, 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 75.2%,
translating to a sustainable loan to value (sLTV) ratio of 79.4%,
represents moderate borrower equity in the property and reduced
default risk compared to a borrower with a CLTV over 80%.
Per the transaction documents, nonconforming loans constitute 91.9%
of the pool, while the remaining 8.1% represent conforming loans.
However, in its analysis, Fitch considered HPQM
government-sponsored entity (GSE)-eligible loans to be
nonconforming; as a result, Fitch viewed the pool as having 92.0%
nonconforming loans and 8.0% conforming loans. All the loans are
designated as QM loans, with 44.7% of the pool originated by a
retail and correspondent channel.
Of the pool, 100.0% comprises loans where the borrower maintains a
primary or secondary residence. Single-family homes, planned unit
developments (PUDs) and single-family attached dwellings constitute
90.5% of the pool; condominiums and site condos make up 7.3%, and
multifamily homes make up 2.2%. The pool consists of loans with the
following loan purposes, as determined by Fitch: purchases (86.7%),
cashout refinances (10.7%) and rate-term refinances (2.6%). Fitch
views favorably that there are no loans to investment properties,
and a majority of the mortgages are purchases.
A total of 223 loans in the pool are over $1.0 million, and the
largest loan is approximately $2.99 million.
Sixty loans in the collateral pool for this transaction have an
interest rate buy down feature. Fitch increased its loss
expectations on these loans to address the potential payment shock
the borrower may face.
Of the pool loans, 29.6% are concentrated in California. The
largest MSA concentration is in the Los Angeles-Long Beach-Santa
Ana, CA MSA (8.4%), followed by the Phoenix-Mesa-Scottsdale, AZ MSA
(7.0%) and the San Diego-Carlsbad-San Marcos, CA MSA (6.8%). The
top three MSAs account for 22% of the pool. As a result, there was
no probability of default (PD) penalty applied for geographic
concentration.
Shifting-Interest Structure with Full Advancing (Mixed): The
mortgage cash flow and loss allocation are based on a
senior-subordinate, shifting-interest structure, whereby the
subordinate classes receive only scheduled principal and are locked
out from receiving unscheduled principal or prepayments for five
years. The lockout feature helps to maintain subordination for a
longer period should losses occur later in the life of the
transaction. The applicable credit support percentage feature
redirects subordinate principal to classes of higher seniority if
specified credit enhancement (CE) levels are not maintained.
The servicers will provide full advancing for the life of the
transaction; each servicer is expected to advance delinquent
principal and interest (P&I) on loans. 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 2.10%
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 1.20% 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 39.6% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC and Clayton. The third-party due diligence
described in Form 15E focused on four areas: compliance review,
credit review, valuation review and data integrity. Fitch
considered this information in its analysis and, as a result, Fitch
decreased its loss expectations by 0.32% at the 'AAAsf' stress due
to 100% due diligence with no material findings.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 100% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
SitusAMC and Clayton were engaged to perform the review. Loans
reviewed under this engagement were given compliance, credit and
valuation grades and assigned initial grades for each subcategory.
Minimal exceptions and waivers were noted in the due diligence
reports. Refer to the "Third-Party Due Diligence" section for more
detail.
Fitch also utilized data files provided by the issuer on its SEC
Rule 17g-5 designated website. Fitch received loan level
information based on the ResiPLS data layout format, and the data
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 2023-9 has an ESG Relevance Score of '4+' for Transaction
Parties and Operational Risk. Operational risk is well controlled
in JPMMT 2023-9, including strong transaction due diligence, an
'Above Average' aggregator, a large portion of the pool being
originated by an 'Above Average' originator and a large portion of
the pool being serviced by a servicer rated 'RPS1-'. All of these
attributes result in a reduction in expected losses and are
relevant to the ratings in conjunction with other factors.
Although this transaction has loans purchased in connection with
the sponsor's Elevate Diversity and Inclusion program or the
sponsor's Clean Energy program, Fitch did not take these programs
into consideration when assigning an ESG Relevance Score, as the
programs did not directly affect the expected losses assigned or
were not relevant to the rating, in Fitch's view.
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.
KEY COMMERCIAL 2019-S2: DBRS Confirms B Rating on Class F Certs
---------------------------------------------------------------
DBRS Limited confirmed its credit ratings on all classes of the
Commercial Mortgage Pass-Through Certificates, Series 2019-S2
issued by Key Commercial Mortgage Trust 2019-S2 as follows:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X at A (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)
All trends are Stable.
The credit rating confirmations reflect the pool's stable
performance since the last credit rating action in November 2022.
Reported year-end financials indicate a weighted-average (WA) pool
debt service coverage ratio (DSCR) of 1.87 times (x) compared with
the WA DBRS Term DSCR of 1.37x at issuance. There are no
delinquencies; no loans in special servicing; and six loans,
representing 16.6% of the pool, are on the servicer's
watchlist—three of which (9.8% of the pool) are being monitored
for nonperformance-related concerns. Although there are some loans
exhibiting increased credit risk, particularly those backed by
office properties, the pool overall is performing in line with DBRS
Morningstar's expectations.
As of the September 2023 reporting, 27 of the original 29 loans
remain in the pool, with an aggregate trust balance of $137.0
million, representing a collateral reduction of approximately 12.6%
since issuance because of scheduled loan amortization and
repayment. Since the last credit rating action, there have been no
defaults, delinquencies, and no additional defeasance. Two loans
representing 10.3% of the pool are defeased. There have also been
no loan payoffs since the last credit rating action. The pool is
most concentrated by loans secured by office and self-storage
properties, which represent 19.8% and 16.8% of the pool,
respectively. 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 its analysis for this review, DBRS
Morningstar adjusted two of the six loans backed by office and
mixed-use properties with office components that exhibited declines
in performance with stressed loan-to-value (LTV) ratios, resulting
in a WA expected loss (EL) that was more than triple the pool's WA
figure.
The largest office loan in the pool, 180 North Wacker Drive
(Prospectus ID#2, 8.0% of the pool), is secured by the leasehold
interest in a 72,088-square-foot (sf) office building in the West
Loop submarket of Chicago. Although the loan is not currently on
the servicer's watchlist, the DSCR remains below breakeven at 0.99x
as of YE2022. The loan has experienced fluctuations in occupancy
and cash flow since 2020 when occupancy declined to 77.4% in
September 2020 from 97.3% at issuance. Occupancy fell further still
to 65.5% at YE2021, rebounding to 78.8% at YE2022. Four tenants,
representing approximately 20.0% of net rentable area (NRA), signed
new leases at the property throughout 2022. Rollover risk is
concentrated in the near term, with four leases, representing 21.3%
of NRA, scheduled to expire in the next 12 months.
The YE2022 reported net cash flow (NCF) of $0.55 million represents
an 48.6% improvement over the YE2021 NCF of $0.37 million,
attributable to increases in expense reimbursements and other
income, but remains well below the issuance figure of $0.88
million. The loan is subject to ground rent payments, which started
at $300,000 at issuance with scheduled annual increases of 1.5%
until expiration in 2118. For Q2 2023, Reis reported average asking
and effective rental rates of $43 per sf (psf) and $34 psf,
respectively, for office properties within a 1-mile radius of the
subject, compared with the property's in-place average rental rate
of $33 psf. Vacancy for the same period was reported at 10.0%,
notably lower than that of the subject. Given the concerns with the
property type, the subject's decline in performance since issuance,
upcoming rollover, and soft submarket conditions, DBRS Morningstar
applied a stressed LTV scenario in its analysis for this review.
The resulting EL exceeded that of the pool by approximately
200.0%.
Another large loan of concern is 415 McFarlan Road (Prospectus
ID#17, 3.4% of the pool), which is secured by a 43,951-sf suburban
office building in Kennett Square, Pennsylvania. The loan was added
to the watchlist in August 2023 for low occupancy following the
departure of the second-largest tenant C-Power (previously 11.1% of
NRA) following its lease expiration in March 2023. As a result,
occupancy declined to 71.2% as of the July 2023 rent roll, down
from 92.5% at issuance. The July 2023 rent roll reported a total
annualized base rent of $729,566 (which excluded C-Power's rent),
implying a 16.8% decline from reported base rent at YE2022. The
average in-place rental rate at the property was reported at $24
psf, compared with the Q2 2023 average asking and effective rental
rates within a 5-mile radius of $28 psf and $24 psf, respectively,
according to Reis. Vacancy for the same period was reported at
21.0%. As a result of increased vacancy, expected decline in cash
flow and soft submarket conditions, DBRS Morningstar applied a
stressed LTV scenario in its analysis. The resulting EL exceeded
that of the pool by approximately 240.0%.
Notes: All figures are in U.S. dollars unless otherwise noted.
KRR STATIC II: Fitch Affirms 'BB-sf' Rating on Class E Notes
------------------------------------------------------------
Fitch Ratings has affirmed the class A-2, B, C, D and E notes of
KKR Static CLO 2, Ltd. (KKR Static 2). The Rating Outlooks on all
of the rated tranches remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
KKR Static
CLO II Ltd.
A-2 482926AC6 LT AAAsf Affirmed AAAsf
B 482926AE2 LT AA+sf Affirmed AA+sf
C 482926AG7 LT Asf Affirmed Asf
D 482926AJ1 LT BBB-sf Affirmed BBB-sf
E 482935AA1 LT BB-sf Affirmed BB-sf
TRANSACTION SUMMARY
KKR Static 2 is a static arbitrage cash flow collateralized loan
obligation (CLO) managed by KKR Financial Advisors II, LLC. The
transaction closed in November 2022 and is secured primarily by
first lien, senior secured leveraged loans.
KEY RATING DRIVERS
Sufficient Credit Enhancement Levels
The affirmations are supported by sufficient credit enhancement
(CE) levels against relevant rating stress loss levels. The credit
quality of the portfolio as of August 2023 reporting has remained
at the 'B/B-' rating level since closing. The Fitch weighted
average rating factors of the portfolio is 25.2, compared to 24.8
at closing. Approximately 11.5% of the class A-1 notes have
amortized since closing.
The portfolio consists of 219 obligors, and the largest 10 obligors
represent 8.8% of the portfolio. Fitch recognized one defaulted
asset, comprising 0.6% of the portfolio. Exposure to issuers with a
Negative Outlook and Fitch's watchlist is 14.5% and 5.3%,
respectively.
First lien loans, cash and eligible investments comprised 99.0% of
the portfolio. Fitch's weighted average recovery rate of the
portfolio is 74.9%, compared with 74.6% at closing.
All coverage tests, collateral quality tests, and concentration
limitations are in compliance.
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, Fitch
extended the current weighted average life (WAL) of the portfolio
to 5.3 years to consider the issuer's ability to consent to
maturity amendments.
The rating actions for all classes are in line with its
model-implied rating (MIR), as defined in Fitch's CLOs and
Corporate CDOs Rating Criteria, except for the class C, D and E
notes. Fitch affirmed the class C notes one notch below its MIR and
class D and E notes two notches below their respective MIRs due to
the increasing exposure to obligors with a Negative Outlook and
minimal positive cushions at rating stresses above the notes'
current rating levels amid recessionary macroeconomic headwinds.
The Stable Outlooks reflect Fitch's expectation that the notes have
sufficient levels of credit protection to withstand potential
deterioration in the credit quality of the portfolio in stress
scenarios commensurate with the class's ratings.
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' CE do not compensate for the higher loss expectation than
initially anticipated;
- 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 three
notches, based on the MIRs.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Except for the tranches already at the highest 'AAAsf' rating,
upgrades may occur in the event of better-than-expected portfolio
credit quality and transaction performance;
- A 25% reduction of the mean default rate across all ratings,
along with a 25% increase of the recovery rate at all rating levels
for the current portfolio, would lead to upgrades of up to five
notches, based on the MIRs.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third-party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
MAGNETITE XXXIX: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Magnetite
XXXIX Ltd./Magnetite XXXIX LLC's floating-rate debt. The
transaction is managed by BlackRock Financial Management Inc.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term
loans.
The preliminary ratings are based on information as of Oct. 13,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through 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
Magnetite XXXIX Ltd./Magnetite XXXIX LLC
Class A, $264.0 million: AAA (sf)
Class B, $40.0 million: AA (sf)
Class C (deferrable), $28.0 million: A (sf)
Class D (deferrable), $22.0 million: BBB- (sf)
Class E (deferrable), $12.4 million: BB- (sf)
Subordinated notes, $37.2 million: Not rated
MANUFACTURED HOUSING 2000-2: S&P Cuts A-5/A-6 Trust Rating to 'D'
-----------------------------------------------------------------
S&P Global Ratings lowered its ratings to 'D (sf)' from 'CC (sf)'
on classes A-5 and A-6 from Manufactured Housing Contract Sr-Sub
Pass-Thru Trust 2000-2. S&P subsequently withdrew its ratings on
the two classes.
The transaction is a U.S. ABS transaction backed by manufactured
housing loans.
The downgrades follow the transaction's failure to make timely
interest payments for 12 consecutive months.
MARINER FINANCE 2023-A: S&P Assigns BB-(sf) Rating on Cl. E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Mariner Finance Issuance
Trust 2023-A's asset-backed notes.
The note issuance is an ABS securitization backed by personal
consumer loan receivables.
The ratings reflect S&P's view of:
-- The availability of approximately 55.78%, 47.63%, 42.83%,
37.08%, and 31.07% credit support for the class A, B, C, D, and E
notes, respectively, in the form of subordination,
overcollateralization, a reserve account, and excess spread. These
credit support levels are sufficient to withstand stresses
commensurate with the ratings assigned to the notes based on S&P's
stressed cash flow scenarios.
-- S&P's worst-case, weighted average, base-case default
assumption for this transaction of 19.80%. Its default assumption
is a function of the transaction-specific reinvestment criteria and
historical Mariner Finance LLC (Mariner) portfolio loan
performance.
-- Mariner's long performance history as originator and servicer.
Mariner has been profitable every year since 2002.
-- S&P's expectation that under a moderate ('BBB') stress
scenario, all else being equal, the assigned ratings will be
consistent with the credit stability section of "S&P Global Ratings
Definitions," published June 9, 2023.
-- The timely interest and full principal payments expected to be
made by the final maturity date under stressed cash flow modeling
scenarios appropriate to the assigned ratings.
-- The characteristics of the pool being securitized and
receivables expected to be purchased during the two-year revolving
period, which considers the worst-case pool according to the
transaction's concentration limits.
-- The transaction's payment and legal structures.
Ratings Assigned
Mariner Finance Issuance Trust 2023-A
Class A, $194.560 million: AAA (sf)
Class B, $34.000 million: AA- (sf)
Class C, $18.210 million: A- (sf)
Class D, $21.290 million: BBB- (sf)
Class E, $31.940 million: BB- (sf)
MF1 2022-FL8: DBRS Confirms B(low) Rating on Class H Notes
----------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of notes
issued by MF1 2022-FL8 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 (high) (sf)
-- Class G at BB (low) (sf)
-- Class H at B (low) (sf)
All trends are Stable.
The credit rating confirmations reflect the overall stable
performance of the transaction, which has remained in line with
DBRS Morningstar's expectations since issuance as evidenced by
stable performance and leverage metrics. Additionally, the trust
continues to be primarily secured by the multifamily collateral. 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.
The initial collateral consisted of 32 floating-rate mortgage loans
secured by 69 transitional multifamily properties and one
manufactured housing community property, totaling $1.8 billion
(77.0% of the fully funded balance of $2.0 billion), excluding
$152.6 million of future funding commitments and $392.1 million of
pari passu debt. Most loans were in a period of transition with
plans to stabilize performance and improve the asset value. The
transaction is a managed vehicle with the reinvestment period
scheduled to expire with the January 2024 Payment Date. As of the
September 2023 remittance, the pool comprises 37 loans secured by
89 properties with a cumulative trust balance of $2.0 billion.
Since issuance three loans, totaling $48.5 million, have been added
to the trust while three loans totaling $86.1 million have repaid
since the last credit rating action in November 2022.
The transaction is concentrated by property type as 35 loans,
representing 96.8% of the current trust balance, are secured by
multifamily properties with the remaining two loans (3.2% of the
current trust balance) secured by manufactured housing properties.
The pool is primarily secured by properties in suburban markets,
with 21 loans, representing 51.6% of the pool, assigned a DBRS
Morningstar Market Rank of 3, 4, or 5. An additional 12 loans,
representing 41.1% of the pool, are secured by properties in urban
markets, with a DBRS Morningstar Market Rank of 6, 7, or 8. The
remaining loans are backed by properties with a DBRS Morningstar
Market Rank of 1 or 2, denoting tertiary markets. These
property-type and market-type concentrations remain generally in
line with the pool composition at the November 2022 credit rating
action.
Leverage across the pool has remained consistent as of September
2023 reporting when compared with issuance metrics as the current
weighted-average (WA) as-is appraised loan-to-value ratio (LTV) is
72.4%, with a current WA stabilized LTV of 64.7%. In comparison,
these figures were 72.1% and 64.5%, respectively, at issuance. DBRS
Morningstar recognizes that select property values may be inflated
as the majority of the individual property appraisals were
completed in 2022 and may not fully reflect the effects of
increased interest rates and/or widening capitalization rates in
the current environment.
Through August 2023, the lender had advanced cumulative loan future
funding of $163.2 million to 26 of the 27 outstanding individual
borrowers. The largest advance, $38.8 million, has been made to the
borrower of the Park Portfolio loan, which is secured by a
portfolio of eight, garden-style multifamily properties totaling
317 units in Brooklyn, New York. The advanced funds have been used
to fund the borrower's $17.0 million planned capital expenditure
plan and fund various performance-based earnouts as part of the
borrower's business plan to convert units into affordable housing
in order to qualify for an Article XI tax abatement. The Q2 2023
collateral manager report noted the property was only 32.5%
occupied as of May 2023 as the remainder of the units are offline
because of ongoing renovations.
An additional $93.1 million of loan future funding allocated to 23
of the outstanding individual borrowers remains available. The
largest portion of available funding ($16.2 million) is allocated
to the SF Multifamily Portfolio IV loan, which is secured by a
portfolio of five multifamily properties totaling 124 units in San
Francisco. The borrower's business plan is to complete both
interior and exterior renovations throughout the properties. As of
March 2023, the portfolio was 84.0% occupied with an average rental
rate of $2,443/unit, representing a rental premium of $194/unit
over in-place rents at issuance.
In September 2023, three of the four loans in the pool sponsored by
Tides Equities (Tides) transferred to special servicing, namely
Superstition Vista, The Meadows, and Aya Las Vegas. The loan that
did not transfer, Wynn Palms ($47.8 million, 2.4% of the pool),
also has a pari passu piece of the A note securitized in the MF1
2022-FL9 LLC transaction, which is also rated by DBRS Morningstar.
The loan in that transaction was transferred to special servicing
with September 2023 reporting. According to The Real Deal, the
principals of the firm noted in June 2023 a capital call would
likely be needed from investors in order to fund debt service
shortfalls across the portfolio, given the rise in floating
interest rate debt. The loans transferred to special servicing in
September 2023 and were reported current. The collateral manager's
commentary indicates the AYA Las Vegas loan was modified, which
included receiving preferred equity capital injections to cover the
projected debt service shortfalls over the next three years. In the
analysis for this review, DBRS Morningstar made a negative
adjustment to the sponsor strength across all Tides-sponsored
loans, resulting in increased expected losses for those loans that
exceeded the pool average.
There are 20 loans on the servicer's watchlist, representing 44.2%
of the current trust balance. The loans have primarily been flagged
for below breakeven debt service coverage ratios and upcoming loan
maturities. All loans remain current with performance declines
expected to be temporary as multifamily units are being taken
offline by respective borrowers to complete interior renovations.
In the next six months, 20 loans, representing 50.5% of the current
trust balance, are scheduled to mature. According to the collateral
manager, 19 of the individual borrowers are expected to exercise
loan extension options, while the one remaining borrower is
expected to successfully execute its exit strategy.
Notes: All figures are in U.S. dollars unless otherwise noted.
MF1 2023-FL12 LLC: DBRS Gives Prov. B(low) Rating on 3 Classes
--------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the following
classes of notes to be issued by MF1 2023-FL12 LLC (the Issuer):
-- 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 (high) (sf)
-- Class F-E at BB (high) (sf)
-- Class F-X at BB (high) (sf)
-- Class G at BB (low) (sf)
-- Class G-E at BB (low) (sf)
-- Class G-X at BB (low) (sf)
-- Class H at B (low) (sf)
-- Class H-E at B (low) (sf)
-- Class H-X at B (low) (sf)
All trends are Stable.
The initial collateral consists of 21 floating-rate mortgage loans
secured by 21 transitional multifamily properties, totaling $895.2
million (64.2% of the total fully funded balance), excluding $119.7
million (8.6% of the total fully funded balance) of future funding
commitments and $380.6 million (27.3% of the total fully funded
balance) of pari passu debt.
Seven loans, representing 31.1% of the total trust balance, are
categorized as Delayed Collateral Interests, which are identified
in the data tape and included in the DBRS Morningstar analysis.
Five of the Delayed Collateral Interests (i.e., Woodside Central,
Metro Edgewater, Broadstone Axis, Ilion Apartments, and Mossdale
Landing) are identified as Delayed Close Collateral Interests,
representing approximately 25.3% of the initial pool, and having
not yet closed. The remaining two of the Delayed Collateral
Interests (i.e., Elements Apartments and 1110 S Hobart) have been
categorized as Delayed CO Collateral Interests, which have closed,
but the borrowers have not yet obtained a certificate of occupancy
for at least 51% of the units at the related Mortgaged Property.
The Issuer has 45 days post-closing to acquire the Delayed
Collateral Interests into the pool (Delayed Purchase Termination
Date). Delayed CO Collateral Interests will need to have obtained a
temporary or final certificate of occupancy for at least 51% of the
units at the respective property, in order to be brought into the
pool. If a Delayed Close Collateral Interest is not expected to
close or fund prior to the Delayed Purchase Termination Date, the
Issuer may acquire any Delayed Collateral Interests during the
reinvestment period, subject to the Eligibility Criteria and
Acquisition Criteria.
The loans are secured by cash-generating assets, many of which are
in a period of transition with plans to stabilize and improve the
asset value. In total, 14 loans, representing 74.4% of the pool,
have remaining future funding participations totaling $119.7
million, which the Issuer may acquire in the future. DBRS
Morningstar's credit rating on the Notes addresses 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.
The managed transaction includes an 18-month reinvestment period.
Reinvestment of principal proceeds during this period is subject to
eligibility criteria, which, among other criteria, includes a
no-downgrade Rating Agency Confirmation (RAC) by DBRS Morningstar
for all new collateral interests and funded companion
participations. The eligibility criteria indicate that future
collateral interests can be secured only by multifamily,
manufactured housing, and student housing property types during the
stated reinvestment period. Additionally, the eligibility criteria
establish minimum debt service coverage ratio, loan-to-value ratio,
and Herfindahl scores. Furthermore, certain events within the
transaction require the Issuer to obtain RAC. DBRS Morningstar will
confirm that a proposed action or failure to act or other specified
event will not, in and of itself, result in the downgrade or
withdrawal of the current credit rating. The Issuer is required to
obtain RAC for acquisitions of all collateral interests.
Notes: All figures are in U.S. dollars unless otherwise noted.
MFA 2023-INV2: DBRS Finalizes B Rating on Class B-2 Certs
---------------------------------------------------------
DBRS, Inc. finalized its provisional credit ratings on the
following Mortgage Pass-Through Certificates, Series 2023-INV2 (the
Certificates) issued by MFA 2023-INV2 Trust (MFA 2023-INV2):
-- $117.6 million Class A-1 at AAA (sf)
-- $22.4 million Class A-2 at AA (high) (sf)
-- $23.9 million Class A-3 at A (high) (sf)
-- $15.0 million Class M-1 at BBB (high) (sf)
-- $12.5 million Class B-1 at BB (high) (sf)
-- $10.0 million Class B-2 at B (sf)
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
The AAA (sf) credit rating on the Class A-1 certificates reflects
45.25% of credit enhancement provided by subordinate certificates.
The AA (high) (sf), A (high) (sf), BBB (high) (sf), BB (high) (sf),
and B (sf) credit ratings reflect 34.80%, 23.65%, 16.65%, 10.85%,
and 6.20% of credit enhancement, respectively.
This is a securitization of a portfolio of fixed- and
adjustable-rate (including loans with initial Interest-Only (IO)
period) investor debt service coverage ratio (DSCR), first-lien
residential mortgages funded by the issuance of the Certificates.
The Certificates are backed by 945 mortgage loans with a total
principal balance of $214,721,152 as of the Cut-Off Date (August
31, 2023).
The primary originator of the loans in the mortgage pool is Lima
One Capital, LLC (Lima One; 97.8%). Lima One will service 100% of
the loans within the pool. MFA Financial, Inc. (MFA) is the Sponsor
and the Servicing Administrator of the transaction.
The mortgage loans were underwritten to program guidelines for
business-purpose loans that are designed to rely on property value,
the mortgagor's credit profile, and the DSCR, where applicable.
Since the loans were made to investors for business purposes, they
are exempt from the Consumer Financial Protection Bureau's
Ability-to-Repay (ATR) rules and TILA/RESPA Integrated Disclosure
rule.
The Sponsor and Servicing Administrator are the same entity, and
the Depositor is its affiliate. The initial Controlling Holder is
expected to be the Depositor. The Depositor will retain an eligible
horizontal interest consisting of a portion of the Class B-3 and
all of the XS Certificates, representing at least 5% of the
aggregate fair value of the Certificates to satisfy the credit
risk-retention requirements under Section 15G of the Securities
Exchange Act of 1934 and the regulations promulgated thereunder.
Such retention aligns Sponsor and investor interest in the capital
structure. Additionally, the Depositor is expected to initially own
the Class B-1, Class B-2, and the portion of the Class B-3 not
required to be held as noted above.
Computershare Trust Company, N.A. (Computershare; rated BBB with a
Stable trend by DBRS Morningstar) will act as the Securities
Administrator and Certificate Registrar. Computershare, Deutsche
Bank National Trust Company, and Wilmington Trust, National
Association will act as the Custodians.
On or after the earlier of (1) the third anniversary of the Closing
Date or (2) the date when the aggregate unpaid principal balance
(UPB) of the mortgage loans is reduced to 30% of the Cut-Off Date
balance, the Depositor, at its option, may redeem all of the
outstanding Certificates at a price equal to the class balances of
the related Certificates plus accrued and unpaid interest,
including any Cap Carryover Amounts, and any noninterest bearing
deferred amounts due to the Class XS Certificates (optional
redemption). After such purchase, the Depositor may complete a
qualified liquidation, which requires (1) a complete liquidation of
assets within the trust and (2) proceeds to be distributed to the
appropriate holders of regular or residual interests.
On any date following the date on which the aggregate UPB of the
mortgage loans is less than or equal to 10% of the Cut-Off Date
balance, the Servicing Administrator will have the option to
terminate the transaction by purchasing all of the mortgage loans
and any real estate owned (REO) property from the Issuer at a price
equal to the sum of the aggregate UPB of the mortgage loans (other
than any REO property) plus accrued interest thereon, the lesser of
the fair market value of any REO property and the stated principal
balance of the related loan, and any outstanding and unreimbursed
servicing advances, accrued and unpaid fees, any noninterest
bearing deferred amounts, and expenses that are payable or
reimbursable to the transaction parties (optional termination). An
optional termination is conducted as a qualified liquidation.
For this transaction, the Servicer or any other transaction party
will not fund advances on delinquent principal and interest (P&I)
on any mortgage. However, the Servicer is obligated to make
advances in respect of taxes, insurance premiums, and reasonable
costs incurred in the course of servicing and disposing of
properties (servicing advances).
The transaction employs a sequential-pay cash flow structure with a
pro rata principal distribution among the Class A-1, Class A-2, and
Class A-3 Certificates (Senior Classes) subject to certain
performance triggers related to cumulative losses or delinquencies
exceeding a specified threshold (Trigger Event). Principal proceeds
can be used to cover interest shortfalls on the Class A-1 and Class
A-2 Certificates (IIPP) before being applied sequentially to
amortize the balances of the senior and subordinated bonds after a
Trigger Event has occurred. For the Class A-3 Certificates (only
after a Trigger Event) and for the mezzanine and subordinate
classes of Certificates (both before and after a Trigger Event),
principal proceeds will be available to cover interest shortfalls
only after the more senior classes have been paid off in full.
Also, excess spread if available can be used to cover (1) realized
losses and (2) cumulative applied realized loss amounts preceding
the allocation of funds to unpaid Cap Carryover Amounts due to
Class A-1 down to Class M-1.
Of note, the Class A-1, Class A-2, and Class A-3 Certificates'
coupon rates step up by 100 basis points on and after the payment
date in October 2027. Of note, on and after the October 2027
payment date, interest and principal otherwise available to pay the
Class B-3 interest and principal may be used to pay the Cap
Carryover Amounts.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2017-H1: DBRS Confirms CCC Rating on H-RR Certs
--------------------------------------------------------------
DBRS Limited downgraded the credit ratings on two classes of
Commercial Mortgage Pass-Through Certificates, Series 2017-H1
issued by Morgan Stanley Capital I Trust 2017-H1 as follows:
-- Class F-RR to B (high) (sf) from BB (high) (sf)
-- Class G-RR to B (low) (sf) from B (high) (sf)
DBRS Morningstar also confirmed the credit ratings on the following
classes:
-- 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 (high) (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class X-D at A (sf)
-- Class D at A (low) (sf)
-- Class E-RR at BBB (sf)
-- Class H-RR at CCC (sf)
DBRS Morningstar changed the trends on Classes B, C, D, E-RR, F-RR,
G-RR, X-B, and X-D to Negative from Stable. The credit rating
assigned to Class H-RR typically does not carry a trend in
commercial mortgage backed securities (CMBS) ratings. All other
trends remain Stable. The ratings downgrades and Negative trends
are reflective of the increased loss expectations for two loans in
special servicing, including the 1615 Poydras loan (Prospectus
ID#11, 3.1% of the current pool balance), which recently
transferred to the special servicer in July 2023 for imminent
monetary default but has defaulted on its June 2023 payment. The
loan is secured by an office property in New Orleans and the
borrower has expressed its intent to transition ownership of the
asset. The second loan in special servicing is the One Presidential
loan (Prospectus ID#13, 2.9% of the currently pool balance), which
is secured by an office property in the Philadelphia suburb of Bala
Cynwyd, Pennsylvania. The loan is real estate owned and the updated
June 2023 appraisal noted a value of $20.0 million, a decline from
the January 2022 value of $22.2 million and issuance value of $50.0
million. Both of the specially serviced loans were analyzed with
liquidation scenarios, resulting in an aggregate loss in excess of
$30.0 million. Additional details on these loans are highlighted
below. The pool is concentrated by property type with loans backed
by office properties representing nearly 40.0% of the pool balance,
which also includes the above-mentioned specially serviced loans.
In general, the office sector continues to be challenged because of
rising vacancy rates in many submarkets and the decreased investor
appetite for this property type considering the shift in workplace
dynamics. Loans that have exhibited increased credit risk were
analyzed with stressed scenarios, resulting in a weighted-average
(WA) expected loss that was more than 35.0% higher than the pool
average. The erosion in credit support from the loss expectations
of the two specially serviced loans and the office loan exposure
suggests downward pressure in the middle to the bottom of the
capital stack, therefore supporting the ratings downgrade and
Negative trends. The rating confirmations reflect the overall
stable performance of the remaining loans in the pool as exhibited
by the WA debt service coverage ratio (DSCR) that is approximately
1.75 times (x) based on the most recent year-end financials.
As of the September 2023 remittance, 54 of the original 58 loans
remain in the trust, with an aggregate balance of $976.7 million,
representing a collateral reduction of 10.4% since issuance. Six
loans, representing 4.1% of the pool are fully defeased. Three
loans, representing 7.9% of the pool balance, are in special
servicing and 14 loans, representing 20.1% of the pool balance, are
on the servicer's watchlist, six of which are being monitored
primarily for declines in occupancy rate and/or DSCRs.
The largest loan in special servicing is 1615 Poydras, which is
secured by a Class A office property in the central business
district of New Orleans. The loan transferred to the special
servicer in July 2023 for imminent monetary default and has
defaulted on its June 2023 payment. According to the servicer, the
borrower is expected to engage a broker to market the property for
sale through the end of the year but if the price is acceptable to
the lender, the title will transfer to the trust.
Occupancy has been trending downward, with the June 2023 occupancy
rate at 53.0% compared with the YE2022 figure of 82.9% and issuance
figure of 81.2%. Freeport McMoRan Services Company was the largest
tenant at issuance and occupied 41.9% of the net rentable area
(NRA) on a lease through April 2026. However, its lease was
structured with a partial termination option in April 2021 when the
tenant could give back approximately 45,000 square feet of its
space, as well as a full termination option in April 2023 for the
entirety of its space: it appears that both termination options
were executed and the tenant is no longer at the subject property.
According to the issuance documents, the estimated termination fee
for both options was approximately $3.0 million. DBRS Morningstar
has requested confirmation from the servicer on whether the fee was
collected. The largest tenant is currently DXC Technology Services
LLC (DXC), which currently leases six floors (representing 26.8% of
the NRA on a lease through October 2031) but only occupies three of
those floors. The three dark floors along with another floor
currently occupied by DXC (collectively representing 17.2% of the
NRA) are listed as available for sublease.
According to an article published in September 2023 by Biz New
Orleans, Shell announced its plans to relocate from its Poydras
Street location at One Shell Square to a new office property in the
River District Neighborhood expected to be completed by late 2024
or early 2025. Furthermore, per Reis, office properties in the
Central New Orleans submarket reported a vacancy rate of 18.0% in
Q2 2023, which has remained relatively static since Q2 2021. Given
the low in-place occupancy, eventual departure of a prominent
tenant from the vicinity, and generally soft submarket, the value
of the property has likely declined from issuance when it was
appraised at $55.3 million. Given the significant deterioration of
the subject's recoverability prospect, this loan was analyzed with
a liquidation scenario based on a stressed haircut to the issuance
value. The resulting loss amount was nearly $18.5 million with a
loss severity in excess of 55.0%, which erodes most of the
non-rated first loss piece in the bond stack.
The second loan in special servicing is the One Presidential loan
(Prospectus ID#13; 2.9% of the currently pool balance), which is
secured by an office property in the Philadelphia suburb of Bala
Cynwyd, Pennsylvania. The loan transferred to the special servicer
in November 2021 for imminent monetary default and the property
became REO in December 2022 with the last payment received in
January 2023. The special servicer and broker are currently working
on leasing up the property in anticipation of a sale. The former
largest tenant, Hamilton Lane Advisors, LLC (Hamilton Lane
Advisors; 39.1% of the NRA), vacated the subject at its December
2021 lease expiry, resulting in the occupancy rate dropping
substantially to about 50%. The loan is structured with a cash flow
sweep that is initiated two years prior to the tenant's lease
expiration. According to the September 2023 loan-level reserve
report, $25.6 million was held in a special rollover reserve that
may be tied to Hamilton Lane Advisor's departure, but DBRS
Morningstar has requested confirmation from the servicer. Based on
the March 2022 rent roll, Pep Boys executed a lease to backfill the
majority of the Hamilton Lane Advisors space beginning in June
2022, bringing the occupancy rate up to about 80.0%. Pep Boys was
already occupying 11.2% of the NRA with a lease that expired in
July 2022, but based on the June 2023 appraisal, the lease was
renewed beginning in January 2024 through to January 2029.
Despite the leasing momentum and substantial amounts currently held
in reserve, the value of the property based on the June 2023
appraisal has declined to $20.0 million from the January 2022 value
of $22.2 million and the issuance value of $50.3 million. For this
review, this loan was analyzed with a liquidation scenario,
resulting in a loss amount approaching $15.0 million and a loss
severity in excess of 50.0%.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2018-L1: DBRS Confirms B Rating on H-RR Certs
------------------------------------------------------------
DBRS Limited confirmed its credit ratings on all classes of the
Commercial Mortgage Pass-Through Certificates, Series 2018-L1
issued by Morgan Stanley Capital I Trust 2018-L1 as follows:
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-B at AA (high) (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (high) (sf)
-- Class X-D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F-RR at BB (high) (sf)
-- Class G-RR at BB (sf)
-- Class H-RR at B (sf)
In addition, DBRS Morningstar changed the trends on Classes D, X-D,
E, F-RR, G-RR, and H-RR to Negative from Stable. All other trends
are Stable.
The credit rating confirmations and Stable trends reflect the
overall stable performance of the transaction, which remains in
line with DBRS Morningstar's expectations since the last credit
rating action. However, there are some challenges for the pool,
including the high concentrations of loans secured by office
properties with exposure to more challenged secondary markets
including Bloomington, Indianapolis, and Rochester, New York. DBRS
Morningstar notes mitigating factors including an unrated first
loss piece totaling $28.6 million with no losses incurred to the
trust to date and no imminent loss projections. In addition,
several of the loans backed by office properties continue to
perform as expected. DBRS Morningstar also maintained its
investment-grade shadow rating on three loans with this review.
However, given the loan-specific challenges for select office loans
and the downward ratings pressure implied by DBRS Morningstar's
Commercial Mortgage-Backed Securities (CMBS) Insight Model's
results, the Negative trends on the five lowest-rated classes most
exposed to loss are warranted.
Per the September 2023 reporting, 46 of the 47 original loans
remained in the pool, with an aggregate principal balance of $873.3
million, reflecting a collateral reduction of just 3.0% since
issuance as a result of scheduled loan amortization and one loan
repayment. No loans have been defeased. There are 13 loans,
representing 40.3% of the pool balance, on the servicer's
watchlist; however, over half of these loans on the servicer's
watchlist are being monitored for non-credit-related reasons,
namely deferred maintenance. There is one loan, representing 2.9%
of the pool, in special servicing. Since DBRS Morningstar's last
review, the Navika Six Portfolio loan (Prospectus ID#4, 4.8% of the
pool) was returned to the master servicer as a corrected loan,
following a significant improvement in performance. A loan
modification was executed in April 2023, which included a full
repayment of the $3.4 million in deferred payments and reserve
deposits.
The pool is most concentrated by loans that are secured by retail
and office properties, which represent 31.6% and 25.5% of the pool,
respectively. 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. While most of the loans continue to perform in
line with issuance expectations, the concentration is noteworthy
given the overall stress for the office market in recent years. To
account for this risk, DBRS Morningstar conducted an analysis to
determine office loans that could be exposed to value declines for
the collateral properties based on the current performance or
future challenges that could arise given rollover concentrations
through the loan term. In its analysis for this review, DBRS
Morningstar applied stressed loan-to-value ratios (LTVs) or
increased probability of default (POD) assumptions for four loans
backed by office properties exhibiting increased risks, resulting
in a weighted-average (WA) expected loss (EL) nearly double the
pool average.
One of the office loans that DBRS Morningstar is monitoring is the
Regions Tower (Prospectus ID#11, 3.4% of the pool), which is
secured by a 687,237-square-foot (sf) Class A office tower in
Indianapolis. The loan was added to the servicer's watchlist in
June 2023 for its upcoming maturity in October 2023. Per the
September 2023 reporting, the loan is late on its payment, but less
than 30 days delinquent. A pari passu note held in the DBRS
Morningstar-rated BANK 2019-BNK16 deal, however, was recently
transferred to special servicing for imminent default.
Since issuance, loan performance has declined, with occupancy
falling from 84.5% to 76.9% as of Q2 2023, and net cash flow
falling from the Issuer's underwritten net cash flow (NCF) figure
of $6.7 million (a debt service coverage ratio (DSCR) of 1.85 times
(x)) to $5.7 million (a DSCR of 1.59x) as of Q1 2023. While
performance has declined, tenant rollover is limited during the
next 12 months, with only 2.1% of the net rentable area (NRA),
having scheduled lease expirations, and the largest five tenants,
representing 39.0% of the NRA, signed to long-term leases with no
rollover until November 2025. Nonetheless, market conditions have
softened, with vacancy reported at 18.2% according to CBRE's Q2
2023 data, while interest rates have continued to rise, making it
more challenging to secure take-out financing, an obstacle the
borrower is likely facing. Given the depressed occupancy and NCF
figures coupled with the soft market conditions, DBRS Morningstar
notes that the collateral's as-is value has likely declined since
issuance, elevating the credit risk to the trust. With
consideration for the elevated refinance risk, DBRS Morningstar
increased its POD assumption for this loan and derived a stressed
value based on the property's in-place cash flow, using the high
end of DBRS Morningstar's cap rate range for office properties,
with the resulting LTV well above 100.0% and an adjusted EL that
was approximately 2.5x the pool average.
The sole specially serviced loan, Shelbourne Global Portfolio I
(Prospectus ID#16, 2.9% of the pool), is secured by a portfolio of
diverse assets, including three industrial, two office, and one
office/flex buildings, totaling 641,000 sf, all of which are
located in suburbs of New Jersey. The loan transferred to special
servicing in December 2022 because of the borrower's failure to
cure a defined event of default of a lease termination fee and
failure to deposit the required TI/LC reserves. While there is no
clear workout strategy, the borrower and lender are discussing next
steps. Despite the event of default, the loan remains current and
has performed with strong occupancy and stable cash flow since
issuance. Most recently, the portfolio was reappraised in September
2021 for $166.8 million, reflecting a 17.0% increase over the
issuance appraised value and an LTV of 55.7%.
At issuance, DBRS Morningstar assigned investment-grade shadow
ratings to three loans: Aventura Mall - Trust (Prospectus ID#1,
6.9% of the pool), Millenium Partners Portfolio – Trust
(Prospectus ID#2, 6.9% of the pool), and The Gateway (Prospectus
ID#6, 4.6% of the pool). As part of this review, DBRS Morningstar
confirmed that the performance of these loans remains consistent
with the investment-grade loan characteristics.
Notes: All figures are in U.S. dollars unless otherwise noted.
ORION CLO 2023-1: S&P Assigns BB- (sf) Rating on Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned ratings to Orion CLO 2023-1 Ltd./Orion
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 Antares Liquid Credit Strategies LLC,
an affiliate of Antares Capital Advisers LLC and subsidiary of
Antares Holdings L.P.
The ratings reflect S&P's view of:
-- The collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Orion CLO 2023-1 Ltd./Orion CLO 2023-1 LLC
Class A, $288.00 million: AAA (sf)
Class B, $54.00 million: AA (sf)
Class C (deferrable), $27.00 million: A (sf)
Class D (deferrable), $27.00 million: BBB- (sf)
Class E (deferrable), $13.50 million: BB- (sf)
Subordinated notes, $51.08 million: Not rated
ORL TRUST 2023-GLKS: S&P Assigns Prelim BB(sf) Rating on E Certs
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to ORL Trust
2023-GLKS's commercial mortgage pass-through certificates series
2023-GLKS.
The certificate issuance is a CMBS securitization backed by the
borrowers' fee simple interest in Grande Lakes Orlando Resort,
which comprises two luxury hotels: the 1,010-guestroom JW Marriott
Grande Lakes and the 582-guestroom Ritz-Carlton Grande Lakes.
The preliminary ratings are based on information as of Oct. 13,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect the collateral's historical and
projected performance, the sponsor's and managers' experience, the
trustee-provided liquidity, the loan terms, and the transaction
structure. S&P determined that the loan has a beginning and ending
loan-to-value ratio of 80.0%, based on its value of the properties
backing the transaction.
Preliminary Ratings Assigned
ORL Trust 2023-GLKS
Class A, $342,150,000: AAA (sf)
Class X-CP(i), $342,150,000(ii): AAA (sf)
Class X-NCP(i), $342,150,000(ii): AAA (sf)
Class B, $105,920,000: AA- (sf)
Class C, $78,750,000: A- (sf)
Class D, $104,050,000: BBB- (sf)
Class E, $81,630,000: BB (sf)
Class HRR(iii), $37,500,000: BB- (sf)
(i)Interest-only class.
(ii)Notional balance. The notional amount of the class X-CP and
X-NCP certificates will be reduced by the aggregate amount of
principal distributions and realized losses allocated to the class
A certificates.
(ii)Horizontal residual interest certificate.
HRR--Horizontal risk retention.
READY CAPITAL 2022-FL8: DBRS Confirms B(low) Rating on G Notes
--------------------------------------------------------------
DBRS, Inc. confirmed its ratings on all classes of notes issued by
Ready Capital Mortgage Financing 2022-FL8, LLC (the Issuer) 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 as evidenced by stable performance and
leverage metrics. Additionally, the trust continues to be primarily
secured by the multifamily collateral. 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.
The initial collateral consisted of 67 floating-rate mortgages
secured by 89 mostly transitional properties with a cut-off date
balance totaling $1.22 billion. Most loans were in a period of
transition with plans to stabilize performance and improve values
of the underlying assets. As of the August 2023 remittance, the
pool comprised 57 loans secured by 78 properties with a cumulative
trust balance of $1.05 billion, representing collateral reduction
of 4.4% since issuance. Since issuance, 10 loans with a prior
cumulative trust balance of $133.4 million have been successfully
repaid from the pool, including six loans totaling $103.6 million
that have repaid since the previous DBRS Morningstar rating action
in November 2022.
The transaction is static with a two-year Permitted Funded
Companion Participation Acquisition Period (Acquisition Period),
whereby the Issuer can purchase funded loan participations into the
trust. The Acquisition Period is scheduled to end with the February
2024 Payment Date, and as of August 2023, the Participation
Acquisition Account had a balance of $35.2 million.
The transaction is concentrated by property type as 48 loans,
representing 90.3% of the current trust balance, are secured by
multifamily properties with eight loans (8.2% of the current trust
balance) secured by industrial properties, and one loan (1.5% of
the current trust balance) secured by a student housing property.
In comparison with the pool at closing, multifamily properties
represented 91.3% of the collateral, industrial properties
represented 7.3% of the collateral, and student housing properties
represented 1.3% of the collateral.
The pool is primarily secured by properties in suburban markets, as
defined by DBRS Morningstar, with 51 loans, representing 88.7% of
the pool, assigned a DBRS Morningstar Market Rank of 3, 4, or 5. An
additional four loans, representing 8.6% of the pool, are secured
by properties with a DBRS Morningstar Market Rank of 6 and 7,
denoting urban markets, while two loans, representing 2.7% of the
pool, are secured by properties with a DBRS Morningstar Market Rank
of 2, denoting tertiary markets. In comparison at closing,
properties in suburban markets represented 90.1% of the collateral,
properties in urban markets represented 7.3% the collateral, and
properties in tertiary markets represented 2.6% of the collateral.
Leverage across the pool has remained consistent as of August 2023
reporting when compared with issuance metrics. The current
weighted-average (WA) as-is appraised value loan-to-value ratio
(LTV) is 74.9%, with a current WA stabilized LTV of 65.4%. In
comparison, these figures were 74.6% and 65.4%, 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 may not reflect the current
rising interest rate or widening capitalization rate environments.
Through August 2023, the lender had advanced cumulative loan future
funding of $53.4 million to 42 of the 57 outstanding individual
borrowers to aid in property stabilization efforts. The largest
advance, $4.2 million, has been made to the borrower of the
Highland Park and Residences at Turnberry loan. The loan is secured
by a portfolio of two multifamily properties, totaling 454 units,
in Reynoldsburg, Ohio, and Pickerington, Ohio, respectively. The
advanced funds have been used to fund the borrower's planned $5.7
million planned capital expenditure (capex) plan across the
portfolio. An additional $1.5 million of future funding remains
available to the borrower to continue its capex plan.
An additional $73.3 million of loan future funding allocated to 52
of the outstanding individual borrowers remains available. The
largest portions are allocated to the borrowers of the Chronos
Portfolio ($6.6 million) and MN Brownstone Portfolio ($5.4 million)
loans. The Chronos Portfolio loan is secured by a portfolio of five
multifamily properties totaling 1,070 units throughout the Dallas
metro area. The available funds are for the borrower's capex plan
across the portfolio. Through August 2023, the lender had advanced
$3.9 million of future funding to the borrower. The MN Brownstone
Portfolio is secured by a portfolio of eight multifamily properties
totaling 332 units in Minneapolis. The available funds are for the
borrower's capex plan across the portfolio. Through August 2023,
the lender had advanced $3.5 million of loan future funding to the
borrower.
As of the August 2023 remittance, there are no delinquent loans or
loans in special servicing, and there are 21 loans on the
servicer's watchlist, representing 30.9% of the current trust
balance. The loans have primarily been flagged for below breakeven
debt service coverage ratios and upcoming loan maturity.
Performance declines noted in the pool are expected to be temporary
as multifamily units are being taken offline by respective
borrowers to complete interior renovations. In the next six months,
seven loans, representing 3.0% of the current trust balance are
scheduled to mature. DBRS Morningstar has not received confirmation
from the collateral manager regarding individual borrower's exit
strategies; however, all loans have remaining extension options.
Five loans, representing 14.6% of the current trust balance, are
sponsored by Tides Equities (Tides). In a June 2023 article
published by The Real Deal, the principals of the firm noted it
would likely need to conduct a capital call from its investors in
order to fund debt service shortfalls across its portfolio given
the rise in floating interest rate debt. All five loans are
current, and DBRS Morningstar is not aware that any of the loans
have been modified. In its analysis, however, DBRS Morningstar made
a negative adjustment to the sponsor strength across all five Tides
sponsored loans, resulting in individual loan expected loss levels
approximately 1.5 times greater than the overall expected loss for
the RCMF 2022-FL8 transaction.
Notes: All figures are in U.S. dollars unless otherwise noted.
START II LTD: Fitch Hikes Rating on Class C Notes to 'BBsf'
-----------------------------------------------------------
Fitch Ratings has upgraded the ratings on START II Ltd. series A, B
and C notes. The Rating Outlook is Stable.
Entity/Debt Rating Prior
----------- ------ -----
START II Ltd.
Class A 85573LAA9 LT Asf Upgrade BBBsf
Class B 85573LAB7 LT BBBsf Upgrade BBsf
Class C 85573LAC5 LT BBsf Upgrade Bsf
TRANSACTION SUMMARY
Fitch has upgraded the ratings of START II series A, B and C notes
to 'Asf', 'BBBsf' and 'BBsf' from 'BBBsf', 'BBsf', and 'Bsf',
respectively. This transaction, along with other aircraft operating
lease ABS transactions rated by Fitch, were placed Under Criteria
Observation (UCO) in June of 2023 following Fitch's publication of
new Aircraft Operating Lease ABS Criteria.
The ratings reflect current transaction performance, Fitch's cash
flow projections, and its expectation for the structure to
withstand rating-specific stresses under Fitch's new criteria and
related asset model. Rating considerations include lease terms,
lessee credit quality and performance, updated aircraft values, and
Fitch's assumptions and stresses, which inform its modeled cash
flows and coverage levels. Fitch's updated rating assumptions for
airlines are based on a variety of performance metrics and airline
characteristics.
Portfolio performance has improved since the prior review. The pool
remains fully utilized with no reported delinquencies. Two lessees
subject to deferral plans have been paying as agreed. The series A
and series B notes both continue to receive timely interest and
have caught up to closing scheduled balances. The series C notes
have received interest and principal over the past five months.
Since the prior review, rental collections have improved and have
outperformed Fitch's prior forecasts due to lessees catching up on
past-due lease payments. Debt service coverage ratio (DSCR) remains
significantly higher than the RAE and cash trap trigger levels and
has remained above these levels for the past 17 months. The
maintenance reserve account is fully funded with sufficient cash to
cover expected costs over the near term.
Overall Market Recovery:
The global commercial aviation market continues to recover, posting
a 47% increase in revenue passenger kilometers (RPKs) in the first
half of 2023 compared to the same period last year with June global
RPKs recovering to 94% of pre-COVID levels per IATA. Asia-Pacific
airlines led the way with a 126% increase in first half 2023
traffic versus last year.
Domestic RPKs globally rose 27% in June compared to the prior year
and have surpassed pre-pandemic RPKs by 5.1%; June international
RPKs climbed 34% compared to the prior year and are approximately
12% below pre-pandemic levels per IATA.
International and domestic market performance differs across
regions. APAC has seen significant growth in domestic markets, led
by China returning to pre-pandemic levels with a 136% June YTD
increase in RPKs versus last year. APAC has also enjoyed triple
digit international RPK growth, however, there is still room for
additional recovery as it has only reached 71% of pre-pandemic
levels per IATA.
North American and European traffic (domestic and international)
continue to rebound with June RPKs marginally exceeding
pre-pandemic levels in North America and reaching approximately 95%
of pre-pandemic levels in Europe per IATA.
Macro Risks:
While the commercial aviation market has recovered significantly
over the past 12 months, it will continue to face certain unknowns
and potential headwinds including workforce shortages, inflationary
pressures particularly related to labor and fuel costs, supply
chain issues, geopolitical risks, and recessionary concerns which
would impact passenger demand. Most of these events would lead to
increased credit risk due to increased lessee delinquencies, lease
restructurings, defaults, and reductions in lease rates and asset
values, particularly for older aircraft, all of which would cause
downward pressure on future cashflows needed to meet debt service.
KEY RATING DRIVERS
Asset Values:
START II mean maintenance adjusted base value (MABV) declined 6.4%
between the April 2022 and April 2023 appraisals, when controlling
for sold aircraft previously included in the April 2022 valuations.
Loan to values (LTVs) remained relatively consistent with the prior
review.
The Fitch value for the pool is $278 million. Fitch used the most
recent appraisal as of April 2023 and applied depreciation
assumptions pursuant to its criteria. Fitch employs a methodology
whereby Fitch varies the type of value per aircraft based on the
remaining leasable life:
- 3 years of Leasable Life: Maintenance-adjusted market value;
- 3 years of Leasable Life, but 15 years old: Maintenance-adjusted
base value;
- 15 years old: Half-life base value.
Fitch then uses the lesser of mean and median of the given value.
Fitch also applies a haircut to residual values that vary based on
rating stress level beginning at 5% at 'Bsf' and increasing to 15%
at 'Asf'.
Tiered Collateral Quality:
The pool consists of 13 narrowbody (NB) aircraft with the majority
characterized as mid-life aircraft (weighted-average [WA] age of
10.4 years). Fitch utilizes three tiers when assessing the quality
and corresponding marketability of aircraft collateral: tier 1,
which is the most marketable, and tier 3, which is the least
marketable. As aircraft in the pool reach an age of 15 and then 20
years, pursuant to Fitch's criteria, the aircraft tier will migrate
one level lower.
The WA tier for the START II portfolio is 1.2, reflecting the
desirability of the aircraft.
Pool Concentration:
The subject pool has moderately elevated concentration with 13
aircraft to nine lessees. As the pool ages and Fitch models
aircraft being sold at the end of their leasable lives (generally
20 years), pool concentration will continue to increase. Pursuant
to Fitch's criteria, Fitch further stresses cash flows based on the
effective aircraft count. Concentration haircuts vary by rating
level and are applied at stresses higher than 'CCCsf'. Fitch
applies a 9% haircut to modeled rental cash flows at the 'Asf'
rating level.
START II has elevated geographic concentration with 65.8% of leases
to Emerging Asia Pacific. The remaining leases are allocated as
follows: 14.7% to Developed Europe, 7.0% to Developed North
America, 6.8% to Emerging Middle East and Africa, and 5.8% to
Emerging Europe and CIS.
Lessee Credit Risk:
Fitch considers the credit risk posed by the pool of lessees to be
moderate, as lease deferrals remain in the pool. However, there are
no delinquencies beyond 30 days.
Operation and Servicing Risk:
Fitch deems the servicer, AerCap (BBB/Stable), to remain a
qualified servicer based on its experience as a lessor, overall
servicing capabilities and historical ABS performance to date.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
An increase in delinquencies, lower lease rates, or sales of
aircraft below Fitch's projections could lead to a downgrade.
The aircraft ABS sector has a rating cap of 'Asf'. All subordinate
tranches carry ratings lower than the senior tranche and below the
ratings at close.
Fitch also considers jurisdictional concentrations per the
"Structured Finance and Covered Bonds Country Risk Rating
Criteria," which could result in rating caps lower than 'Asf'.
Fitch conducted a sensitivity in which residual values were reduced
by 20% to simulate underperformance in sales beyond the haircuts,
depreciation and market value declines already incorporated into
Fitch's model. This sensitivity resulted in a decrease of the
model-implied-ratings for just the B note of one-notch.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
If contractual lease rates or aircraft sales proceeds outperform
modeled cash flows, this may lead to an upgrade.
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.
STWD 2022-FL3: DBRS Confirms B(low) Rating on Class G Notes
-----------------------------------------------------------
DBRS Limited confirmed its credit ratings on the following classes
of notes issued by STWD 2022-FL3 Ltd. (the Issuer) as follows:
-- Class A at AAA (sf)
-- Class X-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)
-- Class E-E at BBB (low) (sf)
-- Class E-X at BBB (low) (sf)
-- Class F-E at BB (low) (sf)
-- Class F-X at BB (low) (sf)
-- Class G-E at B (low) (sf)
-- Class G-X at B (low) (sf)
All trends are Stable.
The credit rating confirmations reflect the overall stable
performance of the transaction, which remains in line with DBRS
Morningstar expectations at issuance as leverage metrics have
remained stable and the majority of the loans are secured by
multifamily collateral. In conjunction with this press release,
DBRS Morningstar has published a Surveillance Performance Update
rating report with in-depth analysis and credit metrics for the
transaction and business plan updates on select loans.
As of the September 2023 remittance, the pool consists of 50
floating-rate mortgages secured by 105 properties with an aggregate
trust balance of $998.8 million. Most loans are in a period of
transition with plans to stabilize and improve asset values. The
transaction is a managed collateralized loan obligation pool, which
remains in its 24-month reinvestment period that is scheduled to
end with the February 2024 Payment Date. The Reinvestment Account
has a balance of $153,414.
As of the September 2023 reporting, four loans with a former
cumulative trust balance of $81.0 million, have been repaid from
the transaction since issuance. One of the loans, Arizona Center
(Prospectus ID#44), totaling $979,492 was repurchased from the
trust by the collateral manager at par. As of September 2023, there
are no loans in special servicing; however, two loans, Harbor Sky
(Prospectus ID#8, 4.8% of the pool) and Lakeshore Towers
(Prospectus ID#13, 3.6% of the pool) are delinquent. In its
analysis of both loans, DBRS Morningstar adjusted the respective
loan probability of defaults, increasing the loan expected loss
levels to reflect the increased credit risk. Additionally, 16 loans
are on the servicer's watchlist, representing 53.0% of the current
trust balance. Thirteen of these loans were flagged for performance
issues with low occupancy rates and/or debt service coverage ratios
(DSCRs); however, this was anticipated at individual loan closing
as borrowers continue to progress through business plans to
stabilize the assets. Additionally, debt service payments have
increased given the floating rate nature of all of the loans in the
pool in the current interest rate environment. The largest loan on
the servicer's watchlist, The Buchanan (Prospectus ID#1, 9.4% of
the current pool balance), is secured by a high-rise, multifamily
in Arlington, Virginia. The loan was added to the watchlist in
August 2023 following a decline in DSCR, which was attributed to
increased debt service payment as the interest rate increased over
70.0% from 2022.
Of the outstanding 50 loans, 25 loans, representing 76.7% of the
current trust balance, are scheduled to mature by YE2024; however,
the majority of these loans have remaining extension options
available. While required performance tests may not be met across
all collateral properties, DBRS Morningstar expects borrowers and
lenders to agree to mutually beneficial modification terms, if
necessary, to allow loan maturity dates to be extended.
The transaction benefits from a significant concentration of loans
backed by multifamily properties, representing 68.8% of the current
trust balance with office properties, representing 29.4% of the
current trust balance, the second-largest property type
concentration. The loans are primarily secured by properties in
suburban markets with 33 loans, representing 58.1% of the current
trust balance, in locations with DBRS Morningstar Market Ranks of
3, 4, and 5. An additional 13 loans, representing 40.9% of the
pool, are secured by properties in an urban location with a DBRS
Morningstar Market Rank of 6, 7, and 8, and four loans,
representing 1.0% of the pool, are secured by properties in
tertiary markets. In terms of leverage, the pool has a current
weighted-average (WA) appraised loan-to-value ratio (LTV) of 69.0%
and a WA stabilized LTV ratio of 63.7%. By comparison, these
figures were 68.6% and 63.4%, respectively, at issuance in February
2022. DBRS Morningstar recognizes the current market values of the
collateralized properties may be inflated as the individual
property appraisals were completed in 2021 and 2022 and do not
reflect increased interest rate and widening capitalization rate
environments.
Through September 2023, the collateral manager has advanced $288.4
million in loan future funding to 42 individual borrowers to aid in
property stabilization efforts. The largest advance, $82.1 million,
was made to the borrower of Anthem Row loan (Prospectus ID#12, 3.6%
of the current pool balance), which is secured by two connected,
12-story office buildings in Washington D.C. The borrower's
business plan centers on achieving stabilized occupancy levels and
bridging the property through existing free rent periods. An
additional $229.6 million of future funding allocated to 37
individual borrowers remains available. Of this outstanding amount,
the largest future funding balance is allocated to the borrower of
The Wheeler (Prospectus ID#29, 0.3% of the current pool balance)
for its stabilization efforts. The loan is secured by a Class A
office property in Brooklyn with the borrower's business plan to
utilize future funding to finance leasing costs. According to the
Q2 2023 collateral manager update, the property was 41.3% leased to
one tenant operating on a 30-year lease term.
Notes: All figures are in U.S. dollars unless otherwise noted.
SYMPHONY CLO 39: S&P Assigns Prelim BB- (sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Symphony CLO
39 Ltd.'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 Symphony Alternative Asset Management
LLC.
The preliminary ratings are based on information as of Oct. 18,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Symphony CLO 39 Ltd. /Symphony CLO 39 LLC
Class A, $262.00 million: AAA (sf)
Class B, $42.00 million: AA (sf)
Class C, $24.00 million: A (sf)
Class D-1, $23.00 million: BBB (sf)
Class D-2, $5.00 million: BBB- (sf)
Class E, $10.00 million: BB- (sf)
Subordinated notes, $38.60 million: Not rated
TOWD POINT 2019-5: Moody's Hikes Rating on Cl. B4 Notes to Caa2
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 50 bonds from
13 transactions issued by Towd Point Mortgage Trust between 2015
and 2019. The transactions are backed by seasoned performing and
modified re-performing residential mortgage loans (RPL). The
collateral is serviced by multiple servicers.
A List of Affected Credit Ratings is available at
https://urlcurt.com/u?l=VNsFXd
The complete rating actions are as follows:
Issuer: Towd Point Mortgage Trust 2015-1
Cl. A6, Upgraded to Aaa (sf); previously on Mar 16, 2022 Upgraded
to Aa1 (sf)
Cl. B1, Upgraded to Baa1 (sf); previously on Mar 16, 2022 Upgraded
to Baa3 (sf)
Issuer: Towd Point Mortgage Trust 2015-2
Cl. 1-B3, Upgraded to Baa1 (sf); previously on Mar 16, 2022
Upgraded to Baa3 (sf)
Issuer: Towd Point Mortgage Trust 2016-5
Cl. B1, Upgraded to Aa1 (sf); previously on Mar 16, 2022 Upgraded
to Aa3 (sf)
Cl. B2, Upgraded to A2 (sf); previously on Mar 16, 2022 Upgraded to
Baa1 (sf)
Cl. B4, Upgraded to Caa2 (sf); previously on Mar 16, 2022 Upgraded
to Caa3 (sf)
Issuer: Towd Point Mortgage Trust 2017-1
Cl. B1, Upgraded to Aa1 (sf); previously on Mar 16, 2022 Upgraded
to Aa3 (sf)
Cl. B2, Upgraded to A2 (sf); previously on Mar 16, 2022 Upgraded to
Baa1 (sf)
Cl. B3, Upgraded to Baa3 (sf); previously on Mar 16, 2022 Upgraded
to Ba1 (sf)
Issuer: Towd Point Mortgage Trust 2017-5
Cl. B1, Upgraded to Aa1 (sf); previously on Mar 16, 2022 Upgraded
to Aa3 (sf)
Cl. B2, Upgraded to A1 (sf); previously on Mar 16, 2022 Upgraded to
A3 (sf)
Cl. B3, Upgraded to Baa1 (sf); previously on Mar 16, 2022 Upgraded
to Baa3 (sf)
Issuer: Towd Point Mortgage Trust 2017-6
Cl. B1, Upgraded to A1 (sf); previously on Mar 16, 2022 Upgraded to
A3 (sf)
Cl. B2, Upgraded to A3 (sf); previously on Mar 16, 2022 Upgraded to
Baa1 (sf)
Cl. M2, Upgraded to Aaa (sf); previously on Mar 16, 2022 Upgraded
to Aa2 (sf)
Issuer: Towd Point Mortgage Trust 2018-1
Cl. B1, Upgraded to A1 (sf); previously on Mar 16, 2022 Upgraded to
A2 (sf)
Cl. B2, Upgraded to Baa1 (sf); previously on Mar 16, 2022 Upgraded
to Baa3 (sf)
Cl. B3, Upgraded to Ba2 (sf); previously on Mar 16, 2022 Upgraded
to B1 (sf)
Cl. M2, Upgraded to Aaa (sf); previously on Mar 16, 2022 Upgraded
to Aa2 (sf)
Issuer: Towd Point Mortgage Trust 2018-5
Cl. A2, Upgraded to Aa1 (sf); previously on Mar 16, 2022 Upgraded
to Aa3 (sf)
Cl. A3, Upgraded to Aaa (sf); previously on Mar 16, 2022 Upgraded
to Aa2 (sf)
Cl. A4, Upgraded to Aa2 (sf); previously on Mar 16, 2022 Upgraded
to A1 (sf)
Cl. B1, Upgraded to B2 (sf); previously on Feb 7, 2020 Assigned
Caa1 (sf)
Cl. M1, Upgraded to A1 (sf); previously on Mar 16, 2022 Upgraded to
A3 (sf)
Cl. M2, Upgraded to Ba1 (sf); previously on Sep 28, 2020 Downgraded
to Ba3 (sf)
Issuer: Towd Point Mortgage Trust 2019-1
Cl. A2, Upgraded to Aa2 (sf); previously on Mar 16, 2022 Upgraded
to A1 (sf)
Cl. A3, Upgraded to Aa1 (sf); previously on Mar 16, 2022 Upgraded
to Aa3 (sf)
Cl. A4, Upgraded to A1 (sf); previously on Feb 7, 2020 Assigned A3
(sf)
Cl. M1, Upgraded to Baa1 (sf); previously on Sep 28, 2020 Confirmed
at Baa3 (sf)
Cl. M2, Upgraded to Ba3 (sf); previously on Sep 28, 2020 Downgraded
to B1 (sf)
Issuer: Towd Point Mortgage Trust 2019-4
Cl. A4, Upgraded to Aa1 (sf); previously on Mar 16, 2022 Upgraded
to Aa2 (sf)
Cl. A5, Upgraded to A1 (sf); previously on Mar 16, 2022 Upgraded to
A3 (sf)
Cl. B1, Upgraded to Baa3 (sf); previously on Mar 16, 2022 Upgraded
to Ba1 (sf)
Cl. B1A, Upgraded to Baa3 (sf); previously on Mar 16, 2022 Upgraded
to Ba1 (sf)
Cl. B1B, Upgraded to Baa3 (sf); previously on Mar 16, 2022 Upgraded
to Ba1 (sf)
Cl. B2, Upgraded to Ba2 (sf); previously on Mar 16, 2022 Upgraded
to B1 (sf)
Cl. M1, Upgraded to Aa2 (sf); previously on Mar 16, 2022 Upgraded
to A1 (sf)
Cl. M1A, Upgraded to Aa2 (sf); previously on Mar 16, 2022 Upgraded
to A1 (sf)
Cl. M1B, Upgraded to Aa2 (sf); previously on Mar 16, 2022 Upgraded
to A1 (sf)
Cl. M2, Upgraded to Baa1 (sf); previously on Sep 28, 2020 Confirmed
at Baa3 (sf)
Cl. M2A, Upgraded to Baa1 (sf); previously on Sep 28, 2020
Confirmed at Baa3 (sf)
Cl. M2B, Upgraded to Baa1 (sf); previously on Sep 28, 2020
Confirmed at Baa3 (sf)
Issuer: Towd Point Mortgage Trust 2019-HY1
Cl. B1, Upgraded to A1 (sf); previously on Mar 16, 2022 Upgraded to
A3 (sf)
Cl. B2, Upgraded to Baa2 (sf); previously on Mar 16, 2022 Upgraded
to Ba1 (sf)
Cl. M2, Upgraded to Aaa (sf); previously on Mar 16, 2022 Upgraded
to Aa2 (sf)
Issuer: Towd Point Mortgage Trust 2019-HY2
Cl. B1, Upgraded to A2 (sf); previously on Mar 16, 2022 Upgraded to
Baa1 (sf)
Cl. M2, Upgraded to Aa2 (sf); previously on Mar 16, 2022 Upgraded
to A1 (sf)
Issuer: Towd Point Mortgage Trust 2019-HY3
Cl. A4, Upgraded to Aaa (sf); previously on Mar 16, 2022 Upgraded
to Aa2 (sf)
Cl. M1, Upgraded to Aaa (sf); previously on Mar 16, 2022 Upgraded
to Aa2 (sf)
Cl. M2, Upgraded to A2 (sf); previously on Mar 16, 2022 Upgraded to
Baa1 (sf)
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's updated loss expectations on the underlying pools. The
rating upgrades are a result of the improving performance of the
related pools, and/or an increase in credit enhancement available
to the bonds. In Moody's analysis, Moody's considered the
likelihood of higher future pool expected losses due to rising
borrower defaults driven by an increase in unemployment and
inflation while prepayments remain broadly subdued amid elevated
interest rates. The actions also reflect Moody's updated loss
expectations on the pools which incorporate Moody's assessment of
the representations and warranties framework of the transactions,
the due diligence findings of the third-party reviews at the time
of issuance, and the strength of the transactions' servicing
arrangement.
Principal Methodologies
The methodologies used in these ratings were "Non-Performing and
Re-Performing Loan Securitizations Methodology" published in July
2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
TRIMARAN CAVU 2023-2: S&P Assigns Prelim BB-(sf) Rating on E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Trimaran
CAVU 2023-2 Ltd./Trimaran CAVU 2023-2 LLC's fixed- and
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 Trimaran Advisors LLC.
The preliminary ratings are based on information as of Oct. 13,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool, which consists
primarily of broadly syndicated speculative-grade (rated 'BB+' and
lower) senior secured term loans.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Trimaran CAVU 2023-2 Ltd./Trimaran CAVU 2023-2 LLC
Class A, $283.500 million: Not rated
Class B-1, $53.000 million: AA (sf)
Class B-2, $5.500 million: AA (sf)
Class C-1 (deferrable), $23.000 million: A+ (sf)
Class C-2 (deferrable), $4.000 million: A+ (sf)
Class D-1A (deferrable), $18.000 million: BBB (sf)
Class D-1B (deferrable), $4.500 million: BBB (sf)
Class D-2 (deferrable), $4.500 million: BBB- (sf)
Class E (deferrable), $14.175 million: BB- (sf)
Subordinated notes, $48.250 million: Not rated
UBS-CITIGROUP 2011-C1: Moody's Cuts Rating on Cl. CX-B Certs to C
-----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on three classes
and downgraded the rating on one class in UBS-Citigroup Commercial
Mortgage Trust 2011-C1 ("UBSC 2011-C1"), Commercial Mortgage
Pass-Through Certificates, Series 2011-C1 as follows:
Cl. E, Affirmed C (sf); previously on Feb 23, 2022 Affirmed C (sf)
Cl. F, Affirmed C (sf); previously on Feb 23, 2022 Affirmed C (sf)
Cl. G, Affirmed C (sf); previously on Feb 23, 2022 Affirmed C (sf)
Cl. X-B*, Downgraded to C (sf); previously on Feb 23, 2022 Affirmed
Ca (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on three P&I classes were affirmed because the ratings
are consistent with Moody's expected losses. The only remaining
loan in the pool, the Poughkeepsie Galleria Loan, is secured by a
class B regional mall that has been in special servicing since
April 2020. The loan was previously delinquent for several years
after passing its initial maturity date in November 2021, however,
the loan was recently modified including a maturity date extension
to January 2025. The property's performance remains significantly
below its performance at securitization primarily due to lower
rental revenues and the most recent appraisal value reported in
2023 was 50% below the outstanding loan balance as of the September
2023 remittance statement.
The ratings on the interest-only class, Cl. X-B, was downgraded due
to the decline in the credit quality resulting from principal
paydowns of higher quality reference classes. Cl. X-B references
all remaining P&I classes, including Cl. H, which is not rated by
Moody's.
Moody's rating action reflects a base expected loss of 72.1% of the
current pooled balance, compared to 86.2% at Moody's last review.
Moody's base expected loss plus realized losses is now 8.5% of the
original pooled balance, compared to 15.5% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, or a
significant improvement in pool performance.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except
interest-only classes was "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-Backed Securitizations Methodology"
published in July 2022.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 100% of the pool is in
special servicing. In this approach, Moody's determines a
probability of default for each specially serviced and troubled
loan that it expects will generate a loss and estimates a loss
given default based on a review of broker's opinions of value (if
available), other information from the special servicer, available
market data and Moody's internal data. The loss given default for
each loan also takes into consideration repayment of servicer
advances to date, estimated future advances and closing costs.
Translating the probability of default and loss given default into
an expected loss estimate, Moody's then applies the aggregate loss
from specially serviced loans to the most junior classes and the
recovery as a pay down of principal to the most senior classes.
DEAL PERFORMANCE
As of the September 12, 2023 distribution date, the transaction's
aggregate certificate balance has decreased by 91% to $61.2 million
from $674 million at securitization. The certificates are
collateralized by one remaining mortgage loan (100% of the pool),
which is in special servicing.
Two loans have been liquidated from the pool, resulting in an
aggregate realized loss of $9.7 million (for an average loss
severity of 34.8%). As of the September 2023 remittance statement
cumulative interest shortfalls were $4.95 million and impact up to
Cl. F.
The specially serviced loan is the Poughkeepsie Galleria Loan
($61.2 million -- 100% of the pool), which represents a pari passu
portion of the $136.0 million senior mortgage. The loan is also
encumbered by $46.6 million of mezzanine debt. The loan is secured
by a 691,000 square foot (SF) portion of a 1.2 million SF regional
mall located about 70 miles north of New York City in Poughkeepsie,
New York. The mall's anchors at securitization included J.C.
Penney, Regal Cinemas, and Dick's Sporting Goods, each part of the
collateral, along with Macy's, Best Buy, Target, and Sears
(non-collateral anchors). However, Sears (145,000 SF) and J.C.
Penney (180,000 SF) vacated in 2020. As of June 2023, the total
mall was 58% leased compared to 85% in December 2019. Since 2018,
the mall has suffered from declining in-line occupancy and tenant
sales, and the property's net operating income (NOI) remains
significantly below securitization levels. The property's 2022 NOI
was 40% below the NOI in 2012. The 2022 NOI DSCR was 0.82X and the
full year NOI DSCR has been below 1.00X since 2019. The property is
managed by the loan's sponsor, Pyramid Management Group, LLC. The
loan has been in special servicing since April 2020 and passed its
original maturity date in November 2021. Per the servicer
commentary, a loan modification agreement was recently executed in
July 2023, extending the maturity date to January 2025, with two
additional one-year extensions and a reduced note interest rate,
along with other terms. The most recent appraisal value was
reported in March 2023 and represented a 71% decline from its value
at securitization and was 50% below the outstanding loan balance.
The loan had been previously deemed non-recoverable by the master
servicer and was more than 90 days delinquent for several years,
however, after the modification the loan was last paid through its
August 2023 payment date as of the September 2023 remittance
statement. Due to the performance of the asset in recent years,
Moody's anticipates a significant loss on this loan.
VOYA 2022-3: Fitch Assigns 'BB-(EXP)sf' Rating on Class E-R Notes
-----------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
the Voya 2022-3, Ltd. reset transaction.
Entity/Debt Rating
----------- ------
Voya CLO 2022-3, Ltd.
X LT NR(EXP)sf Expected Rating
A-1R LT NR(EXP)sf Expected Rating
A-2R LT AAA(EXP)sf Expected Rating
B-R LT AA(EXP)sf Expected Rating
C-R LT A(EXP)sf Expected Rating
D-R LT BBB-(EXP)sf Expected Rating
E-R LT BB-(EXP)sf Expected Rating
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor (WARF) of the indicative
portfolio is 24.09, versus a maximum covenant, in accordance with
the initial expected matrix point of 26.3. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
99.71% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 76.84% versus a
minimum covenant, in accordance with the initial expected matrix
point of 72.4%.
Portfolio Composition (Neutral): The largest three industries may
comprise up to 39% of the portfolio balance in aggregate, while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Positive): The transaction has a five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The weighted average life (WAL) used for the transaction stress
portfolio 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 'BBBsf' and 'AA+sf' for class A-2R, between
'BB+sf' and 'A+sf' for class B-R, between 'B-sf' and 'BBB+sf' for
class C-R, between less than 'B-sf' and 'BB+sf' for class D-R; and
between less than 'B-sf' and 'B+sf' for class E-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2R notes as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B-R, 'A+sf' for class C-R, 'A+sf'
for class D-R; and 'BBB+sf' for class E-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, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
WELLINGTON MANAGEMENT I: S&P Assigns Prelim 'BB-' Rating on E Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Wellington
Management CLO 1 Ltd./Wellington Management CLO 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 Wellington Management CLO Advisors
LLC.
The preliminary ratings are based on information as of Oct. 17,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool, which consists
primarily of broadly syndicated speculative-grade (rated 'BB+' and
lower) senior secured term loans.
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization.
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Wellington Management CLO 1 Ltd./Wellington Management CLO 1 LLC
Class A, $152.00 million: AAA (sf)
Class A loans, $100.00 million: AAA (sf)
Class B, $52.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D (deferrable), $23.00 million: BBB- (sf)
Class E (deferrable), $12.60 million: BB- (sf)
Subordinated notes, $42.00 million: Not rated
WFRBS COMMERCIAL 2013-C15: Moody's Cuts Rating on C Certs to Caa3
-----------------------------------------------------------------
Moody's Investors Service has downgraded the ratings on five
classes in WFRBS Commercial Mortgage Trust 2013-C15, Commercial
Mortgage Pass-Through Certificates, Series 2013-C15 as follows:
Cl. A-S, Downgraded to A1 (sf); previously on Feb 6, 2023
Downgraded to Aa2 (sf)
Cl. B, Downgraded to Ba3 (sf); previously on Feb 6, 2023 Downgraded
to Ba1 (sf)
Cl. C, Downgraded to Caa3 (sf); previously on Feb 6, 2023
Downgraded to Caa1 (sf)
Cl. PEX, Downgraded to B3 (sf); previously on Feb 6, 2023
Downgraded to B1 (sf)
Cl. X-A*, Downgraded to A1 (sf); previously on Feb 6, 2023
Downgraded to Aa1 (sf)
* Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on the three P&I classes were downgraded primarily due
to increased anticipated losses and interest shortfall concerns
from the pool's exposure to specially serviced loans, which now
represent 95% of the remaining pool balance. The two largest
specially serviced loans, Augusta Mall (40% of the pool) and
Carolina Place (27%), are secured by regional malls with declining
performance that were unable to pay off at their original maturity
dates and have been delinquent on debt service payments since July
2023. The third largest specially serviced loan (Kitsap Mall - 26%
of the pool) is secured by a distressed regional mall which is
already REO and has already recognized an appraisal reduction of
57% of its remaining loan balance as of the September 2023
remittance statement. In Moody's rating analysis Moody's also
analyzed loss and recovery scenarios to reflect the recovery value,
the current cash flow the property and timing to ultimate
resolution on the remaining loans and properties in the pool.
The rating on the IO class, Cl. X-A, was downgraded due to a
decline in the credit quality of its referenced class and principal
paydowns of higher quality reference classes. Cl. X-A originally
referenced all classes senior to and including Cl. A-S, however,
the more senior classes have now paid off in full and Cl. A-S is
the only outstanding referenced class.
The rating on the exchangeable class, Cl. PEX, was downgraded due
to a decline in the credit quality of its referenced exchangeable
classes.
Moody's regard e-commerce competition as a social risk under
Moody's ESG framework. The rise in e-commerce and changing consumer
behavior presents challenges to brick-and-mortar discretionary
retailers.
Moody's rating action reflects a base expected loss of 46.6% of the
current pooled balance, compared to 17.7% at Moody's last review.
Moody's base expected loss plus realized losses is now 13.8% of the
original pooled balance, compared to 13.0% at the last review.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization or a
significant improvement in pool performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, an increase in realized and
expected losses from specially serviced and troubled loans or
interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except
interest-only classes was "Large Loan and Single Asset/Single
Borrower Commercial Mortgage-Backed Securitizations Methodology"
published in July 2022.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 95% of the pool is in
special servicing. In this approach, Moody's determines a
probability of default for each specially serviced and troubled
loan that it expects will generate a loss and estimates a loss
given default based on a review of broker's opinions of value (if
available), other information from the special servicer, available
market data and Moody's internal data. The loss given default for
each loan also takes into consideration repayment of servicer
advances to date, estimated future advances and closing costs.
Translating the probability of default and loss given default into
an expected loss estimate, Moody's then applies the aggregate loss
from specially serviced loans to the most junior classes and the
recovery as a pay down of principal to the most senior classes.
DEAL PERFORMANCE
As of the September 15, 2023 distribution date, the transaction's
aggregate certificate balance has decreased by 75% to $273.6
million from $1.1 billion at securitization. The certificates are
collateralized by eight mortgage loans, of which five loans,
constituting 95% of the pool, are currently in special servicing.
One loan constituting 1.2% of the pool, has defeased and is secured
by US government securities.
As of the September 2023 remittance report, loans representing 2.5%
were beyond their grace period but less than 30 days delinquent,
67.4% were classified as non-performing maturity, 2.4% were
performing past maturity and 27.8% were already real estate owned
(REO).
Three loans have been liquidated from the pool, contributing to an
aggregate realized loss of $24.9 million (for an average loss
severity of 79%).
The largest specially serviced loan is the Augusta Mall Loan ($110
million -- 40.2% of the pool), which represents a pari passu
portion of a $170 million mortgage loan. The loan is secured by a
500,000 SF portion of a 1.1 million SF super regional mall in
Augusta, Georgia, approximately 150 miles east of Atlanta. The
property is the only regional mall within a 25-mile radius. The
mall's non-collateral anchors include Dillard's, Macy's, and JC
Penney. A former non-collateral anchor, Sears, vacated in the
spring of 2020 and remains vacant. As of March 2023, inline
occupancy was 87%, compared to 91% in September 2021 and 93% in
June 2020. The loan's interest only NOI DSCR was 2.10X as of March
2023 compared to 2.16X in 2021 and 2.70X at year-end 2018. The loan
is interest-only loan for the entire loan term and was unable to
pay off at its August 2023 maturity date. The loan has now
transferred to special servicing due to maturity default and is
last paid through July 2023. Special servicer commentary indicates
they are dual tracking foreclosure with borrower discussions around
a potential loan extension and modification.
The second largest specially serviced loan is the Carolina Place
Loan ($72.8 million -- 26.6% of the pool), which represents a pari
passu portion of a $149.8 million mortgage loan. The loan is
secured by a 693,000 SF component of a 1.2 million SF
super-regional mall located in Pineville, North Carolina, 10 miles
south of Charlotte. The mall is anchored by Dillard's, Belk, Dick's
Sporting Goods, and JCPenney. JCPenney is the only current anchor
that is part of the collateral. A former collateral anchor, Sears,
had vacated the property in early 2019 and the space remains
vacant. As of June 2023, collateral and inline occupancy were 71%
and 89%, respectively, compared to 67% and 85% in September 2021.
The property's revenue and NOI generally improved through 2018,
however, the NOI has since declined. The year-end 2022 net
operating income (NOI) was 18% lower than in 2018 and 10% lower
than in 2013. After an initial three-year IO period, the loan has
amortized 14% since securitization and the March 2023 NOI DSCR was
1.65X compared to 1.48X in 2020 and 1.84X in 2019. The loan
transferred to special servicing in May 2023 due to imminent
monetary default and is last paid through July 2023. The special
servicer and the borrower are actively engaged in discussions with
respect to a loan modification, however, no terms have been
finalized. A July 2023 appraisal valued the property 49% lower than
at securitization and 10% lower than the outstanding whole loan
amount. As a result, an appraisal reduction of 20% of the
outstanding loan balance has been recognized as of the September
2023 remittance statement.
The third largest specially serviced loan is the Kitsap Mall Loan
($71.8 million -- 26.2% of the pool), which is secured by a 580,000
square feet (SF) component of a 762,000 SF enclosed regional mall
located on the Kitsap Peninsula in Silverdale, Washington, which is
approximately 18 miles west of Seattle. The property is currently
anchored by Kohl's (which is not part of the collateral), JC Penney
(on a ground lease expiring in January 2024) and Macy's (lease
expiration in August 2023). One non-collateral anchor space was
vacant following the October 2019 closure of Sears (105,600 SF) but
has recently been fully leased to grocery chain WinCo. Other major
tenants include Barnes & Noble (on a ground lease), Dick's Sporting
Goods and H&M. As of the July 2023 rent roll, collateral and inline
occupancy were 95% and 82%, respectively, compared to 86% and 56%
in September 2021. Property performance has generally declined
since 2017 and the year-end 2022 net operating income (NOI) was
nearly 44% lower than at securitization. The loan has been in
special servicing since May 2020 and a foreclosure sale occurred in
December 2021. The special servicer is working to renew existing
tenants and lease space to new tenants. The loan has amortized 7%
since securitization, however, a January 2023 appraisal valued the
property 71% below the value at securitization and 56% below the
outstanding loan balance. As of the September 2023 remittance
statement, the master servicer has recognized a $40.7 million
appraisal reduction (57% based on the loan's current balance).
Moody's expects a significant loss from this loan.
The remaining two specially serviced loans are secured by a one
retail and one multifamily property and comprise 2.2% of the pool.
Moody's estimates an aggregate $127.4 million loss for the
specially serviced loans (49% expected loss on average).
As of the September 15, 2023 remittance statement cumulative
interest shortfalls were $7.7 million and impacted up to Cl. D.
Moody's anticipates interest shortfalls will continue because of
the exposure to specially serviced loans and/or modified loans.
Interest shortfalls are caused by special servicing fees, including
workout and liquidation fees, appraisal entitlement reductions
(ASERs), loan modifications and extraordinary trust expenses.
The two non-specially serviced, non-defeased loans represent 3.6%
of the pool balance. The largest is secured by a retail property in
Brooklyn, New York (2.4% of the pool), which is expected to pay off
prior to the end of this year. The second largest is secured by a
fully amortizing loan secured by a retail property in Farmington
Hills, Michigan (1.2% of the pool) which matures in August 2028.
WFRBS COMMERCIAL 2014-LC14: Fitch Lowers Rating on E Certs to 'Bsf'
-------------------------------------------------------------------
Fitch Ratings has downgraded one and affirmed 11 classes of WFRBS
Commercial Mortgage Trust 2014-LC14 commercial mortgage
pass-through certificates. In addition, Fitch has assigned a
Negative Outlook to one class following its downgrade, and revised
the Rating Outlook on classes B, C, D, PEX and X-B to Negative from
Stable. The Under Criteria Observation (UCO) has been resolved.
Entity/Debt Rating Prior
----------- ------ -----
WFRBS 2014-LC14
A-4 96221TAD9 LT AAAsf Affirmed AAAsf
A-5 96221TAE7 LT AAAsf Affirmed AAAsf
A-S 96221TAG2 LT AAAsf Affirmed AAAsf
A-SB 96221TAF4 LT AAAsf Affirmed AAAsf
B 96221TAK3 LT AA-sf Affirmed AA-sf
C 96221TAL1 LT A-sf Affirmed A-sf
D 96221TAQ0 LT BBB-sf Affirmed BBB-sf
E 96221TAS6 LT Bsf Downgrade BBsf
F 96221TAU1 LT CCCsf Affirmed CCCsf
PEX 96221TAM9 LT A-sf Affirmed A-sf
X-A 96221TAH0 LT AAAsf Affirmed AAAsf
X-B 96221TAJ6 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.
The downgrade reflects the updated criteria and increased loss
expectations on the pool since the prior rating action. Fitch's
current ratings incorporate a 'Bsf' rating case loss of 7.9%.
The Negative Outlooks reflect concerns with the remaining loans'
upcoming maturity dates and refinance challenges expected on the
Fitch Loan of Concern (FLOCs) in the current environment. Eleven
loans (37.6% of the pool) are considered FLOCs, the largest of
which include PennCap Portfolio (10.7%), Williams Center Towers
(5.8%) and Canadian Pacific Plaza (5.1%). There are four specially
serviced loans (18.3%).
Alternative Loss Scenario; Maturity Concentration: Given the
significant near-term maturity concentration with approximately 95%
of the pool scheduled to mature by July 2024, Fitch's ratings are
based on a look-through analysis to determine the loans' expected
recoveries and losses to assess the outstanding classes' ratings
relative to CE.
Fitch Loans of Concern/Specially Serviced Loans: The largest
contributor to overall loss expectations, Penn Cap Portfolio (10.7%
of the pool), is secured by 32 properties located within five
different office/industrial parks in the Lehigh Valley area of
Pennsylvania. The combined properties represent 1,386,780 sf and
comprises of 64% office space and 36% flex/warehouse space by
square footage. In August 2023, the loan transferred to special
servicing, ahead of the loan's upcoming maturity in January 2024.
The lender and borrower are currently discussing workout options.
The lender is holding $11.75 million in reserve from the sale of a
property, with the funds to be applied to principal in November
2023 on the open prepayment date.
Occupancy has slightly improved to 84.6% as of June 2023 from 83%
as of December 2022 and 78% as of December 2021, but remains below
90% at issuance. There is significant lease rollover in 2023 and
2024, which includes approximately 40% of the NRA. This includes
the largest tenant, Lehigh Valley Academy (11.2% NRA), which was
expected to vacate at the lease expiration in August 2023.
The loan has remained current since issuance, with NOI DSCR at
1.28x as of TTM June 2023 and YE 2022 compared to 1.33x at YE 2021,
1.45x at YE 2020, and 1.30x at YE 2019. Fitch's 'B' rating case
loss (prior to concentration adjustments) is 19.9% and incorporates
a 10% cap rate and a 10% stress to TTM June 2023 NOI as well as a
higher probability of default given rollover concerns and upcoming
loan maturity.
The second largest contributor to overall loss expectations,
Canadian Pacific Plaza (5.1%), is secured by a 393,902-sf office
building located in the CBD of Minneapolis, MN. Occupancy has
remained low since February 2020 following the lease expiration and
vacancy of a major tenant representing 19.6% of the NRA. Occupancy
reported at 57% as of June 2023, down from 62% as of December 2022,
87% as of YE 2019 and 93% as of YE 2018. The only remaining large
tenant is Soo Line Railroad (23.4% NRA, August 2027 lease
expiration) with no other tenant occupying more than 3% of NRA.
The loan has an Anticipated Repayment Date (ARD) of November 2023
and a final maturity date of November 2028. If the Canadian Pacific
Plaza loan is not repaid in full on or before the ARD, the interest
rate will increase to 8.18% until the November 2028 maturity.
Additionally, the ARD automatically triggers a full cash flow sweep
where all excess cash flow will be used to pay down the principal
balance of the loan.
NOI DSCR has dropped further to 0.64x as of YE 2022 compared to
0.79x as of YE 2021, 1.03x as of YE 2020, 1.92x as of YE 2019, and
2.01x as of YE 2018. Fitch's 'Bsf' rating case loss (prior to
concentration adjustments) is 38.7% and incorporates a 10.5% cap
rate and 20% stress to YE 2022 NOI as well as a higher probability
of default given the declining occupancy.
The third largest contributor to overall loss expectations,
Williams Center Towers (5.8%), is secured by two office towers
totaling 765,809 sf located within the CBD of Tulsa, OK. The loan
transferred to special servicing in April 2018 due to a low DSCR
but remains current with cash management in place.
Occupancy as of December 2022 was 65%, down from 70% as of December
2021, 79% as of September 2019, and 91.6% at issuance. The largest
tenant at issuance, Samson Energy, first downsized and then
completely vacated the building in 2017 after filing bankruptcy.
The property suffered a further occupancy drop in December 2019
when the Bank of Oklahoma terminated its lease. Current largest
tenants include Community Care HMO (17.7% NRA, 2033 lease
expiration), Doerner, Saunders, Daniel and Anderson, LLP (6.4% NRA,
2027 lease expiration), Southwest Power Administration (5.4% NRA,
2033 lease expiration) and McAfee and Taft, PC (5.0% NRA, 2027
lease expiration).
The YE 2022 NOI DSCR is 1.09x compared to 1.06x at YE 2021, 1.15x
at YE 2020 and 1.53x at September 2019. Fitch's 'Bsf' rating case
loss (prior to concentration adjustments) is 33.4% and incorporates
a 10.25% cap rate and 10% stress to YE 2022 NOI as well as a higher
probability of default given occupancy concerns and an upcoming
loan maturity.
Increased CE: As of the September 2023 remittance report, the
pool's aggregate balance has been reduced by 44% to $701.1 million
from $1.26 billion at issuance. There are 19 loans (25.3% of the
pool) that have defeased. All loans mature or have an ARD between
October 2023 and July 2024. Realized losses total $9.1 million and
have been fully absorbed by the non-rated class G. Interest
shortfalls totaling $2.0 million are currently impacting class G.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The Negative Outlooks reflect the potential for downgrades if a
higher than currently expected concentration of loans default at
their upcoming maturities or with further performance deterioration
on the FLOCs, especially PennCap Portfolio, Williams Center Towers
and Canadian Pacific Plaza.
Downgrades to the 'AAAsf' rated classes are not considered likely
due to the expectation of continued increase in CE from
amortization and upcoming payoffs; however, downgrades may occur if
a higher than expected proportion of the pool defaults, expected
losses increase significantly and/or interest shortfalls affect the
'AAAsf' and 'AA-sf' rated classes.
Downgrades to the 'AA-sf', 'A-sf' and 'BBB-sf' categories would
likely occur if Fitch's projected losses increase from declines in
performance, including from higher than expected defaults at
maturity.
Further downgrades to the 'Bsf' category would occur should loss
expectations increase due to an increase in specially serviced
loans and/or defaulted loans incur higher than expected losses.
Downgrades to the 'CCCsf' rated class would occur with greater
certainty of loss or as losses are realized.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Sensitivity factors that lead to upgrades would include stable to
improved asset performance coupled with paydown and/or defeasance.
Upgrades to the 'AA-sf' and 'A-sf' categories are not expected but
may occur with significant improvement in CE and/or defeasance and
the stabilization of performance of the FLOCs, especially PennCap
Portfolio, Williams Center Towers and Canadian Pacific Plaza.
However, increased concentrations, further underperformance of
FLOCs or new defaults may reverse this trend.
Upgrades to the 'BBB-sf' and 'Bsf' categories are considered
unlikely and 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.
An upgrade to the 'CCCsf' rated class is not likely unless the
performance of the remaining pool stabilizes, recoveries are
significantly better than expected on FLOCs and the senior classes
pay off.
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.
[*] DBRS Confirms 18 Credit Ratings From 7 American Trust Deals
---------------------------------------------------------------
DBRS, Inc. upgraded 12 credit ratings and confirmed 18 credit
ratings from seven American Credit Acceptance Receivables Trust
transactions.
The Affected Ratings Are Available at https://bit.ly/3tuvyFR
Here is the list of the Issuers:
American Credit Acceptance Receivables Trust 2020-3
American Credit Acceptance Receivables Trust 2020-1
American Credit Acceptance Receivables Trust 2021-1
American Credit Acceptance Receivables Trust 2022-3
American Credit Acceptance Receivables Trust 2021-3
American Credit Acceptance Receivables Trust 2023-1
American Credit Acceptance Receivables Trust 2022-1
The credit 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 - September 2023 Update, published on September
28, 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 credit rating actions are the result of collateral
performance to date and DBRS Morningstar's assessment of future
performance assumptions.
-- The transaction 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 credit
ratings.
Notes: The principal methodology applicable to the credit ratings
is DBRS Morningstar Master U.S. ABS Surveillance (July 20, 2023).
[*] DBRS Confirms 38 Credit Ratings From 9 Flagship Trust Deals
---------------------------------------------------------------
DBRS, Inc. upgraded 10 credit ratings and confirmed 38 credit
ratings from nine Flagship Credit Auto Trust transactions.
The Affected Ratings Are Available at https://bit.ly/3RUs2OX
Here is the list of the Issuers:
Flagship Credit Auto Trust 2022-2
Flagship Credit Auto Trust 2021-1
Flagship Credit Auto Trust 2021-2
Flagship Credit Auto Trust 2021-3
Flagship Credit Auto Trust 2021-4
Flagship Credit Auto Trust 2022-4
Flagship Credit Auto Trust 2022-1
Flagship Credit Auto Trust 2023-1
Flagship Credit Auto Trust 2022-3
The credit 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 credit rating actions are the result of collateral
performance to date and DBRS Morningstar's assessment of future
performance assumptions.
-- The transaction 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 credit
ratings.
Notes: The principal methodology applicable to the credit ratings
is DBRS Morningstar Master U.S. ABS Surveillance (July 20, 2023).
[*] DBRS Reviews 393 Classes From 37 US RMBS Transactions
---------------------------------------------------------
DBRS, Inc. reviewed 393 classes from 37 U.S. residential
mortgage-backed securities (RMBS) transactions. These transactions
consist of subprime, second lien, prime, option ARM, ALT-A
collateral, fixed- and adjustable-rate, first-lien residential
mortgages collateralized by investor properties with one to four
units (residential investor loans) and small-balance commercial
mortgages (SBC) collateralized by various types of commercial,
multifamily rental, and mixed-use properties. Of the 393 classes
reviewed, DBRS Morningstar upgraded two credit ratings and
confirmed 391 credit ratings.
The Affected Ratings Are Available at https://bit.ly/46LQfvg
Here is the list of the Issuers:
Home Equity Asset Trust 2007-2
Credit Suisse First Boston Mortgage Securities Corp. Home Equity
Asset Trust 2006-8
Credit Suisse First Boston Mortgage Securities Corp. Home Equity
Asset Trust 2006-7
Credit Suisse First Boston Mortgage Securities Corp. Home Equity
Asset Trust 2007-1
Credit Suisse First Boston Mortgage Securities Corp. Home Equity
Mortgage Trust 2006-3
Impac CMB Trust Series 2004-11
Home Equity Mortgage Trust Series 2006-4
Merrill Lynch Mortgage Investors Trust, Series 2005-NCA
Impac CMB Grantor Trust 2005-1-1
Impac CMB Grantor Trust 2005-1-2
Impac CMB Grantor Trust 2005-1-4
Impac CMB Grantor Trust 2005-1-5
Impac CMB Grantor Trust 2005-1-6
Impac CMB Grantor Trust 2005-1-7
Velocity Commercial Capital Loan Trust 2022-5
GSAMP Trust 2006-HE6
Fremont Home Loan Trust 2006-C
Fremont Home Loan Trust 2006-D
GMACM Home Equity Loan Trust 2005-HE2
GSR Mortgage Loan Trust 2005-AR5
Home Equity Mortgage Trust 2006-5
DSLA Mortgage Loan Trust 2006-AR2
DSLA Mortgage Loan Trust 2005-AR5
HarborView Mortgage Loan Trust 2007-A
J.P. Morgan Alternative Trust 2005-S1
HarborView Mortgage Loan Trust 2005-13
EquiFirst Loan Securitization Trust 2007-1
HarborView Mortgage Loan Trust 2006-SB1
First Franklin Mortgage Loan Trust 2006-FFA
First Franklin Mortgage Loan Trust 2006-FF2
First Franklin Mortgage Loan Trust 2006-FFB
CWALT, Inc. Alternative Loan Trust 2005-48T1
CWALT, Inc. Alternative Loan Trust 2005-60T1
CWALT, Inc. Alternative Loan Trust 2005-65CB
J.P. Morgan Mortgage Acquisition Trust 2006-WF1
MortgageIT Securities Corp. Mortgage Loan Trust, Series 2007-2
Meritage Mortgage Loan Trust 2005-3
The credit rating upgrades reflect positive performance trends and
increases in credit support sufficient to withstand stresses at
their new credit rating levels. The credit rating confirmations
reflect asset performance and credit-support levels that are
consistent with the current credit ratings.
Notes: The principal methodologies applicable to the credit ratings
are the U.S. RMBS Surveillance Methodology (March 3, 2023).
[*] S&P Places 60 Ratings on 47 Classes From 11 Deals on Watch Neg.
-------------------------------------------------------------------
S&P Global Ratings placed its ratings on 47 classes from seven U.S.
single-asset single-borrower CMBS transactions and 13 classes from
four U.S. conduit CMBS transactions on CreditWatch with negative
implications.
S&P said, "The CreditWatch negative placements follow the revision
of our capitalization rate assumptions for class B office assets as
detailed in the recently updated criteria guidance article
"Guidance: CMBS Global Property Evaluation Methodology," originally
published March 13, 2019. As detailed in the related press release,
"Guidance On Global CMBS Property Evaluation Methodology Updated,"
published Sept. 27, 2023, while the current rising interest rate
environment has led to correspondingly higher market capitalization
rates for most property types, market capitalization rates for
office assets have increased notably, suggesting a widening in the
risk premium for the sector, presumably due to weakened
fundamentals and property performance from reduced demand caused by
hybrid and remote work arrangements. Given the continued "flight to
quality" within the office segment, as well as some assumed base
level of office need/demand, we expect class A office performance
to improve with time, while class B stock may see a long-term
decrease in demand. Accordingly, we raised our capitalization rate
assumptions for class B office assets by 100 basis points, to
better align with market conditions.
"In determining the classes to place on CreditWatch negative, we
started by isolating transactions in our rated book with material
exposure to office assets. We rate 79 single-borrower and
large-loan transactions collateralized by mortgage loans secured
either with office assets or mixed-use assets that have some office
components. Of this subset, we identified 18 transactions that we
deemed, in our opinion, to have class B office characteristics.
However, eight of the 18 transactions already have S&P Global
Ratings capitalization rates that are within the range of the
revised class B office capitalization rates, and therefore, we do
not believe at this time, a revision to the capitalization rate is
needed. Of the remaining 10 transactions, we concluded that a
revision to the S&P Global Ratings capitalization rate is
warranted. Accordingly, seven transactions have classes that are
placed on CreditWatch negative, while three do not. The credit
metrics for the three transactions that did not result in a
CreditWatch negative placement are listed below.
"For conduits, of which we rate 150 private-label transactions, our
initial focus was on transactions with 40.0% exposure or more to
loans collateralized by office asset types. (Preliminary testing
showed no rating impact on the rated classes for transactions with
office exposure of less than 40.0%.) For pools with more than 40.0%
exposure to office-backed loans, we determined class B
office-quality assets comprised between 11.3% and 51.0% of pooled
trust balances.
"For the conduit transactions, we further refined this population
by considering the likelihood of negative rating outcomes. This led
to the exclusion of any transactions with a minimum bond rating in
the 'AA' category, where we view downgrades as unlikely given
qualitative considerations such as amortization, potential
de-leveraging from loan payoffs, and their position in the payment
waterfall.
"We expect to resolve the CreditWatch placements over the next few
months as we finalize our rating analysis for each transaction. Our
analysis will consider the revised capitalization rate assumptions
as well as a cursory review of other factors including collateral
and transaction performance trends, the economic environment (both
current and anticipated), and transaction-specific structural
characteristics.
"In addition, we identified three additional single-asset
single-borrower transactions with class B office exposure that we
adjusted the capitalization rates but did not place the ratings on
CreditWatch negative. This stems from trust balance paydowns due to
property releases that offset the effect of lower valuations."
Ratings list
RATING
ISSUER SERIES CLASS CUSIP TO FROM
BBCMS 2021-AGW Mortgage Trust
2021-AGW A 05493HAA3 AAA (sf)/Watch Neg AAA (sf)
BBCMS 2021-AGW Mortgage Trust
2021-AGW B 05493HAG0 AA- (sf)/Watch Neg AA- (sf)
BBCMS 2021-AGW Mortgage Trust
2021-AGW C 05493HAJ4 A- (sf)/Watch Neg A- (sf)
BBCMS 2021-AGW Mortgage Trust
2021-AGW D 05493HAL9 BBB- (sf)/Watch Neg BBB- (sf)
BBCMS 2021-AGW Mortgage Trust
2021-AGW X-NCP 05493HAE5 BBB- (sf)/Watch Neg BBB- (sf)
GS Mortgage Securities Corp. Trust 2018-HART
2018-HART A 36259DAA1 AA (sf)/Watch Neg AAA (sf)
GS Mortgage Securities Corp. Trust 2018-HART
2018-HART B 36259DAG8 AA- (sf)/Watch Neg AA- (sf)
GS Mortgage Securities Corp. Trust 2018-HART
2018-HART C 36259DAJ2 A- (sf)/Watch Neg A- (sf)
GS Mortgage Securities Corp. Trust 2018-HART
2018-HART D 36259DAL7 BBB- (sf)/Watch Neg BBB- (sf)
GS Mortgage Securities Corp. Trust 2018-HART
2018-HART E 36259DAN3 BB- (sf)/Watch Neg BB- (sf)
GS Mortgage Securities Corp. Trust 2018-HART
2018-HART X-NCP 36259DAE3 BBB- (sf)/Watch Neg BBB- (sf)
GS Mortgage Securities Corp. Trust 2021-ROSS
2021-ROSS A 36264YAA8 AAA (sf)/Watch Neg AAA (sf)
GS Mortgage Securities Corp. Trust 2021-ROSS
2021-ROSS B 36264YAE0 AA- (sf)/Watch Neg AA- (sf)
GS Mortgage Securities Corp. Trust 2021-ROSS
2021-ROSS C 36264YAG5 A- (sf)/Watch Neg A- (sf)
GS Mortgage Securities Corp. Trust 2021-ROSS
2021-ROSS D 36264YAJ9 BB- (sf)/Watch Neg BB- (sf)
GS Mortgage Securities Corp. Trust 2021-ROSS
2021-ROSS A-Z 36264YAW0 AAA (sf)/Watch Neg AAA (sf)
GS Mortgage Securities Corp. Trust 2021-ROSS
2021-ROSS A-Y 36264YAU4 AAA (sf)/Watch Neg AAA (sf)
GS Mortgage Securities Corp. Trust 2021-ROSS
2021-ROSS A-IO 36264YAY6 AAA (sf)/Watch Neg AAA (sf)
J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-PTC
2018-PTC A 46649GAA2 A (sf)/Watch Neg A (sf)
J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-PTC
2018-PTC B 46649GAG9 BBB- (sf)/Watch Neg BBB- (sf)
J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-PTC
2018-PTC C 46649GAJ3 BB- (sf)/Watch Neg BB- (sf)
J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-PTC
2018-PTC D 46649GAL8 B- (sf)/Watch Neg B- (sf)
J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-PTC
2018-PTC E 46649GAN4 CCC (sf)/Watch Neg CCC (sf)
J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-PTC
2018-PTC X-EXT 46649GAE4 B- (sf)/Watch Neg B- (sf)
Morgan Stanley Capital I Trust 2018-BOP
2018-BOP A 61768FAA8 AAA (sf)/Watch Neg AAA (sf)
Morgan Stanley Capital I Trust 2018-BOP
2018-BOP B 61768FAG5 AA- (sf)/Watch Neg AA- (sf)
Morgan Stanley Capital I Trust 2018-BOP
2018-BOP C 61768FAJ9 A- (sf)/Watch Neg A- (sf)
Morgan Stanley Capital I Trust 2018-BOP
2018-BOP D 61768FAL4 BB (sf)/Watch Neg BB (sf)
Morgan Stanley Capital I Trust 2018-BOP
2018-BOP X-EXT 61768FAE0 BB (sf)/Watch Neg BB (sf)
Natixis Commercial Mortgage Securities Trust 2017-75B
2017-75B A 63874EAA8 AAA (sf)/Watch Neg AAA (sf)
Natixis Commercial Mortgage Securities Trust 2017-75B
2017-75B B 63874EAG5 A (sf)/Watch Neg A (sf)
Natixis Commercial Mortgage Securities Trust 2017-75B
2017-75B C 63874EAJ9 BBB (sf)/Watch Neg BBB (sf)
Natixis Commercial Mortgage Securities Trust 2017-75B
2017-75B D 63874EAL4 BB- (sf)/Watch Neg BB- (sf)
Natixis Commercial Mortgage Securities Trust 2017-75B
2017-75B E 63874EAN0 CCC (sf)/Watch Neg CCC (sf)
Natixis Commercial Mortgage Securities Trust 2017-75B
2017-75B V1-A 63874EAS9 AAA (sf)/Watch Neg AAA (sf)
Natixis Commercial Mortgage Securities Trust 2017-75B
2017-75B V1-B 63874EAW0 A (sf)/Watch Neg A (sf)
Natixis Commercial Mortgage Securities Trust 2017-75B
2017-75B V1-C 63874EAY6 BBB (sf)/Watch Neg BBB (sf)
Natixis Commercial Mortgage Securities Trust 2017-75B
2017-75B V1-D 63874EBA7 BB- (sf)/Watch Neg BB- (sf)
Natixis Commercial Mortgage Securities Trust 2017-75B
2017-75B V1-E 63874EBC3 CCC (sf)/Watch Neg CCC (sf)
Natixis Commercial Mortgage Securities Trust 2017-75B
2017-75B V1-XB 63874EAU4 BBB (sf)/Watch Neg BBB (sf)
Natixis Commercial Mortgage Securities Trust 2017-75B
2017-75B V2 63874EBE9 CCC (sf)/Watch Neg CCC (sf)
Natixis Commercial Mortgage Securities Trust 2017-75B
2017-75B X-A 63874EAC4 AAA (sf)/Watch Neg AAA (sf)
Natixis Commercial Mortgage Securities Trust 2017-75B
2017-75B X-B 63874EAE0 BBB (sf)/Watch Neg BBB (sf)
ONE 2021-PARK Mortgage Trust
2021-PARK A 682413AA7 AAA (sf)/Watch Neg AAA (sf)
ONE 2021-PARK Mortgage Trust
2021-PARK B 682413AC3 AA- (sf)/Watch Neg AA- (sf)
ONE 2021-PARK Mortgage Trust
2021-PARK C 682413AE9 A- (sf)/Watch Neg A- (sf)
ONE 2021-PARK Mortgage Trust
2021-PARK D 682413AG4 BBB- (sf)/Watch Neg BBB- (sf)
BANK 2021-BNK34
2021-BN34 C 06541JBD2 A- (sf)/Watch Neg A- (sf)
BANK 2021-BNK34
2021-BN34 X-B 06541JAS0 A- (sf)/Watch Neg A- (sf)
BANK 2021-BNK34
2021-BN34 C-1 06541JBE0 A- (sf)/Watch Neg A- (sf)
BANK 2021-BNK34
2021-BN34 C-2 06541JBF7 A- (sf)/Watch Neg A- (sf)
BANK 2021-BNK34
2021-BN34 C-X1 06541JBG5 A- (sf)/Watch Neg A- (sf)
BANK 2021-BNK34
2021-BN34 C-X2 06541JBH3 A- (sf)/Watch Neg A- (sf)
Benchmark 2018-B1 Mortgage Trust
2018-B1 C 08162PBB6 BBB+ (sf)/Watch Neg BBB+ (sf)
COMM 2012-CCRE4 Mortgage Trust
2012-CCRE4 A-M 12624QAT0 BBB+ (sf)/Watch Neg BBB+ (sf)
COMM 2012-CCRE4 Mortgage Trust
2012-CCRE4 B 12624QBA0 B (sf)/Watch Neg B (sf)
COMM 2012-CCRE4 Mortgage Trust
2012-CCRE4 X-A 12624QAS2 BBB+ (sf)/Watch Neg BBB+ (sf)
BANK 2019-BNK20
2019-BNK20 C 06540AAJ0 A (sf)/Watch Neg A (sf)
BANK 2019-BNK20
2019-BNK20 D 06540AAM3 BBB+ (sf)/Watch Neg BBB+ (sf)
BANK 2019-BNK20
2019-BNK20 X-B 06540AAF8 A (sf)/Watch Neg A (sf)
[*] S&P Places 810 Ratings From 174 U.S. Deals on Watch Positive
----------------------------------------------------------------
S&P Global Ratings placed its ratings on 810 classes from 174 U.S.
residential mortgage-backed securities (RMBS) transactions on
CreditWatch with positive implications. These CreditWatch positive
placements are related to a revision in S&P's 'B' rating level
foreclosure frequency (FF) assumption for an archetypal pool of
U.S. mortgage loans.
A list of Affected Ratings can be viewed at:
https://rb.gy/gvox7
S&P said, "As described in our criteria, "Methodology And
Assumptions For Rating U.S. RMBS Issued 2009 And Later, published
Feb. 22, 2018, we may revise our outlook for the mortgage market
and our projected FF assumption to reflect changing economic
conditions.
"Given our current views, we updated our market outlook as it
relates to the 'B' projected archetypal loss level. We revised and
lowered our 'B' foreclosure frequency to 2.5% from 3.25%, which
reflects the level prior to the COVID-19 pandemic and our April
2020 update. This revision is based on our benign view of the state
of the U.S. residential mortgage and housing market as demonstrated
through general national level home price behavior, unemployment
rates, mortgage performance, and underwriting.
"For further information on our revised market outlook and updated
FF assumption please see "Guidance: Methodology And Assumptions For
Rating U.S. RMBS Issued 2009 And Later," published April 17, 2020,
and related media release."
CreditWatch Positive Placements
S&P said, "We placed our ratings on CreditWatch positive in cases
where our preliminary analysis indicates at least a one-in-two
likelihood that we will raise the affected ratings under our
revised outlook and corresponding decrease in the projected
archetypal 'B' FF.
"The 810 classes placed on CreditWatch represent approximately 15%,
by number of classes, of S&P Global Ratings' total rated in-scope
U.S. RMBS. Of the 810 affected classes, 330 were related modifiable
and combinable real estate mortgage investment conduit (MACR)
certificates. The CreditWatch placements affected classes at the
'BBB (sf)' and below rating levels and any eventual rating actions
associated with this change is expected to be typically one or two
notches. We typically resolve CreditWatch placements within three
months of initial placement."
[*] S&P Takes Various Actions on 335 Bonds From 23 Tobacco Trusts
-----------------------------------------------------------------
S&P Global Ratings reviewed its ratings on 335 tobacco settlement
bonds from 23 transactions. The review resulted in 25 upgrades, one
downgrade, and 309 affirmations.
A list of Affected Ratings can be viewed at:
https://rb.gy/hacgm
The bond issuances are ABS transactions backed by tobacco
settlement revenues from the master settlement agreement (MSA)
payments, liquidity reserve accounts, and interest income. MSA
payment calculations typically reflect inflation, annual shipment
volume, and market shift in non-participating manufacturers
(NPMs).
In May 2023, the National Association of Attorneys General (NAAG)
released its annual domestic cigarette volume data, reporting a
9.72% decrease in the 2022 sales year. Combined with 6.45%
inflation and 9.48% NPM market share, as reported by the NAAG,
total MSA distribution payments decreased in sales year 2022 for
most states and territories. The average consumption decline per
annum was 4.60% for the past five years and 3.82% for the past 10
years.
In S&P's view, recent inflation trends impacted total MSA payments
in two ways. On one hand, higher inflation (floored at 3.00%)
offset consumption decline in the MSA payment calculation. On the
other hand, persistent inflation pressured consumer discretionary
spending, potentially driving smokers to cheaper products of NPMs
or other alternative products not covered by the MSA and therefore
reducing overall MSA payments. Nevertheless, NPM adjustments under
the MSA at least partially reduce the impact of shifting market
share toward NPMs. Although first- and second-quarter data indicate
that the 2023 consumption decline will likely be higher than S&P's
base case assumption of 4.00%-4.50%, it believes total MSA payments
will continue to be impacted by inflation and NPM adjustments.
S&P said, "The Volume Decline Stress table shows our current volume
decline assumptions applied in our cash flow analysis. Although
these assumptions are higher than what is prescribed in our
criteria, we believe the additional volume declines reflect recent
consumption trends, access to healthier alternatives, higher retail
prices, and an uncertain future regulatory environment."
VOLUME DECLINE STRESS
Constant decline starting year 1
Change in
Rating volume (%)
B (4.25)
B+ (4.42)
BB- (4.58)
BB (4.75)
BB+ (4.92)
BBB- (5.08)
BBB (5.25)
BBB+ (5.42)
A- (5.58)
A (5.75)
S&P said, "During our review, we applied a cash flow analysis that
includes a cigarette volume decline test, a participating
manufacturer bankruptcy test, and a nonparticipating manufacturer
adjustment (collectively, rating tests), as well as additional
sensitivity stresses on market share shifts and spikes in volume
decline. The sensitivity runs are designed to test the
transaction's tolerance to event risks such as a menthol ban, tax
increases, and new product replacement. Our cash flow results
reflect the transactions' ability to pay timely interest and
scheduled principal at each bond's stated maturity date, based on
their underlying credit support and payment priority.
"We considered the transactions' material exposure to social credit
factors within the environmental, social, and governance framework.
Cigarette consumption has been declining in recent years due to a
variety of factors, including pricing, alternative products, and
legislative and social changes. As the decline in social
acceptability and the widespread awareness of health concerns
continue, these social factors could adversely affect consumption
of cigarettes and, therefore, the amounts payable under the MSA. We
have generally accounted for these social credit factors, along
with other factors, by applying stresses in our cash flow analysis
to the projected consumption rates."
The rating actions mainly reflect S&P's view of:
-- The transactions' performance reflecting bond amortization to
date and our forward-looking payment expectation. For example, some
subordinate turbo bonds have received substantial or near total
paydown since our review in 2022, allowing them to pass at higher
rating levels.
-- The bonds' time remaining until maturity. The shorter remaining
time to maturity has moved some of the bonds into different
maturity buckets for notching. For example, a bond that previously
had 20 years until maturity now has 19 years, and, therefore, only
received a one-notch adjustment instead of the prior two-notch
adjustment.
S&P said, "If a current interest bond failed all rating tests, we,
in a manner consistent with our prior reviews, assigned a 'B-'
rating if a steady state test is passed (defined as 0% consumption
decline with 'B-' recovery assumption on NPM adjustments);
otherwise, we assigned a 'CCC+' rating. The capital appreciation
bonds that did not pass any rating tests were typically assigned a
'CCC-' rating."
The majority of S&P's rating actions were consistent with the
model-implied results with the tenor adjustment described. However,
S&P made additional qualitative adjustments on some transactions:
-- Michigan Tobacco Settlement Finance Authority: S&P affirmed its
rating on the series 2007 capital appreciation bond due in 2052 at
'CCC- (sf)'. Although the bond passed its steady state test, S&P
doesn't believe the slight improvement in cash flow projections
warranted an upgrade due to the inherent volatility in long
maturity capital appreciation bonds.
-- New York Counties Tobacco Trust II: S&P raised its rating on
the series 2001 term bond due in 2035 to 'A (sf)' from 'A- (sf)',
which passed 'A' level stress while having more than 10 years until
maturity. Given the bond's note factor is just over 1.00%, S&P
expects it will be paid off in full by 2024, and, therefore,
further tenor notching is not necessary.
-- New York Counties Tobacco Trust VI: S&P said, "We upgraded the
class A-1 turbo term bond due in 2040 to 'BBB+ (sf)' from 'BBB
(sf)' and the class A-1 turbo term bond due in 2043 to 'BBB (sf)'
from 'BBB- (sf)'. Although the bonds passed our rating level tests
and sensitivities at the 'A' and 'BBB+' rating levels,
respectively, we notched the turbo term bonds by their
chronological order in maturity due to the priority of principal
payments. In addition, we affirmed our 'BB+ (sf)' and 'BB (sf)'
ratings, respectively, on the class C turbo term bonds maturing in
2042 and 2045. Although the 2042 and 2045 class C turbo term bonds
passed our rating level tests and sensitivities at the 'BBB' and
'BBB-' rating levels, respectively, we continue to notch these
bonds down for subordination to the class B bonds."
-- Tobacco Settlement Financing Corporation (Louisiana): S&P said,
"We raised our rating on the series 2013A term bond due in 2035,
which passed 'A' level stress while having more than 10 years until
maturity, to 'A (sf)' from 'A- (sf)'. We expect it will be paid off
in full by 2024, and, therefore, further tenor notching is not
necessary."
-- Westchester Tobacco Asset Securitization Corporation: S&P said,
"We affirmed our 'BB+ (sf)', 'BB (sf)', and 'BB-' (sf)' ratings on
the series 2017, class C subordinated turbo bonds maturing in 2042,
2045, and 2051, respectively. Although the 2045 and 2051 class C
turbo bonds passed our rating level tests at the 'BB+' stress
level, we continue to notch these bonds down by their chronological
order in maturity due to the priority of principal payments."
-- Tobacco Settlement Authority (Iowa): In August 2023, Iowa
reached a settlement agreement with the tobacco manufacturers, and
the transaction is expected to receive a lump sum of $95 million in
2024 and additional payments in 2025-2029. S&P affirmed all ratings
in the transaction after reviewing the information. The class B-1
turbo term bond is expected to receive more accelerated paydown
relative to our initial anticipation.
S&P will continue to monitor the tobacco sector and the tobacco
settlement bonds and assess any potential impact on its outstanding
ratings.
*********
Monday's edition of the TCR delivers a list of indicative prices
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S U B S C R I P T I O N I N F O R M A T I O N
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Randy Antoni, Jhonas Dampog, Marites Claro, Joy Agravante,
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herein is obtained from sources believed to be reliable, but is
not guaranteed.
The TCR subscription rate is $975 for 6 months delivered via
e-mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance thereof
are $25 each. For subscription information, contact Peter A.
Chapman at 215-945-7000.
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