/raid1/www/Hosts/bankrupt/TCR_Public/231029.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 29, 2023, Vol. 27, No. 301
Headlines
1988 CLO 3: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
ABPCI DIRECT XV: S&P Assigns Prelim 'BB-' Rating on Class E Notes
ALEN 2021-ACEN: S&P Lowers Class E Certs Rating to 'B- (sf)'
AMERICAN CREDIT 2023-4: S&P Assigns Prelim 'BB-' Rating on E Notes
ANCHORAGE CREDIT 7: Moody's Ups Rating on $15MM Cl. E Notes to Ba1
BAIN CAPITAL 2020-4: Fitch Assigns Final BB-sf Rating on E-R Notes
BANK 2020-BNK29: DBRS Confirms BB Rating on Class X-J Certs
BANK 2021-BNK35: DBRS Confirms BB Rating on Class H Certs
BBAM US II: S&P Assigns BB- (sf) Rating on $12MM Class D Notes
BENCHMARK 2018-B7: Fitch Lowers Rating on Two Tranches to 'BBsf'
BENEFIT STREET XXXII: S&P Assigns Prelim 'BB-' Rating on E Notes
BMO 2023-5C2: Fitch Gives 'B-(EXP)sf' Rating on Class G-RR Certs
BRAVO RESIDENTIAL 2023-NQM7: Fitch Gives B(EXP) Rating on B-2 Notes
BRIDGECREST LENDING 2023-1: S&P Assigns BB (sf) Rating on E Notes
C-BASS MORTGAGE 2004-RP1: Moody's Cuts Rating on M-3 Certs to Caa1
CD 2018-CD7: Fitch Affirms 'B-sf' Rating on Cl. G-RR Certificates
CHASE HOME 2023-1: DBRS Finalizes BB Rating on Class B-4 Certs
CHASE HOME 2023-RPL3: Fitch Assigns 'B(EXP)' Rating on B-2 Certs
CIFC FUNDING 2023-I: Fitch Assigns Final 'BB-sf' Rating on E Notes
CITIGROUP 2019-GC41: Fitch Affirms 'B-sf' Rating on Cl. G-RR Certs
CITIGROUP COMMERCIAL 2016-C2: DBRS Confirms BB Rating on 2 Classes
COMM 2014-CCRE21: Fitch Affirms 'B-sf' Rating on Class E Certs
COMM 2015-CCRE22: Fitch Lowers Rating on Class E Certs to 'B-sf'
CONNECTICUT AVENUE 2023-R07: DBRS Gives BB Rating on 4 Classes
CRESTLINE DENALI XVI: Moody's Ups Rating on $22MM D Notes From Ba1
CSAIL 2017-CX9: Fitch Lowers Rating on Three Tranches to 'B+sf'
CSAIL 2018-CX12: DBRS Confirms B(high) Rating on Class G-RR Certs
DRYDEN 113: Fitch Assigns 'BB+sf' Rating on Class E-R Notes
EAGLE RE 2023-1: DBRS Finalizes BB Rating on Class M-1B-3 Notes
ELMWOOD CLO 21: S&P Assigns B- (sf) Rating on Class F-R Notes
GS MORTGAGE 2016-GS4: Fitch Lowers Two Tranches to Bsf, Outlook Neg
HAMLET 2020-CRE1: DBRS Confirms BB(high) Rating on Class E Certs
HGI CRE 2022-FL3: DBRS Confirms B(low) Rating on Class G Notes
JPMBB COMMERCIAL 2015-C32: Moody's Cuts Rating on 2 Tranches to Ba1
JPMBB COMMERCIAL 2015-C33: Fitch Affirms 'B-' Rating on Cl. F Certs
JPMCC 2015-JP1: Fitch Lowers Rating on Two Tranches to 'BB-sf'
KATAYMA CLO I: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
KKR CLO 43: Fitch Affirms 'BB-sf' Rating on E Notes, Outlook Stable
LCM XV: Moody's Upgrades Rating on $33MM Class D-R Notes From Ba1
MAGNETITE XXXV: S&P Assigns Prelim BB-(sf) Rating on Class ER Notes
MORGAN STANLEY 2017-HR2: DBRS Confirms B Rating on H-RR Certs
MORGAN STANLEY 2018-H3: DBRS Confirms B(low) Rating on H-RR Certs
N-STAR REAL IX: Moody's Withdraws 'Caa3' Rating on 8 Tranches
ORL TRUST 2023-GLKS: S&P Assigns BB-(sf) Rating on Class HRR Certs
PAGAYA AI 2023-1: DBRS Finalizes B Rating on Class G Certs
PIKE PEAK 15 (2023): Fitch Assigns BB-(EXP)sf Rating on Cl. E Notes
PRESTIGE AUTO 2023-2: S&P Assigns Prelim BB-(sf) Rating on E Notes
PROGRESS RESIDENTIAL 2019-SFR3: DBRS Confirms BB Rating on F Trust
PRPM 2023-NQM2: DBRS Gives Prov. B Rating on Class B-2 Certs
ROCKFORD TOWER 2022-2: Fitch Gives BB+sf Final Rating on E-R Notes
ROCKFORD TOWER 2022-2: Moody's Assigns B3 Rating to $1MM F-R Notes
SIERRA TIMESHARE 2023-3: Fitch Assigns Final BBsf Rating on D Notes
SIERRA TIMESHARE 2023-3: Moody's Assigns Ba2 Rating to Cl. D Notes
SLM STUDENT 2008-5: S&P Raises Class B Notes Rating to 'BB (sf)'
SYMPHONY CLO 39: S&P Assigns BB- (sf) Rating on Class E Notes
TOWD POINT 2023-CES2: Fitch Assigns 'B-(EXP)' Rating on B2 Notes
TRICOLOR AUTO 2023-2: Moody's Withdraws (P)B2 Rating on F Notes
TRTX 2022-FL5: DBRS Confirms B(low) Rating on Class G Notes
UBS COMMERCIAL 2018-C8: Fitch Affirms 'B-sf' Rating on F-RR Certs
UNLOCK HEA 2023-1: DBRS Finalizes BB(low) Rating on Class B
VALLEY STREAM: S&P Assigns 'BB- (sf)' Rating on Class E-R Notes
VOYA CLO 2022-3: Fitch Assigns Final BB-sf Rating on Cl. E-R Notes
WELLINGTON MANAGEMENT 1: S&P Assigns BB-(sf) Rating on Cl. E Notes
WELLS FARGO 2015-NXS3: DBRS Confirms BB Rating on Class X-E Certs
WELLS FARGO 2016-C33: Fitch Affirms 'B-sf' Rating on Two Tranches
WELLS FARGO 2016-NXS5: Fitch Lowers Rating on 2 Tranches to CC
WELLS FARGO 2019-C51: Fitch Affirms 'B-sf' Rating on Cl. G-RR Debts
WELLS FARGO 2019-C52: Fitch Affirms B- Rating on Cl. G-RR Certs
WFRBS COMMERCIAL 2013-C18: DBRS Confirms C Rating on 2 Classes
[*] DBRS Reviews 752 Classes From 18 US RMBS Transactions
[*] Fitch Affirms 113 Classes of 8 CMBS Deals Issued 2016 to 2019
[*] Moody's Hikes Ratings of 30 Bonds Issued by Towd Point
[*] Moody's Takes Action on $73.1MM of US RMBS Issued 1997-2005
[*] Moody's Upgrades Ratings on $226MM of US RMBS Issued 2017-2019
[*] Moody's Upgrades Ratings on $74MM of US RMBS Issued 2003-2007
[*] S&P Lowers Ratings on 10 Classes From 10 U.S. RMBS to 'D (sf)'
[*] S&P Places 16 Ratings from 11 CLO transactions on Watch Negativ
*********
1988 CLO 3: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to 1988 CLO 3
Ltd./1988 CLO 3 LLC's floating-rate debt. The transaction is
managed by 1988 Asset Management LLC, a subsidiary of Muzinich &
Co.
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. 26,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- S&P's view of the collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
1988 CLO 3 Ltd./1988 CLO 3 LLC
Class A-1, $190.50 million: AAA (sf)
Class A-1 loans(i), $65.50 million: AAA (sf)
Class A-2, $14.00 million: AAA (sf)
Class B, $34.00 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, $48.65 million: Not rated
(i)The class A-1 loans are not convertible into any notes.
ABPCI DIRECT XV: S&P Assigns Prelim 'BB-' Rating on Class E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to ABPCI Direct
Lending Fund CLO XV Ltd./ABPCI Direct Lending Fund CLO XV LLC's
fixed- and floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by middle market speculative-grade
(rated 'BB+' or lower) senior secured term loans. The transaction
is managed by AB Private Credit Investors LLC.
The preliminary ratings are based on information as of Oct. 20,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
ABPCI Direct Lending Fund XV Ltd./
ABPCI Direct Lending Fund XV LLC
Class A-1, $225.65 million: AAA (sf)
Class A-2, $20.00 million: AAA (sf)
Class B, $39.00 million: AA (sf)
Class C (deferrable), $38.79 million: A (sf)
Class D (deferrable), $30.20 million: BBB- (sf)
Class E (deferrable), $21.55 million: BB- (sf)
Subordinated notes, $57.15 million: Not rated
ALEN 2021-ACEN: S&P Lowers Class E Certs Rating to 'B- (sf)'
------------------------------------------------------------
S&P Global Ratings lowered its ratings on four classes of
commercial mortgage pass-through certificates from ALEN 2021-ACEN
Mortgage Trust, a U.S. CMBS transaction. At the same time, S&P
affirmed its ratings on two other classes from the transaction.
This U.S. stand-alone (single-borrower) CMBS transaction is backed
by a floating-rate, interest-only (IO) mortgage loan secured by the
borrower's fee simple interest in One Allen and Three Allen
Centers, comprising two class A office towers in Houston, an
adjacent six-story parking garage and the Downtown Club at the Met,
a health club located on the top level of the garage.
Rating Actions
The downgrades on classes C, D, E, and F reflect:
-- S&P's revised valuation, which is lower than the valuation it
derived at issuance in March 2021 due primarily to higher vacancy
and lower rents at the properties.
-- S&P's belief that, due to weak office submarket fundamentals
and high exposure to energy sector tenants, the borrower will
continue to face challenges re-tenanting vacant spaces in a timely
manner.
-- S&P's concerns with the borrower's ability to make timely debt
service payments if the property's net cash flow (NCF) does not
improve. The loan is on the master servicer's watchlist due to low
reported occupancy and debt service coverage (DSC), which were
75.1% and 1.02x, respectively, as of the six months ended June 30,
2023.
-- The affirmations on classes A and B consider the comparatively
low debt per sq. ft. (about $107.12 per sq. ft. through class B),
among other factors.
S&P said, "At issuance in March 2021, the property was 79.5%
occupied. We assumed a 24.0% vacancy rate due to weak office
submarket fundamentals at the time, coupled with more than a third
of the tenants exposed to the energy sector, an S&P Global Ratings'
base rent of $24.18 per sq. ft. and gross rent of $38.16 per sq.
ft. and 45.0% operating expense ratio to arrive at our long-term
sustainable net cash flow (NCF) of $35.8 million.
"Office fundamentals in this submarket continue to exhibit declines
in occupancy and rents. While occupancy at the property was 75.1%
as of the June 1, 2023, rent roll, we expect the occupancy rate to
decline to 73.4%, after excluding certain tenants with 2023 or 2024
lease expirations that the servicer or CoStar indicated are dark or
vacated. In addition, office leases at the property that commenced
in 2022 and 2023, together representing approximately 5.6% of net
rentable area (NRA), had a lower average gross rent of $35.68 per
sq. ft., as calculated by S&P Global Ratings, compared with those
signed at issuance in 2021, which was $41.41 per sq. ft. As a
result, utilizing a 26.6% vacancy rate, an S&P Global Ratings
$23.50 per sq. ft. base rent and $37.05 per sq. ft. gross rent, and
a 45.8% operating expense ratio, we revised and lowered our
long-term sustainable NCF by 10.6% to $32.0 million from $35.8
million at issuance. Using an S&P Global Ratings capitalization
rate of 8.00%, unchanged from issuance, we arrived at an S&P Global
Ratings expected case value of $401.5 million, or $173 per sq. ft.,
10.9% lower than our issuance value of $450.7 million and 43.0%
below the issuance appraisal value of $704.3 million. This yielded
an S&P Global Ratings loan-to-value ratio of 117.1% on the trust
balance, up from 104.3% at issuance.
"Specifically, we lowered our rating on class F to 'CCC (sf)' to
reflect our view that, due to current market conditions and its
position in the payment waterfall, this class is at a heightened
risk of default and loss.'
Although the model-indicated ratings were lower than the classes'
current or revised ratings, S&P tempered its downgrades on classes
C and D and affirmed its ratings on classes A and B based on
certain qualitative considerations. These include:
-- The potential that the property's operating performance could
improve above our revised expectations. According to the CRE
Finance Council reserve report as of October 2023, there was $9.0
million in reserve.
-- The significant market value decline that would need to occur
before these classes experience principal losses.
-- The liquidity support provided in the form of servicer
advancing.
-- The relative position of the classes in the payment waterfall.
S&P said, "We will continue to monitor the tenancy and performance
of the property and loan as well as the overall office submarket
conditions. If we receive information that differs materially from
our expectations, such as reported negative changes in the
performance beyond what we already considered or sponsor's
commitment, we may revisit our analysis and take further rating
actions, as we deem necessary."
Property-Level Analysis
The loan collateral includes:
-- One Allen Center, a 34-story, 952,347-sq.-ft., 1972-built,
class A office building located at 500 Dallas Street in Houston;
-- Three Allen Center, a 50-story, 1.2 million-sq.-ft.,
1980-built, class A office building located at 333 Clay Street in
Houston;
-- An adjacent six-story, 2,273-space, parking garage; and
-- The Downtown Club at the Met, a 154,743-sq.-ft. health club
located on the top floor of the garage.
Both office towers were last renovated in 2020 and are part of the
larger Allen Center, a mixed-use development that includes a third
office tower, a second parking garage, and a hotel (none are
collateral) owned by the sponsors, Brookfield Office Properties
Inc., Brookfield Asset Management Inc., and Brookfield Property
Partners L.P. The property is centrally located in the Houston
central business district (CBD) and near major interstates and
various public transportation modes.
The servicer reported that net operating income (NOI) fell 9.6%
during the COVID-19 pandemic to $42.1 million in 2020 from $46.6
million in 2019 and a further 19.0% to $34.1 million in 2021 before
rebounding 17.3% to $40.0 million in 2022. The NOI for the
trailing-12-month period ended June 30, 2023, as calculated by S&P
Global Ratings, declined 5.5% to $37.8 million. The reported
occupancy at the property was 86.0% in 2019, 80.0% in 2020, 78.0%
in 2021, and 85.3% in 2022. As of the June 2023 rent roll, the
property was 75.1% leased and we expect occupancy to fall to 73.4%
after including known tenant movements. The five largest tenants
comprise 39.0% of NRA and are:
-- Plains Marketing L.P. (12.7% of NRA, 18.7% of in-place gross
rent as calculated by S&P Global Ratings, June 2031 lease
expiration). The tenant has one remaining contraction option
starting in 2027 to contract up to three floors. The tenant
previously exercised its 2021 and 2023 contraction options (S&P
considered the tenant's reduced square footage [by about 2.1% of
NRA] in our analysis at issuance).
-- Motiva Enterprises LLC (10.7%, 17.0%, December 2027).
-- The Downtown Club Inc. (6.7%, 2.6%, August 2031).
-- Talos Production LLC (5.3%, 7.9%, July 2029). The tenant has
one termination option effective on July 31, 2027.
-- Callon Petroleum Co. (3.6%, 5.2%, June 2029). According to
CoStar, the tenant's space is being marketed for sublease.
-- The property's notable rollover risk is in 2027 (17.9% of NRA,
27.2% of S&P Global Ratings' in-place gross rent), 2029 (12.1%,
17.8%), and 2031 (22.9%, 25.8%).
According to CoStar, the CBD office submarket, where the property
is located, experienced persistent negative net absorption due
mainly to increased supply, low office leasing demand from the
energy sector, which occupies about 30% of the submarket's office
space, and companies continuing to embrace remote and hybrid work
arrangements. As a result, submarket vacancies have been and are
expected to remain elevated. As of year-to-date October 2023, the
four- and five-star office properties in the submarket had a 24.9%
vacancy rate, 29.6% availability rate, and $39.24 per sq. ft.
asking rent, versus a 23.9% vacancy rate and $38.39 per sq. ft.
asking rent at issuance in 2021. CoStar projects vacancy to
increase to 27.1% in 2024 and 26.8% in 2025, and asking rent to
contract to $38.37 per sq. ft. and $38.49 per sq. ft. for the same
periods. CoStar noted that the peer properties in the submarket had
a $44.67 per sq. ft. asking rent, 27.2% vacancy rate, and 34.7%
availability rate. This compares with the property's in-place
vacancy of 26.6% and gross rent of $37.05 per sq. ft., as
calculated by S&P Global Ratings.
Transaction Summary
The IO mortgage loan had an initial and current balance of $470.0
million (as of the Oct. 16, 2023, trustee remittance report) and,
commencing in July 2023, pays an annual floating interest rate
indexed to one-month term SOFR plus a 3.08% adjusted spread. Prior
to July 2023, the loan, which was originated with an initial
two-year term, referenced a LIBOR-based interest rate plus a 2.97%
spread. The borrower has three one-year extension options
exercisable upon satisfying certain terms and conditions, including
obtaining an interest rate cap agreement. As part of exercising its
first extension option, the borrower obtained an interest rate cap
agreement with a 5.38% strike rate that expires in April 2024. The
loan currently matures on April 9, 2024, and the borrower has two
one-year extension options remaining. The loan's fully extended
maturity date is April 9, 2026. The master servicer, Wells Fargo
Bank N.A., reported a DSC of 1.02x for the six months ended June
2023, down from 1.74x in 2022 and 2.14x in 2021. To date, the trust
has not incurred any principal losses.
Ratings Lowered
ALEN 2021-ACEN Mortgage Trust
Class C to 'BBB+ (sf)' from 'A- (sf)'
Class D to 'BB (sf)' from 'BBB- (sf)'
Class E to 'B- (sf)' from 'BB- (sf)'
Class F to 'CCC (sf)' from 'B- (sf)'
Ratings Affirmed
ALEN 2021-ACEN Mortgage Trust
Class A: AAA (sf)
Class B: AA- (sf)
AMERICAN CREDIT 2023-4: S&P Assigns Prelim 'BB-' Rating on E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to American
Credit Acceptance Receivables Trust 2023-4's automobile
receivables-backed notes.
The note issuance is an ABS transaction backed by subprime auto
loan receivables.
The preliminary ratings are based on information as of Oct. 26,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The availability of approximately 64.5%, 58.0%, 47.7%, 38.3%,
and 34.4% credit support (hard credit enhancement and haircut to
excess spread) for the class A, B, C, D, and E notes, respectively,
based on stressed cash flow scenarios. These credit support levels
provide at least 2.35x, 2.10x, 1.70x, 1.37x, and 1.20x coverage of
S&P's expected cumulative net loss of 27.25% for the class A, B, C,
D, and E notes, respectively.
-- The expectation that under a moderate ('BBB') stress scenario
(1.37x S&P's expected loss level), all else being equal, its
preliminary 'AAA (sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)', and 'BB-
(sf)' ratings on the class A, B, C, D, and E notes, respectively,
will remain within its credit stability limits.
-- The timely payment of interest and principal by the designated
legal final maturity dates under S&P's stressed cash flow modeling
scenarios, which it believes are appropriate for the assigned
preliminary ratings.
-- The collateral characteristics of the series' subprime
automobile loans, S&P's view of the credit risk of the collateral,
and its updated macroeconomic forecast and forward-looking view of
the auto finance sector.
-- The series' bank accounts at Wells Fargo Bank N.A., which do
not constrain the preliminary ratings.
-- S&P's operational risk assessment of American Credit Acceptance
LLC as servicer, and its view of the company's underwriting and
backup servicing arrangement with Computershare Trust Co. N.A.
-- S&P's assessment of the transaction's potential exposure to
environmental, social, and governance credit factors, which are in
line with our sector benchmark.
-- The transaction's payment and legal structures.
Preliminary Ratings Assigned
American Credit Acceptance Receivables Trust 2023-4
Class A, $161.27 million: AAA (sf)
Class B, $35.74 million: AA (sf)
Class C, $65.38 million: A (sf)
Class D, $65.37 million: BBB (sf)
Class E, $28.55 million: BB- (sf)
ANCHORAGE CREDIT 7: Moody's Ups Rating on $15MM Cl. E Notes to Ba1
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Anchorage Credit Funding 7, Ltd.:
US$41,000,000 Class B-R Senior Secured Fixed Rate Notes due 2037
(the "Class B-R Notes"), Upgraded to Aa1 (sf); previously on April
26, 2021 Assigned Aa2 (sf)
US$15,000,000 Class C-R Mezzanine Secured Deferrable Fixed Rate
Notes due 2037 (the "Class C-R Notes"), Upgraded to Aa3 (sf);
previously on April 26, 2021 Assigned A2 (sf)
US$12,000,000 Class D-R Mezzanine Secured Deferrable Fixed Rate
Notes due 2037 (the "Class D-R Notes"), Upgraded to A3 (sf);
previously on April 26, 2021 Assigned Baa1 (sf)
US$15,000,000 Class E Junior Secured Deferrable Fixed Rate Notes
due 2037 (the "Class E Notes"), Upgraded to Ba1 (sf); previously on
April 26, 2021 Assigned Ba2 (sf)
Anchorage Credit Funding 7, Ltd., originally issued in March 2019
and partially refinanced in April 2021 is a managed cashflow CBO.
The notes are collateralized primarily by a portfolio of corporate
bonds and loans. The transaction's reinvestment period will end in
April 2024.
RATINGS RATIONALE
These rating actions reflect the benefit of the shortening of the
portfolio's weighted average life since September 2022. Moody's
also notes that the transaction's reported OC ratios have been
stable since September 2022, and that the deal will be exiting its
reinvestment period in April 2024 after which note repayments are
expected to commence.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
coupon, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $293,256,582
Defaulted par: $8,585,094
Diversity Score: 63
Weighted Average Rating Factor (WARF): 3358
Weighted Average Coupon (WAC): 5.77%
Weighted Average Recovery Rate (WARR): 35.42%
Weighted Average Life (WAL): 5.98 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, decrease in overall WAC or net interest
income, lower recoveries on defaulted assets.
Methodology Used for the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
BAIN CAPITAL 2020-4: Fitch Assigns Final BB-sf Rating on E-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Bain Capital Credit CLO 2020-4, Limited.
Entity/Debt Rating
----------- ------
Bain Capital Credit
CLO 2020-4, Limited
A1-R LT NRsf New Rating
A2-R LT AAAsf New Rating
B-R LT AAsf New Rating
C-R LT Asf New Rating
D1A-R LT BBBsf New Rating
D1B-R LT BBBsf New Rating
D2-R LT BBB-sf New Rating
E-R LT BB-sf New Rating
Subordinated Notes LT NRsf New Rating
X-R LT AAAsf New Rating
TRANSACTION SUMMARY
Bain Capital Credit CLO 2020-4, Limited (the issuer) is an
arbitrage cash flow collateralized loan obligation (CLO) that is
managed by Bain Capital Credit U.S. CLO Manager LLC. The original
transaction closed in December 2020 and net proceeds from the
issuance of the replacement secured notes and existing subordinated
notes will provide financing on a portfolio of approximately $487.6
million of primarily first lien senior secured leveraged loans.
Fitch did not rate the original transaction.
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 24.31, versus a maximum covenant, in accordance with
the initial expected matrix point of 26. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from appropriate credit enhancement and
standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
96.39% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 74.78% versus a
minimum covenant, in accordance with the initial expected matrix
point of 73.4%.
Portfolio Composition (Positive): The largest three industries may
comprise up to 42.5% of the portfolio balance in aggregate while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity resulting from the
industry, obligor and geographic concentrations is in line with
other recent CLOs.
Portfolio Management (Neutral): The transaction has a five-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio and matrices
analysis is approximately 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 for class A2-R, between 'BBBsf' and 'AA+sf' for class
B-R, between 'BB+sf' and 'A+sf' for class C-R, between 'B+sf' and
'BBB+sf' for class D1-R, between less than 'B-sf' and 'BB+sf' for
class D2-R, between less than 'B-sf' and 'BB+sf' for class D2-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 X-R and class
A2-R notes; and 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 D1-R, 'A+sf' for class D2-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.
BANK 2020-BNK29: DBRS Confirms BB Rating on Class X-J Certs
-----------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of
Commercial Mortgage Pass Through Certificates, Series 2020-BNK29
issued by BANK 2020-BNK29 as follows:
-- Class A-1 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-3-1 at AAA (sf)
-- Class A-3-2 at AAA (sf)
-- Class A-3-X1 at AAA (sf)
-- Class A-3-X2 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 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 C at AA (high) (sf)
-- Class X-D at A (sf)
-- Class X-F at A (low) (sf)
-- Class X-G at BBB (sf)
-- Class X-H at BBB (low) (sf)
-- Class X-J at BB (sf)
-- Class X-K at B (high) (sf)
-- Class D at A (high) (sf)
-- Class E at A (low) (sf)
-- Class F at BBB (high) (sf)
-- Class G at BBB (low) (sf)
-- Class H at BB (high) (sf)
-- Class J at BB (low) (sf)
-- Class K at B (sf)
All trends are Stable.
The credit rating confirmations reflect the transaction's overall
stable performance, which remains in line with DBRS Morningstar's
expectations since the last credit rating action in November 2022.
The reported performance metrics for the majority of the loans in
the pool have been strong, evidenced by the pool's healthy
weighted-average (WA) debt service coverage ratio of 3.01 times
(x). DBRS Morningstar does, however, recognize that there is
increased credit risk associated with the pool's concentration of
office properties, which includes eight loans representing more
than half of the pool balance, as uncertainty around the future
demand for the property type looms. In the analysis for this
review, certain loans backed by office properties were analyzed
with stressed scenarios to increase the expected losses as
applicable, resulting in WA expected loss for the office loans in
the pool that is about 25% higher than the pool's average expected
loss.
According to the September 2023 remittance, all of the original 41
fixed-rate loans secured by 89 commercial and multifamily
properties remain in the pool, and the trust balance has been
reduced nominally by 1.6% to $857.0 million from $871.2 million at
issuance. One loan, representing 3.3% of the trust balance, is
fully defeased. The transaction is concentrated by property type
with eight loans representing 51.6% of the pool secured by office
collateral and 13 loans representing 22.2% of the pool secured by
retail collateral. No loans are currently reporting delinquent;
however, there is one loan (114 Mulberry Street; Prospectus ID#14,
2.0% of the pool) in special servicing and four loans, representing
9.1% of the pool, on the servicer's watchlist.
The only loan in special servicing, 114 Mulberry Street, is secured
by a mixed-use property comprising 23 multifamily units and 6,993
square feet (sf) of commercial space in New York City and
transferred to special servicing in June 2022 because the loan
sponsor and guarantor filed Chapter 11 bankruptcy. The servicer
notes that the borrower has signed the prenegotiation letter and
the special servicer and the obligors are currently discussing
settlement options. According to the most recent financial
reporting, the property occupancy declined to 68% as of YE2022 from
100% at YE2021, and the DSCR declined to 1.15x from 1.48x during
the same period. Despite the decline in performance metrics, the
most recent appraisal, dated March 2023, valued the property at
$25.7 million, suggesting a loan-to-value ratio (LTV) of 67.6%. In
its analysis, DBRS Morningstar increased the LTV adjustment given
the recent performance declines and the sponsor's bankruptcy
filing.
The largest loan on the servicer's watchlist, McDonald's Global HQ
(Prospectus ID#6, 5.0% of the pool), is secured by a 575,018-sf,
Class A and LEED Platinum certified office property in the Fulton
Market submarket of Chicago with more than 90% of the net rentable
area leased to McDonald's through 2033. The loan is being monitored
because of a nonmonetary default stemming from the borrower's
failure to comply with lockbox provisions. The recently reported
financials are as of March 2021 and indicate a property occupancy
of 96% and a DSCR of 1.49x. The loan was shadow-rated investment
grade by DBRS Morningstar at issuance. Given the loan's low
leverage (DBRS Morningstar LTV and DBRS Morningstar Balloon LTV of
41.6% and 26.7%, respectively), the long-term in-place lease,
building quality, and desirable location, combined with a strong
historical performance, DBRS Morningstar maintained the
investment-grade shadow rating on the loan with this review.
In addition to McDonald's Global HQ, The Grace Building (Prospectus
ID#4, 8.8% of the pool) and Turner Towers (Prospectus ID#13, 2.7%
of the pool) were assigned investment-grade shadow-ratings by DBRS
Morningstar at issuance. With this review, DBRS Morningstar
confirms the performance for these loans remains consistent with
investment-grade characteristics based on their strong credit
metrics and continued stable performance.
Notes: All figures are in U.S. dollars unless otherwise noted.
BANK 2021-BNK35: DBRS Confirms BB Rating on Class H Certs
---------------------------------------------------------
DBRS Limited confirmed its credit ratings on all classes of
Commercial Mortgage Pass-Through Certificates, Series 2021-BNK35
issued by BANK 2021-BNK35 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 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 X-B at AA (sf)
-- Class C at AA (low) (sf)
-- Class C-1 at AA (low) (sf)
-- Class C-2 at AA (low) (sf)
-- Class C-X1 at AA (low) (sf)
-- Class C-X2 at AA (low) (sf)
-- Class X-D at A (low) (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (high) (sf)
-- Class X-FG at BBB (low) (sf)
-- Class F at BBB (low) (sf)
-- Class X-H at BB (high) (sf)
-- Class G at BB (high) (sf)
-- Class H at BB (sf)
-- Class X-J at B (high) (sf)
-- Class J at B (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, as exhibited by a healthy
weighted-average pool debt service coverage ratio (DSCR) of 3.05
times (x) and no loans in special servicing. As of the September
2023 remittance, all 76 of the original loans remain in the pool
with a marginal collateral reduction of 0.7% since issuance. To
date, no loans have defeased from the pool. There are five loans,
representing 1.6% of the pool balance, on the servicer's watchlist,
four of which are being monitored for deferred maintenance and one
for failure to provide proof of insurance. The pool is concentrated
with loans backed by office and retail properties that make up
27.5% and 25.0% of the pool balance, respectively.
The loans backed by office properties have generally illustrated
stable performance since issuance. There is a notable concentration
of government- and city-affiliated tenants among these loans, with
three loans in the top 15 (accounting for 10.6% of the pool
balance) that were 100% leased to government or city agencies.
However, given the challenges faced by the office sector as of late
with low investor appetite for the property type and high vacancy
rates in many submarkets as a result of the shift in workplace
dynamics, DBRS Morningstar applied stress scenarios to its
analysis, where applicable. This includes the One Trinity Center
(Prospectus ID#11, 2.9% of the pool balance), which is secured by a
Class B office property located in downtown San Francisco. The
$40.0 million fixed-rate loan pays interest-only (IO) for the
entirety of its 10-year term. The property was developed by the
sponsor in 1990 and at issuance, it was noted that approximately
$13.0 million of renovations were completed since 2017. The subject
has exposure to government tenants, which is ideal considering the
subject is in close proximity to the San Francisco City Hall.
According to the June 2023 rent roll, occupancy was reported at
81.2% with tenants representing 56.9% of the net rentable area
(NRA) rolling over in the next 12 months, including the largest
tenants, City and County of San Francisco (27.4% of NRA, lease
expiry in July 2024); the San Francisco Law Library (14.8% of the
NRA, lease expiry in June 2023); and San Francisco City Health
Service System (14.4% of the NRA, lease expiry in March 2024).
However, the borrower is close to finalizing a renewal for San
Francisco Law Library that would extend the lease to June 2028.
Furthermore, per the Reis Q2 2023 report for the Van Ness/Civic
Center submarket, the average vacancy rate was 28.7%, a steep
increase from the Q1 2023 vacancy of 14.8%; however, it is expected
to decrease to 14.4% in the next five years.
According to YE2022 financial reporting, the subject reported a net
cash flow (NCF) and DSCR of $4.2 million and 3.55x, respectively,
compared with the DBRS Morningstar NCF and DSCR of $3.4 million and
2.88x, respectively. While performance to date remains stable, the
high rollover risk as well as the soft San Francisco office market
are concerning. As such, DBRS Morningstar applied a stressed
loan-to-value ratio and an elevated probability of default in its
analysis for this review, resulting in an expected loss nearly
triple the deal average.
At issuance, DBRS Morningstar shadow-rated three loans as
investment-grade: Four Constitution (Prospectus ID#3, 4.0% of the
pool balance), River House Coop (Prospectus ID#4 3.8% of the pool
balance), and Three Constitution (Prospectus ID#12, 2.7% of the
pool balance). These loans continue to exhibit strong credit
characteristics consistent with investment-grade shadow ratings.
The Four Constitution and Three Constitution loans are backed by
office properties that are 100% occupied by the United States
Department of Justice on 15-year leases with no termination options
through maturity, while the River House Coop loan is backed by an
exclusive co-operative apartment building in Manhattan that is of
excellent property quality. With this review, DBRS Morningstar
maintained shadow ratings on all three of the loans.
Notes: All figures are in U.S. dollars unless otherwise noted.
BBAM US II: S&P Assigns BB- (sf) Rating on $12MM Class D Notes
--------------------------------------------------------------
S&P Global Ratings assigned its 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 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
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.
BENCHMARK 2018-B7: Fitch Lowers Rating on Two Tranches to 'BBsf'
----------------------------------------------------------------
Fitch Ratings has downgraded two and affirmed 13 classes of
Benchmark 2018-B7 Mortgage Trust. Fitch has assigned Negative
Rating Outlooks to the downgraded classes and revised Outlooks for
three classes to Negative from Stable. The under criteria
observation (UCO) has been resolved.
Entity/Debt Rating Prior
----------- ------ -----
Benchmark 2018-B7
A-1 08162TAX1 LT AAAsf Affirmed AAAsf
A-2 08162TAY9 LT AAAsf Affirmed AAAsf
A-3 08162TBA0 LT AAAsf Affirmed AAAsf
A-4 08162TBB8 LT AAAsf Affirmed AAAsf
A-M 08162TBD4 LT AAAsf Affirmed AAAsf
A-SB 08162TAZ6 LT AAAsf Affirmed AAAsf
B 08162TBE2 LT AA-sf Affirmed AA-sf
C 08162TBF9 LT A-sf Affirmed A-sf
D 08162TAG8 LT BBBsf Affirmed BBBsf
E 08162TAJ2 LT BBsf Downgrade BBB-sf
F 08162TAL7 LT B-sf Affirmed B-sf
G-RR 08162TAN3 LT CCCsf Affirmed CCCsf
X-A 08162TBC6 LT AAAsf Affirmed AAAsf
X-D 08162TAC7 LT BBsf Downgrade BBB-sf
X-F 08162TAE3 LT B-sf Affirmed B-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 downgrades reflect the impact of the criteria, deterioration in
performance of Fitch Loans of Concern (FLOCs), including 192
Lexington (4.1%), Castleton Commons & Square (2.9%) and Overland
Park Xchange (2.3%), and exposure to loans in special servicing.
The Negative Outlooks on classes D, E, F, X-D and X-F reflect the
potential for downgrades should performance of the FLOCs continue
to deteriorate, additional loans transfer to special servicing
and/or workout/modification discussions fail to materialize for
loans currently in special servicing.
Fitch's current ratings incorporate a 'Bsf' rating case loss of
5.9%. Thirteen loans are FLOCs (34.9%), including six loans (20.9%)
in special servicing.
Fitch Loans of Concern: The largest contributor to expected losses
is the specially serviced Castleton Commons & Square loan, which is
secured by a 279,452-sf retail complex located in Indianapolis, IN.
The loan transferred to special servicing in August 2023 for
imminent default due to cash flow issues stemming from the loss of
a large tenant (Haverty's Furniture; 16.7% of NRA). Current tenants
include: Floor & Décor (25.7% NRA, expiring Aug 2028), Dave &
Buster's (12.5% NRA, expiring Dec 2026) and REI (4% NRA, expiring
March 2027). As of June 2023, occupancy has declined to 76% from
93% at YE 2022 and the DSCR was reported to be 1.04x. The loan has
remained current and the servicer is gathering information to
determine a workout strategy. Fitch's loss expectations of 21.9%
(prior to concentration adjustments) reflects a 10% stress to the
annualized June 2023 NOI and a 10% cap rate. Fitch also included a
higher default probability due to the low occupancy and DSCR.
The second largest contributor to expected losses is 192 Lexington
Avenue (4.1%). The loan is secured by a 132,049-sf office building
in Midtown South in New York City. Occupancy declined to 70.4% as
of TTM June 2022 with NOI debt service coverage ratio (DSCR) of
0.9x compared to an occupancy of 78% at YE 2020 and 89% at YE 2019.
The decline in occupancy is driven by the departure of multiple
tenants, including the top tenants at issuance Broadway Suites III
(6.4% of the NRA) and Silverson Pareres, Lombardi (5.1%), which
both vacated upon their lease expirations in 2019. However, net
cash flow has been improving due to several new leases that have
been signed at the property. Occupancy has increased to 85% per the
April 2023 rent roll and the servicer reported DSCR was 1.0x as of
June 2023. Fitch's loss expectations of 14.3% (prior to
concentration adjustments) reflects a 10% stress to the YE 2022 NOI
and an 8.5% cap rate.
The Overland Park Xhchange loan is secured by a 733,400-sf office
property located in Overland Park, KS, approximately 15 miles
southwest of downtown Kansas City. Occupancy has declined to 72% as
of YE 2022 due to the loss of tenant Black & Veatch, which vacated
prior to its April 2026 lease expiration. Fitch's loss expectations
of 18.3% (prior to concentration adjustments) reflects a 20% stress
to the YE 2022 NOI and an 10% cap rate. Fitch also included a
higher default probability due to the occupancy decline.
The largest loan in the pool, DUMBO Heights Portfolio (7.2%),
recently transferred to special serving ahead of its September 2023
maturity date. According to the servicer, the borrower has
submitted a five-year loan maturity extension request and
discussions remain ongoing. Two loans currently in special
servicing have recently executed modification/extension agreements
and are expected to return to the master servicer. These include
the Aon Center (3.9%) and Workspace (3.6%) loans. The maturity for
Aon Center was extended for 36 months, while Workspace was extended
for 24 months.
Increasing Credit Enhancement: CE has improved since issuance due
to loan payoffs and amortization. In addition, two loans are fully
defeased (2.6% of the current pool balance).
As of the September 20236 distribution date, the pool's aggregate
balance has been paid down by 4.95% to $1.1 billion from $1.7
billion at issuance. There are 22 loans (58.8% of the pool) that
are full-term, interest-only (IO); three loans representing 6.6% of
the pool are partial IO and have not started to amortize. The
remaining loans are currently amortizing. Interest shortfalls are
currently impacting the J-RR class.
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
likely due to their position in the capital structure but may occur
should interest shortfalls affect these classes.
Downgrades to classes B, C and D are possible should expected
losses for the pool increase significantly and/or performing loans
begin to experience performance declines.
Downgrades to class E, F, X-D and X-F would occur should loss
expectations increase from continued performance decline of the
FLOCs, additional loans transfer to special servicing and/or higher
losses are incurred on the specially serviced loans than expected.
A further downgrade to class G-RR would occur with increased
certainty of losses or as losses are realized.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes B, C and D would only occur with significant
improvement in CE, defeasance, and/or performance stabilization of
FLOCs. Classes would not be upgraded above 'Asf' if there were
likelihood of interest shortfalls.
Upgrades to classes E, F, X-D and X-F may occur as the number of
FLOCs are reduced and/or loss expectations for specially-serviced
loans improve.
An upgrade to class G-RR is 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.
BENEFIT STREET XXXII: S&P Assigns Prelim 'BB-' Rating on E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Benefit
Street Partners CLO XXXII Ltd./Benefit Street Partners CLO XXXII
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 BSP CLO Management LLC, a subsidiary
of Franklin Templeton.
The preliminary ratings are based on information as of Oct. 20,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Benefit Street Partners CLO XXXII Ltd./
Benefit Street Partners CLO XXXII LLC
Class A-1, $240.00 million: AAA (sf)
Class A-2, $16.00 million: Not rated
Class B, $48.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D (deferrable), $24.00 million: BBB- (sf)
Class E (deferrable), $14.00 million: BB- (sf)
Subordinated notes, $35.40 million: Not rated
BMO 2023-5C2: Fitch Gives 'B-(EXP)sf' Rating on Class G-RR Certs
----------------------------------------------------------------
Fitch Ratings has issued a presale report on BMO 2023-5C2 Mortgage
Trust, commercial mortgage pass-through certificates, series
2023-5C2. Fitch has assigned the following expected ratings:
- $600,000 class A-1 'AAAsf'; Outlook Stable;
- $125,000,000a class A-2 'AAAsf'; Outlook Stable;
- $402,557,000a class A-3 'AAAsf'; Outlook Stable;
- $528,157,000b class X-A 'AAAsf'; Outlook Stable;
- $99,030,000 class A-S 'AAAsf'; Outlook Stable;
- $33,010,000 class B 'AA-sf'; Outlook Stable;
- $26,408,000 class C 'A-sf'; Outlook Stable;
- $158,448,000b class X-B 'A-sf'; Outlook Stable;
- $15,090,000c class D 'BBBsf'; Outlook Stable;
- $15,090,000bc class X-D 'BBBsf'; Outlook Stable;
- $7,545,000c class E 'BBB-sf'; Outlook Stable;
- $7,545,000bc class X-E 'BBB-sf'; Outlook Stable;
- $10,375,000c class F 'BBsf'; Outlook Stable;
- $10,375,000bc class X-F 'BBsf'; Outlook Stable;
- $12,260,000cd class G-RR 'B-sf'; Outlook Stable.
Fitch does not expect to rate the following classes:
- $22,636,275cd class J-RR;
- $22,534,323e combined VRR Interest.
a) The initial certificate balances of classes A-2 and A-3 are not
yet known but are expected to be $527,557,000 in aggregate, subject
to a 5% variance. The certificate balances will be determined based
on the final pricing of those classes of certificates. The expected
class A-2 balance range is $0 - 250,000,000, and the expected class
A-3 balance range is $277,557,000 - $527,557,000. The balances of
classes A-2 and A-3 above represent the hypothetical balance for
class A-2 if class A-3 were sized at the midpoint of its range. In
the event that the class A-3 certificates are issued with an
initial certificate balance of $527,557,000, the class A-2
certificates will not be issued.
b) Notional amount and interest-only.
c) Privately placed and pursuant to Rule 144A.
d) Represents the "eligible horizontal interest" comprising at
least 2.1% of the pool.
e) An "eligible vertical interest" in the form of a "single
vertical security" with an initial principal balance of
approximately $22,534,323 (the "Combined VRR Interest"), which is
expected to represent approximately 2.9% of the aggregate principal
balance of all the "ABS interests".
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 35 loans secured by 62
commercial properties having an aggregate principal balance of
$777,045,598 as of the cut-off date. The loans were contributed to
the trust by Bank of Montreal, Goldman Sachs Mortgage Company,
Societe Generale Financial Corporation, Citi Real Estate Funding
Inc., German American Capital Corporation, LMF Commercial, LLC, UBS
AG and Starwood Mortgage Capital LLC. The master servicer is
expected to be KeyBank National Association, and the special
servicer is expected to be Greystone Servicing Company LLC.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 72.4% of the properties
by balance, cash flow analyses of 87.1% of the pool and asset
summary reviews on 100.0% of the pool.
KEY RATING DRIVERS
Lower Leverage Compared to Recent Transactions: The pool has lower
leverage compared to recent multiborrower transactions rated by
Fitch. The pool's Fitch loan to value ratio (LTV) of 86.0% is lower
than the YTD 2023 and 2022 averages of 88.5% and 99.3%,
respectively. The pool's Fitch 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
of 87.7% is lower than the equivalent conduit YTD 2023 LTV of
95.2%. The pool's Fitch DY of 10.9% is higher than the equivalent
conduit YTD 2023 DY of 10.5%.
Shorter-Duration Loans: Loans with five-year terms comprise 100% of
the pool, whereas standard conduit transactions have historically
included mostly loans with 10-year terms. Fitch's historical loan
performance analysis shows that five-year loans have a modestly
lower probability of default than 10-year loans, all else equal.
This is mainly attributed to the shorter window of exposure to
potential adverse economic conditions. Fitch considered its loan
performance regression in its analysis of the pool.
Investment-Grade Credit Opinion Loans: Two loans representing 11.0%
of the pool received an investment-grade credit opinion. Piazza
Alta (9.7% of the pool) received a standalone credit opinion of
'BBB-sf*', Harborside 2-3 (1.3%) received a standalone credit
opinion of 'BBBsf*'. The pool's total credit opinion percentage is
lower than the YTD 2023 and 2022 averages of 19.6% and 14.4%,
respectively.
Higher Pool Concentration: The pool is more concentrated than
recently rated Fitch transactions. The top 10 loans in the pool
make up 62.5% of the pool, which is in line with the 2023 YTD
average of 62.8% and well above the 2022 average of 55.2%. The
pool's effective loan count of 20.3 is lower than the 2023 YTD and
2022 averages of 20.7 and 25.9, respectively.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Reduction in cash flow decreases property value and capacity to
meet its debt service obligations.
The table below indicates the model implied rating sensitivity to
changes to the same one variable, Fitch NCF:
- Original Rating:
'AAAsf'/'AA-sf'/'A-sf'/'BBBsf'/'BBB-sf'/'BBsf'/'B-sf';
- 10% NCF Decline: 'AAsf'/'A-sf'/'BBB-sf'/'BB+sf'/'BBsf'/'Bsf'/'
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Similarly, improvement in cash flow increases property value and
capacity to meet its debt service obligations.
The list below indicates the model implied rating sensitivity to
changes in one variable, Fitch NCF:
- Original Rating:
'AAAsf'/'AA-sf'/'A-sf'/'BBBsf'/'BBB-sf'/'BBsf'/'B-sf';
- 10% NCF Increase:
'AAAsf'/'AA+sf'/'A+sf'/'BBB+sf'/'BBBsf'/'BB+sf'/'Bsf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Ernst & Young LLP. The third-party due diligence
described in Form 15E focused on a comparison and re-computation of
certain characteristics with respect to each of the mortgage loans.
Fitch considered this information in its analysis and it did not
have an effect on Fitch's analysis or conclusions.
ESG CONSIDERATIONS
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-NQM7: Fitch Gives B(EXP) Rating on B-2 Notes
-------------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed notes
to be issued by BRAVO Residential Funding Trust 2023-NQM7 (BRAVO
2023-NQM7).
Entity/Debt Rating
----------- ------
BRAVO 2023-NQM7
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
A-3 LT A(EXP)sf Expected Rating
M-1 LT BBB(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
AIOS LT NR(EXP)sf Expected Rating
XS LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
FB LT NR(EXP)sf Expected Rating
SA LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
The notes are supported by 787 loans with a total interest-bearing
balance of approximately $330 million as of the cutoff date.
Loans in the pool were primarily originated by Acra Lending (Acra);
the remaining loans were originated by multiple entities. The loans
are primarily serviced by Acra (primarily subserviced by
ServiceMac) with a smaller portion serviced by NewRez dba
Shellpoint Mortgage Servicing.
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 7.1% above a long-term sustainable level (versus
7.6% on a national level as of 1Q23, down 0.2% since 4Q22). Home
prices have increased 0.9% YoY nationally as of July 2023 despite
modest regional declines, but are still being supported by limited
inventory.
Non-Qualified Mortgage Credit Quality (Mixed): The collateral
consists of 787 loans totaling $330 million and seasoned at
approximately eight months in aggregate, calculated by Fitch as the
difference between the origination date and the cutoff date. The
borrowers have a moderate credit profile — a 720 model FICO and a
42% debt to income (DTI) ratio, which includes mapping for debt
service coverage ratio (DSCR) loans — and leverage, as evidenced
by a 74% sustainable loan-to-value (sLTV) ratio. Of the pool, 49.4%
of loans are treated as owner-occupied, while 50.6% are treated as
an investor property or second home, which include loans to foreign
nationals or loans where the residency status was not confirmed.
Additionally, 2.9% of the loans were originated through a retail
channel. Of the loans, 50.2% are non-qualified mortgages (non-QMs),
while the Ability to Repay Rule is not applicable for the remaining
portion.
Loan Documentation (Negative): Approximately 91.7% of the pool
loans were underwritten to less than full documentation, as
determined by Fitch, and 51.4% were underwritten to a 12-month or
24-month bank statement program for verifying income, which is not
consistent with Appendix Q standards and Fitch's view of a full
documentation program.
A key distinction between this pool and legacy Alt-A loans is that
these loans adhere to underwriting and documentation standards
required under the Consumer Financial Protections Bureau's
Ability-to-Repay/Qualified Mortgage Rule (ATR), which reduces the
risk of borrower default arising from lack of affordability,
misrepresentation or other operational quality risks due to the
rigors of the ATR mandates regarding underwriting and documentation
of a borrower's ability to repay.
Additionally, 34.0% of the loans are a DSCR product, while the
remainder comprise a mix of asset depletion, collateral principal
amount, P&L and written verification of employment products.
Separately, 13 loans were originated to foreign nationals or the
borrower residency status of the loans could not be confirmed.
Modified Sequential-Payment Structure (Mixed): The structure
distributes principal pro rata among the senior notes while
shutting out the subordinate bonds from principal until all senior
classes are reduced to zero. If a cumulative loss trigger event or
delinquency trigger event occurs in a given period, principal will
be distributed sequentially to class A-1, A-2 and A-3 notes until
they are reduced to zero.
The structure has a step-up coupon for the senior classes (A-1, A-2
and A-3). After four years, the senior classes pay the lesser of a
100-bp increase to the fixed coupon but are limited by the net
weighted average coupon (WAC) rate. Fitch expects the senior
classes to be capped by the net WAC in its analysis. Additionally,
on or after November 2027, the unrated class B-3 interest
allocation will redirect toward the senior cap carryover amount for
as long as there is an unpaid cap carryover amount. This increases
the P&I allocation for the senior classes as long as class B-3 is
not written down and helps ensure payment of the 100-bp step up.
As additional analysis to Fitch's rating stresses, Fitch factored a
WAC deterioration that varied by rating stress. The WAC cut was
derived by assuming a 2.5% cut (based on the most common historical
modification rate) on 40% (the historical Alt-A modification
percentage) of the performing loans. Although the WAC reduction
stress is based on historical modification rates, Fitch did not
include the WAC reduction stress in its testing of the delinquency
trigger.
Fitch viewed the WAC deterioration as more of a pre-emptive cut,
given the ongoing macroeconomic and regulatory environment. A
portion of borrowers will likely be impaired but, ultimately, will
not default due to modifications and reduced P&I. Furthermore, this
approach had the largest impact on the back-loaded benchmark
scenario.
No P&I Advancing (Mixed): The servicers will not be advancing
delinquent monthly payments of P&I. Because P&I advances made on
behalf of loans that become delinquent and eventually liquidate
reduce liquidation proceeds to the trust, the loan-level loss
severities are less for this transaction than for those where the
servicer is obligated to advance P&I. The downside to this is the
additional stress on the structure, as liquidity is limited in the
event of large and extended delinquencies. The structure has enough
internal liquidity through the use of principal to pay interest,
excess spread and credit enhancement (CE) to pay timely interest to
senior notes during stressed delinquency and cash flow periods.
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 39.6% at 'AAA'. The
analysis indicates that there is some potential for rating
migration with higher MVDs for all rated classes, compared with the
model projection. Specifically, a 10% additional decline in home
prices would lower all rated classes by one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class, excluding those being
assigned ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by multiple third-party review firms. The third-party due
diligence described in Form 15E focused on credit, compliance, and
property valuation review. Fitch considered this information in its
analysis and, as a result, Fitch made the following adjustments to
its analysis:
- A 5% PD credit was applied at the loan level for all loans graded
either 'A' or 'B';
- Fitch lowered its loss expectations by approximately 47bps as a
result of the diligence review.
ESG CONSIDERATIONS
BRAVO 2023-NQM7 has an ESG Relevance Score of '4' for Transaction
Parties & Operational Risk due to increased operational risk
considering R&W, transaction due diligence and originator and
servicer results in an increase in expected losses, which has a
negative impact on the credit profile, and is relevant to the
ratings in conjunction with other factors.
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.
BRIDGECREST LENDING 2023-1: S&P Assigns BB (sf) Rating on E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its 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 ratings reflect S&P's view of:
-- The availability of approximately 61.06%, 55.70%, 45.49%,
36.70%, and 32.95% credit support (hard credit enhancement and a
haircut to excess spread) for the class A (classes A-1, A-2, and
A-3, collectively), B, C, D, and E notes, respectively, based on
S&P's final post-pricing 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 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 'A-1+
(sf)'/'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, which it believes are appropriate for the assigned
ratings.
-- The collateral characteristics of the subprime automobile
loans, S&P's view of the credit risk of the collateral, and its
updated macroeconomic forecast and forward-looking view of the auto
finance sector.
-- The series' bank accounts at Wells Fargo Bank N.A., which do
not constrain the ratings.
-- S&P's operational risk assessment of Bridgecrest Acceptance
Corp. as servicer, and 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 structures.
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)
C-BASS MORTGAGE 2004-RP1: Moody's Cuts Rating on M-3 Certs to Caa1
------------------------------------------------------------------
Moody's Investors Service has downgraded the rating of one bond
issued by C-BASS Mortgage Loan Asset-Backed Certificates, Series
2004-RP1. The collateral backing this deal consists of scratch and
dent mortgages.
Complete rating actions are as follows:
Issuer: C-BASS Mortgage Loan Asset-Backed Certificates, Series
2004-RP1
Cl. M-3, Downgraded to Caa1 (sf); previously on Mar 15, 2017
Upgraded to B3 (sf)
RATINGS RATIONALE
The rating action reflects the recent performance as well as
Moody's updated loss expectations on the underlying pool. The
rating downgrade is due to outstanding interest shortfalls on the
bond that are not expected to be recouped. This bond has weak
interest recoupment mechanism where missed interest payments will
likely result in a permanent interest loss. Unpaid interest owed to
bonds with weak interest recoupment mechanisms are reimbursed
sequentially based on bond priority, from excess interest, if
available, and often only after the overcollateralization has built
to a pre-specified target amount. In transactions where
overcollateralization has already been reduced or depleted due to
poor performance, any such missed interest payments to these bonds
is unlikely to be repaid.
Principal Methodology
The principal methodology used in this rating was "US RMBS
Surveillance Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the rating:
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.
CD 2018-CD7: Fitch Affirms 'B-sf' Rating on Cl. G-RR Certificates
-----------------------------------------------------------------
Fitch Ratings has affirmed 13 classes of CD 2018-CD7 Mortgage Trust
Commercial Mortgage Pass-Through Certificates, Series 2018-CD7 and
affirmed 13 classes of UBS Commercial Mortgage Trust 2017-C2 (UBS
2017-C2) commercial mortgage pass-through certificates.
The Rating Outlooks for three classes in the CD 2018-CD7
transaction were revised to Negative from Stable. The Rating
Outlook for class F-RR in the UBS 2017-C2 transaction was revised
to Negative from Stable and the Rating Outlook on class G-RR
remains Negative.
All classes from these transactions have been removed from Under
Criteria Observation (UCO).
Entity/Debt Rating Prior
----------- ------ -----
UBS 2017-C2
A-3 90276CAD3 LT AAAsf Affirmed AAAsf
A-4 90276CAE1 LT AAAsf Affirmed AAAsf
A-S 90276CAH4 LT AAAsf Affirmed AAAsf
A-SB 90276CAC5 LT AAAsf Affirmed AAAsf
B 90276CAJ0 LT AA-sf Affirmed AA-sf
C 90276CAK7 LT A-sf Affirmed A-sf
D-RR 90276CAL5 LT BBB+sf Affirmed BBB+sf
E-RR 90276CAN1 LT BBBsf Affirmed BBBsf
F-RR 90276CAQ4 LT BBB-sf Affirmed BBB-sf
G-RR 90276CAS0 LT Bsf Affirmed Bsf
H-RR 90276CAU5 LT CCCsf Affirmed CCCsf
X-A 90276CAF8 LT AAAsf Affirmed AAAsf
X-B 90276CAG6 LT A-sf Affirmed A-sf
CD 2018-CD7
A-3 12512JAV6 LT AAAsf Affirmed AAAsf
A-4 12512JAW4 LT AAAsf Affirmed AAAsf
A-M 12512JAY0 LT AAAsf Affirmed AAAsf
A-SB 12512JAT1 LT AAAsf Affirmed AAAsf
B 12512JAZ7 LT AA-sf Affirmed AA-sf
C 12512JBA1 LT A-sf Affirmed A-sf
D 12512JAE4 LT BBB-sf Affirmed BBB-sf
E-RR 12512JAG9 LT BBB-sf Affirmed BBB-sf
F-RR 12512JAJ3 LT BB-sf Affirmed BB-sf
G-RR 12512JAL8 LT B-sf Affirmed B-sf
X-A 12512JAX2 LT AAAsf Affirmed AAAsf
X-B 12512JAA2 LT AA-sf Affirmed AA-sf
X-D 12512JAC8 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 last
rating action.
The affirmations reflect generally stable pool performance since
the prior rating actions, as well as the impact of the updated
criteria. Fitch's current ratings on CD 2018-CD7 incorporate a
'Bsf' rating case loss of 4.6%. Fitch has identified nine Fitch
Loans of Concern (FLOCs; 24.5% of the pool balance), including two
loans in special servicing (5.6%). Fitch's current ratings on UBS
2017-C2 incorporate a 'Bsf' rating case loss of 3.8%. Fitch has
identified 15 FLOCs (31.4% of the pool balance), including one loan
in special servicing (0.8%).
Given the performance concerns and elevated level of FLOCs in both
transactions, Fitch's analysis includes additional sensitivity
scenarios that incorporated an increased probability of default on
the larger FLOCs, which drove the Negative Outlooks.
The Negative Outlooks on classes E-RR, F-RR and G-RR in CD 2018-CD7
reflect the high FLOC exposure, including office and retail
properties with occupancy concerns, the largest of which are Bank
of America Center (7.3% of the pool) and 175 Park Avenue (5.0%).
The Negative Outlooks on classes F-RR and G-RR in UBS 2017-C2
reflect the high level of FLOCs, including Starwood Capital Group
Hotel Portfolio (5.5% of the pool), 85 Broad Street (5%) and AHIP
Northeast Portfolio III (4.6%).
FLOCs/Specially Serviced Loans: The largest contributor to modeled
loss in CD 2018-CD7 is the specially serviced NoLita Multifamily
Portfolio (4.6%) loan, which is secured by three multifamily
properties and 5,528-sf of retail space. All three properties are
located in the NoLita and SoHo neighborhoods of Manhattan. The loan
entered special servicing in April 2021 for imminent monetary
default stemming from issues relating to the coronavirus pandemic.
The loan is now in foreclosure. Fitch modeled a 'Bsf' rating case
loss of approximately 26%, based on a discount to the most recently
reported July 2023 appraisal value.
The largest FLOC in CD 2018-CD7 is Bank of America Center, which is
secured by 501,384 sf office building located in Richmond, VA. The
property was built in 1974 and renovated in 2017 and serves several
Virginia government tenants. The reported occupancy was 78.6% as of
the servicer provided June 2023 rent roll. Bank of America extended
a portion of their lease through April 2033, but downsized to 8.4%
of the NRA from 17% at issuance. Per media reports, the fourth
largest tenant (7.7% of the NRA) was expected to relocate to a
nearby office tower which would further depress occupancy at the
property. Fitch's Bsf' rating case loss of 9% reflects a 9.5% cap
rate and the TTM 2Q23 NOI with a total 15% stress for rollover
concerns.
175 Park Avenue, the second largest FLOC in CD 2018-CD7, is secured
by a 270,000 sf office building, located in Madison, NJ. The
property is 100% leased to Anywhere Real Estate (formerly Realogy),
which has a lease expiration in 2029. The tenant is occupying the
first floor, with the other floors available for sublease.
The largest contributor of modeled loss in UBS 2017-C2 is the AHIP
Northeast Portfolio III loan (FLOC), which is secured by four
limited service hotels located in Maryland, New York, and New
Jersey. The hotels within the portfolio include the 127-room
Hampton Inn Baltimore-White Marsh, the 116-room Fairfield Inn and
Suites Baltimore-White Marsh, the 128-room SpringHill Suites
Bellport, and the 120-room Homewood Suites-Egg Harbor. The
portfolio has been negatively impacted by the pandemic and was
granted COVID Relief from the servicer in June 2020. The portfolio
cash flow and occupancy rate remain below underwritten levels.
Fitch's 'Bsf' case loss of 17% applied a blended 11.69% cap rate to
the portfolio's most recent reported TTM NOI with a 15% stress.
The largest FLOC in UBS 2017-C2 is the Starwood Capital Hotel
Portfolio loan secured by 65 hotels offering a range of amenities,
spanning the limited service, full service and extended stay
varieties. The hotels range in size from 56 to 147 rooms, with an
average count of 98 rooms. The portfolio was impacted by the
pandemic with performance rebounding since YE 2020; however,
property cash flow remains below issuance and pre-pandemic levels.
Fitch's 'Bsf' case loss of approximately 5% applied a 11.5% cap
rate to the portfolio's most recent TTM YE 2022 NOI.
85 Broad Street is the second largest FLOC in UBS 2017-C2. The loan
is secured by a 1.12 million sf office property located in the
Financial District, steps from the New York Stock Exchange in
downtown Manhattan. Large tenants include WeWork, which has
downsized to 17% of the NRA and has lease expiration in August
2033, and Viner Finance (Oppenheimer, 24.7% of NRA) expires in
February 2028. The reported occupancy as of March 2023 was
approximately 79%. According to recent CoStar data, the property
has substantial availability of nearly 36%.
Change in CE: As of the September 2023 distribution date, CD
2018-CD7 and UBS 2017-C2 have paid down by 3.2% and 23.7%,
respectively. CD 2018-CD7 has two defeased loans representing 2.7%
of the pool and UBS 2017-C12 has nine defeased loans representing
16.6%. All of the remaining loans in CD 2018-CD7 are scheduled to
mature in 2028. One loan (1.1%) of UBS 2017-C2 is scheduled to
mature in late 2026 with all other loans scheduled to mature in
2027.
Credit Opinion Loans: Two loans (Aventura Mall and Westside NYC
Multifamily Portfolio) representing 14.7% of CD 2018-CD7 and two
loans (General Motors Building and 245 Park Avenue) representing
12% of UBS 2017-C2 remain as credit opinion loans. The Del Amo
Fashion Center loan and 85 Broad Street loan in UBS 2017-C2 are 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
Outlooks for the senior classes remain Stable due to the
amortization, defeasance, and stable performance of the majority of
the remaining pool. Downgrades to the classes with Negative
Outlooks are possible should performance of the FLOCs continue to
decline and should additional loans transfer to special servicing.
Downgrades to 'AAAsf' and 'AAsf' category rated classes could occur
if deal-level expected losses increase significantly and/or
interest shortfalls occur. For 'AAAsf' rated bonds, additional
stresses applied to defeased collateral if the U.S. sovereign
rating is lower than 'AAA' could also contribute to downgrades.
Downgrades to 'Asf' and 'BBBsf' category rated classes could occur
if deal-level losses increase significantly on the remaining loans
in the transactions and with outsized losses on larger FLOCs in
each transaction.
Downgrades to 'BBsf' and 'Bsf' category rated classes are possible
with higher expected losses from continued underperformance of the
FLOCs or with greater certainty of near-term losses on specially
serviced assets.
Downgrades to distressed classes could occur should additional
loans transfer to special servicing or should losses be realized or
become more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to 'AAsf' and 'Asf' category rated classes are possible
with significantly increased CE from paydown, coupled with
stable-to-improved pool-level loss expectations and improved
performance of FLOCs. Upgrades of these classes to 'AAAsf' will
also consider the concentration of defeased loans in the
transaction.
Upgrades to the 'BBBsf' category rated classes could be limited
based on sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'Asf' if there
is likelihood for interest shortfalls.
Upgrades to 'BBsf' and 'Bsf' category rated classes are not likely
until the later years in a transaction and only if the performance
of the remaining pool is stable, recoveries on and there is
sufficient CE to the classes.
Upgrades to distressed ratings are possible with better than
expected recoveries on specially serviced loans or significantly
higher values on FLOCs.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
CHASE HOME 2023-1: DBRS Finalizes BB Rating on Class B-4 Certs
--------------------------------------------------------------
DBRS, Inc. finalized the following provisional ratings on the
Mortgage Pass-Through Certificates, Series 2023-1 (the
Certificates) issued by Chase Home Lending Mortgage Trust 2023-1
(CHASE 2023-1):
-- $375.2 million Class A-1 at AAA (sf)
-- $375.2 million Class A-1-A at AAA (sf)
-- $375.2 million Class A-1-X at AAA (sf)
-- $340.9 million Class A-2 at AAA (sf)
-- $340.9 million Class A-3 at AAA (sf)
-- $340.9 million Class A-3-X at AAA (sf)
-- $255.7 million Class A-4 at AAA (sf)
-- $255.7 million Class A-4-A at AAA (sf)
-- $255.7 million Class A-4-X at AAA (sf)
-- $85.2 million Class A-5 at AAA (sf)
-- $85.2 million Class A-5-A at AAA (sf)
-- $85.2 million Class A-5-X at AAA (sf)
-- $34.3 million Class A-6 at AAA (sf)
-- $34.3 million Class A-6-A at AAA (sf)
-- $34.3 million Class A-6-X at AAA (sf)
-- $375.2 million Class A-X-1 at AAA (sf)
-- $11.8 million Class B-1 at AA (low) (sf)
-- $6.0 million Class B-2 at A (low) (sf)
-- $3.4 million Class B-3 at BBB (sf)
-- $2.2 million Class B-4 at BB (sf)
-- $1.0 million Class B-5 at B (low) (sf)
Classes A-1-X, 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-1, A-1-A, A-3, 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 Class A-6-A
certificates) with respect to loss allocation.
The AAA (sf) ratings on the Certificates reflect 6.45% of credit
enhancement provided by subordinated certificates. The AA (low)
(sf), A (low) (sf), BBB (sf), BB (sf), and B (low) (sf) ratings
reflect 3.50%, 2.00%, 1.15%, 0.60%, and 0.35% 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 356 loans with a
total principal balance of $401,033,526 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 seven months. All of the loans are
traditional, nonagency, prime jumbo mortgage loans. In addition,
all of the loans in the pool were originated in accordance with the
new general Qualified Mortgage (QM) rule.
J.P. Morgan Chase Bank N.A (JPMCB) is the Originator and Servicer
of 100.0% of the pool.
For this transaction, generally, the servicing fee payable for
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.
U.S. Bank Trust Company, National Association (rated AA (high) with
a Negative trend by DBRS Morningstar) will act as Securities
Administrator. U.S. Bank Trust National Association will act as and
Delaware Trustee. JPMCB 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.
CHASE HOME 2023-RPL3: Fitch Assigns 'B(EXP)' Rating on B-2 Certs
----------------------------------------------------------------
Fitch Ratings has assigned expected ratings to Chase Home Lending
Mortgage Trust 2023-RPL3 (Chase 2023-RPL3).
Entity/Debt Rating
----------- ------
Chase 2023-RPL3
A-1-A LT AAA(EXP)sf Expected Rating
A-1-B LT AAA(EXP)sf Expected Rating
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
M-1 LT A(EXP)sf Expected Rating
M-2 LT BBB(EXP)sf Expected Rating
B-1 LT BB(EXP)sf Expected Rating
B-2 LT B(EXP)sf Expected Rating
B-3 LT NR(EXP)sf Expected Rating
B-4 LT NR(EXP)sf Expected Rating
B-5 LT NR(EXP)sf Expected Rating
X LT NR(EXP)sf Expected Rating
B-X LT NR(EXP)sf Expected Rating
A-R LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch expects to rate the residential mortgage-backed Certificates
to be issued by Chase Home Lending Mortgage Trust 2023-RPL3 (Chase
2023-RPL3) as indicated. The transaction is expected to close on
Oct. 30, 2023. The certificates are supported by one collateral
group that consists of 2,314 seasoned performing loans (SPLs) and
re-performing loans (RPLs) with a total balance of approximately
$526.51 million, which includes $50.9 million, or 9.7%, of the
aggregate pool balance in non-interest-bearing deferred principal
amounts, as of the statistical calculation date.
All of the loans in the transaction were originated by J.P. Morgan
Chase Bank or Washington Mutual Bank and all loans have been held
by J.P. Morgan Chase since origination or acquisition of Washington
Mutual Bank. All the loans have been serviced by J.P. Morgan Chase
Bank N.A (Chase) since origination or acquisition of Washington
Mutual. J.P. Morgan Chase Bank is considered an 'Above Average'
originator by Fitch. Chase, rated 'RPS1-' by Fitch, is the named
servicer for the transaction.
Distributions of principal and interest (P&I) and loss allocations
are based on a traditional senior-subordinate, sequential
structure. The sequential-pay structure locks out principal to the
subordinated certificates until the most senior certificates
outstanding are paid in full. The servicer will not be advancing
delinquent monthly payments of P&I.
There is no Libor exposure in the transaction. The collateral is
98.3% fixed rate and 1.7% step loans. The A-1 bonds are fixed-rate
and capped at the net WAC/Available Fund Cap and the subordinate
bonds are based on the net WAC/Available Fund Cap and the A-2, M-1,
M-2, B-1, B-2, B-3, and B-4 bonds are based on the net
WAC/Available Fund Cap. The B-5 bond is a principal-only class.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 8.1% 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. Driven by the strong
gains seen in 1H22, home prices decreased -0.2% yoy nationally as
of April 2023.
Seasoned Performing and Reperforming Credit Quality (Mixed): The
collateral consists of 2,314 seasoned, re-performing, fully
amortizing and balloon, fixed-rate and step-rate mortgage loans
secured by first liens on primarily one- to four-family residential
properties, planned unit developments (PUDs), condominiums,
townhouses, manufactured homes, cooperatives and unimproved land,
totaling $527 million, and seasoned approximately 212 months in
aggregate according to Fitch (210 months per the transaction
documents). The loans were originated by Chase (29%) and Washington
Mutual (71%). The vast majority of the loans originated by
Washington Mutual were modified by Chase after they were acquired.
All loans have been serviced by J.P. Morgan Chase Bank N.A. since
origination or since the loans were acquired from Washington
Mutual.
The borrower profile is typical of recent seasoned RPL transactions
that Fitch has seen recently. The borrowers have a moderate credit
profile (698 FICO according to Fitch and 721 per the transaction
documents) and low current leverage with an updated LTV of 43.8% as
determined by Fitch (original LTV of 75.4% as determined by Fitch)
and a sustainable LTV as determined by Fitch of 48.0%. Borrower
DTIs were not provided so Fitch assumed each loan had a 45% DTI in
its analysis. 99% of the pool has been modified, with 27.5% being
borrower retention modifications. In Fitch's analysis, Fitch only
considered 72.5% of the pool as having a modification, since these
modifications were made due to credit issues. Fitch does not
consider loans that have a borrower retention modification as
having been modified in its analysis.
As of the cut-off date the pool is 100% current. 83.4% of loans
have been clean current with 26.1% being clean current for 24
months and 57.3% have been clean current for 36 months. Many of the
prior delinquencies were related to COVID-19 and the borrowers that
were affected by COVID-19 have successfully completed their
COVID-19 relief plan.
The pool consists of 88.5% of loans where the borrower maintains a
primary residence, while 11.5% are investment properties or second
homes. Fitch viewed the high percentage of primary residences as a
positive feature in its analysis.
There are loans in the pool with potential principal reduction
amounts, which total $199,483.50. Since these amounts will be
forgiven, Fitch increased its loss expectation by this amount (the
increase in loss was not material).
There is one loan in the pool that was affected by a natural
disaster and incurred minor damage with a maximum repair cost of
$10,000. Since the damage rep carves out loans that have damages
that are less than $30,000, Fitch reduced the updated property
value by the amount of the estimated damage as determined by the
property inspection. As a result, the sLTV was increased for this
loan, which in turn increased the loss severity.
Geographic Concentration (Negative): Approximately 33.5% of the
pool is concentrated in California. The largest MSA concentration
is in the New York-Northern New Jersey-Long Island, NY-NJ-PA MSA
(17.8%), the Los Angeles-Long Beach-Santa Ana, CA MSA (13.6%) and
the Miami-Fort Lauderdale-Miami Beach, FL MSA (7.9%). The top three
MSAs account for 39.3% of the pool. As a result, there was a 1.02x
probability of default (PD) penalty for geographic concentration,
which increased the 'AAAsf' loss by 0.09%.
No Advancing (Positive): The servicer will not be advancing
delinquent monthly payments of principal and interest. Because P&I
advances made on behalf of loans that become delinquent and
eventually liquidate reduce liquidation proceeds to the trust, the
loan-level loss severities (LS) are less for this transaction than
for those where the servicer is obligated to advance P&I.
Structural provisions and cash flow priorities, together with
increased subordination, provide for timely payments of interest to
the 'AAAsf' and 'AAsf' rated classes.
Sequential Payment Structure (Positive): The transaction's cash
flow is based on a sequential-pay structure whereby the subordinate
classes do not receive principal until the senior classes are
repaid in full. Losses are allocated in reverse-sequential order.
Furthermore, the provision to re-allocate principal to pay interest
on the 'AAAsf' and 'AAsf' rated certificates prior to other
principal distributions is highly supportive of timely interest
payments to that class with no advancing.
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 40.2% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by SitusAMC. The third-party due diligence review was
performed on 19.5% of the loans in the transaction pool. The
third-party due diligence described in Form 15E focused on
compliance review, payment history review, servicing comment review
and title review. All loans in the compliance due diligence sample
set that are in the final pool received a compliance grade of A or
B with no material findings.
AMC conducted a tax and title review on 584 of the loans (25.2%).
The review found there are $4,768,673 in outstanding tax,
municipal, HOA liens (0.91% of the total pool balance). The
servicer confirmed they are monitoring for outstanding tax,
municipal, HOA liens and will advance as needed to maintain the
first lien position.
The servicer confirmed that all liens are in first lien position
and that lien status is being monitored and will be advanced on, as
needed. All the loans are serviced by Chase, and Chase stated they
follow standard servicing practices to monitor lien status, tax and
title issues (including municipal and HOA liens) and advance as
needed to maintain the first lien status of the loans.
There are loans in the pool that have missing or defective
documents, this includes the loans with missing modification
agreements, for the loans in the pool, which Chase is actively
tracking down. Chase also consulted their foreclosure attorney who
confirmed that the majority of the missing documents would not
prevent a foreclosure. If Chase is not able to obtain the missing
documents by the time the loan goes to foreclosure, and they are
not able to foreclose, they will repurchase the loan.
A pay history review was conducted on a sample set of loans by AMC.
This review that confirmed the pay strings are accurate and the
servicer confirmed the payment history was accurate for all the
loans. As a result, 100% of the pool had the payment history
confirmed.
Fitch considered the results of the due diligence in its analysis.
Fitch did not make any adjustments to the expected losses due to
the fact that the review resulted in no material findings and
mitigating factors. The mitigating factors that Fitch took into
consideration are that the outstanding tax and tile issues are
insignificant and would not have a material impact on the losses,
JPMorgan Chase is the servicer and is monitoring for tax/title
issues in order to maintain the first lien position, the servicer
confirmed the payment history on 100% of the loans, the custodian
is actively tracking down missing documents and the missing
documents would not prevent a foreclosure, and JPMorgan Chase is
the R&W provider who holds an investment-grade rating from Fitch.
DATA ADEQUACY
Fitch relied on an independent third-party due diligence review
performed on 19.5% of the pool. The third-party due diligence was
generally consistent with Fitch's "U.S. RMBS Rating Criteria."
SitusAMC was engaged to perform the review. Loans reviewed under
this engagement were given compliance grades. Minimal exceptions
and waivers were noted in the due diligence reports. Refer to the
Third-Party Due Diligence section of the presale for more details.
AMC also performed a serving comment review, payment history
review, and data integrity review of the loans that had a
compliance review.
584 had a tax and title review performed by AMC.
For 100% of the loans in the pool, Fitch also received confirmation
from the servicer on the payment history provided in the loan tape
and confirmation that all liens are in the first lien position.
JPMorgan Chase has a very robust process for confirming the data in
loan tape is accurate based on the documentation they have in the
loan files and servicing systems, which is a mitigating factor to
the limited data integrity review by AMC in addition to the R&W
being provided by JPMorgan Chase.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. Fitch received
loan-level information; however, this information was not provided
based on the American Securitization Forum's (ASF) data layout
format. Despite this difference in data presentation, Fitch
considered the data to be comprehensive. The data contained in the
data tape were reviewed by the due diligence company and no
material discrepancies were noted.
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.
CIFC FUNDING 2023-I: Fitch Assigns Final 'BB-sf' Rating on E Notes
------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
CIFC Funding 2023-I, Ltd.
Entity/Debt Rating
----------- ------
CIFC Funding
2023-I, Ltd.
A LT NRsf New Rating
B LT AAsf New Rating
C LT Asf New Rating
D LT BBB-sf New Rating
E LT BB-sf New Rating
Subordinated LT NRsf New Rating
TRANSACTION SUMMARY
CIFC Funding 2023-I, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by CIFC
Asset Management LLC. Net proceeds from the issuance of the secured
and subordinated notes will provide financing on a portfolio of
approximately $450 million of primarily first lien senior secured
leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 24.9, versus a maximum covenant, in
accordance with the initial expected matrix point of 26. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from appropriate credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
98.65% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 75.57% versus a
minimum covenant, in accordance with the initial expected matrix
point of 71.6%.
Portfolio Composition (Neutral): The largest three industries may
comprise up to 45% 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 'BB+sf' and 'A+sf' for class B, between 'B+sf'
and 'BBB+sf' for class C, between less than 'B-sf' and 'BB+sf' for
class D; and between less than 'B-sf' and 'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'A+sf' for class C, 'Asf' for
class D; and 'BBB+sf' for class E.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
CITIGROUP 2019-GC41: Fitch Affirms 'B-sf' Rating on Cl. G-RR Certs
------------------------------------------------------------------
Fitch Ratings has affirmed 16 classes of Citigroup Commercial
Mortgage Trust (CGCMT) 2019-GC41 commercial mortgage pass-through
certificates. The Rating Outlooks on classes F, G-RR and X-F have
been revised to Negative from Stable. The Under Criteria
Observation (UCO) has been resolved.
Entity/Debt Rating Prior
----------- ------ -----
CGCMT 2019-GC41
A-2 17328FAT2 LT AAAsf Affirmed AAAsf
A-3 17328FAU9 LT AAAsf Affirmed AAAsf
A-4 17328FAV7 LT AAAsf Affirmed AAAsf
A-5 17328FAW5 LT AAAsf Affirmed AAAsf
A-AB 17328FAX3 LT AAAsf Affirmed AAAsf
A-S 17328FAY1 LT AAAsf Affirmed AAAsf
B 17328FAZ8 LT AA-sf Affirmed AA-sf
C 17328FBA2 LT A-sf Affirmed A-sf
D 17328FAA3 LT BBBsf Affirmed BBBsf
E 17328FAC9 LT BBB-sf Affirmed BBB-sf
F 17328FAE5 LT BB-sf Affirmed BB-sf
GRR 17328FAG0 LT B-sf Affirmed B-sf
X-A 17328FBB0 LT AAAsf Affirmed AAAsf
X-B 17328FAL9 LT A-sf Affirmed A-sf
X-D 17328FAN5 LT BBB-sf Affirmed BBB-sf
X-F 17328FAQ8 LT BB-sf Affirmed BB-sf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of the
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
The affirmations reflect the impact of the criteria and generally
stable pool performance since the last rating action. Fitch's
current ratings incorporate a 'Bsf' rating case loss of 4.0%.
The Outlook revisions to Negative from Stable on classes F, G-RR
and X-F primarily reflects refinance concerns on the upcoming June
2024 maturity of The Zappettini Portfolio (4.4% of the pool). Five
loans are Fitch Loans of Concern (FLOCs; 15.6%), with no loans
currently in special servicing.
Fitch Loans of Concern: The largest contributor to overall loss
expectations is The Zappettini Portfolio, which is secured by a
portfolio of 10 office buildings located in Mountain View, CA. The
loan's scheduled maturity date is in June 2024. Occupancy has
declined to 87.5% per the June 2023 rent roll from 100% at
issuance. Near-term rollover includes two leases totaling 17% of
the NRA scheduled to expire by YE 2023 and four leases totaling 36%
scheduled to expire by YE 2024. Despite recent tenant departures
and upcoming rollover, the properties are well located in the Palo
Alto office submarket and are in close proximity to Google's global
headquarters and Microsoft's Silicon Valley campus.
The interest-only loan has remained current since issuance, with
NOI debt service coverage ratio (DSCR) at 1.56x as of YE 2022,
1.66x as of YE 2021, 1.96x at YE 2020 and 1.83x at issuance.
Fitch's 'B' rating case loss (prior to concentration adjustments)
is 18.5% and incorporates an 8.75% cap rate and a 20% stress to YE
2022 NOI as well as a higher probability of default given rollover
concerns and upcoming loan maturity.
The second largest contributor to overall loss expectations is the
Millennium Park Plaza loan (5.6% of the pool), which is secured by
a mixed-use property located in Chicago, IL. The property, located
in downtown Chicago near Millennium Park and the Loop, consists of
561 multifamily units, 85,000-sf of retail space, and 18,000-sf of
office. Overall occupancy has declined to 80% as of July 2023 from
99% at issuance. The multifamily portion of the collateral, which
accounts for approximately 75% of the base rent was 80% occupied at
July 2023 and the office/retail portion was 80% occupied as well.
The servicer-reported NOI DSCR was 1.71x at YE 2022 compared to
0.95x at YE 2021, and 1.56x at YE 2020.
Fitch's 'B' rating case loss (prior to concentration adjustments)
is 9% and incorporates a 9% cap rate and a 7.5% stress to YE 2022
NOI.
Minimal Changes to Credit Enhancement (CE): As of the October 2023
distribution date, the pool's aggregate balance has been paid down
by 1.4% of the original pool balance. There are 26 loans (81% of
the pool) that are full-term, IO, three loans (3%) that have a
remaining partial IO term, and the remaining loans (16%) are
currently amortizing. Interest shortfalls of $50,895 and $1,845 are
affecting the JRR and VRR classes, respectively. 1% of the
transaction is defeased.
Credit Opinion Loans: Four loans, representing 18.3% of the pool,
had credit opinions at issuance and remain credit opinion loans,
including 30 Hudson Yards (7.9% of the pool), Grand Canal Shoppes
(4.8%), Moffett Towers II Buildings 3 & 4 (4.4%), and The Centre
(1.2%).
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Sensitivity factors that lead to downgrades include an increase in
pool level losses from underperforming or specially serviced
loans/assets.
Downgrades to the 'AA-sf' and 'AAAsf' categories are unlikely due
to increasing CE and expected continued amortization, but may occur
should interest shortfalls affect these classes.
Downgrades to classes rated in the 'BBB-sf', 'BBBsf' and A-sf'
categories may occur should overall pool losses increase
significantly with one or more large FLOCs transferring to special
servicing and/or suffer an outsized loss.
Downgrades to the 'B-sf' and 'BB-sf' categories would occur should
the performance of the FLOCs, especially the Zappettini Portfolio
and Millennium Park Plaza loans, fail to stabilize and/or losses
materialize and CE becomes eroded.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Sensitivity factors that could lead to upgrades include stable to
improved asset performance coupled with paydown and/or defeasance.
Upgrades of the 'A-sf' and 'AA-sf' categories would likely occur
with significant improvement in CE and/or defeasance; however,
adverse selection, increased concentrations and further
underperformance of the FLOCs could cause this trend to reverse.
Upgrades to the 'BBB-sf' and 'BBBsf' categories would be limited
based on sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'Asf' if there
is likelihood for interest shortfalls.
Upgrades to 'B-sf' and 'BB-sf' categories are not likely until the
later years in a transaction and only if the performance of the
remaining pool is stable and there is sufficient CE to the
classes.
ESG CONSIDERATIONS
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.
CITIGROUP COMMERCIAL 2016-C2: DBRS Confirms BB Rating on 2 Classes
------------------------------------------------------------------
DBRS Limited downgraded its credit ratings on four classes of the
Commercial Mortgage Pass-Through Certificates, Series 2016-C2
issued by Citigroup Commercial Mortgage Trust 2016-C2 as follows:
-- Class G-1 to B (low) (sf) from B (sf)
-- Class G-2 to CCC (sf) from B (low) (sf)
-- Class G to CCC (sf) from B (low) (sf)
-- Class EFG to CCC (sf) from B (low) (sf)
In addition, DBRS Morningstar confirmed the credit ratings on the
following classes:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S 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 D at BBB (sf)
-- Class X-D at BBB (sf)
-- Class E-1 at BB (high) (sf)
-- Class E-2 at BB (sf)
-- Class E at BB (sf)
-- Class F-1 at BB (low) (sf)
-- Class F-2 at B (high) (sf)
-- Class F at B (high) (sf)
-- Class EF at B (high) (sf)
The trends on Classes F-1, F-2, F, EF, and G-1 were changed to
Negative from Stable. Classes G-2, G, and EFG have ratings that do
not typically carry trends in commercial mortgage backed securities
(CMBS) ratings. All remaining classes have Stable trends.
The ratings downgrades and Negative trends are reflective of the
decline in value for the sole specially serviced loan, Marriott –
Livonia at Laurel Park (Prospectus ID#17; 2.5% of the pool
balance), which is secured by a 247-key, full-service hotel in
Livonia, Michigan. The loan transferred to special servicing in
March 2020 because of the challenges arising from the Coronavirus
Disease (COVID-19) pandemic, with the last debt payment having been
made in May 2020. The subject has been reporting a debt service
coverage ratio (DSCR) below breakeven since that time and, in July
2023, the trust took title of the property via a deed-in-lieu of
foreclosure. At last review, the most recent appraisal available
was from October 2021, which valued the property at $23.7 million,
sufficiently covering the total loan exposure at the time of
approximately $18.5 million. However, an updated appraisal from
August 2022 valued the property at $13.1 million, a steep decline
from the prior value and from issuance, while advances have
continued to accrue. In its analysis for this review, DBRS
Morningstar liquidated the loan from the trust, resulting in an
implied loss of nearly $8.5 million or a loss severity in excess of
60.0%. In addition to the credit erosion indicated from the
projected loss, the capital structure of the transaction is
noteworthy as the junior tranches carry small balances, providing
little cushion to mitigate any additional loss and/or performance
volatility for the remaining loans in the pool, thereby supporting
the ratings downgrades and Negative trends.
Despite some loan-specific challenges, the rating confirmations and
Stable trends reflect the overall performance of the pool, which
generally remains in line with expectations since last review, as
evidenced by the pool's weighted-average (WA) DSCR, which was well
above 2.0 times (x) based on the most recent year-end financial
reporting. Since the last review, the Welcome Hospitality Portfolio
loan (Prospectus ID#8), which was previously in special servicing,
was liquidated with no loss to the trust.
As of the September 2023 remittance, 43 of the original 44 loans
remained in the pool with an aggregate principal balance of $555.0
million, representing a collateral reduction of 9.6% since
issuance. The pool is concentrated by property type as loans backed
by mixed-use, retail, and hotel properties represented 26.0%,
25.7%, and 15.7% of the pool balance, respectively. Six loans,
representing 9.8% of the pool balance, are fully defeased.
Seventeen loans, representing 34.6% of the pool balance, are on the
servicer's watchlist being monitored primarily for low DSCRs,
tenant rollover risk, and/or trigger events. In the analysis for
this review, DBRS Morningstar applied stressed loan-to-value ratios
(LTV) or elevated probability of default (POD) assumptions for
loans exhibiting declines in performance or increased credit risk
since issuance, as applicable. Consequently, the WA expected loss
for those loans was double the pool average.
The largest loan on the servicer's watchlist is Crocker Park Phase
One & Two (Prospectus ID#3; 10.6% of the pool balance), which is
secured by a mixed-used property, consisting of retail and office
space, in Westlake, Ohio. The loan is currently being monitored for
a trigger event tied to the bankruptcy filing of Cinemark, the
parent company to the fourth-largest tenant, Regal Cinemas (about
4.0% of the net rentable area (NRA)). However, Cinemark emerged
from bankruptcy in Q3 2023 and an inquiry on whether the cash flow
sweep will be terminated was posted to the servicer. Regal Cinemas
had extended its lease from 2020 through to 2029 at a rental rate
of $65.05 per square foot (psf), generally in line with its
previous rental rate.
During the first year of the pandemic, the loan was modified to
allow a 12-month deferral of debt service payments that will be
repaid at loan maturity. The borrower was expected to pay all other
fees but, according to the servicer, there are nonrecoverable
advances amounting to $2.3 million outstanding. Based on the
financials for the trailing three-months (T-3) ended March 31,
2023, the loan reported a strong annualized DSCR of 1.40x with an
occupancy rate of 98.3%, compared with the YE2022 DSCR of 1.16x and
occupancy rate of 98.2%. Other large tenants at the subject include
Dick's Sporting Goods, Fitness & Sports Clubs LLC, and Barnes &
Noble, collectively representing approximately 23.0% of NRA.
The Staybridge Suites Times Square loan (Prospectus ID#6; 5.1% of
the pool balance), is secured by a 310-key, extended-stay hotel
located in the Times Square district of Manhattan. The loan is on
the servicer's watchlist for a low DSCR related to the impact of
the pandemic, with the property reporting depressed and even
negative net cash over the past several years. However, performance
has improved recently with the financials for the T-3 ended March
31, 2023, reporting an annualized DSCR of 1.19x, compared with the
YE2022 DSCR of 0.98x. While the property has shown some recent
signs of improvement, the loans coverage continues to be below the
DBRS Morningstar DSCR of 1.77x derived at issuance. Based on the
financials, the YE2022 occupancy rate, average daily rate (ADR),
and revenue per available room (RevPAR) were 82.6%, $127, and $105,
respectively, compared with the YE2021 RevPAR of $60. While the
RevPAR growth is noteworthy, it continues to lag well behind the
issuance RevPAR of $235. As such, this loan was analyzed with a
significantly elevated POD assumption, resulting in an expected
loss that was more than double the pool average.
At issuance, Vertex Pharmaceuticals HQ (Prospectus ID#1; 10.9% of
the pool balance) was shadow rated investment grade. With this
review, DBRS Morningstar confirms that the loan performance trends
remain consistent with investment-grade loan characteristics.
Notes: All figures are in U.S. Dollars unless otherwise noted.
COMM 2014-CCRE21: Fitch Affirms 'B-sf' Rating on Class E Certs
--------------------------------------------------------------
Fitch Ratings has affirmed 11 classes of Deutsche Bank Securities,
Inc's COMM 2014-CCRE21 Mortgage Trust pass-through certificates
(COMM 2014-CCRE21). The Rating Outlooks for classes C and PEZ were
revised to Negative from Stable. Additionally, The Negative
Outlooks were maintained on classes D, E, and X-C. The Under
Criteria Observation (UCO) has been resolved.
Entity/Debt Rating Prior
----------- ------ -----
COMM 2014-CCRE21
A-3 12592RBF5 LT AAAsf Affirmed AAAsf
A-M 12592RBJ7 LT AAAsf Affirmed AAAsf
A-SB 12592RBE8 LT AAAsf Affirmed AAAsf
B 12592RBK4 LT AA-sf Affirmed AA-sf
C 12592RBM0 LT A-sf Affirmed A-sf
D 12592RAL3 LT BBsf Affirmed BBsf
E 12592RAN9 LT B-sf Affirmed B-sf
PEZ 12592RBL2 LT A-sf Affirmed A-sf
X-A 12592RBH1 LT AAAsf Affirmed AAAsf
X-B 12592RAA7 LT AA-sf Affirmed AA-sf
X-C 12592RAC3 LT BBsf Affirmed BBsf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of Fitch's
updated "U.S. and Canadian Multiborrower CMBS Rating Criteria,"
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
The affirmations reflect the updated criteria and generally stable
performance of loans in the pool. Due to exposure to Fitch Loans of
Concern (FLOCs) and loans in special servicing and increasing
concentration risk with potential for adverse selection as loans
repay at maturity, classes C and PEZ were revised to Rating Outlook
Negative in addition to maintaining the Negative Outlooks on
classes D, E, and X-C.
All loans are scheduled to mature between September and December
2024. Fitch's current ratings incorporate a 'Bsf' rating case loss
of 5.4%. Fitch identified eight loans (21.7% of the pool) as FLOCs,
which include two assets/loans (12.2%) in special servicing: Kings
Shops (8.3% of the pool) and Marine Club Apartments (3.9%).
Largest FLOCs: The largest specially serviced asset is the $48.0
million Kings Shops (8.3% of the pool), a 69,023-sf retail center
within the 1,150-acre master-planned Waikoloa Beach Resort
community in Waikoloa, HI. The largest tenants include Roy's
Waikoloa Bar and Grill (7.2% of the NRA; lease expiration April
2025), Tiffany and Co. (4.6% of the NRA; January 2024), Hulakai
(4.5%; February 2024) and Tommy Bahama (4.3%; May 2024). The asset
transferred to special servicing in September 2020 after
experiencing pandemic-related performance declines with the
property subsequently becoming REO in March 2023.
Occupancy improved to 81% as of June 2023 from 61% at March 2022
and 76% at YE 2020. Occupancy improvements were mainly driven by
lease-up from temporary tenants. The servicer noted that the recent
wildfires in Maui, Hawaii have increased traffic and tenant
interest to the subject. According to the June 2023 rent roll,
permanent tenants comprised 66.6% of total occupancy while
temporary tenants accounted for 14.3%. Due to the increase in
temporary tenants, upcoming rollover includes 6.7% of the NRA in
2023 and 33.5% in 2024.
Fitch's 'Bsf' Rating loss of 18.7% (prior to concentration add-ons)
reflects a discount to a recent appraisal value, which equates to
an implied 7.5% cap rate to YE 2019 NOI.
Marine Club Apartments (3.9%) are secured by 204-units of a
302-unit apartment building and 133 parking spaces located in
Philadelphia, PA. The loan transferred to special servicing in
October 2020 due to payment default. In 2021, a motions to appoint
a receiver and foreclosure were filed. However, motion to appoint a
receiver was denied by the court. Foreclosure has been delayed due
to ongoing appeals and the lender is dual tracking foreclosure
while discussing workout alternatives with the borrower.
Fitch requested an updated rent roll and OSAR, but did not receive
an update from the servicer. A recent appraisal reflecting a value
$175k per unit is higher than the debt amount of $109.5k. Fitch
modeled a minimal 'Bsf' rating case loss to account for special
servicing fees and expenses.
12650 Ingenuity Drive (2.8%) is secured by a 124,500-sf suburban
office property located in Orlando, FL. Performance declined after
Iowa College Acquisition Corp. (100% of the NRA) vacated at lease
expiration in 2021. The borrower was able to lease 66% of the NRA
to Sedgwick Claims Management in January 2022 on a lease through
April 2027. Due to the occupancy declines, the NOI DSCR fell to
0.74x for the YTD June 2023 reporting period and -0.21x for the YTD
September 2022 reporting period. The annualized YTD June 2023 NOI
is about 17.1% below NOI at issuance. Despite the low DSCR, the
loan has remained current.
Per the June 2023 rent roll, the collateral is 33.9% vacant with
average in-place rents of $27.00 psf. According to CoStar, the
collateral is located in the University Research submarket of the
Orlando MSA, which have vacancy rates for the submarket and MSA of
9.9% and 8.7%, respectively and average asking rents of $27.87 psf
and $28.45 psf, respectively.
Fitch's 'Bsf' ratings case loss of 26.4% (prior to concentration
add-ons) reflects the annualized June 2023 NOI and an increased
probability of default due to the loan's heightened risk of default
at maturity.
Refinance Risk; Near-Term Maturities: All loans have a scheduled
maturity between September and December 2024. Three performing
loans; Preserve at Autumn Ridge (5.6%), 10 Quivira Plaza (2.9%),
and Clearwater Estates (0.5%), and eight FLOCS (21.7% of the pool)
were assigned higher probability of defaults due to their
heightened maturity default risk.
Increasing Credit Enhancement: As of the September 2023
distribution date, the pool's aggregate balance has been reduced by
30.2% to $576.1 million from $824.8 million at issuance. Since
Fitch's prior review, defeasance concentration has increased to
$215.2 million (37.4% of the pool) from $173.6 million. Eight loans
(40.2% of the pool) are full-term, interest-only (IO) and 39 loans
(59.8%) are currently amortizing. Realized losses of about $18
million are affecting the non-rated class J and interest shortfalls
of $3.5 million are impacting non-rated classes G, H, and I.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Sensitivity factors that lead to downgrades include an increase in
pool-level losses from underperforming or specially serviced
loans.
Downgrades to classes A-3, A-SB, A-M, B, X-A and X-B are not likely
due to the increasing CE and expected continued paydowns, but may
occur should interest shortfalls affect these classes. Downgrades
to class C are possible should expected losses for the pool
increase significantly.
Downgrades to classes D, E and X-C would occur should loss
expectations increase from sustained performance declines of the
FLOCs, additional loans default or transfer to special servicing
and/or higher than expected losses incurred on the specially
serviced loans/assets.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Sensitivity factors that could lead to upgrades would include
stable to improved asset performance, particularly on the FLOCs,
coupled with additional paydown and/or additional defeasance.
Upgrades to classes B, C and X-B would only occur with significant
improvement in CE, defeasance, and/or performance stabilization of
FLOCs. Classes would not be upgraded above 'Asf' if there were
likelihood of interest shortfalls. Upgrades to classes D, E and X-C
are not likely unless the performance of the remaining pool is
stable and/or recovery prospects for the specially serviced loans
significantly improve, 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 2015-CCRE22: Fitch Lowers Rating on Class E Certs to 'B-sf'
-----------------------------------------------------------------
Fitch Ratings has downgraded two and affirmed 10 classes of COMM
2015-CCRE22 Mortgage Trust commercial mortgage pass-through
certificates series 2015-CCRE22.
The Rating Outlooks on classes C and PEZ have been revised to
Negative from Stable. Classes D and E have been assigned Negative
Outlooks following the downgrades.
Entity/Debt Rating Prior
----------- ------ -----
COMM 2015-CCRE22
A-3 12592XBA3 LT AAAsf Affirmed AAAsf
A-4 12592XBC9 LT AAAsf Affirmed AAAsf
A-5 12592XBD7 LT AAAsf Affirmed AAAsf
A-M 12592XBF2 LT AAAsf Affirmed AAAsf
A-SB 12592XBB1 LT AAAsf Affirmed AAAsf
B 12592XBG0 LT AA-sf Affirmed AA-sf
C 12592XBJ4 LT A-sf Affirmed A-sf
D 12592XAG1 LT BB-sf Downgrade BBB-sf
E 12592XAJ5 LT B-sf Downgrade BB-sf
PEZ 12592XBH8 LT A-sf Affirmed A-sf
X-A 12592XBE5 LT AAAsf Affirmed AAAsf
X-B 12592XAA4 LT AA-sf Affirmed AA-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.
Higher Loss Expectations: Loss expectations for the pool have
increased since Fitch's prior rating action. Eleven loans (28.0% of
pool) were flagged as Fitch Loans of Concern (FLOCs). There is
currently one loan in special servicing, One Riverway (7.5%) which
is the third largest loan in the pool. Fitch's current ratings
reflect a 'Bsf' rating case loss of 9.9%.
The downgrades and Negative Outlooks reflect the impact of the
updated criteria and increased pool loss expectations, due to the
deteriorating performance of several FLOCs, particularly, the Wells
Fargo Crossed Portfolio, One Riverway, and 205 West Randolph loans.
Additionally, the pool has a high overall exposure to office
properties (37.9% of the pool). Classes with Negative Outlooks may
be downgraded should the FLOCs' performance continue to deteriorate
and if the properties do not stabilize.
The largest contributor to loss expectations is the Wells Fargo
Crossed Portfolio (8.4%), which comprises a group of six crossed
loans secured by six single-tenant, office properties totaling
1,636,299-sf located in Virginia, Georgia, North Carolina, and
South Carolina.
Occupancy for the portfolio as of YE 2022 was 74%, down from 91% at
YE 2021 and 100% at YE 2020. Occupancy declined after Wells Fargo
gave notice of its intent not to renew its lease at the Wells Fargo
Winston-Salem West End II location. According to the servicer, the
space is currently dark, and a broker is currently marketing the
space. In addition, Wells Fargo exercised an option to downsize
their space at the Wells Fargo Atlanta property in 2018.
As of YE 2022, the Wells Fargo Atlanta property reported an
occupancy of 46.1% and all the former Wells Fargo space remained
vacant. Fitch requested a leasing update from the master servicer,
but has not received a response. As of the September 2023 reserve
report, the Wells Fargo Portfolio loan reported $43.9 million or
$26.8 psf in total reserves.
According to the third-quarter 2023 CoStar, market rents in the
North Clayton/Airport office submarket in the Atlanta market
average $21.38 psf and the submarket vacancy rate is 8.6%. Market
rents in the St. Andrews office submarket in the Columbia market
average $18.72 psf and the submarket vacancy rate is 13.0%.
Submarket rents in the Northeast Roanoke office submarket average
$17.12 psf and the market vacancy rate is 16.1%. Submarket rents in
the Winston-Salem CBD office submarket average $19.02 psf and the
market vacancy rate is 10.9%.
Fitch's 'Bsf' case loss of 50% (prior to a concentration
adjustment) is based on an 10.0% cap rate and factors in an
increased probability of default and outsized loss due to the
occupancy decline and the loan's heightened maturity default risk.
The second largest contributor loss expectations is the One
Riverway (7.5%) loan, which is secured by a 483,410-sf multi-tenant
office building located in Houston, TX. The loan transferred to
special servicing in May 2023 due to Imminent Monetary Default as a
result of low occupancy issues. The property's major tenants
include Thompson Coe Cousins (10.5% of NRA, leased through January
2024); Texas Financial Group (7.8%, December 2031) a portion of
Texas Financial Groups space (2.0%; expires in December 2024); and
Wright & Close, LLP (4.6%, June 2026).
The property's occupancy was 65.4% as of the March 2023 rent roll,
63.1% at YE 2022, 64.5% at YE 2021, 65.9% at YE 2020, 65% at YE
2019, 74% at YE 2018 and 80% at YE 2017. The declines are primarily
related to the departure of multiple tenants either at or ahead of
lease expiration, including the former top tenants Texas Capital
Bank (previously 9.6% of NRA) and South Padre Ventures (previously
6.0% of NRA).
The property's largest tenant, Thompson, Coe, Cousi (10.5% of NRA;
10.6% of base rental income) will not be renewing its lease at the
property upon lease expiry in January 2024. The tenant currently
pays a weighted average in-place base rent of $20.18 psf. Occupancy
is expected to decline to 54.9% from 65.4% as of March 2023. The
loan reported $1.1 million or $2.2 psf in total reserves as of the
September 2023 loan level reserve report.
According to CoStar, the property lies within the Galleria/Uptown
submarket of the Houston market area. As of Q3 2023, average rental
rates were $31.30psf and $29.45 psf for the submarket and market,
respectively. Vacancy for the submarket and market was 30.7% and
18.7%, respectively.
Fitch's 'Bsf' case loss of 30.8% (prior to a concentration
adjustment) is based on an 10.0% cap rate and 10% stress to the YE
2022 NOI, and factors in an increased probability of default due to
the expected occupancy decline and the loan's heightened maturity
default risk.
Increased Credit Enhancement: As of the October 2023 distribution
date, the pool's aggregate principal balance has paid down by 26.9%
to $947.3 million from $1.3 billion at issuance. Seven loans in the
pool (15.3% of the pool) are fully defeased. Six loans (27.9%) are
interest-only for the full term. An additional 23 loans (43.4%)
were structured with partial interest-only periods and 25 loans
(28.7%) have a balloon payment. To date, the trust has incurred
$253,055 (0.02% of the original pool balance) in realized losses
since issuance.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades would occur with an increase in pool-level losses from
underperforming or specially serviced loans. Downgrades to classes
A-3, A-4, A-5, A-SB, A-M and X-A are not likely due to the position
in the capital structure, but may occur should interest shortfalls
affect these classes.
Downgrades to classes B, C, D, E and X-B may occur should expected
pool losses increase significantly and/or the FLOCs performance,
particularly, the Wells Fargo Crossed Portfolio, One Riverway, and
205 West Randolph loans, deteriorate further and/or not stabilize;
overall pool loss expectations increase; and/or additional loans
default or transfer to special servicing.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Factors that could lead to upgrades would include stable to
improved asset performance, coupled with additional paydown and/or
defeasance. Upgrades to the 'A-sf' and 'AA-sf' rated classes are
not expected, but may occur with significant improvement in CE
and/or defeasance, in addition to the stabilization of office
properties in the pool.
Upgrades of the 'BBB-sf' category rated classes are considered
unlikely, until the later years in the transaction and only if the
performance of the remaining pool is stable and there is sufficient
CE to the class. Classes would not be upgraded above 'Asf' if there
is a likelihood of interest shortfalls.
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.
CONNECTICUT AVENUE 2023-R07: DBRS Gives BB Rating on 4 Classes
--------------------------------------------------------------
DBRS, Inc. assigned the following provisional credit ratings to the
Connecticut Avenue Securities Notes, Series 2023-R07 (the Notes) to
be issued by Connecticut Avenue Securities Trust 2023-R07 (CAS
2023-R07):
-- $246.0 million Class 2M-1 at A (low) (sf)
-- $184.5 million Class 2M-2 at BBB (sf)
-- $129.5 million Class 2B-1 at BB (sf)
-- $61.5 million Class 2M-2A at BBB (high) (sf)
-- $61.5 million Class 2M-2B at BBB (high) (sf)
-- $61.5 million Class 2M-2C at BBB (sf)
-- $64.7 million Class 2B-1A at BBB (low) (sf)
-- $64.7 million Class 2B-1B at BB (sf)
-- $61.5 million Class 2E-A1 at BBB (high) (sf)
-- $61.5 million Class 2A-I1 at BBB (high) (sf)
-- $61.5 million Class 2E-A2 at BBB (high) (sf)
-- $61.5 million Class 2A-I2 at BBB (high) (sf)
-- $61.5 million Class 2E-A3 at BBB (high) (sf)
-- $61.5 million Class 2A-I3 at BBB (high) (sf)
-- $61.5 million Class 2E-A4 at BBB (high) (sf)
-- $61.5 million Class 2A-I4 at BBB (high) (sf)
-- $61.5 million Class 2E-B1 at BBB (high) (sf)
-- $61.5 million Class 2B-I1 at BBB (high) (sf)
-- $61.5 million Class 2E-B2 at BBB (high) (sf)
-- $61.5 million Class 2B-I2 at BBB (high) (sf)
-- $61.5 million Class 2E-B3 at BBB (high) (sf)
-- $61.5 million Class 2B-I3 at BBB (high) (sf)
-- $61.5 million Class 2E-B4 at BBB (high) (sf)
-- $61.5 million Class 2B-I4 at BBB (high) (sf)
-- $61.5 million Class 2E-C1 at BBB (sf)
-- $61.5 million Class 2C-I1 at BBB (sf)
-- $61.5 million Class 2E-C2 at BBB (sf)
-- $61.5 million Class 2C-I2 at BBB (sf)
-- $61.5 million Class 2E-C3 at BBB (sf)
-- $61.5 million Class 2C-I3 at BBB (sf)
-- $61.5 million Class 2E-C4 at BBB (sf)
-- $61.5 million Class 2C-I4 at BBB (sf)
-- $123.0 million Class 2E-D1 at BBB (high) (sf)
-- $123.0 million Class 2E-D2 at BBB (high) (sf)
-- $123.0 million Class 2E-D3 at BBB (high) (sf)
-- $123.0 million Class 2E-D4 at BBB (high) (sf)
-- $123.0 million Class 2E-D5 at BBB (high) (sf)
-- $123.0 million Class 2E-F1 at BBB (sf)
-- $123.0 million Class 2E-F2 at BBB (sf)
-- $123.0 million Class 2E-F3 at BBB (sf)
-- $123.0 million Class 2E-F4 at BBB (sf)
-- $123.0 million Class 2E-F5 at BBB (sf)
-- $123.0 million Class 2-X1 at BBB (high) (sf)
-- $123.0 million Class 2-X2 at BBB (high) (sf)
-- $123.0 million Class 2-X3 at BBB (high) (sf)
-- $123.0 million Class 2-X4 at BBB (high) (sf)
-- $123.0 million Class 2-Y1 at BBB (sf)
-- $123.0 million Class 2-Y2 at BBB (sf)
-- $123.0 million Class 2-Y3 at BBB (sf)
-- $123.0 million Class 2-Y4 at BBB (sf)
-- $61.5 million Class 2-J1 at BBB (sf)
-- $61.5 million Class 2-J2 at BBB (sf)
-- $61.5 million Class 2-J3 at BBB (sf)
-- $61.5 million Class 2-J4 at BBB (sf)
-- $123.0 million Class 2-K1 at BBB (sf)
-- $123.0 million Class 2-K2 at BBB (sf)
-- $123.0 million Class 2-K3 at BBB (sf)
-- $123.0 million Class 2-K4 at BBB (sf)
-- $184.5 million Class 2M-2Y at BBB (sf)
-- $184.5 million Class 2M-2X at BBB (sf)
-- $129.5 million Class 2B-1Y at BB (sf)
-- $129.5 million Class 2B-1X at BB (sf)
The A (low) (sf), BBB (high) (sf), BBB (sf), BBB (low) (sf), and BB
(sf) ratings reflect 3.500%, 3.000%, 2.750%, 2.125%, and 1.500%
credit enhancement, respectively. Other than the specified classes
above, DBRS Morningstar does not rate any other classes in this
transaction.
CAS 2023-R07 is the 58th benchmark transaction in the CAS series.
The Notes are subject to the credit and principal payment risk of a
certain reference pool (the Reference Pool) of residential mortgage
loans held in various Fannie Mae-guaranteed mortgage-backed
securities (MBS). As of the Cut-Off Date, the Reference Pool
consists of 77,088 greater-than-20-year term, fully amortizing,
first-lien, fixed-rate mortgage loans underwritten to a full
documentation standard, with original loan-to-value (LTV) ratios
greater than 80%. The mortgage loans were acquired by Fannie Mae
between June 1, 2022 and December 31, 2022 and were securitized by
Fannie Mae between June 1, 2022, and June 30, 2023.
On the Closing Date, the trust will enter into a Collateral
Administration Agreement (CAA) with Fannie Mae. Fannie Mae, as the
credit protection buyer, will be required to make transfer amount
payments. The trust is expected to use the aggregate proceeds
realized from the sale of the Notes to purchase certain eligible
investments to be held in a securities account. The eligible
investments are restricted to highly rated, short-term investments.
Cash flow from the Reference Pool will not be used to make any
payments; instead, a portion of the eligible investments held in
the securities account will be liquidated to make principal
payments to the Noteholders and return amounts, if any, to Fannie
Mae upon the occurrence of certain specified credit events and
modification events.
The coupon rates for the Notes are based on the Secured Overnight
Financing Rate (SOFR). There are replacement provisions in place in
the event that SOFR is no longer available; please see the Offering
Memorandum (OM) for more details. DBRS Morningstar did not run
interest rate stresses for this transaction as the interest is not
linked to the performance of the reference obligations. Instead,
the trust will use the net investment earnings on the eligible
investments, together with Fannie Mae's transfer amount payments,
to pay interest to the Noteholders.
In this transaction, approximately 0.06% of the loans were
originated using property values determined by using Fannie Mae's
Appraisal Waiver (AW) rather than a traditional full appraisal.
Loans where the AW is offered generally have better credit
attributes, as shown in the table below. Please see the OM for more
details about the AW.
The calculation of principal payments to the Notes will be based on
actual principal collected on the Reference Pool. The scheduled and
unscheduled principal will be combined and only be allocated pro
rata between the senior and nonsenior tranches if the performance
tests are satisfied. For CAS 2023-R07, the minimum credit
enhancement test is set to pass at the Closing Date. This allows
rated classes to receive principal payments from the First Payment
Date, provided the other two performance tests—delinquency test
and cumulative net loss test—are met. Additionally, the nonsenior
tranches will also be entitled to supplemental subordinate
reduction amount if the offered reference tranche percentage
increases above 5.50%.
The interest payments for these transactions are not linked to the
performance of the reference obligations except to the extent that
modification losses have occurred.
The Notes will be scheduled to mature on the payment date in
September 2043, but will be subject to mandatory redemption prior
to the scheduled maturity date upon the termination of the CAA.
The administrator and trustor of the transaction will be Fannie
Mae. Citibank, N.A. will act as the Indenture Trustee, Exchange
Administrator, Custodian, and Investment Agent. U.S. Bank National
Association (rated AA (high) with a Stable trend and R-1 (high)
with a Stable trend by DBRS Morningstar) will act as the Delaware
Trustee.
The Reference Pool consists of approximately 7.0% of loans
originated under the HomeReady® program. HomeReady® is Fannie
Mae's affordable mortgage product designed to expand the
availability of mortgage financing to creditworthy low- to
moderate-income borrowers.
If a reference obligation is refinanced under the High LTV
Refinance Program, then the resulting refinanced reference
obligation may be included in the Reference Pool as a replacement
of the original reference obligation. The High LTV Refinance
Program provides refinance opportunities to borrowers with existing
Fannie Mae mortgages who are current in their mortgage payments but
whose LTV ratios exceed the maximum permitted for standard
refinance products. The refinancing and replacement of a reference
obligation under this program will not constitute a credit event.
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 September 28, 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.
Notes: All figures are in U.S. dollars unless otherwise noted.
CRESTLINE DENALI XVI: Moody's Ups Rating on $22MM D Notes From Ba1
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Crestline Denali CLO XVI, Ltd.:
US$48,000,000 Class B Senior Secured Floating Rate Notes due 2030
(the "Class B Notes"), Upgraded to Aa1 (sf); previously on March 8,
2018 Definitive Rating Assigned Aa2 (sf)
US$24,000,000 Class C Senior Secured Deferrable Floating Rate Notes
due 2030 (the "Class C Notes"), Upgraded to A1 (sf); previously on
March 8, 2018 Definitive Rating Assigned A2 (sf)
US$22,000,000 Class D Senior Secured Deferrable Floating Rate Notes
due 2030 (the "Class D Notes"), Upgraded to Baa3 (sf); previously
on August 19, 2020 Downgraded to Ba1 (sf)
Crestline Denali CLO XVI, Ltd., originally issued in March 2018 is
a managed cashflow CLO. The notes are collateralized primarily by a
portfolio of broadly syndicated senior secured corporate loans. The
transaction's reinvestment period ended in January 2023.
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since September 2022. Class A
notes have been paid down by approximately 18.5% or $47.3 million
since then. Based on Moody's calculation, the OC ratios for the
Class B, Class C and Class D notes (before applying Caa par
reduction amounts) are approximately at 133.02%, 121.65% and
112.81%, respectively, versus September 2022 report [1] levels of
128.44%, 119.04% and 111.56%, respectively.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $341,231,604
Defaulted par: $3,596,439
Diversity Score: 72
Weighted Average Rating Factor (WARF): 3142
Weighted Average Spread (WAS): (before accounting for reference
rate floors): 3.41%
Weighted Average Recovery Rate (WARR): 47.42%
Weighted Average Life (WAL): 4.2 years
Par haircut in OC tests and interest diversion test: 1.75%
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, decrease in overall WAS or net interest
income, lower recoveries on defaulted assets.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
CSAIL 2017-CX9: Fitch Lowers Rating on Three Tranches to 'B+sf'
---------------------------------------------------------------
Fitch Ratings has downgraded 10 classes and affirmed eight classes
of CSAIL 2017-CX9 Commercial Mortgage Trust, commercial mortgage
pass-through certificates, series 2017-CX9 (CSAIL 2017-CX9). The
downgraded classes were assigned a Negative Rating Outlook. The
Under Criteria Observation has been resolved.
Entity/Debt Rating Prior
----------- ------ -----
CSAIL 2017-CX9
A-2 12595FAB8 LT AAAsf Affirmed AAAsf
A-3 12595FAC6 LT AAAsf Affirmed AAAsf
A-4 12595FAD4 LT AAAsf Affirmed AAAsf
A-5 12595FAE2 LT AAAsf Affirmed AAAsf
A-S 12595FAJ1 LT AAAsf Affirmed AAAsf
A-SB 12595FAF9 LT AAAsf Affirmed AAAsf
B 12595FAK8 LT Asf Downgrade AA-sf
C 12595FAL6 LT BBBsf Downgrade A-sf
D 12595FAP7 LT BB+sf Downgrade BBB-sf
E 12595FAR3 LT B+sf Downgrade BB-sf
F 12595FAT9 LT CCCsf Downgrade B-sf
V1-A 12595FBB7 LT AAAsf Affirmed AAAsf
V1-B 12595FBC5 LT BBBsf Downgrade A-sf
V1-D 12595FBD3 LT BB+sf Downgrade BBB-sf
V1-E 12595FBF8 LT B+sf Downgrade BB-sf
X-A 12595FAG7 LT AAAsf Affirmed AAAsf
X-B 12595FAH5 LT Asf Downgrade AA-sf
X-E 12595FAM4 LT B+sf Downgrade 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 downgrades and Negative Outlooks primarily reflect the impact
of the criteria due to the concentrated pool nature of the
remaining pool. There are only 24 loans remaining, of which 65% are
secured by office properties, many of which are underperforming.
Six loans (31%) were flagged as Fitch Loans of Concern (FLOCs),
which includes one REO asset (6.4%) and three loans (9.6%) in
special servicing that are still current as of the September 2023
distribution date. Fitch's current ratings reflect a 'Bsf' rating
case loss of 4.35%.
Additional Sensitivity: Fitch's analysis incorporates an increased
probability of default assumption on two office properties, the
Keystone 200 & 300 loan (3%) and the Apex Fort Washington loan
(2.6%). The sensitivity contributes to the Negative Outlooks.
Largest Contributor to Loss: The largest contributor to loss is The
Manhattan loan (3.9%), which is secured by a 77,851-sf mixed-use
(office/retail) property located in Washington, DC. The loan
transferred to special servicing in June 2021 as a result of
WeWork's notice of lease termination. According to servicer
updates, the borrower submitted a request to replace WeWork with a
borrower affiliated tenant, which is currently being negotiated. A
re-tenanting request was conditionally approved; however, the
borrower has not yet complied with the terms set forth. The loan
remains current as of August 2023.
The Fitch-modeled a loss of 29% (prior to concentration
adjustments) reflects a 10% cap rate to the annualized 3Q 2020 NOI.
Updated financials have not been provided.
The next largest contributor to loss is the 300 Montgomery loan
(6%), which is secured by a 192,574-sf office building located in
San Francisco, CA. The loan has been designated as a FLOC due to
performance decline and weakened market. Occupancy had declined to
59% as of the March 2023 rent roll, compared with 53% as of YE
2021, 57% at YE 2020 and 83% at YE2019. NOI has been affected by
the decline in occupancy with YE 2022 NOI DSCR falling to 1.67x
from 3.70x at YE 2020. The decline in occupancy is attributed to
Lyric Hospitality (30% of the NRA) vacating a significant portion
of the building in Q4 2020. The borrower collected a $1.9 million
termination fee, which contributed to the 31% higher NOI as of
YE2020 than YE2019. The Leasing Reserve is also being funded to
re-lease the vacant spaces.
Fitch's 'Bsf' loss of approximately 12% (prior to concentration
adjustments) utilized a 9.5% cap rate and 10% HC to YE 2022 NOI due
to rollover concerns and weak market.
Credit Enhancement: As of the August 2023 distribution date, the
pool's aggregate balance has been paid down by 32% to $605.2
million from $858.9 million at issuance. The increase in CE is
attributed to loan payoffs. Since issuance, seven loans have paid
off. There have been no realized losses to date and interest
shortfalls are currently affecting the NR class.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to the 'AAAsf' rated classes are not likely due to their
position in the capital structure, but could occur with significant
continued decline in the FLOCs. Further Downgrades to the classes
rated 'Asf' and 'BBB-sf' would occur if the performance of the
FLOCs fail to stabilize. Downgrades to the 'BB+sf' and 'B+sf' rated
classes are possible should office loans not stabilize and/or
deteriorate further, additional loans default or transfer to
special servicing, and/or higher realized losses than expected
occur on the specially serviced loans.
Further downgrades to the distressed 'CCCsf' class will occur as
losses are realized or become more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to the 'Asf' and 'BBBsf' rated classes, while considered
unlikely, could occur with significant improvement in credit
enhancement and/or defeasance; however, adverse selection and
increased concentrations, or the underperformance of the FLOCs,
could cause this trend to reverse. Classes would not be upgraded
above 'Asf' if there is a likelihood of interest shortfalls.
An upgrade to the 'BB+sf', 'B+sf', and the distressed 'CCCsf' rated
classes are considered unlikely and would be limited based on
sensitivity to concentrations or the potential for future
concentrations.
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.
CSAIL 2018-CX12: DBRS Confirms B(high) Rating on Class G-RR Certs
-----------------------------------------------------------------
DBRS Limited confirmed the following credit ratings on the
Commercial Mortgage Pass-Through Certificates, Series 2018-CX12
issued by CSAIL 2018-CX12 Commercial Mortgage Trust:
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
-- Class X-D at A (sf)
-- Class D at A (low) (sf)
-- Class E-RR at BBB (sf)
-- Class F-RR at BB (high) (sf)
-- Class G-RR at B (high) (sf)
All trends are Stable.
The credit rating confirmations reflect the loss expectations for
the loans in the pool. Although the pool reports a high
concentration of specially serviced loans, including the largest
loan in the pool, 20 Times Square (Prospectus ID#1, 10.6% of the
pool), DBRS Morningstar's stressed analysis of this loan suggests
that, even in an adverse workout scenario, the current credit
ratings continue to reflect the pool's overall risk profile.
Furthermore, there have been recent developments with the 20 Times
Square loan, outlined below, that DBRS Morningstar expects could
have a positive impact on the loan's ultimate resolution. Outside
of the specially serviced loans, there are just three loans,
representing 1.8% of the pool, on the servicer's watchlist as well
as just four loans, representing 9.4% of the pool, that are secured
by office collateral, further supporting the credit rating
confirmations with this review.
As of the September 2023 remittance, 36 of the original 41 loans
remained in the pool, with an aggregate principal balance of $601.3
million, representing a collateral reduction of 10.6% since
issuance as a result of loan amortization, repayment, and
liquidations. Three loans (representing 1.8% of the pool) are being
monitored on the servicer's watchlist and two loans (representing
17.3% of the pool) are in special servicing.
The 20 Times Square loan is secured by the leased-fee interest in
16,066 square feet (sf) of land under 20 Times Square in Manhattan.
The subject loan is part of the $750.0 million whole loan, of which
$600.0 million is secured in a single-asset/single-borrower (SASB)
transaction, 20 Times Square Trust 2018-20TS (TSQ 2018-20TS), which
is rated by DBRS Morningstar. The noncollateral improvements
consist of a mixed-use property located at the corner of Seventh
Avenue and West 47th Street. The property comprises a 452-key
Marriott Edition luxury hotel, 74,820 sf of retail space (5,500 sf
of which is non-revenue-generating storage space), and 18,000 sf of
digital billboards. The debt on the noncollateral leasehold
interest went into default in December 2019, with the lender citing
numerous undischarged mechanics liens against the property as well
as a missed deadline to lease up the retail space, and the property
was foreclosed in January 2022. The subject loan was transferred to
special servicing in relation to the aforementioned mechanics
liens, which are a breach under the terms of the ground lease.
The loan is now past its May 2023 maturity date and the mezzanine
lender has indicated its desire to proceed with a uniform
commercial code (UCC) foreclosure. A standstill agreement between
the senior lender and mezzanine lender was put in place as of
August 2023 to allow the mezzanine lender to complete the UCC
foreclosure. The standstill agreement will remain in place until
December 2023 or until the UCC foreclosure is completed and can be
extended upon request by the mezzanine lender for up to four
successive two-month periods. According to the special servicer,
following the completion of the UCC foreclosure, a loan
modification is expected to be finalized that will include a
two-year loan maturity extension to May 2025 in exchange for a
$50.0 million principal curtailment. An additional one-year
extension option will be exercisable provided an additional $25.0
million is paid and applied to the principal balance of the loan.
With both the leasehold interest and leased-fee interest of the
collateral being taken over by motivated parties, as well as the
additional de-leveraging provided by the $50.0 million principal
curtailment, DBRS Morningstar views the aforementioned developments
positively with regard to the loan's resolution. Furthermore, as
part of its analysis for TSQ 2018-20TS, DBRS Morningstar estimated
the value of the leased-fee component at approximately $758.6
million based on an analysis of the payments expected from the
in-place ground lease and applying a blended cap rate to the ground
rent payment at maturity. Based on the derived value, the implied
whole-loan loan-to-value ratio (LTV) is 98.9% and 118.6% when
including the $150.0 million of mezzanine debt. However, when
considering just the pari passu senior debt of $150.0 million and
the senior debt of $114.8 million in the SASB transaction, the
derived LTV is just 34.9%. In its analysis for this review, DBRS
Morningstar considered a stressed scenario whereby a stressed LTV
and an elevated probability of default was applied. In this
scenario, the resulting expected loss was over 50.0% greater than
the pool average. However, given the aforementioned positive
developments and the low LTV on the A-note debt, DBRS Morningstar
maintained the loan's investment-grade shadow rating with this
review.
The second loan in special servicing is SIXTY Hotel Beverly Hills
(Prospectus ID#6, 6.7% of the pool), which is secured by a 118-key,
full-service hotel in Beverly Hills. The loan originally
transferred to special servicing in September 2020 because of
payment default as a result of the challenges arising from the
Coronavirus Disease (COVID-19) pandemic. A forbearance was granted,
which entailed debt service deferral for six months beginning in
February 2021, with deferred amounts to be repaid over the
following 12-month period. The loan had been performing under the
terms of the agreement and was transferred back to the master
servicer in June 2022. At that time, a loan extension agreement was
finalized resulting in a final maturity of February 2024. However,
the loan was transferred back to special servicing in August 2023
at the request of the borrower in order to request an additional
extension beyond the February 2024 maturity date and is currently
being evaluated. According to the trailing 12-month period ended
March 31, 2023, financials, net cash flow was reported at $4.2
million (debt service coverage ratio of 2.13 times), in line with
the DBRS Morningstar issuance figure. In its analysis for this
review, DBRS Morningstar stressed the loan in the analysis to
reflect the collateral's most recent appraised value of $57.5
million as of January 2022, as well as the loan's transfer back to
special servicing. This results in an expected loss that was more
than four times the initial loan-level expected loss.
DBRS Morningstar maintains an investment-grade shadow rating on the
20 Times Square, Aventura Mall (Prospectus ID#3, 8.3% of the pool),
and Queens Place (Prospectus ID#5, 7.0% of the pool) loans. DBRS
Morningstar confirmed that the performance of these loans remains
consistent with investment-grade loan characteristics.
Notes: All figures are in U.S. dollars unless otherwise noted.
DRYDEN 113: Fitch Assigns 'BB+sf' Rating on Class E-R Notes
-----------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to Dryden
113 CLO, Ltd. refinancing notes.
Entity/Debt Rating Prior
----------- ------ -----
Dryden 113 CLO, Ltd.
A-1R LT NRsf New Rating
A-2R LT NRsf New Rating
B 26253EAF5 LT PIFsf Paid In Full AAsf
B-R LT AAsf New Rating
C 26253EAH1 LT PIFsf Paid In Full Asf
C-R LT A+sf New Rating
D 26253EAK4 LT PIFsf Paid In Full BBB-sf
D-R LT BBBsf New Rating
E 26253GAA1 LT PIFsf Paid In Full BB-sf
E-R LT BB+sf New Rating
TRANSACTION SUMMARY
Dryden 113 CLO, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) managed by PGIM, Inc. that
originally closed in November 2022. The CLO's secured notes were
refinanced in whole on Oct. 20, 2023 (the first refinancing date)
from the proceeds of the issuance of new secured notes. After the
first refinancing date, the CLO will have a two-year reinvestment
period and a one-year non-call period.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B+'/'B', which is in line with that of
recent CLOs. The weighted average rating factor (WARF) of the
indicative portfolio is 23.13, versus a maximum covenant, in
accordance with the initial expected matrix point of 24.0. Issuers
rated in the 'B' rating category denote a highly speculative credit
quality; however, the notes benefit from appropriate credit
enhancement and standard U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
95.2% first-lien senior secured loans. The weighted average
recovery rate (WARR) of the indicative portfolio is 76.1% versus a
minimum covenant, in accordance with the initial expected matrix
point of 73.3%.
Portfolio Composition (Neutral): The largest three industries may
comprise up to 50.0% of the portfolio balance in aggregate while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
U.S. CLOs.
Portfolio Management (Neutral): The transaction has a two-year
reinvestment period and reinvestment criteria similar to other U.S.
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
KEY PROVISION CHANGES
The refinancing is being implemented via the refinancing
supplemental indenture, which amended certain provisions of the
transaction. The changes include but are not limited to:
- Class A-1, A-1 Loans and A-1L Notes are combined in one new class
A-1R.
- The spread for the class A-1R, A-2R, B-R, C-R, D-R and E-R notes
are 1.63%, 1.9%, 2.25%, 2.7%, 4.4% and 7.55% respectively, compared
to the spread of 2.0% for class A debt (A-1, A-1 Loans and A-1L
Notes), 2.6%, 2.85%, 3.85%, 5.5%, 8.89% on the original class A-2,
B, C, D and E notes, respectively. No other material changes were
made to the capital structure as a result of this refinancing.
- Non-call period for the refinancing notes will extend to October
2024.
- $1.5 million of collateral principal collections will be
designated excess par proceeds. Interest proceeds will be applied
to pay expenses related to the first refinancing of secured debt
and the remaining will be distributed to equity holders.
FITCH ANALYSIS
The current portfolio dated Oct. 5, 2023, includes 460 assets from
396 primarily senior secured loans. Fitch's analysis is based on
the $400,000,000 target par. The weighted average rating of the
indicative portfolio is 'B+'/'B'. Fitch has an explicit public
rating, private rating or a credit opinion for 49.8% of the current
portfolio balance; ratings for 49.4% of the portfolio were derived
from using Fitch's Issuer Default Rating equivalency map. Assets
without a public rating or a Fitch credit opinion represent 0.8% of
the current portfolio balance and was assumed to be rated 'CCC'.
Fitch tested the new structure against both of the matrices from
the 2022 closing date and its recommendations are based on the
lowest outcome of the two, although Fitch recommends a rating that
is one notch higher for the D-R notes. The class D-R notes have two
marginal failures when deriving model-implied ratings across matrix
2. Fitch is comfortable recommending 'BBBsf' for class D-R notes
because the highest default cushion shortfall was only for two
matrix points and was limited to 20bps when considering a stressed
portfolio. When considering the current portfolio there is
substantial cushion.
Analysis focused on the Fitch stressed portfolio (FSP) and cash
flow model analysis was conducted for the first refinancing. The
FSP included the following concentrations, reflecting the maximum
limitations per the indenture or Fitch's assumption:
- Largest five obligors: 2.5% each, for an aggregate of 12.5%;
- Largest three industries: 20%, 15%, and 15%, respectively;
- Assets rated 'CCC' or below: 7.5%;
- Assumed risk horizon: six years;
- Minimum weighted average coupon of 6.5%;
- Minimum weighted average spread of 3.4% for the current matrix
point;
- Maximum weighted average rating factor of 24.0 for the current
matrix point;
- Minimum weighted average recovery rate of 73.3% as the current
matrix point.
Projected default and recovery statistics of the FSP were generated
using Fitch's portfolio credit model (PCM). The PCM default rate
outputs for the FSP at the 'AAsf' rating stress were 46.7%, 'A+'
rating stress were 42.9%, 'BBB' rating stress were 35.2% and 'BB+'
rating stress were 29.9%, respectively. The PCM recovery rate
outputs for the FSP at the 'AAsf' rating stress were 47.1%, 'A+'
rating stress were 56.57%, 'BBB' rating stress were 65.81% and
'BB+' rating stress were 71.74%, respectively.
In the analysis of the current portfolio the class B-R, C-R, D-R,
and E-R notes passed the 'AAsf', 'A+sf', 'BBBsf' and 'BB+sf' rating
thresholds in all nine cash flow scenarios with minimum cushions of
15.0%, 12.9%, 10.0% and 12.9%, respectively. In the analysis of the
FSP, the class B-R, C-R, D-R, and E-R notes passed the 'AAsf',
'A+sf', 'BBBsf' and 'BB+sf' rating thresholds in all nine cash flow
scenarios with minimum cushions of 5.1%, 2.7%, 2.1%, and 5.9%,
respectively.
Fitch assigned 'AAsf', 'A+sf', 'BBBsf' and 'BB+sf' ratings with a
Stable Rating Outlook to the class B-R, C-R, D-R, and E-R notes,
respectively, because it believes the notes can sustain a robust
level of defaults combined with low recoveries, as well as other
factors, such as the degree of cushion when analyzing the
indicative portfolio and the strong performance in the sensitivity
scenarios.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB-sf' and 'AAsf' for class B-R, between 'BBsf'
and 'Asf' for class C-R, between less than 'B-sf' and 'BBB-sf' for
class D and between less than 'B-sf' and 'BB+sf' for class E-R.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the maximum 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, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
EAGLE RE 2023-1: DBRS Finalizes BB Rating on Class M-1B-3 Notes
---------------------------------------------------------------
DBRS, Inc. finalized the following provisional credit ratings to
the Mortgage Insurance-Linked Notes, Series 2023-1 (the Notes)
issued by Eagle Re 2023-1 Ltd. (EMIR 2023-1 or the Issuer):
-- $110.3 million Class M-1A at BBB (low) (sf)
-- $145.6 million Class M-1B at BB (sf)
-- $48.5 million Class M-1B-1 at BB (high) (sf)
-- $48.5 million Class M-1B-2 at BB (high) (sf)
-- $48.5 million Class M-1B-3 at BB (sf)
-- $75.0 million Class M-2 at B (high) (sf)
-- $22.1 million Class B-1 at B (sf)
The BBB (low) (sf) credit rating reflects 6.00% of credit
enhancement, provided by subordinated notes in the transaction. The
BB (high) (sf), BB (sf), B (high) (sf), and B (sf) credit ratings
reflect 4.90%, 4.35%, 3.50%, and 3.25% of credit enhancement,
respectively.
Other than the classes specified above, DBRS Morningstar does not
rate any other classes in this transaction.
EMIR 2023-1 is Radian Guaranty Inc.'s (Radian Guaranty or the
Ceding Insurer) seventh rated mortgage insurance (MI)-linked note
transaction. The Notes are backed by reinsurance premiums, eligible
investments, and related account investment earnings, in each case
relating to a pool of MI policies linked to residential loans. The
Notes are exposed to the risk arising from losses the Ceding
Insurer pays to settle claims on the underlying MI policies. As of
the Cut-off Date, the pool of insured mortgage loans consists of
131,258 fully amortizing first-lien fixed- and variable-rate
mortgages. They all have been underwritten to a full documentation
standard, have original loan-to-value ratios (LTVs) less than or
equal to 97%, have never been reported to the Ceding Insurer as 60
or more days delinquent, and have never been reported to be in a
payment forbearance plan as of the Cut-off Date. The mortgage loans
have MI policies activated on or after April 2022 and on or before
December 2022.
On March 1, 2020, a new master policy was introduced to conform to
government-sponsored enterprises' revised rescission relief
principles under the Private Mortgage Insurer Eligibility
Requirements guidelines (see the Representations and Warranties
section of the related report for more details). All of the
mortgage loans were originated under the new master policy.
On the Closing Date, the Issuer will enter into the Reinsurance
Agreement with the Ceding Insurer. As per the agreement, the Ceding
Insurer will get protection for the funded portion of the MI
losses. In exchange for this protection, the Ceding Insurer will
make premium payments related to the underlying insured mortgage
loans to the Issuer.
The Issuer is expected to use the proceeds from the sale of the
Notes to purchase certain eligible investments that will be held in
the reinsurance trust account. The eligible investments are
restricted to U.S. Treasury money-market funds and securities rated
Aaa-mf by Moody's or AAAm by S&P. Unlike other residential
mortgage-backed security (RMBS) transactions, cash flow from the
underlying loans will not be used to make any payments; rather, in
MI-linked note transactions, a portion of the eligible investments
held in the reinsurance trust account will be liquidated to make
principal payments to the noteholders and to make loss payments to
the Ceding Insurer when claims are settled with respect to the MI
policy.
The Issuer will use the investment earnings on the eligible
investments, together with the Ceding Insurer's premium payments,
to pay interest to the noteholders.
The calculation of principal payments to the Notes will be based on
the reduction in the aggregate exposed principal balance on the
underlying MI policy that is allocated to the Notes. The
subordinate Notes will receive their pro rata share of available
principal funds if the minimum credit enhancement test and the
delinquency test are satisfied. The minimum credit enhancement test
has been set to fail at the closing date, thus locking out the
rated classes from initially receiving any principal payments until
the subordinate percentage grows to 7.75% from 7.25%. The
delinquency test will be satisfied if the three-month average of
the 60+ days delinquency percentage is below 75% of the subordinate
percentage. Additionally, if these performance tests are met and
subordinate percentage is above 7.75%, then the subordinate Notes
will be entitled to accelerated principal payments equal to two
times the subordinate principal reduction amount, until the
subordinate percentage comes down to the target CE of 7.75%. See
the Cash Flow Structure and Features section of the related report
for more details.
The coupon rates for the Notes issued by EMIR 2023-1 are based on
the Secured Overnight Financing Rate (SOFR). There are replacement
provisions in place in the event that SOFR is no longer available;
please see the Offering Circular for more details. DBRS Morningstar
did not run interest rate stresses for this transaction as the
interest is not linked to the performance of the underlying loans.
Instead, interest payments are funded via (1) premium payments that
the Ceding Insurer must make under the reinsurance agreement and
(2) earnings on eligible investments.
On the Closing Date, the Ceding Insurer will establish a cash and
securities account, the premium deposit account. In case of the
Ceding Insurer's default in paying coverage premium payments to the
Issuer, the amount available in this account will be used to make
interest payments to the noteholders. The premium deposit account
will not be funded at closing. The Ceding Insurer will make a
deposit into this account up to the applicable target balance only
when one of several Premium Deposit Events occur. Please refer to
the related report for more details.
The EMIR 2023-1 transaction is issued with a 10-year term. The
Notes are scheduled to mature on September 26, 2033, but will be
subject to early redemption at the option of the Ceding Insurer (1)
for a 10% clean-up call or (2) on or following the payment date in
September 2028, among other options The Notes are also subject to
mandatory redemption before the scheduled maturity date upon the
termination of the Reinsurance Agreement. Additionally, there is a
provision for the Ceding Insurer to issue a tender offer to reduce
all or a portion of the outstanding Notes.
Radian Guaranty will be the Ceding Insurer. The Bank of New York
Mellon (rated AA (high) with a Stable trend by DBRS Morningstar)
will act as the Indenture Trustee, Paying Agent, Note Registrar,
and Reinsurance Trustee.
Notes: All figures are in U.S. dollars unless otherwise noted.
ELMWOOD CLO 21: S&P Assigns B- (sf) Rating on Class F-R Notes
-------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R, E-R, and F-R replacement debt from Elmwood CLO 21 Ltd./Elmwood
CLO 21 LLC, a CLO originally issued in 2022 that is managed by
Elmwood Asset Management LLC. At the same time, S&P withdrew its
ratings on the original class A-1, A-2, B-1, B-2, C, D, E, and F
debt following payment in full on the Oct. 20, 2023, refinancing
date.
The replacement debt were issued via a supplemental indenture,
which outlines the terms of the replacement debt. According to the
supplemental indenture:
-- The stated maturity and non-call periods was extended by just
over one year and two years, respectively.
-- The reinvestment period were extended by three years.
-- The replacement class A-R, B-R, C-R, D-R, E-R, and F-R debt
were issued at a lower spread over three-month CME term SOFR than
the original debt.
-- The replacement class A-R, B-R, C-R, D-R, E-R, and F-R debt
were issued at a floating spread, replacing one class that was at a
fixed coupon and the remaining classes that were at a floating
spread.
-- The required minimum overcollateralization coverage ratios were
amended.
-- No additional subordinated notes were issued on the refinancing
date.
-- The documents were updated to include the ability to acquire
uptier priming debt.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-R, $189.00 million: Three-month CME term SOFR + 1.65%
-- Class B-R, $39.00 million: Three-month CME term SOFR + 2.20%
-- Class C-R (deferrable), $18.00 million: Three-month CME term
SOFR + 2.70%
-- Class D-R (deferrable), $18.00 million: Three-month CME term
SOFR + 4.00
-- Class E-R (deferrable), $10.50 million: Three-month CME term
SOFR + 6.50%
-- Class F-R (deferrable), $4.50 million: Three-month CME term
SOFR + 7.75%
Original debt
-- Class A-1, $180.00 million: Three-month CME term SOFR + 2.25% +
CSA(i)
-- Class A-2, $10.00 million: Three-month CME term SOFR + 2.95% +
CSA(i)
-- Class B-1, $18.00 million: Three-month CME term SOFR + 3.05% +
CSA(i)
-- Class B-2, $20.00 million: 7.03% + CSA(i)
-- Class C, $16.50 million: Three-month CME term SOFR + 3.85% +
CSA(i)
-- Class D, $15.75 million: Three-month CME term SOFR + 5.65% +
CSA(i)
-- Class E, $10.50 million: Three-month CME term SOFR + 8.60%+
CSA(i)
-- Class F, $4.5 million: Three-month CME term SOFR+ 10.15% +
CSA(i)
-- Subordinated notes, $25.00 million: residual
(i)CSA--Credit spread adjustment = 0.26161%.
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
Elmwood CLO 21 Ltd./Elmwood CLO 21 LLC
Class A-R, $189.00 million: AAA (sf)
Class B-R, $39.00 million: AA (sf)
Class C-R (deferrable), $18.00 million: A (sf)
Class D-R (deferrable), $18.00 million: BBB- (sf)
Class E-R (deferrable), $10.50 million: BB- (sf)
Class F-R (deferrable), $4.50 million: B- (sf)
Ratings Withdrawn
Elmwood CLO 21 Ltd./Elmwood CLO 21 LLC
Class A-1 to NR from 'AAA (sf)'
Class A-2 to NR from 'AAA (sf)'
Class B-1 to NR from 'AA (sf)'
Class B-2 to NR from 'AA (sf)'
Class C to NR from 'A (sf)'
Class D to NR from 'BBB- (sf)'
Class E to NR from 'BB- (sf)'
Class F to NR from 'B- (sf)'
Other Outstanding Classes
Elmwood CLO 21 Ltd./Elmwood CLO 21 LLC
Subordinated notes, $25.00 million: NR
NR--Not rated.
GS MORTGAGE 2016-GS4: Fitch Lowers Two Tranches to Bsf, Outlook Neg
-------------------------------------------------------------------
Fitch Ratings has downgraded two and affirmed 11 classes of GS
Mortgage Securities Trust 2016-GS3. In addition, Negative Outlooks
were assigned to two classes following their downgrades. The
Outlook remains Negative for one affirmed class. The Rating
Outlooks were also revised to Negative from Stable for two
classes.
Fitch downgraded four and affirmed nine classes of GS Mortgage
Securities Trust 2016-GS4. In addition, Negative Outlooks were
assigned to four classes following their downgrades.
Fitch has removed all classes from these transactions from Under
Criteria Observation (UCO).
Entity/Debt Rating Prior
----------- ------ -----
GSMS 2016-GS3
A-3 36251PAC8 LT AAAsf Affirmed AAAsf
A-4 36251PAD6 LT AAAsf Affirmed AAAsf
A-AB 36251PAE4 LT AAAsf Affirmed AAAsf
A-S 36251PAH7 LT AAAsf Affirmed AAAsf
B 36251PAJ3 LT AA-sf Affirmed AA-sf
C 36251PAL8 LT A-sf Affirmed A-sf
D 36251PAM6 LT BBsf Downgrade BBB-sf
E 36251PAR5 LT B-sf Affirmed B-sf
F 36251PAT1 LT CCCsf Affirmed CCCsf
PEZ 36251PAK0 LT A-sf Affirmed A-sf
X-A 36251PAF1 LT AAAsf Affirmed AAAsf
X-B 36251PAG9 LT AA-sf Affirmed AA-sf
X-D 36251PAP9 LT BBsf Downgrade BBB-sf
GSMS 2016-GS4
A-3 36251XAQ0 LT AAAsf Affirmed AAAsf
A-4 36251XAR8 LT AAAsf Affirmed AAAsf
A-AB 36251XAS6 LT AAAsf Affirmed AAAsf
A-S 36251XAV9 LT AAAsf Affirmed AAAsf
B 36251XAW7 LT AA-sf Affirmed AA-sf
C 36251XAY3 LT BBBsf Downgrade A-sf
D 36251XAA5 LT Bsf Downgrade BB-sf
E 36251XAE7 LT CCCsf Affirmed CCCsf
F 36251XAG2 LT CCsf Affirmed CCsf
PEZ 36251XAX5 LT BBBsf Downgrade A-sf
X-A 36251XAT4 LT AAAsf Affirmed AAAsf
X-B 36251XAU1 LT AA-sf Affirmed AA-sf
X-D 36251XAC1 LT Bsf Downgrade 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 last
rating action.
The downgrades in GSMS 2016-GS3 reflect the impact of the updated
criteria and higher loss expectations since the last rating action
on the Cool Springs Commons (4.0%) loan. Fitch's current ratings
incorporate a 'Bsf' rating case loss of 6.4%.
The downgrades in GSMS 2016-GS4 reflect the impact of the updated
criteria and significantly higher pool loss expectations since the
last rating action, driven by further performance deterioration on
two suburban office loans, combined for 10.1% of the pool:
Westchester Office Portfolio 700 Series (6.8%) and Westchester
Office Portfolio 2500-2700 Series (3.3%). Fitch's current ratings
incorporate a 'Bsf' rating case loss of 9.2%.
The Negative Outlooks in GSMS 2016-GS3 reflect the potential for
downgrades with further performance deterioration and/or lack of
stabilization on the Fitch Loans of Concern (FLOCs), particularly
Hamilton Place, Cool Springs Commons, Capitol Plaza Hotel Topeka
and The Falls. Nine loans have been designated as FLOCs (32.8%),
including one loan (0.9%) in special servicing.
The Negative Outlooks in GSMS 2016-GS4 reflect the potential for
downgrades with further performance deterioration and/or lack of
stabilization on the FLOCs, particularly Westchester Office
Portfolio 700 Series, Simon Premium Outlets, Hamilton Place and
Westchester Office Portfolio 2500-2700 Series. Nine loans have been
designated as FLOCs (43.2%), including one loan (6.8%) in special
servicing.
FLOCs/Specially Serviced Loans: The largest contributor to overall
loss expectations in GSMS 2016-GS4 is the specially serviced
Westchester Office Portfolio 700 Series loan, which is secured by a
portfolio of suburban office properties consisting of five
buildings totaling 671,330-sf located in White Plains, NY. The loan
transferred to special servicing in May 2023 for imminent monetary
default as the borrower was no longer able to fund shortfalls. The
special servicer is dual-tracking workout discussions with the
borrower and proceeding with remedies. As of July 2023, a
consensual receivership order was being discussed, according to the
special servicer.
The portfolio has experienced declining occupancy and cash flow
since issuance. Portfolio occupancy was 67% as of YE 2022, compared
with 64.5% in March 2022, 67.2% in March 2021 and 73.9% in December
2020 due to several tenants vacating or downsizing at or ahead of
their scheduled lease expirations. Larger tenants that have vacated
include W.J. Deutsche (4.5% of NRA) and Benjamin Edwards (1.1%) at
their respective February 2021 and April 2020 lease expirations.
Major in-place tenants include Citrin Cooperman & Company (5.1%;
October 2024), NY Life (4.9%; January 2025), Pentegra (4.4%; July
2027) and UBS (4.4%; August 2024). Upcoming lease rollover includes
8.7% of the NRA in 2023 and 16.8% in 2024. With the exception of
UBS, no tenant representing greater than 2.2% of the NRA is
scheduled to roll through YE 2024.
Portfolio-level YE 2022 NOI improved 5.3% from YE 2020, although it
still remains 45% below the issuer's underwritten NOI. Per the
servicer, overall portfolio performance has continued to decline as
a result of the high vacancy and weakening submarket conditions.
The borrower has been experiencing difficulties maintaining
occupancy as tenants with rolling leases are vacating or downsizing
as they have adopted hybrid or fully remote working arrangements.
Fitch's 'Bsf' loss of 32.6% (prior to concentration adjustments)
utilized a 10% cap rate, 10% haircut to the YE 2022 NOI and factors
an increased probability of default.
The fourth largest contributor to overall loss expectations in GSMS
2016-GS4 is the Westchester Office Portfolio 2500-2700 Series loan,
which is secured by two suburban office properties totaling 291,265
sf located in Westchester, NY. The loan is on the servicer's
watchlist due to declining occupancy and DSCR.
Portfolio occupancy was 63% as of YE 2022, compared with 61.2% at
March 2022, 68.4% in March 2021, 78.4% in March 2020 and 79.7% in
December 2019, as the former largest tenant, Westchester Medical
Group (13.9% of NRA) vacated the majority of its space (31,662 sf;
11% of NRA; 15% of total base rent) at expiration in August 2020.
The tenant will continue occupying its remaining 8,529 sf (3% of
NRA) space through August 2025. Additionally, four tenants totaling
6.7% of the portfolio NRA vacated at expiration in 2021, the
largest of which was Ammann & Whitney, Inc. (2.2%).
The largest tenants include Quorum Federal Credit Union (7.5% of
NRA leased through December 2029), Wells Fargo Clearing Services,
LLC (7.3%; May 2027), Wells Fargo Bank (6.0%; December 2031) and
Tokyo Century (USA) Inc. (5.0%; August 2024). Upcoming lease
rollover includes 4.1% of the NRA in 2023 and 5.8% in 2024, the
latter of which is primarily concentrated in the August 2024
expiration of Tokyo Century (USA) Inc.
YE 2022 NOI DSCR was 0.77x, compared with 0.61x at YE 2021, 1.09x
at YE 2020, and 1.61x at YE 2019.
Fitch's 'Bsf' loss of 34.9% (prior to concentration adjustments)
utilized a 10% cap rate, 10% haircut to the YE 2022 NOI and factors
an increased probability of default.
The largest contributor to overall loss expectations in GSMS
2016-GS3 and the third largest contributor to overall loss
expectations in GSMS 2016-GS4 is the Hamilton Place loan, which is
secured by a super-regional mall located in Chattanooga, TN. The
loan transferred to special servicing in April 2020 for imminent
monetary default at the borrower's request due to the pandemic and
was returned to the master servicer in May 2022. The sponsor, CBL &
Associates Properties, Inc. (CBL), subsequently filed for Chapter
11 bankruptcy in November 2020 but exited bankruptcy in November
2021.
Dillard's, Belk and JCPenney serve as non-collateral anchors and
the larger collateral tenants include Barnes & Noble and H&M. As of
March 2023, overall mall occupancy was 98.0% and collateral
occupancy was 92%, compared with 98.2% and 94.6% as of March 2022.
According to the sponsor's 2021 annual report, in-line tenant sales
were $465 psf in 2021, compared with $418 psf in 2019 and $406 psf
in 2018. An updated total tenant sales report was not provided. The
June 2023 NOI DSCR was 1.69x compared with 1.75x at YE 2022.
Fitch's 'Bsf' loss of approximately 26.0% (prior to concentration
adjustments) utilized a 15% cap with a 7.5% haircut to the YE 2022
NOI, and factors an increased probability of default.
The second largest contributor to overall loss expectations in GSMS
2016-GS3 is the Cool Springs Common loan, which is secured by a
suburban office with 301,697 sf located in Brentwood, TN,
approximately 15 miles south of the Nashville CBD. According to the
June 2023 rent roll, the property was 26.1% occupied and has
remained depressed, compared with 97% at YE 2020 due to Community
Health Systems (66% of NRA) and Comprehensive Health Management
(6%) vacating at their lease expirations in 2021.
The previous largest tenant at the property, Community Health
Systems, built a 240,000-sf facility in Antioch, TN which was
completed in 2017. The borrower deposited $2.5 million in a
critical tenant reserve fund to avoid a cash trap requirement due
to a major tenant vacating. The June 2023 NOI DSCR was 0.02x,
compared with the YE 2022 NOI DSCR of 0.04x. According to the
servicer, the borrower is continuing to market the vacant spaces.
Fitch's 'Bsf' loss of 31.4% (prior to concentration adjustments)
utilized a 10% cap rate, 50% stress to the YE 2020 NOI to account
for the tenant departures and declining occupancy, and factors an
increased probability of default.
The second largest contributor to overall loss expectations in GSMS
2016-GS4 is the Simon Premium Outlets loan, which is secured by two
cross collateralized/cross defaulted outlet malls totaling
436,987sf in Queenstown, MD (289,667 sf) and Pismo Beach, CA
(148,009 sf). Major tenants at the Pismo Beach Premium Outlets
include Polo Ralph Lauren (2.3% of total portfolio NRA leased
through January 2026), Nike Factory Store (1.7%; February 2025),
Skechers (1.5%; January 2029) and Calvin Klein (1.3%; July 2024).
Major tenants at the Queenstown Premium Outlets include Nike
Factory Store (3%; April 2024), Old Navy (3%; June 2026) and Polo
Ralph Lauren (2.3%; July 2026).
The loan, which is sponsored by Simon Property Group, transferred
to special servicing in July 2020 for payment default, but was
brought current through the application of lockbox funds and
subsequently returned to the master servicer in June 2021 following
the execution of a loan reinstatement agreement in May 2021.
Total portfolio occupancy was 74.4% as of June 2023, compared with
74.7% as of March 2022, 76.5% in March 2021, 80.7% in August 2020
and 87.9% in December 2019 due to several tenants vacating the
properties at or prior to lease expiration. Occupancy of the Pismo
Beach property was 86.0%, compared with 72.7%, 75.9%, 81.6% and
87.9% over the same period, and for the Queenstown property dropped
to 68.5%, from 75.6%, 76.9%, 80.3% and 86.1%.
According to the June 2023 rent roll, the portfolio also faces
moderate upcoming rollover, including 15.0% in 2023 and 19.7% in
2024. However, with the exception of Nike Factory Store (3%; April
2024) at the Queenstown Premium Outlets property, no tenant
scheduled to roll through YE 2024 represents more than 2.1% of the
total portfolio NRA. The servicer has noted that the borrower is
working on lease renewals for a majority of the leases that
expiring in the near term.
Fitch's 'Bsf' loss of 28.2% (prior to concentration adjustments)
utilized a 15% cap rate, 15% stress to the YE 2022 NOI to account
for declining occupancy and upcoming lease rollover, and factors an
increased probability of default.
Increased CE: As of the September 2023 distribution date, GSMS
2016-GS3 and GSMS 2016-GS4 have paid down by 13.7% and 38.5%,
respectively. GSMS 2016-GS3 has 12 defeased loans representing 9.7%
of the pool and GSMS 2016-GS4 has two defeased loans representing
1.3%. Cumulative interest shortfalls are currently affecting class
G in both transactions. GSMS 2016-GS3 has realized losses of 0.04%
of the original pool balance and GSMS 2016-GS4 has realized losses
of 0.27% of the original pool balance.
All remaining loans in both transactions are scheduled to mature in
2026, except for one loan, Alton Corporate (3.4%) in GSMS 2016-GS4,
which matures in October 2028.
Credit Opinion Loans at Issuance: At issuance, the top two loans in
GSMS 2016-GS3 and the largest loan in GSMS 2016-GS4 were assigned
investment grade credit opinions. The 10 Hudson Yards (9.6% of the
pool in GSMS 2016-GS3) and 540 West Madison (9.5% of the pool in
GSMS 2016-GS3; 9.9% of the pool in GSMS 2016-GS4) are still
considered to have characteristics consistent with credit opinion
loans.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The Negative Outlooks reflect possible future downgrades stemming
from concerns with potential further declines in performance that
could result in higher expected losses on FLOCs. If expected losses
do increase, downgrades to these classes are anticipated.
Downgrades to 'AAAsf' and 'AAsf' category rated classes could occur
if deal-level expected losses increase significantly and/or
interest shortfalls occur. For 'AAAsf' rated bonds, additional
stresses applied to defeased collateral if the U.S. sovereign
rating is lower than 'AAA' could also contribute to downgrades.
Downgrades to 'Asf' and 'BBBsf' category rated classes could occur
if deal-level losses increase significantly on non-defeased loans
in the transactions and with outsized losses on larger FLOCs,
particularly Hamilton Place, Cool Springs Commons, Capitol Plaza
Hotel Topeka, and The Falls in GSMS 2016-GS3, and Westchester
Office Portfolio 700 Series, Simon Premium Outlets, Hamilton Place,
and Westchester Office Portfolio 2500-2700 Series in GSMS
2016-GS4.
Downgrades to 'BBsf' and 'Bsf' category rated classes are possible
with higher expected losses from continued performance of the FLOCs
and with greater certainty of near-term losses on specially
serviced assets and other FLOCs.
Downgrades to distressed ratings of 'CCCsf' and 'CCsf' would occur
as losses become more certain and/or as losses are incurred.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to 'AAsf' and 'Asf' category rated classes are possible
with significantly increased CE from paydowns, coupled with
stable-to-improved pool-level loss expectations and performance
stabilization of FLOCs, particularly Hamilton Place, Cool Springs
Commons, Capitol Plaza Hotel Topeka, and The Falls in GSMS
2016-GS3, and Westchester Office Portfolio 700 Series, Simon
Premium Outlets, Hamilton Place, and Westchester Office Portfolio
2500-2700 Series in GSMS 2016-GS4. Upgrades of these classes to
'AAAsf' will also consider the concentration of defeased loans in
the transaction.
Upgrades to the 'BBBsf' category rated classes would be limited
based on sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'Asf' if there
is likelihood for interest shortfalls.
Upgrades to 'BBsf' and 'Bsf' category rated classes are not likely
until the later years in a transaction and only if the performance
of the remaining pool is stable and there is sufficient CE to the
classes.
Upgrades to distressed ratings of 'CCCsf' and 'CCsf' are not
expected but would be possible with better than expected recoveries
on specially serviced loans or significantly higher values on
FLOCs.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
HAMLET 2020-CRE1: DBRS Confirms BB(high) Rating on Class E Certs
----------------------------------------------------------------
DBRS Limited downgraded its credit rating on one class of the
Commercial Mortgage Pass-Through Certificates, Series 2020-CRE1
issued by Hamlet Securitization Trust 2020-CRE1:
-- Class F-RR 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 (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (high) (sf)
All trends are Stable, with the exception of Class F-RR, which has
a rating that does not typically carry a trend in commercial
mortgage-backed securities (CMBS) ratings.
The rating downgrade reflects a period of unpaid interest and
realized losses, stemming from 545 & 555 North Michigan Avenue
(Prospectus ID#12, 3.2% of the pool), which received a loan
modification in March 2023. Terms of the modification included
splitting the loan into A and B notes, with interest being deferred
on the A note through month 36 of the modification. As a result,
interest shortfalls have been accumulating, extending into Class
F-RR starting with the May 2023 reporting. In an effort to repay
the shortfalls, the servicer diverted distributable principal
starting with the May 2023 remittance, resulting in a realized loss
of $2.5 million being passed through to the trust as of the
September 2023 remittance. Although unpaid interest to Class F-RR
has been partially reimbursed, the certificate has been shorted for
five consecutive months as of the September 2023 remittance, and is
approaching DBRS Morningstar's maximum shortfall tolerance for the
respective rating category assigned prior to this rating action.
Given the structure of the loan modification, DBRS Morningstar
expects that interest shortfalls will continue to accumulate or
additional realized loss will be passed through to the trust to
repay interest due, further eroding credit support to the bonds.
545 & 555 North Michigan Avenue is secured by two adjacent low-rise
retail buildings on Chicago's Magnificent Mile, on the corner of
North Michigan Avenue and East Ohio Street, totaling 61,909 square
feet (sf). The 555 building includes 45,904 sf, with the remaining
16,005 sf contained within the 545 building. At closing, both
buildings were leased to single tenants; however, vacancy fell to
74.3% following the departure of Gap in 2020, which fully occupied
the 555 building. The loan was transferred to special servicing in
February 2022 for imminent monetary default following the
borrower's missed debt payment and the indication it would no
longer be able to make future payments under the original loan
terms.
As noted above, an A/B note structure loan modification was
executed in March 2023, and the loan was subsequently returned to
the master servicer in May 2023. Terms of the loan modification
include splitting the note into a $55.0 million A note and a $20.0
million B note, which is subordinate to the borrower's equity
contribution of approximately $9.8 million. Interest on the A note
will accrue until month 36, when it will be payable at the contract
rate, while interest on the B note will continue to accrue through
the remainder of the loan term in November 2027. Upon the effective
modification date, the borrower was required to fund approximately
$9.8 million of new equity, including a $4.6 million deposit into a
stabilization reserve and a $1.8 million deposit into an operating
shortfall reserve. The borrower will also be required to fund up to
$5.0 million of tenant improvements arising under the newly signed
Aritzia lease, among other obligations.
In May 2023, the borrower was permitted to execute a 12-year lease
agreement with Aritzia, which will fully occupy the 555 building
(74.3% of the net rentable area (NRA)), through August 2035,
bringing the property's occupancy to 100%. Following the build out
of its new space, Aritzia will receive one full year of free rent
and will pay an initial base rent of $71.35 per square foot (psf),
with annual rent escalation of 3.0%. Prior to departing, Gap paid a
base rent of $72.54 psf. At issuance, the 545 building was leased
to luxury watch boutique retailer, Tourbillon, through its parent
company, Swatch. The space was sublet to UGG conterminously with
Swatch's original lease expiration in January 2023. Following the
conclusion of the sublease, UGG's parent company, Deckers Retail,
LLC, signed a direct lease for the space, expiring in January 2024.
DBRS Morningstar has requested a leasing update, but no updates
have been provided.
While financial performance has recently yielded negative cash
flow, the recent restructuring of the loan through its
modification, along with the recent signing of Aritzia and a
significant contribution of borrower equity (some of which is
specifically tied to TI/LC costs) should better the borrower's
ability to stabilize operations. Despite recent developments, DBRS
Morningstar applied a probability of default (POD) penalty for this
review, given the near-term tenant rollover coupled with the
extremely soft market conditions, exhibiting vacancy of 17.8%. This
resulted in an expected loss that was approximately 2.0 times (x)
the pool average.
The rating confirmations and Stable trends reflect the otherwise
overall consistent performance of the transaction since last
review. Per the September 2023 reporting, 21 of the original 23
loans remain in the pool, with an aggregate principal balance of
$1.67 billion, representing a collateral reduction of 11.9% since
issuance. There are no delinquent or special serviced loans,
following the reinstatement of 545 & 555 North Michigan Avenue, but
there are nine loans, representing 38.9% of the pool balance, on
the servicer's watchlist. Four of these loans (16.8% of the pool)
are being monitored for failing to submit updated financials, while
the remaining five loans (22.1% of the pool) are being monitored
for either low debt service coverage ratios (DSCRs) or other
servicing trigger events.
At issuance, there were four transitional loans (27.9% of the pool)
secured in the pool. Three of the four loans have completed their
original business plans; however, 20 Broad Street (Prospectus ID#1,
13.2% of the pool) is still working toward its original plan of
leasing up its retail space and remains on the servicer's watchlist
for a low DSCR. The loan is secured by the leasehold interest in a
533-unit luxury residential property, with 39,029 sf of retail
space located in Manhattan's Financial District. The sponsor,
MetroLoft, acquired the property in 2015 and completed a gut
renovation to reposition the property.
While leasing of the retail space has been slower than expected,
the borrower does have a master lease signed for the unleased
space, which will be released as the space is signed. Per the Q4
2022 reporting, the retail space was 46% occupied, up from 38% in
Q3 2022 following the signing of Los Tacos (7.7% of the NRA). The
borrower is also in discussions with two prospective tenants that
are interested in leasing the remaining ground floor space. At
issuance, 235 of the 355 residential units were subject to a
10-year lease with Sonder through August 2029; however, the tenant
stopped making rent payments in July 2020. Following the tenant's
default, the lease was ultimately terminated, with litigation
ongoing. While the sponsor has leased the residential space back to
95% occupied as of Q4 2022, following an aggressive marketing
campaign which included the use of concessions, financials have not
yet captured the upside. Per the trailing 12-month financials
ending September 30, 2022, the loan reported a net cash flow of
$10.9 million (a DSCR of 0.78x), which is well below the budgeted
figure for 2023 and the DBRS Morningstar Stabilized figure of $15.1
million (a DSCR of 1.70x). Given the recent leasing updates, DBRS
Morningstar remains optimistic about the borrower's ability to
stabilize property operations during the near term.
The pool is considerably concentrated, with loans secured by office
and multifamily properties, representing 40.1% and 32.4% of the
pool balance, respectively. In general, the office sector has been
challenged, given the low investor appetite for that property type
and high vacancy rates in many submarkets as a result of the shift
in workplace dynamics. While select office loans in the transaction
continue to perform as expected, several others are exhibiting
increased risk. In its analysis for this review, DBRS Morningstar
applied stressed loan-to-value (LTV) ratios or increased POD
assumptions for two loans backed by office properties that are
exhibiting declines in performance, resulting in a weighted-average
(WA) expected loss (EL) approximately 3.0x greater than the pool
average.
One of these loans, Merritt on the River Portfolio (Prospectus ID
#3, 12.0% of the pool), is secured by three Class A office
buildings and two Class B office buildings, totaling 974,575 sf,
located in Norwalk, Connecticut. According to the most recent rent
roll dated September 2022, the subject was 85.9% occupied compared
to the issuance occupancy rate of 73.2%; however, there is a
considerable amount of tenant rollover during the next 24 months,
as tenants representing 55.5% of NRA have leases scheduled to
expire. This includes two of the three largest tenants at the
property, GE Capital (39.7% of the NRA, lease expiry February 2025)
and Bridgewater (9.4% of the NRA, lease expiry April 2024).
According to LoopNet, approximately 27.0% of the total NRA is
currently being marketed for lease, including a portion of the GE
Capital space. As of Q2 2023, Reis data indicated that the
submarket of Central in Fairfield County reported a vacancy rate of
25.5%, an increased over the Q2 2023 rate of 22.4%. Per the Q3 2022
annualized financials, the loan reported a net operating income of
$19.6 million, lower than the year-end (YE) 2021 NOI of $24.5
million and the DBRS Morningstar figure of $22.3 million. The
decreased NOI in 2022, despite a rise in the occupancy rate, was
primarily due to a $2.8 million termination fee from Bridgewater
that was included in revenue during the 2021 reporting period.
Furthermore, the subject has seen an increase in operating expenses
since issuance also contributing to the decline in 2022 and as
compared to the DBRS Morningstar figures. Given the near-term
concentration of tenant rollover paired with the soft submarket
conditions, DBRS Morningstar analyzed this loan with a stressed LTV
assumption and a POD penalty, resulting in an expected loss that
was nearly 3.5x the pool average.
Notes: All figures are in U.S. dollars unless otherwise noted.
HGI CRE 2022-FL3: DBRS Confirms B(low) Rating on Class G Notes
--------------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of notes
issued by HGI CRE CLO 2022-FL3, LLC (the Issuer):
-- Class A Notes at AAA (sf)
-- Class B Notes at AA (low) (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BBB (low) (sf)
-- Class F Notes at BB (low) (sf)
-- Class G Notes 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 the trust
continues to be solely 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 22 floating-rate mortgages
secured by 35 mostly transitional properties with a cut-off date
balance totaling $546.8 million. Most loans were in a period of
transition with plans to stabilize performance and improve values
of the underlying assets. As of the September 2023 remittance, the
pool comprised 25 loans secured by 42 properties with a cumulative
trust balance of $546.8 million. Since issuance, two loans with a
prior cumulative trust balance of $65.3 million have been
successfully repaid in full from the pool or been purchased out of
the trust at par by the collateral manager. This includes the $32.5
million Burlington Pointe loan, which paid off since the previous
DBRS Morningstar rating action in November 2022, having been
purchased out of the trust in May 2023.
The transaction is managed with a two-year Reinvestment Period,
whereby the Issuer can purchase new loans and funded loan
participations into the trust. The Reinvestment Period is scheduled
to end with the March 2024 payment date. As of September 2023, the
Reinvestment Account did not have any available funds as the
transaction is at its maximum funding amount. All future loans will
be secured by multifamily collateral.
The transaction is concentrated by property type, as all loans are
secured by multifamily properties. The pool is primarily secured by
properties in suburban markets, as defined by DBRS Morningstar,
with 19 loans, representing 69.4% of the pool, assigned a DBRS
Morningstar Market Rank of 3, 4, or 5. An additional three loans,
representing 22.5% of the pool, are secured by properties with a
DBRS Morningstar Market Rank of 6, denoting urban markets, while
three loans, representing 8.1% of the pool, are secured by
properties with a DBRS Morningstar Market Rank of 2, denoting rural
and tertiary markets. In comparison, at closing, properties in
suburban markets represented 75.8% of the collateral, properties in
urban markets represented 16.9% of the collateral, and properties
in tertiary markets represented 7.3% of the collateral.
Leverage across the pool was generally stable to slightly elevated
as of September 2023 reporting when compared with issuance metrics.
The current weighted-average (WA) as-is appraised value
loan-to-value ratio (LTV) is 69.9%, with a current WA stabilized
LTV of 63.6%. In comparison, these figures were 72.3% and 65.0%,
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 reflect the
current rising interest rate or widening capitalization rate
environments.
Through June 2023, the lender had advanced cumulative loan future
funding of $34.8 million to 22 of the 25 outstanding individual
borrowers to aid in property stabilization efforts. The largest
advances have been made to the borrowers of the Willow Creek ($3.7
million) and Tzadik Portfolio Pool 4 ($3.6 million) loans. The
Willow Creek loan is secured by a 304-unit multifamily property in
Winston-Salem, North Carolina. The advanced funds have been used to
fund the borrower's planned capital expenditure (capex) throughout
the property. The loan is now considered fully funded as the
borrower has exhausted all available future funding. According to
the Q2 2023 collateral manager report, the sponsor has completed
156 unit renovations to date and is planning to complete the
remaining renovations by YE2023. As of May 2023, the property was
85.0% occupied with renovated units achieving rental premiums
upward of $400/unit compared with rents at issuance. The Tzadik
Portfolio Pool 4 loan is secured by a portfolio of four
garden-style multifamily properties totaling 728 units in Tampa,
Florida. The advanced funds have been used to fund capex projects
across the portfolio. An additional $6.2 million of future funding
remains available to the borrower. According to the May 2023 rent
rolls for the individual properties, occupancy rates ranged from
80.7% to 94.2% and the average rental rate across all four
properties was $977/unit, an improvement of approximately $100/unit
from closing.
An additional $35.9 million of loan future funding allocated to 17
of the outstanding individual borrowers remains available. The
largest portion of available funds ($6.9 million) is allocated to
the borrower of the Lofts at Twenty25 loan, which is secured by a
multifamily property in downtown Atlanta. The available funds will
be used to complete the borrower's capital improvement plan. The
borrower has not made an advance draw request since loan closing.
As of the September 2023 remittance, there were no delinquent loans
or loans in special servicing, and there are 14 loans on the
servicer's watchlist, representing 54.2% of the current trust
balance. The loans have generally been flagged for low occupancy
rates and below-threshold debt service coverage ratios. Regarding
properties that are not generating sufficient cash flow to cover
operations and debt service, the servicer noted several common
factors for the performance declines. These include planned tenant
evictions and taking units offline to complete upgrades, increased
repairs and maintenance and marketing expenses to upgrade units and
execute new leases, and an increase in the benchmark interest rate,
which has resulted in higher debt service costs as all loans have
floating interest rates. The borrowers of all 14 loans on the
servicer's watchlist remain in the midst of executing their
respective business plans with no single loan maturity occurring
until Q3 2024. DBRS Morningstar expects the loans to remain
current.
Notes: All figures are in U.S. dollars unless otherwise noted.
JPMBB COMMERCIAL 2015-C32: Moody's Cuts Rating on 2 Tranches to Ba1
-------------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on four classes
and downgraded the ratings on four classes in JPMBB Commercial
Mortgage Securities Trust 2015-C32, Commercial Pass-Through
Certificates, Series 2015-C32 as follows:
Cl. A-3, Affirmed Aaa (sf); previously on Oct 5, 2022 Affirmed Aaa
(sf)
Cl. A-4, Affirmed Aaa (sf); previously on Oct 5, 2022 Affirmed Aaa
(sf)
Cl. A-5, Affirmed Aaa (sf); previously on Oct 5, 2022 Affirmed Aaa
(sf)
Cl. A-S, Downgraded to A3 (sf); previously on Oct 5, 2022
Downgraded to A1 (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Oct 5, 2022 Affirmed Aaa
(sf)
Cl. B, Downgraded to Ba1 (sf); previously on Oct 5, 2022 Downgraded
to Baa2 (sf)
Cl. X-A*, Downgraded to Aa2 (sf); previously on Oct 5, 2022
Affirmed Aa1 (sf)
Cl. X-B*, Downgraded to Ba1 (sf); previously on Oct 5, 2022
Downgraded to Baa2 (sf)
* Reflects Interest-Only Class
RATINGS RATIONALE
The ratings on four P&I classes were affirmed due to the
significant credit support and because the transaction's key
metrics, including Moody's loan-to-value (LTV) ratio, Moody's
stressed debt service coverage ratio (DSCR) and the transaction's
Herfindahl Index (Herf), are within acceptable ranges.
The ratings on two P&I classes, Cl. A-S and Cl. B, were downgraded
due to higher expected losses and increased risk of interest
shortfalls driven primarily by the exposure to specially serviced
and troubled loans. Five loans, representing 31% of the pool, are
in special servicing, and the three largest loans in special
servicing have all recognized significant appraisal reductions.
Furthermore, the sixth largest loan, One Shell Square (4.3% of the
pool), is secured by an office building with significant lease
rollover near or prior to its maturity date in July 2025. Moody's
has also identified four troubled loans (5% of the pool) secured by
mostly retail properties with recent declines in performance.
Nearly all the remaining loans mature by October 2025 and if
certain loans are unable to pay off at their maturity date, the
outstanding classes may face increased risk of interest
shortfalls.
The rating on the IO classes were downgraded due to a decline in
the credit quality of its referenced classes.
Moody's rating action reflects a base expected loss of 22.6% of the
current pooled balance, compared to 19.9% at Moody's last review.
Moody's base expected loss plus realized losses is now 15.7% of the
original pooled balance, compared to 14.5% 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. Additionally, significant
changes in the 5-year rolling average of 10-year US Treasury rates
will impact the magnitude of the interest rate adjustment and may
lead to future rating actions.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in rating all classes except
interest-only classes was "US and Canadian Conduit/Fusion
Commercial Mortgage-Backed Securitizations Methodology" published
in July 2022.
DEAL PERFORMANCE
As of the September 15, 2023 distribution date, the transaction's
aggregate certificate balance has decreased by 36.1% to $734
million from $1.1 billion at securitization. The certificates are
collateralized by 73 mortgage loans ranging in size from less than
1% to 9.4% of the pool, with the top ten loans (excluding
defeasance) constituting 54.2% of the pool. One loan, constituting
1.6% of the pool, has an investment-grade structured credit
assessment. Six loans, constituting 5.7% of the pool, have defeased
and are secured by US government securities.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 22, down from 24 at Moody's last review.
As of the September 2023 remittance report, loans representing
69.4% were current or within their grace period on their debt
service payments, 9.4% of the loans were more than 90 days
delinquent and 21.2% were in foreclosure or were REO.
Fourteen loans, constituting 22.7% of the pool, are on the master
servicer's watchlist, of which three loans, representing 5.5% of
the pool, indicate the borrower has received loan modifications in
relation to the coronavirus impact on the property. The watchlist
includes loans that meet certain portfolio review guidelines
established as part of the CRE Finance Council (CREFC) monthly
reporting package. As part of Moody's ongoing monitoring of a
transaction, the agency reviews the watchlist to assess which loans
have material issues that could affect performance.
Three loans have been liquidated from the pool, resulting in an
aggregate realized loss of $13.8 million (for an average loss
severity of 32.8%). Five loans, constituting 30.5% of the pool, are
currently in special servicing.
The largest specially serviced loan is the Civic Opera Building
Loan ($68.7 million – 9.4% of the pool), which represents a
pari-passu portion of a $150.2 million whole loan. The loan is
secured by a 915,162 square foot (SF), 44-story office property
located in the West Loop of Chicago. The property was constructed
in 1929 and most recently renovated in 2015. The property is home
to the non-collateral Lyric Opera, a 3,500 seat performance venue.
The loan transferred to special servicing in July 2020 due to
imminent monetary default at the borrowers request in relation to
business disruptions from the coronavirus pandemic. Occupancy
declined to 69% as of September 2022 compared to 80% in 2019. The
property has not been able to generate enough cash flow to cover
debt service since 2020. The most recent appraisal from April 2023
valued the property 40% lower than the value at securitization, and
as of the September 2023 remittance the master servicer has
recognized a 41.8% appraisal reduction based on the current loan
balance. A receiver has been appointed and is managing the
property. The lender is continuing with the foreclosure process. As
of the September 2023 remittance, the e loan was last paid through
May 2021 and has amortized 8.4% since securitization.
The second largest specially serviced loan is the Hilton Suites
Chicago Magnificent Mile Loan ($66.7 million – 9.1% of the pool),
which is secured by a 345 key full service hotel located on
Chicago's Magnificent Mile. The hotel was built in 1989 and
renovated in 2014. The hotel features two F&B outlets, 8,400 SF of
meeting space and an indoor pool. Property perfromance began to
deteriorate starting in 2019, due to new hotel supply in the
submarket since securitization. The loan transferred to special
servicing in May 2020 due to imminent monetary default in relation
to business disruptions from the coronavirus pandemic. The lender
began the foreclosure process in July 2022, and the loan became REO
in April 2023. The property is not currently being marketed for
sale, though the manager is stabilizing the property through
securing a new F&B tenant and ordering a new Hilton branded
property improvement plan (PIP). Operating statements through July
2023 indicate a slight recovery in occupancy but revenue is still
well below pre-pandemic levels. The most recent appraisal from
March 2023 valued the property 44% below the value at
securitization and as of the September 2023 remittance statement,
the master servicer has recognized a 32.5% appraisal reduction
based on the current loan balance. As of the September 2023
remittance, the loan was last paid through June 2021 and has
amortized 13.7% since securitization.
The third largest specially serviced loan is the Palmer House
Retail Shops Loan ($57.7 million – 7.9% of the pool), which is
secured by the 134,564 SF ground floor interest underneath the
non-collateral Palmer House hotel located in Chicago's central
loop. The collateral net rentable area (NRA) is approximately 49%
parking (166 spaces), 40% retail and 11% office. The property's
performance has been significantly impacted by the pandemic as the
access to the collateral's retail portion is provided through the
non-collateral Palmer House Hilton Hotel, which was closed between
April 2020 and June 2021. The parking operator (49% of the
collateral NRA) exercised their one-time termination option and
vacated the property in July 2020. The loan transferred to the
special servicer in July 2020 due to delinquent payments. As of
December 2022, the property was 55% occupied, compared to 66% in
December 2021 and 98% in 2019. The property was foreclosed on in
December 2020 and a receiver was appointed in February 2021. The
most recent appraisal from July 2022 valued the property 60% below
the value at securitization and as of the September 2023 remittance
statement, the master servicer has recognized a 61% appraisal
reduction based on the current loan balance. As of the September
2023 remittance, the loan was last paid through April 2020 and has
amortized 7% since securitization.
The remaining two specially serviced loans are secured by hotel and
retail properties that are REO. Both properties have seen
significant declines in performance due to tenancy and occupancy
issues, with significant appraisal reductions. Moody's estimates an
aggregate $136.7 million loss for the specially serviced loans (61%
expected loss on average).
Moody's has also assumed a high default probability for four poorly
performing loans, constituting 4.9% of the pool, and has estimated
an aggregate loss of $11.6 million (a 32% expected loss on average)
from these troubled loans. The largest troubled loan is The Outlet
Shoppes at Gettysburg Loan ($20.7 million – 2.8% of the pool), a
249,937 SF outlet mall located near Gettysburg, PA. Property
performance has declined since 2019 due to the pandemic and the
property has not been able to generate sufficient cash flow to
cover debt service. The loan had previously transferred to special
servicing in July 2020, but transferred back to the master servicer
in late 2020. The loan transferred back to special servicing in
April 2021 due to imminent default, and subsequently returned back
to the master servicer in February 2023 after being modified. The
most recent appraisal from May 2022 valued the property 70% below
the value at securitization. The loan is current and has amortized
41.6% since securitization.
As of the September 2023 remittance statement cumulative interest
shortfalls were $13.1 million. Moody's anticipates interest
shortfalls will continue because of the exposure to specially
serviced loans and/or modified loans. Interest shortfalls are
caused by special servicing fees, including workout and liquidation
fees, appraisal entitlement reductions (ASERs), loan modifications
and extraordinary trust expenses.
The credit risk of loans is determined primarily by two factors: 1)
Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the
severity of loss upon a default, which is largely driven by each
loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV.
As described in the CMBS methodology used to rate this
transaction, Moody's make various adjustments to the MLTV. Moody's
adjust the MLTV for each loan using a value that reflects
capitalization (cap) rates that are between Moody's sustainable cap
rates and market cap rates. Moody's also use an adjusted loan
balance that reflects each loan's amortization profile. The MLTV
reported in this publication reflects the MLTV before the
adjustments described in the methodology.
Moody's received full year 2022 operating results for 98% of the
pool, and full or partial year 2023 operating results for 72% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 106%, compared to 104% at Moody's
last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 21.8% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 10.0%.
Moody's actual and stressed conduit DSCRs are 1.38X and 1.07X,
respectively, compared to 1.42X and 1.06X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The loan with a structured credit assessment is the U-Haul Loan
($11.8 million – 1.6% of the pool), which represents a pari passu
portion of an $82.5 million A-note. The loan is also structured
with a $111 million B-note. The loan is secured by a portfolio of
105 U-Haul branded self storage locations across 35 states. The
portfolio contains 2.7 million SF of storage space across 32,500
units. Approximately 41% of the units are climate controlled, and
the portfolio also contains 300 RV parking units. As of year-end
2022, the portfolio was 94% occupied, and the NOI has improved
significantly since securitization. The loan has amortized 76.3%
since securitization and is fully amortizing over its 20 year term.
Moody's structured credit assessment and stressed DSCR are aaa
(sca.pd) and 3.54X, respectively.
The top three conduit loans represent 15.5% of the pool balance.
The largest loan is the Gateway Business Park Loan ($48.3 million
– 6.6% of the pool), which is secured by a 514,037 SF, Cl. B
office park located in Mount Laurel, NJ, east of the Philadelphia
Central Business District (CBD). The collateral consists of eight
low-rise suburban office buildings with a granular tenant roster.
As of year-end 2022, the property was 77% occupied, compared to 81%
in December 2021. Property performance has been generally stable
since securitization. As of the September 2023 remittance, the loan
has amortized 13.6% since securitization. Moody's LTV and stressed
DSCR are 124% and 0.87X, respectively, compared to 127% and 0.85X
at the last review.
The second largest loan is the Frandor Shopping Center Loan ($34.3
million – 4.7% of the pool), which is secured by a grocery
anchored shopping center located in Lansing, MI, near the campus of
Michigan State University. The property is anchored by national
retailers including Kroger, Jo-Ann's, Michaels and TJ Maxx. As of
June 2023, the property was 96% occupied, compared to 97% as of
June 2022 and 96% as of December 2020. Property performance has
improved since securitization. As of the September 2023 remittance,
the loan has amortized 15% since securitization. Moody's LTV and
stressed DSCR are 97% and 1.05X, respectively, compared to 100% and
1.03X at the last review.
The third largest loan is the One Shell Square Loan ($31.2 million
– 4.3% of the pool), which represents a pari passu portion of a
$109.1 million A-note. The loan is also structured with $20 million
of mezzanine debt. The loan is secured by a 1.2 million SF, LEED
Gold certified office tower located in the New Orleans, Louisiana
CBD. The 51 story building was constructed in 1972 and is the
tallest building in Louisiana. The largest tenant, Shell Oil
Company, reduced its presence at the property since securitization
and currently accounts for 29% of NRA. The building was renamed to
Hancock Whitney Center when the second largest tenant, Hancock
Whitney (17% of NRA), moved their regional headquarters to the
property in 2018. As of June 30, 2023 the property was 81%
occupied, compared to compared to 86% in December 2021 and 87% in
December 2020. The property has significant tenant rollover over
the next two years. Moody's LTV and stressed DSCR are 159% and
0.70X, respectively, compared to 110% and 0.97X at the last review.
JPMBB COMMERCIAL 2015-C33: Fitch Affirms 'B-' Rating on Cl. F Certs
-------------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of JPMBB Commercial Mortgage
Securities Trust commercial mortgage pass-through certificates
series 2015-C33. The Rating Outlook for class C was revised to
Stable from Positive. The Rating Outlook for classes E and F was
revised to Negative from Stable. The under criteria observation
(UCO) has been resolved for all classes.
Entity/Debt Rating Prior
----------- ------ -----
JPMBB 2015-C33
A-3 46645JAC6 LT AAAsf Affirmed AAAsf
A-4 46645JAD4 LT AAAsf Affirmed AAAsf
A-S 46645JAF9 LT AAAsf Affirmed AAAsf
A-SB 46645JAE2 LT AAAsf Affirmed AAAsf
B 46645JAG7 LT AAsf Affirmed AAsf
C 46645JAH5 LT A-sf Affirmed A-sf
D 46645JAS1 LT BBB-sf Affirmed BBB-sf
D-1 46645JBG6 LT BBBsf Affirmed BBBsf
D-2 46645JBJ0 LT BBB-sf Affirmed BBB-sf
E 46645JAU6 LT BB-sf Affirmed BB-sf
F 46645JAW2 LT B-sf Affirmed B-sf
X-A 46645JAJ1 LT AAAsf Affirmed AAAsf
X-B 46645JAL6 LT AAsf Affirmed AAsf
X-D 46645JAQ5 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 32 Avenue of the Americas (20.6%) and overall
refinancing concerns as all loans mature in the next two years.
Four loans (23.6%) are considered Fitch Loans of Concern (FLOCs)
including one loan in special servicing (1.4%). Fitch's current
ratings incorporate a 'Bsf' rating case loss of 3.9%.
The largest contributor to losses, DoubleTree Anaheim - Orange
County (4.2% of the pool), is secured by 461-room full service
hotel located in downtown Anaheim, CA. Demand drivers include
Disneyland, Anaheim Convention Center, Angel Stadium, Honda Center,
& the Outlets at Orange. Performance has shown signs of steady
recovery but remains below pre-pandemic levels. The NOI debt
service coverage ratio (DSCR) was 2.07x at YE 2022, up from 0.29x
at YE 2020 but lower than 2.69x at YE 2019. Occupancy was 72% as of
YE 2022 compared with 85% at YE 2019. Fitch's 'Bsf' rating case
loss (prior to concentration adjustments) of 22.1% reflects a
11.25% cap rate and a 15% stress at YE 2022 NOI.
The second largest contributor to modeled losses and largest loan,
32 Avenue of the Americas, is secured by a 1.2 million-sf office
property/data center in Manhattan. The loan was flagged as a FLOC
due to low occupancy, which declined to 76% in 2021 from 100% at YE
2019, primarily due to the two largest tenants downsizing. Dentsu
Holdings USA and CenturyLink Communications reduced their spaces by
8.5% and 8.2%, respectively. Occupancy continued to decline to 62%
as of March 2023 after AMFM Operating, Inc. (14.4%) vacated at its
September 2022 lease expiration. DSCR was 1.90x as of YE 2022,
compared to 2.08x at YE 2021, 2.13x at YE 2020, and 2.11x at YE
2019. Fitch's 'Bsf' rating case loss (prior to concentration
adjustments) of 3.0% is based on a 9.5% cap rate and a 10% stress
to the YE 2022 NOI. Fitch also considered an additional sensitivity
scenario that factors in an increased probability of default on the
loan.
Improvement in Credit Enhancement: As of the September 2023
remittance report, the pool's aggregate principal balance has been
paid down by 20.2% to $608 million from $761.8 million at issuance.
Since last review, two loans were prepaid before their maturities
for $34.5 million. Thirteen loans (19.7%) are defeased; seven
(13.2%) are newly defeased since the last review. 12 loans (43.1%
of the pool) are full-term interest-only (IO) and nine (19.6% of
the pool) had partial IO periods; all loans are no longer in their
partial IO period and have begun amortizing. The CE to senior
classes is expected to continue to improve given the pool's
amortization.
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 specially serviced loans. In addition,
downgrades for the classes with Negative Outlooks would be
triggered by higher losses on the FLOCs, most notably if 32 Avenue
of the Americas fails to stabilize.
Downgrades to classes rated 'AAAsf' and 'AAsf' 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 for the pool increase significantly.
Downgrades to classes rated 'A-sf', 'BBBsf' and 'BBB-sf' may occur
should expected losses for the pool increase significantly and/or
if the performing FLOCs begin to experience performance decline
beyond expectations.
Classes rated 'BB-sf' and 'B-sf' 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 'AAsf' to 'A-sf' rated classes would only occur with
significant improvement in CE and/or defeasance, and the
performance stabilization of the FLOCs, most notably City Square
and Clay Street and Braemar Office.
Upgrades to 'BBBsf' and '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 a
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.
JPMCC 2015-JP1: Fitch Lowers Rating on Two Tranches to 'BB-sf'
--------------------------------------------------------------
Fitch Ratings has downgraded two and affirmed 12 classes of JPMCC
Commercial Mortgage Securities Trust, commercial mortgage
pass-through certificates, series 2015-JP1. Fitch assigned a
Negative Rating Outlook on two classes following their downgrades.
In addition, three affirmed classes were revised to Negative from
Stable Rating Outlook and two affirmed classes were revised to
Negative from Positive. The under criteria observation (UCO) has
been resolved.
Entity/Debt Rating Prior
----------- ------ -----
JPMCC 2015-JP1
A-3 46590KAC8 LT PIFsf Paid In Full AAAsf
A-4 46590KAD6 LT AAAsf Affirmed AAAsf
A-5 46590KAE4 LT AAAsf Affirmed AAAsf
A-S 46590KAG9 LT AAAsf Affirmed AAAsf
A-SB 46590KAF1 LT AAAsf Affirmed AAAsf
B 46590KAH7 LT AA-sf Affirmed AA-sf
C 46590KAK0 LT A-sf Affirmed A-sf
D 46590KAL8 LT BBBsf Affirmed BBBsf
E 46590KBA1 LT BB-sf Downgrade BBB-sf
F 46590KAS3 LT CCCsf Affirmed CCCsf
G 46590KAU8 LT CCsf Affirmed CCsf
X-A 46590KAN4 LT AAAsf Affirmed AAAsf
X-B 46590KAP9 LT AA-sf Affirmed AA-sf
X-D 46590KAR5 LT BBBsf Affirmed BBBsf
X-E 46590KAY0 LT BB-sf Downgrade BBB-sf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of the
updated "U.S. and Canadian Multiborrower CMBS Rating Criteria",
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
The downgrades reflect the impact of the updated criteria and
increased loss expectations since the prior rating action on the
Fitch Loans of Concern (FLOCs), specifically on the specially
serviced Franklin Ridge (2.9%) loans. The Negative Outlooks are
based on performance and refinance concerns and an additional
sensitivity scenario that incorporated an increased probability of
default on the 32 Avenue of the Americas (18.2% of the pool) and
The 9 (6.7%) loans.
Fitch's current ratings incorporate a 'Bsf' rating case loss of
4.7%. Ten loans (48.5%) have been designated as FLOCs, including
three loans (2.9%) in special servicing. The transaction has a high
concentration of loans backed by office properties, representing
approximately 53% of the pool.
The largest contributor to overall loss expectations is the
Franklin Ridge loans, which are three cross-collateralized and
cross-defaulted loans secured by three suburban office properties
located adjacent to each other, in Nottingham, MD.
The loans transferred to special servicing in February 2021 due to
payment default after major tenant Johns Hopkins (previously 100%
NRA of 9910 Franklin; 42% of portfolio NRA) vacated upon its
December 2020 lease expiration. The 9910 Franklin space remains
vacant and occupancy across the portfolio has remained less than
50%. Per the August 2023 rent rolls, the portfolio was 43.9%
occupied. A receiver was appointed in February 2022, with current
stabilization strategy to re-tenant the building or find a new
owner.
Remaining major tenants include EZShield Group (34.6% NRA of 9920
Franklin through October 2026; 11.3% of portfolio NRA) and Traffic
Group (35.4% NRA of 9900 Franklin through December 2033; 9.0% of
portfolio NRA).
Fitch's 'Bsf' rating case loss of 49% (prior to concentration
add-ons) was based on a haircut to a recent appraisal valuation,
reflecting a stressed value of $85 psf.
The second largest contributor to overall loss expectations is the
32 Avenue of the Americas (18.2%) loan, which is secured by a 1.2
million-sf office property/data center in Manhattan.
The loan was flagged as a FLOC due to low occupancy, which declined
to 76% in 2021 from 100% at YE 2019, primarily due to the two
largest tenants downsizing. Dentsu Holdings USA and CenturyLink
Communications reduced their spaces by 8.5% and 8.2%, respectively.
Occupancy continued to decline to 62% as of March 2023 after AMFM
Operating, Inc. (14.4%) vacated at its September 2022 lease
expiration. The NOI debt service coverage ratio (DSCR) was 1.90x as
of YE 2022, compared to 2.08x at YE 2021, 2.13x at YE 2020, and
2.11x at YE 2019.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 3.0% is based on a 9.5% cap rate and a 10% stress to the YE 2022
NOI. Fitch also considered an additional sensitivity scenario that
factors in an increased probability of default on the loan, which
contributed to the Negative Outlooks.
The third largest contributor to overall loss expectations is the
Hampton Inn College Park (1.3%) loan, which is secured by an 80 key
limited service property in College Park, MD.
The NOI DSCR was 0.42x as of YE2022, compared to -0.36x at YE 2020,
1.27x at YE 2019, and 1.64x at YE 2019. As of the July 2023 TTM STR
report, the property reported an occupancy, ADR, and RevPAR of 72%,
$119, and $86, respectively, compared to its competitive set of
60%, $113, and $68, respectively. Although the property is
performing above its competitive set, loan performance is still
well below pre-pandemic levels.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 39% is based on an 11.5% cap rate to the YE 2022 NOI.
The 9 loan (6.7%) is secured by a mixed-use development that is
comprised of three components: a hotel, apartments and a parking
garage located in the Playhouse Square District of Cleveland, OH.
Property operations were significantly affected as a result of the
pandemic. The most recently reported occupancy for the hotel,
apartments and garage components were 97%, 100% and 61%,
respectively, as of September 2022. The NOI DSCR remains low at
1.02x as of September 2022, compared with 0.83x for September 2021
and 1.85x in 2019.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 3.5% is based on a 10.4% cap rate and 20% stress to the
pre-pandemic YE 2019 NOI. Fitch also considered an additional
sensitivity scenario that factors in an increased probability of
default on the loan, which contributed to the Negative Outlooks.
Improved CE: Credit enhancement to the senior classes has increased
due to loan payoffs. As of the September 2023 distribution date,
the pool's aggregate balance has been paid down by 33.1% to $534.6
million from $799.2 million at issuance.
Three loans representing 35.1% of the pool are full-term IO, and 18
loans (40.8%) with partial IO periods at issuance have begun
amortizing. Seven loans (14.2% of the pool) were defeased. There
has been $34.0 million in realized losses to date, all of which
have been absorbed by the non-rated class NR.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to the 'AAAsf' rated classes are not likely due to the
expected continued amortization and increasing CE relative to loss
expectations, but may occur should interest shortfalls affect these
classes.
Downgrades to the 'AA-sf', 'A-sf' 'BBBsf' and 'BB-sf' rated classes
will occur if expected losses increase significantly for the FLOCs,
specifically the Franklin Ridge loans, 32 Avenue of the Americas
and The 9, and/or loans anticipated to pay off at maturity exhibit
declines in performance.
Further downgrades to the 'CCCsf' and 'CCsf' rated classes will
occur with a greater certainty of loss from continued performance
decline of the FLOCs and/or realized losses are greater than
anticipated.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to the 'AA-sf' and 'A-sf' rated classes may occur with
significant improvement in CE and/or defeasance as well as with the
stabilization of performance on the FLOCs, specifically 32 Avenue
of the Americas and The 9.
Upgrades to the 'BBBsf' and 'BB-sf' rated classes 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 'CCCsf' and 'CCsf' rated classes is considered
unlikely are not likely unless resolution of the specially serviced
loans 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.
KATAYMA CLO I: S&P Assigns Prelim BB- (sf) Rating on Class E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Katayma CLO
I Ltd./Katayma CLO I 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 KLM, a subsidiary of Kuvare.
The preliminary ratings are based on information as of Oct. 23,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- 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
Katayma CLO I Ltd./Katayma CLO I LLC
Class A-1, $248.00 million: AAA (sf)
Class A-2, $16.00 million: AAA (sf)
Class B, $40.00 million: AA (sf)
Class C (deferrable), $24.00 million: A (sf)
Class D (deferrable), $22.00 million: BBB- (sf)
Class E (deferrable), $14.00 million: BB- (sf)
Subordinated notes, $38.11 million: Not rated
KKR CLO 43: Fitch Affirms 'BB-sf' Rating on E Notes, Outlook Stable
-------------------------------------------------------------------
Fitch Ratings has affirmed the ratings on the class A-2, B-1, B-2,
C and D notes of KKR CLO 37 Ltd. (KKR 37) and the class B-1, B-2 C,
D and E notes of KKR CLO 43, Ltd. (KKR 43). The Rating Outlooks on
all rated tranches remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
KKR CLO 37, Ltd.
A-2 48254FAE8 LT AAAsf Affirmed AAAsf
B-1 48254FAG3 LT AAsf Affirmed AAsf
B-2 48254FAJ7 LT AAsf Affirmed AAsf
C 48254FAL2 LT A+sf Affirmed A+sf
D 48254FAN8 LT BBBsf Affirmed BBBsf
KKR CLO 43 Ltd.
B-1 48255UAC8 LT AAsf Affirmed AAsf
B-2 48255UAD6 LT AAsf Affirmed AAsf
D 48255UAF1 LT BBB-sf Affirmed BBB-sf
E 48256BAA3 LT BB-sf Affirmed BB-sf
TRANSACTION SUMMARY
KKR 37 and KKR 43 are broadly syndicated collateralized loan
obligations (CLOs) managed by KKR Financial Advisors II, LLC. KKR
37 closed in December 2021 and will exit its reinvestment period in
January 2027. KKR 43 closed in December 2022 and will exit its
reinvestment period in January 2026. Both CLOs are secured
primarily by first-lien, senior secured leveraged loans.
KEY RATING DRIVERS
Credit Enhancement Remains Sufficient
The affirmations are supported by credit enhancement (CE) levels
against relevant rating stress loss levels. The Fitch weighted
average rating factor (WARF) for KKR 37 increased to 27.4 from 26.3
at last review. The WARF for KKR 43 portfolio is 25.8, compared to
25.1 at closing. As of August 2023 reporting, the credit quality of
both portfolios remained at the 'B'/'B-' level.
KKR 37 exceeds both the S&P "CCC+" or below and Moody's "Caa1" or
below limits of 7.5%. The remaining coverage tests, collateral
quality tests (CQTs), and concentration limitations for KKR 37 are
in compliance. KKR 43 is in compliance with all coverage tests,
CQTs, and concentration limitations.
The portfolio for KKR 37 consists of 259 obligors, and the largest
10 obligors represent 9.2% of the portfolio. KKR 43 has 251
obligors, with the largest 10 obligors comprising 9.7% of the
portfolio. There are no trustee reported defaults in either
portfolio. Exposure to issuers with a Negative Outlook and Fitch's
watchlist is 18.4% and 10.3%, respectively, for KKR 37 and 14.5%
and 6.6%, respectively, for KKR 43.
On average, first lien loans, cash and eligible investments
comprise 98% of the portfolios. Fitch's weighted average recovery
rate (WARR) of the KKR 37 portfolio was 73.8%, compared to 73.7% at
last review, and the WARR of the KKR 43 portfolio was 74.5%,
compared to 74.8% at closing.
Cash Flow Analysis
Fitch conducted updated cash flow analyses based on newly run Fitch
Stressed Portfolio (FSP) since both transactions are still in their
reinvestment periods. The FSP analysis stressed the current
portfolios from the August trustee reports to account for
permissible concentration and CQT limits. The FSP analysis assumed
weighted average lives of 6.44 years and 6.18 years for KKR 37 and
KKR 43, respectively. Fixed rate assets were also assumed at 5% and
7.5% for KKR 37 and KKR 43, respectively.
The portfolio weighted average spread (WAS) and non-senior secured
assets were assumed at the covenant level of 3.5% and 7.5% for KKR
37. The WAS, WARR and WARF were stressed to the current Fitch test
matrix points for KKR 43.
The ratings are in line with their respective model-implied ratings
(MIRs), as defined in Fitch's CLOs and Corporate CDOs Rating
Criteria. The Stable Outlooks reflect Fitch's expectation that the
notes have sufficient level of credit protection to withstand
potential deterioration in the credit quality of the portfolios in
stress scenarios commensurate with each classes' 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 three
rating notches for both transactions, 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 four rating
notches for KKR 37 and five rating notches for KKR 43, based on
MIRs, except for the 'AAAsf'-rated debt, which is at the highest
level on Fitch's scale and cannot be upgraded.
LCM XV: Moody's Upgrades Rating on $33MM Class D-R Notes From Ba1
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by LCM XV Limited Partnership:
US$63,000,000 Class B-R Senior Floating Rate Notes due 2030 (the
"Class B-R Notes"), Upgraded to Aaa (sf); previously on April 6,
2021 Upgraded to Aa1 (sf)
US$42,000,000 Class C-R Deferrable Mezzanine Floating Rate Notes
due 2030 (the "Class C-R Notes"), Upgraded to Aa3 (sf); previously
on May 25, 2017 Assigned A2 (sf)
US$33,000,000 Class D-R Deferrable Mezzanine Floating Rate Notes
due 2030 (the "Class D-R Notes"), Upgraded to Baa3 (sf); previously
on September 21, 2020 Downgraded to Ba1 (sf)
LCM XV Limited Partnership, originally issued in February 2014,
refinanced in May 2017 and partially refinanced in April 2021, is a
managed cashflow CLO. The notes are collateralized primarily by a
portfolio of broadly syndicated senior secured corporate loans. The
transaction's reinvestment period ended in July 2022.
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since September 2022. The Class
A-R2 notes have been paid down by approximately 27% or $102.7
million since September 2022. Based on the trustee's September 2023
[1] report, the OC ratios for the Class A-R2/B-R, Class C-R, and
Class D-R notes are reported at 135.74%, 121.10%, and 111.63%,
respectively, versus September 2022 [2] levels of 129.82%, 118.74%
and 111.28%, respectively.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
spread, and weighted average recovery rate, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions:
Performing par and principal proceeds balance: $471,305,116
Defaulted par: $2,466,500
Diversity Score: 78
Weighted Average Rating Factor (WARF): 2869
Weighted Average Spread (WAS) (before accounting for reference rate
floors): 3.23%
Weighted Average Recovery Rate (WARR): 47.39%
Weighted Average Life (WAL): 3.73 years
In addition to base case analysis, Moody's ran additional scenarios
where outcomes could diverge from the base case. The additional
scenarios consider one or more factors individually or in
combination, and include: defaults by obligors whose low ratings or
debt prices suggest distress, defaults by obligors with potential
refinancing risk, deterioration in the credit quality of the
underlying portfolio, decrease in overall WAS or net interest
income, lower recoveries on defaulted assets.
Methodology Used for the Rating Action
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the rated notes is subject to uncertainty. The
performance of the rated notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the rated notes.
MAGNETITE XXXV: S&P Assigns Prelim BB-(sf) Rating on Class ER Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
B-R, C-R, D-R, and E-R replacement notes from Magnetite XXXV
Ltd./Magnetite XXXV LLC, a CLO originally issued in August 2022
that is managed by BlackRock Financial Management Inc. and was not
rated by S&P Global Ratings.
The preliminary ratings are based on information as of Oct. 20,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Oct. 25, 2023, refinancing date, the proceeds from the
replacement notes will be used to redeem the original notes. At
that time, S&P expects to assign ratings to the replacement notes.
However, if the refinancing does not occur, S&P may withdraw its
preliminary ratings on the replacement notes.
The replacement notes will be issued via a proposed supplemental
indenture, which outlines the terms of the replacement notes.
According to the proposed supplemental indenture:
-- The transaction will be collateralized by at least 90.0% senior
secured loans, cash, and eligible investments, with a minimum of
80.0% of the loan borrowers required to be based in the U.S.
-- A maximum of 60.0% of the loans in the collateral pool can be
covenant-lite.
-- The replacement class B-R, C-R, D-R, and E-R notes are expected
to be issued at a lower spread over three-month CME Term SOFR than
the original notes.
-- Of the identified underlying collateral obligations, 100.00%
have credit ratings (which may include confidential ratings,
private ratings, and credit estimates) assigned by S&P Global
Ratings.
-- Of the identified underlying collateral obligations, 96.58%
have recovery ratings (which may include confidential and private
ratings) assigned by S&P Global Ratings.
-- After analyzing the changes to the transaction, S&P assigned
its preliminary ratings to the replacement class B-R, C-R, D-R, and
E-R notes.
-- All or some of the notes issued by this CLO transaction contain
stated interest at SOFR plus a fixed margin.
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 notes remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Preliminary Ratings Assigned
Magnetite XXXV Ltd./Magnetite XXXV LLC
Class X, $5.00 million: NR
Class A-R, $320.00 million: NR
Class B-R, $60.000 million: AA (sf)
Class C-R (deferrable), $30.00 million: A (sf)
Class D-R (deferrable), $30.00 million: BBB- (sf)
Class E-R (deferrable), $17.50 million: BB- (sf)
Subordinated notes, $44.85 million: NR
NR--Not rated.
MORGAN STANLEY 2017-HR2: DBRS Confirms B Rating on H-RR Certs
-------------------------------------------------------------
DBRS Limited confirmed its ratings on all classes of the Commercial
Mortgage Pass-Through Certificates Series 2017-HR2 issued by Morgan
Stanley Capital I Trust 2017-HR2 as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (high) (sf)
-- Class B at AA (sf)
-- Class C at A (low) (sf)
-- Class X-D at A (low) (sf)
-- Class D at BBB (high) (sf)
-- Class E-RR at BBB (low) (sf)
-- Class F-RR at BB (high) (sf)
-- Class G-RR at BB (low) (sf)
-- Class H-RR at B (sf)
All trends are Stable.
The rating confirmations reflect DBRS Morningstar's stable outlook
for the transaction, which remains relatively unchanged from last
review. Overall, the pool continues to exhibit healthy credit
metrics, as evidenced by the weighted-average (WA) debt service
coverage ratio (DSCR) of nearly 2.70 times (x) for all non-defeased
loans, based on the YE2022 financial reporting.
Per the September 2023 reporting, 39 of the original 42 loans
remain in the trust, reflecting a collateral reduction of 14.4%
since issuance as a result of loan amortization and loan repayment.
Since last review, the concentration of loans on the servicer's
watchlist has been reduced by nearly 15.0%, while Eagle Village
Apartments (Prospectus ID#28) repaid in full and Meadow Creek
Apartments (Prospectus ID#20) was fully defeased. Three loans,
representing 3.5% of the pool, are now fully defeased. No loans are
delinquent or in special servicing. Six loans, representing 10.9%
of the pool, are on the servicer's watchlist, all because of low
DSCRs and/or increased vacancy.
The pool is concentrated by property type with loans backed by
retail and office properties representing 34.4% and 19.5% of the
current pool balance, 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 several office loans in the transaction continue to perform
as expected, select loans are exhibiting increased risk. 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 the analysis for this review, DBRS Morningstar
applied stressed loan-to-value (LTV) ratios or elevated probability
of default (POD) assumptions for four loans exhibiting declines in
performance, resulting in a WA expected loss (EL) approximately
1.25x of the pool average.
The largest of these loans, One Ally Center (Prospectus ID#8; 4.0%
of the pool), is secured by a 976,095 square foot (sf), Class A
office property in Detroit. While performance experienced some
volatility during 2021, coverage remained healthy as of YE2022 at
2.72x based on the whole loan; however, since issuance occupancy
has fallen from 94.3% to 86.7% as of YE2022. In addition, five
tenant tenants (7.7% of the net rentable area (NRA)) have leases
that are scheduled to expire prior to YE2024. Tenant Price
Waterhouse Coopers LLP (7.2% of the NRA; lease expiration in
October 2023) has renewed its lease according to the servicer's
most recent update; however, renewal terms has not been disclosed.
While a recent news article published by DBusiness indicated that
Miller Johnson, a legal services provider, planned to relocate to
the subject property in June 2023, terms and rates have not yet
been provided, and LoopNet currently shows an availability rate of
16.7%. Despite the long term tenancy in the property's largest
tenant, Ally Financial (41.3% of the NRA; lease expiration in
December 2028), and the property's low going-in LTV of 55.1%, DBRS
Morningstar has a cautious outlook on this loan given the increased
vacancy and upcoming tenant rollover, coupled with the soft market
conditions, as vacancy in the Detroit central business district
submarket was reported at 23.3% as of Q2 2023. In its analysis for
this review, DBRS Morningstar analyzed this loan with a stressed
LTV and an increased POD assumption, resulting in an EL that was
1.50x of the pool average.
Another loan that DBRS Morningstar is monitoring is Totowa Commons
(Prospectus ID#5; 6.3% of the pool), which is secured by an
anchored retail center in Totowa, New Jersey. At issuance, the
property was fully occupied by six tenants and anchored by Home
Depot (37.0% of the NRA; lease expiration in April 2025), Bed, Bath
& Beyond (formerly 34.5% of the NRA; lease expiration in November
2023), Staples (7.6% of the NRA), and Marshalls (formerly 16.6% of
the NRA). Since then, however, three tenants (51.1% of the NRA)
have vacated the property, including Bed, Bath & Beyond in July
2023, and Marshalls in June 2022. Buy Baby initially subleased
approximately 30,000 sf (11.1% of the NRA) of Bed, Bath & Beyond's
space; however, the servicer has confirmed that Buy Baby has signed
a direct lease for the space, which would increase the physical
occupancy from 48.9% as of July 2023 to approximately 60.0%. In
addition, the borrower has executed a new lease with Lidl (10.0% of
the NRA; lease expiration in June 2034), with would further improve
occupancy to 70%; however the lease will not commence until July
2024, and no terms or rates have been provided. Per the most recent
financials, the loan reported an annualized NCF $3.4 million
(reflecting a DSCR of 1.54x) as of Q2 2023, a notable drop from
$4.1 million (reflecting a DSCR of 1.84x) at issuance, with
performance anticipated to decline further following Bed Bath &
Beyond's departure given the tenant accounted for nearly 25.0% of
the base rent; however, based on DBRS Morningstar's analysis, the
implied DSCR will remain above breakeven. To recognize the
increased credit risk for this loan, DBRS Morningstar applied an
elevated POD adjustment in its analysis, resulting in an EL that
was more than 3.0x the pool's average.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2018-H3: DBRS Confirms B(low) Rating on H-RR Certs
-----------------------------------------------------------------
DBRS Limited confirmed its credit ratings on the Commercial
Mortgage Pass-Through Certificates, Series 2018-H3 issued by Morgan
Stanley Capital I Trust 2018-H3 as follows:
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class X-D at BBB (high) (sf)
-- Class D at BBB (sf)
-- Class E-RR at BBB (low) (sf)
-- Class F-RR at BB (low) (sf)
-- Class G-RR at B (high) (sf)
-- Class H-RR at B (low) (sf)
DBRS Morningstar also changed the trends on both Class G-RR and
Class H-RR to Stable from Negative. The trends on all other classes
are Stable. The rating confirmations reflect the overall stable
performance of this transaction as exhibited by the healthy
weighted-average (WA) debt service coverage ratio (DSCR) of
approximately 2.0 times (x) based on the most recent year-end
reporting. Although there appear to be increased risks from
issuance for select loans in the pool, particularly those backed by
office properties in suburban markets, DBRS Morningstar notes all
loans are currently performing. In addition, should the increased
risks result in defaults and/or transfers to special servicing, the
analysis for this review suggests the capital structure provides
sufficient cushion against liquidated losses for the bonds
currently rated investment grade.
As of the September 2023 remittance, 63 of the original 66 loans
remain in the trust, with an aggregate balance of $899.6 million,
representing a collateral reduction of 12.2% since issuance. Two
loans, representing 2.7% of the pool balance, are fully defeased.
Furthermore, 6330 West Loop South (Prospectus ID#2), which was
previously on the servicer's watchlist, and University Business
Center (Prospectus ID# 29) were repaid in full in May 2023. There
are 14 loans, representing 17.1% of the pool, on the servicer's
watchlist primarily for declines in occupancy rate, upcoming
rollover, deferred maintenance items, and/or low DSCRs.
The pool is concentrated by property type with loans backed by
office, retail and hotel properties representing 31.6%, 17.3% and
14.8% of the pool balance, respectively. In general, the office
sector has been under pressure because of rising vacancy rates in
the broader office market, which may challenge landlords' efforts
to backfill vacant space and, in certain instances, contribute to
value declines, particularly for assets in noncore markets and/or
with disadvantages in location, building quality or amenities.
Office loans and other loans exhibiting increased credit risk from
issuance were analyzed with stressed scenarios, resulting in a WA
expected loss that was about double the pool average.
Prince and Spring Street Portfolio (Prospectus ID#30; 1.2% of the
pool balance) is the sole loan in special servicing, secured by a
portfolio of three mixed-use properties in New York City. The loan
transferred to special servicing in December 2020 for payment
default, with the last payment received in May 2021 and the
servicer is currently pursuing a foreclosure. The loan has been
reporting DSCRs below break-even for the last several years, with
the YE2022 figure at 0.24x. The property was most recently valued
at $50.7 million according to a July 2023 appraisal, an increase
from the December 2022 appraisal value of $49.5 million, but still
below the issuance value of $66.0 million. For this review, the
loan was analyzed with a liquidation scenario, which resulted in an
implied loss severity approaching 10.0%.
One loan of concern is Westbrook Corporate Center (Prospectus ID#7,
9.1% of the pool balance), which is secured by a 1.1 million square
foot (sf), Class A office complex in Westchester, Illinois, located
about 15 miles west of the Chicago central business district. The
loan is pari passu with several other loan pieces secured in the
Benchmark 2018-B4 transaction and the Benchmark 2018-B5 transaction
(both rated by DBRS Morningstar). Occupancy at the subject has
declined to 70% as of June 2023 from 84% at issuance. The
trailing-six month financials ended June 30, 2023, reported an
annualized DSCR of 1.40x and a net cash flow (NCF) figure of $8.8
million, which represents about a 10% decline in cash flow from the
DBRS Morningstar figure. There is considerable tenant rollover risk
during the remaining term of the loan, which includes the three
largest tenants, Follett Higher Education Group Inc (13.2% of net
rentable area (NRA), lease expiry in Oct 2025), Ingredion
Incorporated (11.4% of NRA, lease expiry in November 2027) and
American Imaging Management Inc (8.0% of NRA, lease expiry in June
2024). As of Q2 2023, Reis reported that office properties in the
West submarket had an average vacancy rate of 21.8%, compared to
the Q2 2022 vacancy rate of 21.0% and the five-year forecast rate
of 19.4%. Given the decline in occupancy, a soft submarket and
significant tenant rollover risk during the remaining term of the
loan, the loans' refinance risk has increased. As such, DBRS
Morningstar analyzed the Westbrook Corporate Center loan with a
stressed loan-to-value ratio, which resulted in an expected loss
nearly 2.5x the pool average.
Notes: All figures are in U.S. dollars unless otherwise noted.
N-STAR REAL IX: Moody's Withdraws 'Caa3' Rating on 8 Tranches
-------------------------------------------------------------
Moody's Investors Service has withdrawn the ratings of eleven
classes of Notes issued by N-Star Real Estate CDO IX, Ltd.
Complete rating actions are as follows:
Cl. A-2, Withdrawn (sf); previously on Jan 17, 2018 Affirmed Caa1
(sf)
Cl. A-3, Withdrawn (sf); previously on Jan 17, 2018 Affirmed Caa2
(sf)
Cl. B, Withdrawn (sf); previously on Jan 17, 2018 Affirmed Caa2
(sf)
Cl. C, Withdrawn (sf); previously on Jan 17, 2018 Affirmed Caa3
(sf)
Cl. D, Withdrawn (sf); previously on Jan 17, 2018 Affirmed Caa3
(sf)
Cl. E, Withdrawn (sf); previously on Jan 17, 2018 Affirmed Caa3
(sf)
Cl. F, Withdrawn (sf); previously on Jan 17, 2018 Affirmed Caa3
(sf)
Cl. G, Withdrawn (sf); previously on Jan 17, 2018 Affirmed Caa3
(sf)
Cl. H, Withdrawn (sf); previously on Jan 17, 2018 Affirmed Caa3
(sf)
Cl. J, Withdrawn (sf); previously on Jan 17, 2018 Affirmed Caa3
(sf)
Cl. K, Withdrawn (sf); previously on Jan 17, 2018 Affirmed Caa3
(sf)
RATINGS RATIONALE
Moody's has decided to withdraw the ratings because it believes it
has insufficient or otherwise inadequate information to support the
maintenance of the ratings.
Moody's adopts all necessary measures so that the information it
uses in assigning a credit rating is of sufficient quality and from
sources Moody's considers to be reliable including, when
appropriate, independent third-party sources. However, Moody's is
not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
ORL TRUST 2023-GLKS: S&P Assigns BB-(sf) Rating on Class HRR Certs
------------------------------------------------------------------
S&P Global Ratings assigned its 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.
Since issuance, the mortgage loan has closed and its spread
increased to SOFR plus 3.76% from SOFR plus 3.50%. The S&P Global
Ratings debt service coverage (DSC) is 1.19x, calculated using a
one-month term SOFR of 5.33% plus the 3.76% spread and the S&P
Global Ratings net cash flow (NCF). The DSC based on the capped
SOFR of 5.25% plus the spread and its NCF is 1.20x.
The 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's
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.
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.
(iii)Horizontal residual interest certificate.
HRR--Horizontal risk retention.
PAGAYA AI 2023-1: DBRS Finalizes B Rating on Class G Certs
----------------------------------------------------------
DBRS, Inc. finalized its provisional ratings to the Single-Family
Rental Pass-Through Certificates (the Certificates) issued by
Pagaya AI Technology in Housing Trust 2023-1 (PATH 2023-1):
-- $140.5 million Class A at AAA (sf)
-- $48.3 million Class B at AA (high) (sf)
-- $20.4 million Class C at A (high) (sf)
-- $24.7 million Class D at A (low) (sf)
-- $26.8 million Class E-1 at BBB (high) (sf)
-- $33.3 million Class E-2 at BBB (low) (sf)
-- $26.8 million Class F at BB (sf)
-- $34.3 million Class G at B (sf)
The AAA (sf) rating on the Class A Certificates reflects 66.9% of
credit enhancement provided by subordinated notes in the pool. The
AA (high) (sf), A (high) (sf), A (low) (sf), BBB (high) (sf), BBB
(low) (sf), BB (sf), and B (sf) ratings reflect 55.6%, 50.8%,
44.9%, 38.6%, 30.8%, 24.5%, and 16.4% of credit enhancement,
respectively.
Other than the classes specified above, DBRS Morningstar does not
rate any other classes in this transaction.
The PATH 2023-1 Certificates are supported by the income streams
and values from 1,149 rental properties. The properties are
distributed across 11 states and 32 metropolitan statistical areas
(MSAs) in the United States. DBRS Morningstar maps an MSA based on
the ZIP code provided in the data tape, which may result in
different MSA stratifications than those provided in offering
documents. As measured by broker-price-opinion value, 65.5% of the
portfolio is concentrated in three states: Georgia (25.6%), Florida
(24.5%), and Arizona (15.4%). The average value is $373,503. The
average age of the properties is roughly 24 years. All properties
in the collateral pool have three or more bedrooms. The
Certificates represent a beneficial ownership in an approximately
five-year, fixed-rate, interest-only loan with an initial aggregate
principal balance of approximately $424.9 million.
The sponsor intends to satisfy its risk-retention obligations under
the U.S. Risk Retention Rules. The sponsor does not make any
representation with respect to whether such risk retention
satisfies EU Risk Retention Requirements and UK Risk Retention
Requirements by Class I, which is 9.1% of the initial total
issuance balance, either directly or through a majority-owned
affiliate.
DBRS Morningstar assigned the provisional ratings for each class of
Certificates by performing a quantitative and qualitative
collateral, structural, and legal analysis. This analysis uses DBRS
Morningstar's single-family rental subordination analytical tool
and is based on DBRS Morningstar's published criteria. DBRS
Morningstar developed property-level stresses for the analysis of
single-family rental assets. DBRS Morningstar assigned the
provisional ratings to each class based on the level of stresses
each class can withstand and whether such stresses are commensurate
with the applicable rating level. DBRS Morningstar's analysis
includes estimated base-case net cash flows (NCFs) by evaluating
the gross rent, concession, vacancy, operating expenses, and
capital expenditure data. The DBRS Morningstar NCF analysis
resulted in a minimum debt service coverage ratio of more than 1.0
times.
Notes: All figures are in U.S. dollars unless otherwise noted.
PIKE PEAK 15 (2023): Fitch Assigns BB-(EXP)sf Rating on Cl. E Notes
-------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
Pikes Peak CLO 15 (2023) Ltd.
Entity/Debt Rating
----------- ------
Pikes Peak CLO
15 (2023) Ltd
A LT NR(EXP)sf Expected Rating
A-L LT NR(EXP)sf Expected Rating
B LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D LT BBB-(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
Subordinated LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Pikes Peak CLO 15 (2023) Ltd (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by
Partners Group US Management CLO LLC. Net proceeds from the
issuance of the secured and subordinated notes will provide
financing on a portfolio of approximately $450.0 million of
primarily first lien senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. The weighted average rating factor of the indicative
portfolio is 24.4 versus a maximum covenant, in accordance with the
initial expected matrix point of 25.8. Issuers rated in the 'B'
rating category denote a highly speculative credit quality;
however, the notes benefit from credit enhancement of and standard
U.S. CLO structural features.
Asset Security (Positive): The indicative portfolio consists of
100% first lien senior secured loans. The weighted average recovery
rate of the indicative portfolio is 74.8% versus a minimum
covenant, in accordance with the initial expected matrix point of
73.3%.
Portfolio Composition (Positive): The largest three industries may
constitute up to 45.0% of the portfolio balance in aggregate, while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
U.S. CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other U.S.
CLOs. Fitch's analysis was based on a stressed portfolio created by
making adjustments to the indicative portfolio to reflect
permissible concentration limits and collateral quality test
levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In its 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 reinvestment conditions after
the reinvestment period. In Fitch's opinion, these conditions would
reduce the effective risk horizon of the portfolio during stress
periods. The performance of the rated notes at the other permitted
matrix points is in line with other recent CLOs.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BB+sf' and 'A+sf' for class B, between 'B+sf'
and 'BBB+sf' for class C, between less than 'B-sf' and 'BB+sf' for
class D; and between less than 'B-sf' and 'BB-sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'A+sf' for class C, 'A+sf' for
class D; and 'BBB+sf' for class E.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
PRESTIGE AUTO 2023-2: S&P Assigns Prelim BB-(sf) Rating on E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Prestige
Auto Receivables Trust 2023-2's automobile receivables-backed
notes.
The note issuance is an ABS transaction backed by subprime auto
loan receivables.
The preliminary ratings are based on information as of Oct. 26,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The availability of approximately 58.94%, 50.11%, 41.44%,
31.89%, and 24.79% credit support (hard credit enhancement and
haircut to excess spread) for the class A, B, C, D, and E notes,
respectively, based on stressed cash-flow scenarios. These credit
support levels provide at least 3.10x, 2.60x, 2.10x, 1.60x, and
1.27x coverage of S&P's expected cumulative net loss of 18.75% for
the class A, B, C, D, and E notes, respectively.
-- The expectation that under a moderate ('BBB') stress scenario
(1.60x S&P's expected loss level), all else being equal, its
preliminary 'AAA (sf)', 'AA (sf)', 'A (sf)', 'BBB (sf)', and 'BB-
(sf)' ratings on the class A, B, C, D, and E notes, respectively,
are within its credit stability limits.
-- The timely payment of interest and principal by the designated
legal final maturity dates under S&P's stressed cash flow modeling
scenarios, which it believes are appropriate for the assigned
preliminary ratings.
-- The collateral characteristics of the subprime automobile loans
securitized in this transaction, our view of the credit risk of the
collateral, and S&P's updated macroeconomic forecast and
forward-looking view of the auto finance sector.
-- S&P's assessment of the series' bank accounts at Citibank N.A.,
which does not constrain the preliminary ratings.
-- S&P's operational risk assessment of Prestige Financial
Services Inc. as servicer, and our view of the company's
underwriting and the backup servicing with Citibank.
-- S&P's assessment of the transaction's potential exposure to
environmental, social, and governance credit factors, which are in
line with our sector benchmark.
-- The transaction's payment and legal structures.
Preliminary Ratings Assigned
Prestige Auto Receivables Trust 2023-2
Class A-1, $33.00 million: A-1+ (sf)
Class A-2, $80.77 million: AAA (sf)
Class B, $38.95 million: AA (sf)
Class C, $30.49 million: A (sf)
Class D, $32.24 million: BBB (sf)
Class E, $31.17 million: BB- (sf)
NR--Not rated.
N/A—-Not applicable.
PROGRESS RESIDENTIAL 2019-SFR3: DBRS Confirms BB Rating on F Trust
------------------------------------------------------------------
DBRS, Inc. reviewed 52 classes from seven U.S. single-family rental
transactions. Of the 52 classes reviewed, DBRS Morningstar
confirmed 46 credit ratings and upgraded six credit ratings as
follows:
Progress Residential 2019-SFR3 Trust
-- PRD 2019-SFR3, Class A confirmed at AAA (sf)
-- PRD 2019-SFR3, Class B confirmed at AAA (sf)
-- PRD 2019-SFR3, Class C confirmed at AA (high) (sf)
-- PRD 2019-SFR3, Class D confirmed at A (high) (sf)
-- PRD 2019-SFR3, Class E confirmed at BBB (low) (sf)
-- PRD 2019-SFR3, Class F confirmed at BB (sf)
Progress Residential 2020-SFR3 Trust
-- Single-Family Rental Pass-Through Certificate, Class A
confirmed at AAA (sf)
-- Single-Family Rental Pass-Through Certificate, Class B upgraded
to AA (high) (sf)
-- Single-Family Rental Pass-Through Certificate, Class C upgraded
to A (high) (sf)
-- Single-Family Rental Pass-Through Certificate, Class D
confirmed at A (low) (sf)
-- Single-Family Rental Pass-Through Certificate, Class E
confirmed at BBB (low) (sf)
-- Single-Family Rental Pass-Through Certificate, Class F
confirmed at BB (sf)
-- Single-Family Rental Pass-Through Certificate, Class G
confirmed at B (sf)
Progress Residential 2021-SFR1 Trust
-- Single-Family Rental Pass-Through Certificate, Class A
confirmed at AAA (sf)
-- Single-Family Rental Pass-Through Certificate, Class B upgraded
to AA (high) (sf)
-- Single-Family Rental Pass-Through Certificate, Class C upgraded
to A (high) (sf)
-- Single-Family Rental Pass-Through Certificate, Class D
confirmed at BBB (high) (sf)
-- Single-Family Rental Pass-Through Certificate, Class E
confirmed at BBB (low) (sf)
-- Single-Family Rental Pass-Through Certificate, Class F
confirmed at BB (low) (sf)
-- Single-Family Rental Pass-Through Certificate, Class G
confirmed at B (low) (sf)
Progress Residential 2021-SFR2 Trust
-- Single-Family Rental Pass-Through Certificate, Class A
confirmed at AAA (sf)
-- Single-Family Rental Pass-Through Certificate, Class B
confirmed at AAA (sf)
-- Single-Family Rental Pass-Through Certificate, Class C
confirmed at AA (high) (sf)
-- Single-Family Rental Pass-Through Certificate, Class D
confirmed at A (high) (sf)
-- Single-Family Rental Pass-Through Certificate, Class E-1
confirmed at BBB (high) (sf)
-- Single-Family Rental Pass-Through Certificate, Class E-2
confirmed at BBB (low) (sf)
-- Single-Family Rental Pass-Through Certificate, Class F
confirmed at BB (low) (sf)
-- Single-Family Rental Pass-Through Certificate, Class G
confirmed at B (low) (sf)
Progress Residential 2021-SFR4 Trust
-- Single-Family Rental Pass-Through Certificate, Class A
confirmed at AAA (sf)
-- Single-Family Rental Pass-Through Certificate, Class B upgraded
to AA (sf)
-- Single-Family Rental Pass-Through Certificate, Class C upgraded
to A (sf)
-- Single-Family Rental Pass-Through Certificate, Class D
confirmed at BBB (high) (sf)
-- Single-Family Rental Pass-Through Certificate, Class E-1
confirmed at BBB (sf)
-- Single-Family Rental Pass-Through Certificate, Class E-2
confirmed at BBB (low) (sf)
-- Single-Family Rental Pass-Through Certificate, Class F
confirmed at BB (low) (sf)
-- Single-Family Rental Pass-Through Certificate, Class G
confirmed at B (low) (sf)
Progress Residential 2021-SFR7 Trust
-- Single-Family Rental Pass-Through Certificates, Class A
confirmed at AAA (sf)
-- Single-Family Rental Pass-Through Certificates, Class B
confirmed at AA (high) (sf)
-- Single-Family Rental Pass-Through Certificates, Class C
confirmed at A (high) (sf)
-- Single-Family Rental Pass-Through Certificates, Class D
confirmed at A (low) (sf)
-- Single-Family Rental Pass-Through Certificates, Class E-1
confirmed at BBB (sf)
-- Single-Family Rental Pass-Through Certificates, Class E-2
confirmed at BBB (low) (sf)
-- Single-Family Rental Pass-Through Certificates, Class F
confirmed at BB (low) (sf)
-- Single-Family Rental Pass-Through Certificates, Class G
confirmed at B (sf)
Progress Residential 2021-SFR9 Trust
-- Single-Family Rental Pass-Through Certificate, Class A
confirmed at AAA (sf)
-- Single-Family Rental Pass-Through Certificate, Class B
confirmed at AA (high) (sf)
-- Single-Family Rental Pass-Through Certificate, Class C
confirmed at A (high) (sf)
-- Single-Family Rental Pass-Through Certificate, Class D
confirmed at A (low) (sf)
-- Single-Family Rental Pass-Through Certificate, Class E-1
confirmed at BBB (sf)
-- Single-Family Rental Pass-Through Certificate, Class E-2
confirmed at BBB (low) (sf)
-- Single-Family Rental Pass-Through Certificate, Class F
confirmed at BB (sf)
-- Single-Family Rental Pass-Through Certificate, Class G
confirmed at B (low) (sf)
The credit rating confirmations reflect asset performance and
credit-support levels that are consistent with the current credit
ratings.
DBRS Morningstar's rating actions are based on the following
analytical consideration:
-- Key performance measures as reflected in month-over-month
changes in vacancy and delinquency, quarterly analysis of the
actual expenses, credit enhancement increases since deal inception,
and bond paydown factors.
PRPM 2023-NQM2: DBRS Gives Prov. B Rating on Class B-2 Certs
------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the following
Mortgage-Backed Certificates, Series 2023-NQM2 (the Certificates)
to be issued by PRPM 2023-NQM2 Trust (the Issuer):
-- $178.7 million Class A-1 at AAA (sf)
-- $28.4 million Class A-2 at AA (sf)
-- $21.2 million Class A-3 at A (sf)
-- $13.8 million Class M-1 at BBB (sf)
-- $8.7 million Class B-1 at BB (sf)
-- $8.6 million Class B-2 at B (sf)
The AAA (sf) rating on the Class A-1 Notes reflects 35.45% of
credit enhancement provided by subordinated notes. The AA (sf), A
(sf), BBB (sf), BB (sf), and B (sf) ratings reflect 25.20%, 17.55%,
12.55%, 9.40%, and 6.30% 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 fixed- and
adjustable-rate expanded prime and nonprime first-lien residential
mortgages funded by the issuance of the Certificates. The
Certificates are backed by 615 mortgage loans with a total
principal balance of $276,774,030 as of the Cut-Off Date (August
31, 2023).
PRPM 2023-NQM2 represents the third securitization issued from the
PRPM NQM shelf, which is backed by both non-qualified mortgages
(non-QM) and business purpose investment property loans
underwritten using debt service coverage ratios (DSCR). PRP-LB V
AIV, LLC, a fund owned by the aggregator, Balbec Capital LP & PRP
Advisors, LLC (PRP), serves as the Sponsor of this transaction.
Nexera Holding LLC d/b/a Newfi Lending (30.0%) and NMSI, Inc.
(27.2%) are the top two originators for the mortgage pool. The
remaining originators each comprise less than 15.0% of the mortgage
loans. Fay Servicing, LLC (100.0%) is the Servicer of the loans in
this transaction. PRP acts as the Servicing Administrator. U.S.
Bank Trust Company, National Association (rated AA (high) with a
Negative trend by DBRS Morningstar) will act as the Trustee and
Securities Administrator. U.S. Bank National Association (rated AA
(high) with a Negative trend by DBRS Morningstar) will act as the
Custodian.
For 41.8% of the pool, 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. In addition, 5.3% of the pool comprises
investment property loans underwritten using debt-to-income ratios.
Because these loans were made to investors for business purposes,
they are exempt from the Consumer Financial Protection Bureau's
(CFPB) Ability-to-Repay (ATR) rules and the TILA/RESPA Integrated
Disclosure rule.
For 51.9% of the pool, the mortgage loans were originated to
satisfy the CFPB's ATR rules, but were made to borrowers who
generally do not qualify for agency, government, or private-label
nonagency prime jumbo products for various reasons. In accordance
with the QM/ATR rules, these loans are designated as non-QM. The
remaining loans subject to the ATR rules are designated as QM Safe
Harbor (0.7%) and QM Rebuttable Presumption (0.2%) by unpaid
principal balance (UPB).
The Depositor, a majority-owned affiliate of the Sponsor, will
retain the Class B-3 and XS Certificates, representing an eligible
horizontal interest of 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.
On or after the earlier of (1) the distribution date in September
2026 or (2) the date when the aggregate 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,
any post-closing deferred amounts, and other fees, expenses,
indemnification and reimbursement amounts described in the
transaction documents (Optional Redemption). An Optional Redemption
will be followed by a qualified liquidation.
The Sponsor will have the option, but not the obligation, to
repurchase any mortgage loan that becomes 60 or more days
delinquent under the Mortgage Bankers Association method at the
Repurchase Price (par plus interest), provided that such
repurchases in aggregate do not exceed 10% of the total principal
balance as of the Cut-Off Date.
For this transaction, the Servicer will not fund advances of
delinquent principal and interest 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 senior classes (Class
A-1, A-2, and A-3) subject to certain performance triggers related
to cumulative losses or delinquencies exceeding a specified
threshold (Trigger Event). After a Trigger Event, principal
proceeds can be used to cover interest shortfalls on Class A-1 and
then Class A-2 before being applied sequentially to amortize the
balances of the certificates (IIPP). For all other classes,
principal proceeds can be used to cover interest shortfalls after
the more senior classes are paid in full (IPIP).
Excess spread can be used to cover realized losses before being
allocated to unpaid Cap Carryover Amounts due to Class A-1, A-2,
and A-3. For this transaction, the Class A-1, A-2, and A-3 fixed
rates step up by 100 basis points on and after the payment date in
October 2027. On or after October 2027, interest and principal
otherwise payable to the Class B-3 may also be used to pay Cap
Carryover Amounts.
Notes: All figures are in U.S. dollars unless otherwise noted.
ROCKFORD TOWER 2022-2: Fitch Gives BB+sf Final Rating on E-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to the
Rockford Tower CLO 2022-2, Ltd. Reset Transaction.
Entity/Debt Rating Prior
----------- ------ -----
Rockford Tower
CLO 2022-2, Ltd.
A-1-R LT NRsf New Rating
A-2-R LT NRsf New Rating
B 77340LAE0 LT PIFsf Paid In Full AAsf
B-R LT AA+sf New Rating
C-R LT Asf New Rating
D-1 77340LAJ9 LT PIFsf Paid In Full BBB+sf
D-2 77340LAL4 LT PIFsf Paid In Full BBB-sf
D-R LT BBB-sf New Rating
E 77340NAA4 LT PIFsf Paid In Full BBsf
E-R LT BB+sf New Rating
F-R LT NRsf New Rating
TRANSACTION SUMMARY
Rockford Tower CLO 2022-2, Ltd. (the issuer), is an arbitrage cash
flow collateralized loan obligation (CLO) managed by Rockford Tower
Capital Management, L.L.C. The transaction originally closed in
July 2022. The CLO's existing secured notes will be refinanced in
whole on Oct. 20, 2023 from proceeds of the new secured notes. Net
proceeds from the issuance of the secured notes, along with the
existing subordinated notes, will provide financing on a portfolio
of approximately $400 million of primarily first lien senior
secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B', which is in line with that of recent
CLOs. Issuers rated in the 'B' rating category denote a highly
speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard U.S. CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
96.0% first lien senior secured loans and has a weighted average
recovery assumption of 75.5%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
constitute up to 39.0% of the portfolio balance in aggregate, while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
U.S. CLOs.
Portfolio Management (Neutral): The transaction has a 4.0-year
reinvestment period and reinvestment criteria similar to other U.S.
CLOs. Fitch's analysis was based on a stressed portfolio created by
making adjustments to the indicative portfolio to reflect
permissible concentration limits and collateral quality test
levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default rates and recovery assumptions consistent with
their assigned ratings.
The weighted average life (WAL) used for the transaction stress
portfolio is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics. The results under these sensitivity scenarios are as
severe as between 'BB+sf' and 'A+sf' for class B-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
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, 'Asf'
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.
ROCKFORD TOWER 2022-2: Moody's Assigns B3 Rating to $1MM F-R Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to three classes of
CLO refinancing notes (the "Refinancing Notes") issued by Rockford
Tower CLO 2022-2, Ltd. (the "Issuer").
Moody's rating action is as follows:
US$240,000,000 Class A-1-R Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$16,000,000 Class A-2-R Senior Secured Floating Rate Notes due
2035, Assigned Aaa (sf)
US$1,000,000 Class F-R Junior Secured Deferrable Floating Rate
Notes, due 2035 Assigned B3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation
(CLO). The issued notes are collateralized primarily by a portfolio
of broadly syndicated senior secured corporate loans. At least
90.0% of the portfolio must consist of first lien senior secured
loans, cash, and eligible investments, and up to 10.0% of the
portfolio may consist of second lien loans, unsecured loans, and
permitted non-loan assets.
Rockford Tower Capital Management, L.L.C. (the "Manager") will
continue to direct the selection, acquisition and disposition of
the assets on behalf of the Issuer and may engage in trading
activity, including discretionary trading, during the transaction's
extended four year reinvestment period. Thereafter, subject to
certain restrictions, the Manager may reinvest unscheduled
principal payments and proceeds from sales of credit risk assets.
In addition to the issuance of the Refinancing Notes and the four
other classes of secured notes, a variety of other changes to
transaction features will occur in connection with the refinancing.
These include: extension of the reinvestment period; extensions of
the stated maturity and non-call period; changes to certain
collateral quality tests; and changes to the overcollateralization
test levels and changes to the base matrix and modifiers.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2021.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. For modeling
purposes, Moody's used the following base-case assumptions:
Portfolio par: $400,000,000
Diversity Score: 75
Weighted Average Rating Factor (WARF): 3061
Weighted Average Spread (WAS): SOFR + 3.70%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 47.50%
Weighted Average Life (WAL): 7.0 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors That Would Lead to an Upgrade or a Downgrade of the
Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing Notes is sensitive to the
performance of the underlying portfolio, which in turn depends on
economic and credit conditions that may change. The Manager's
investment decisions and management of the transaction will also
affect the performance of the Refinancing Notes.
SIERRA TIMESHARE 2023-3: Fitch Assigns Final BBsf Rating on D Notes
-------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
notes issued by Sierra Timeshare 2023-3 Receivables Funding LLC
(Sierra Timeshare 2023-3).
Entity/Debt Rating Prior
----------- ------ -----
Sierra Timeshare
2023-3 Receivables
Funding LLC
A LT AAAsf New Rating AAA(EXP)sf
B LT Asf New Rating A(EXP)sf
C LT BBBsf New Rating BBB(EXP)sf
D LT BBsf New Rating BB-(EXP)sf
TRANSACTION SUMMARY
The notes are backed by a pool of fixed-rate timeshare loans
originated by Wyndham Vacation Resorts, Inc. (WVRI) and Wyndham
Resort Development Corporation (WRDC). Both entities are indirect,
wholly owned operating subsidiaries of Travel + Leisure Co. (T+L,
formerly Wyndham Destinations, Inc.) This is T+L's 47th public
Sierra transaction.
KEY RATING DRIVERS
Borrower Risk — Improving Credit Quality: Approximately 69.5% of
Sierra 2023-3 consists of WVRI-originated loans; the remainder of
the pool comprises WRDC loans. Fitch has determined that, on a
like-for-like FICO basis, WRDC's receivables perform better than
WVRI's. The weighted average (WA) original FICO score of the pool
is 737, higher than 735 in Sierra 2023-2 and the highest for the
platform to date. Additionally, compared with the prior
transaction, the 2023-3 pool has overall stronger FICO
distribution.
Forward-Looking Approach on CGD Proxy — Increasing CGDs: Similar
to other timeshare originators, T+L's delinquency and default
performance exhibited notable increases in the 2007-2008 vintages
and stabilized in 2009 and thereafter. However, more recent
vintages, from 2014 through 2019, have begun to show increasing
gross defaults versus prior vintages dating back to 2009, partially
driven by increased paid product exits.
The 2020-2022 transactions are generally demonstrating improving
default trends relative to prior transactions. Fitch's cumulative
gross default (CGD) proxy for this pool is 22.00%, consistent with
2023-2. Given the current economic environment, Fitch used proxy
vintages that reflect a recessionary period, along with more recent
vintage performance, specifically of 2007-2009 and 2016-2019
vintages.
Structural Analysis — Lower Credit Enhancement: The initial hard
credit enhancement (CE) for class A, B, C and D notes is 64.75%,
40.50%, 21.00% and 10.75%, respectively. CE is consistent for class
A and lower for classes B, C and D relative to 2023-2, mainly due
to lower overcollateralization (OC) and lower subordination
compared to the prior transaction. Hard CE comprises OC, a reserve
account and subordination. Soft CE is also provided by excess
spread and is expected to be 6.93% per annum.
Loss coverage for all notes is able to support default multiples of
3.25x, 2.25x, 1.50x and 1.25x for 'AAAsf', 'Asf', 'BBBsf' and
'BBsf', respectively. As excess spread increased at pricing, loss
coverage for the D class notes now supports a default multiple of
1.25x, commensurate with the rating of 'BBsf'.
Originator/Seller/Servicer Operational Review — Quality of
Origination/Servicing: T+L has demonstrated sufficient capabilities
as an originator and servicer of timeshare loans. This is evidenced
by the historical delinquency and loss performance of securitized
trusts and the managed portfolio.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Unanticipated increases in the frequency of defaults could produce
CGD levels higher than the base case and would likely result in
declines of CE and remaining default coverage levels available to
the notes. Additionally, unanticipated increases in prepayment
activity could also result in a decline in coverage. Decreased
default coverage may make certain note ratings susceptible to
potential negative rating actions, depending on the extent of the
decline in coverage.
Therefore, Fitch conducts sensitivity analyses by stressing both a
transaction's initial base case CGD and prepayment assumptions and
examining the rating implications on all classes of issued notes.
The CGD sensitivity stresses the CGD proxy to the level necessary
to reduce each rating by one full category, to non-investment grade
(BBsf) and to 'CCCsf' based on the break-even loss coverage
provided by the CE structure.
The CGD and prepayment sensitivities include 1.5x and 2.0x
increases to the prepayment assumptions, representing moderate and
severe stresses, respectively. These analyses are intended to
provide an indication of the rating sensitivity of the notes to
unexpected deterioration of a trust's performance.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing CE levels and consideration
for potential upgrades. If CGD is 20% less than the projected
proxy, the ratings would be maintained for the class A note at a
stronger rating multiple. For class B, C and D notes, the multiples
would increase, resulting in potential upgrade of approximately one
rating category for each of the subordinate classes.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Deloitte & Touche LLP. The third-party due diligence
described in Form 15E focused on a comparison and re-computation of
certain characteristics with respect to 155 sample loans. Fitch
considered this information in its analysis and it did not have an
effect on Fitch's analysis or conclusions.
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.
SIERRA TIMESHARE 2023-3: Moody's Assigns Ba2 Rating to Cl. D Notes
------------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to the
notes issued by Sierra Timeshare 2023-3 Receivables Funding LLC
(Sierra 2023-3). Sierra 2023-3 is backed by a pool of timeshare
loans originated by Wyndham Resort Development Corporation (WRDC),
Wyndham Vacation Resorts, Inc. (WVRI) and certain WVRI affiliates.
WVRI and WRDC are wholly owned subsidiaries of Wyndham Vacation
Ownership, Inc. (WVO). WVO, in turn, is a wholly owned subsidiary
of Travel + Leisure Co. (T+L, Ba3 stable). T+L is a global
timeshare company engaged in developing and acquiring vacation
ownership resorts, marketing and selling VOIs, offering consumer
financing in connection with such sales and providing property
management services to property owners' associations (POAs).
Wyndham Consumer Finance, Inc. (WCF) will act as the servicer of
the transaction and T+L will act as the performance guarantor.
Issuer: Sierra Timeshare 2023-3 Receivables Funding LLC
Class A Notes, Definitive Rating Assigned Aaa (sf)
Class B Notes, Definitive Rating Assigned A2 (sf)
Class C Notes, Definitive Rating Assigned Baa2 (sf)
Class D Notes, Definitive Rating Assigned Ba2 (sf)
RATINGS RATIONALE
The ratings are based on the quality of the underlying collateral
and its expected performance, the capital structure, and the
experience and expertise of WCF as servicer.
Moody's expected median cumulative net loss expectation for Sierra
2023-3 is 21.7% and the loss at a Aaa stress is 60%. Moody's based
its net loss expectations on an analysis of the credit quality of
the underlying collateral; the historical performance of similar
collateral, including securitization performance and managed
portfolio performance; the ability of WCF to perform the servicing
functions; and current expectations for the macroeconomic
environment during the life of the transaction.
At closing, the Class A notes, Class B notes, Class C notes and
Class D notes are expected to benefit from 64.75%, 40.50%, 21.00%
and 10.75% of hard credit enhancement, respectively. Hard credit
enhancement for the notes consists of a combination of
overcollateralization, a reserve account and subordination. The
notes may also benefit from excess spread.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "US Vacation
Timeshare Loan Securitizations Methodology" published in July
2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the Class B, C and D notes if, given current
expectations of portfolio losses, levels of credit enhancement are
consistent with higher ratings. This transaction has a pro-rata
structure with sequential pay triggers. Moody's expectation of pool
losses could decline as a result of better than expected
improvements in the economy, changes to servicing practices that
enhance collections or refinancing opportunities that result in
prepayments.
Down
Moody's could downgrade the ratings of the notes if pool losses
exceed its expectations and levels of credit enhancement are
consistent with lower ratings. Credit enhancement could decline if
excess spread is not sufficient to cover losses in a given month.
Moody's expectation of pool losses may increase, for example, due
to performance deterioration stemming from a downturn in the US
economy, deficient servicing, errors on the part of transaction
parties, inadequate transaction governance or fraud.
SLM STUDENT 2008-5: S&P Raises Class B Notes Rating to 'BB (sf)'
----------------------------------------------------------------
S&P Global Ratings raised its ratings on the class B notes from
three SLM Student Loan Trusts, series 2008-5, 2008-6, and 2008-7,
to 'BB (sf)' from 'CC (sf)'. At the same time, S&P removed the
ratings from CreditWatch, where S&P placed them with developing
implications on May 19, 2023. The three trusts are student loan ABS
transactions backed by student loans originated through the U.S.
Department of Education's (ED) Federal Family Education Loan
Program (FFELP).
The upgrades reflect the strength of the collateral, the current
overcollateralization that is expected to build over time, the
pay-in-kind (PIK) nature of the interest on the notes, and the
strong liquidity position resulting from maturity dates in 2073 or
later, which is well after the expected repayment of the pool of
loans. However, S&P has limited the ratings on the class B notes to
'BB (sf)', which reflects uncertainties that exist due to an
ongoing event of default (EOD) on the notes. The ratings also
reflect the modest credit enhancement (primarily due to
overcollateralization) that is in place to protect against losses
in each trust.
Losses
The ED reinsures at least 97% of the principal and interest on
defaulted loans serviced according to FFELP guidelines. Due to the
high level of recoveries from the ED on defaulted loans, defaults
effectively function similarly to prepayments. Thus, we expect net
losses to be minimal.
Liquidity
All of the class A-4 notes from each trust previously defaulted
primarily due to a decline in the pace of amortization of the loans
as a result of an increase in borrowers that have qualified for
income-based repayment (IBR) plans, which can lower a borrower's
monthly payment and extend the loan term by up to 25 years. The
class B notes do not face the same liquidity pressures because
their legal final maturity dates are in 2073 or later, which allows
time for the loans to come out of the IBR and enter repayment
status. The loans in the pool are expected to be repaid through the
guaranty recovery on default, borrower repayment, or ED loan
forgiveness well in advance of the class B maturity date.
Class B Interest Payments
On July 26, 2023, S&P lowered its ratings on the class A-4 notes
from each trust to 'D (sf)' because the classes were not repaid by
their legal final maturity date, which triggered an EOD under the
transaction documents. As a result of the class A EOD, the
waterfall changed--principal payments to the class A-4 notes were
reprioritized in front of interest to the class B notes--triggering
an additional EOD under the transaction documents because the class
B notes are not receiving payments for their current interest.
The transaction documents define the current interest payable to
the class B noteholders to comprise interest for the current
payment, as well as any cumulative interest shortfall, including
interest on the cumulative interest shortfall. As such, S&P
considers the notes to be PIK notes. These transactions are similar
to SLM Student Loan Trust 2008-3 (SLM 2008-3), which also had an
EOD occur on its senior class due to failure to repay by the legal
final maturity date, also triggering the reprioritization of
interest payments to class B, a note with PIK features.
Comparison With 2008-3 Transaction
S&P previously ran various cash flow scenarios for SLM 2008-3,
which included additional scenarios to stress for high levels of
IBR. In a 'AA+' cash flow scenario, the class B notes received all
the interest (including interest on any shortfalls owed due to the
notes' PIK nature) and principal by their legal final maturity
date. The cash flow results show that class B was repaid all
interest and principal three to five years after class A was
repaid. The PIK feature had minimal impact on the cash flow,
primarily because:
-- The class B maturity date is well past the expected paydown of
the loan pool.
-- Net losses on the loan pool are expected to be minimal due to
the guaranty from the ED.
-- The size of class B, which is paying interest in kind, is small
relative to the size of the loan pool.
Most nonpaying loans accrue interest that is capitalized upon
entering repayment, so the collateral pool grows until repaid
either by the borrower or the ED through loan forgiveness or
recovery of default.
S&P said, "We qualitatively compared these trusts to the SLM 2008-3
trust and believe the transactions are similar. The coupons on
these three SLM Trusts are higher than the coupons on SLM 2008-3,
but we believe the overcollateralization and the full turbo nature
of the trust offset the higher coupons.
"We believe that modeling cash flow scenarios for the three later
SLM Trusts would generate similar results to the SLM 2008-3 deal,
which shows that all class B interest and principal owed would be
repaid well before its legal final maturity date, and therefore we
did not run a cash flow model for these transactions.
"Our cash flow model cannot account for the various outcomes that
could be exercised in the future because of an ongoing EOD. Before
an EOD, the transaction documents define the payment priority, cap
the fees and expenses, and limit actions the trust can take that
can result in losses to the noteholders. After an EOD, numerous
alternatives are available to the trustee and noteholders that can
result in actions such as uncapping certain expenses paid before
payments to the noteholders and liquidating the collateral."
Uncertainty Relating To The EOD
Based on the current pace of payments, the class A-4 notes are
expected to be repaid within 11-15 years, and overcollateralization
is expected to grow as each of the trusts are no longer allowed to
release amounts. While the parties have not yet exercised their
remedies under the EOD provisions, they retain their rights until
an EOD is no longer declared. Noteholders may have competing
interests (which may change over time) as to how they would like
the EOD to be addressed.
The ongoing EOD and the parties' ongoing right to enact the
post-EOD remedies introduce uncertainty relating to the future
course of action, which did not exist prior to the EOD. The class B
notes are the most subordinate bonds and, as such, would be the
first class exposed to any losses if the parties take a course of
action with negative consequences to the timing or amount of the
cash flow.
Ratings Upgraded And Removed From CreditWatch Developing
SLM Student Loan Trust 2008-5
-- Class B to 'BB (sf)' from 'CC (sf)/Watch Dev'
SLM Student Loan Trust 2008-6
-- Class B to 'BB (sf)' from 'CC (sf)/Watch Dev'
SLM Student Loan Trust 2008-7
-- Class B to 'BB (sf)' from 'CC (sf)/Watch Dev'
SYMPHONY CLO 39: S&P Assigns BB- (sf) Rating on Class E Notes
-------------------------------------------------------------
S&P Global Ratings assigned its 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 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
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 2023-CES2: Fitch Assigns 'B-(EXP)' Rating on B2 Notes
----------------------------------------------------------------
Fitch Ratings has assigned expected ratings to Towd Point Mortgage
Trust 2023-CES2 (TPMT 2023-CES2).
Entity/Debt Rating
----------- ------
TPMT 2023-CES2
A1A LT AAA(EXP)sf Expected Rating
A1B LT AAA(EXP)sf Expected Rating
A2 LT AA-(EXP)sf Expected Rating
M1 LT A-(EXP)sf Expected Rating
M2 LT BBB-(EXP)sf Expected Rating
B1 LT BB-(EXP)sf Expected Rating
B2 LT B-(EXP)sf Expected Rating
B3 LT NR(EXP)sf Expected Rating
B4 LT NR(EXP)sf Expected Rating
B5 LT NR(EXP)sf Expected Rating
A1 LT AAA(EXP)sf Expected Rating
A2A LT AA-(EXP)sf Expected Rating
A2AX LT AA-(EXP)sf Expected Rating
A2B LT AA-(EXP)sf Expected Rating
A2BX LT AA-(EXP)sf Expected Rating
A2C LT AA-(EXP)sf Expected Rating
A2CX LT AA-(EXP)sf Expected Rating
A2D LT AA-(EXP)sf Expected Rating
A2DX LT AA-(EXP)sf Expected Rating
M1A LT A-(EXP)sf Expected Rating
M1AX LT A-(EXP)sf Expected Rating
M1B LT A-(EXP)sf Expected Rating
M1BX LT A-(EXP)sf Expected Rating
M1C LT A-(EXP)sf Expected Rating
M1CX LT A-(EXP)sf Expected Rating
M1D LT A-(EXP)sf Expected Rating
M1DX LT A-(EXP)sf Expected Rating
M2A LT BBB-(EXP)sf Expected Rating
M2AX LT BBB-(EXP)sf Expected Rating
M2B LT BBB-(EXP)sf Expected Rating
M2BX LT BBB-(EXP)sf Expected Rating
M2C LT BBB-(EXP)sf Expected Rating
M2CX LT BBB-(EXP)sf Expected Rating
M2D LT BBB-(EXP)sf Expected Rating
M2DX LT BBB-(EXP)sf Expected Rating
XS1 LT NR(EXP)sf Expected Rating
XS2 LT NR(EXP)sf Expected Rating
X LT NR(EXP)sf Expected Rating
R LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch Ratings expects to rate the residential mortgage-backed notes
issued by Towd Point Mortgage Trust 2023-CES2 (TPMT 2023-CES2) as
indicated above. The transaction is expected to close on Oct. 31,
2023. The notes are supported by one collateral group that consists
of 4,803 newly originated, closed-end second (CES) lien loans with
a total balance of $354 million, as of the statistical calculation
date. The bond balances indicated above are as of the statistical
calculation date. Rocket Mortgage, LLC (Rocket), PennyMac Financial
Services, LLC (PennyMac), and SpringEQ, LLC (SpringEQ) originated
approximately 53%, 25% and 22% of the loans, respectively.
PennyMac, Rocket and Specialized Loan Servicing LLC (SLS) will
service the loans. The servicers will not advance delinquent
monthly payments of principal and interest (P&I).
Distributions of P&I and loss allocations are based on a
traditional senior-subordinate, sequential structure. The
sequential-pay structure locks out principal to the subordinated
notes until the most senior notes outstanding are paid in full. In
addition, excess cashflow can be used to repay losses or net
weighted average coupon (WAC) shortfalls, as well as to partially
pay down the notes sequentially.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to an updated view
on sustainable home prices, Fitch views the home price values of
this pool as 8.9% above a long-term sustainable level (versus 7.6%
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.
Closed-End Second Liens (Negative): The entirety of the collateral
pool is composed of newly originated CES lien mortgages. Fitch
assumed no recovery and 100% loss severity (LS) on second lien
loans based on the historical behavior of second lien loans in
economic stress scenarios. Fitch assumes second lien loans default
at a rate comparable to first lien loans; after controlling for
credit attributes, no additional penalty was applied.
Strong Credit Quality (Positive): The pool consists of
new-origination CES loans, seasoned approximately five months (as
calculated by Fitch), with a relatively strong credit profile
-weighted average (WA) model credit score of 738, a 37.4% debt to
income ratio (DTI) and a moderate sustainable loan to value ratio
(sLTV) of 77.0%. Roughly 95.5% of the loans were treated as full
documentation in Fitch's analysis. None of the loans have
experienced any prior modifications since origination. Seven loans
were flagged previously delinquent (DQ) due to a temporary payment
interruption as a result of servicing transfer or initial payment
set-up. Fitch did not penalize the delinquencies and considered
those loans as current in its analysis.
Sequential-Pay Structure with Realized Loss and Writedown Feature
(Positive): The transaction's cash flow is based on a
sequential-pay structure, whereby the subordinate classes do not
receive principal until the senior classes are repaid in full.
Losses are allocated in reverse-sequential order. Furthermore, the
provision to reallocate principal to pay interest on the 'AAAsf'
and 'AA-sf' rated notes prior to other principal distributions is
highly supportive of timely interest payments to those classes in
the absence of servicer advancing.
With respect to any loan that becomes DQ for 150 days or more under
the Office of Thrift Supervision (OTS) methodology, the related
servicer will review, and may charge off, such loan with the
approval of the asset manager, based on an equity analysis review
performed by the servicer, causing the most subordinated class to
be written down.
Despite the 100% LS assumed for each defaulted second lien loan,
Fitch views the writedown feature positively, as cash flows will
not be needed to pay timely interest to the 'AAAsf' and 'AA-sf'
rated notes during loan resolution by the servicers. In addition,
subsequent recoveries realized after the writedown at 150 days' DQ
(excluding forbearance mortgage or loss mitigation loans) will be
passed on to bondholders as principal.
Additionally, the structure allocates 50% of the remaining excess
cashflow after reimbursement of losses and net WAC shortfalls to
turbo down bonds. Given this and the significant amount of excess
spread, Fitch ran an additional analysis that incorporated a WAC
deterioration scenario. Fitch applied a 2.5% WAC cut (based on the
most common historical modification rate) on 40% (historical Alt A
modification %) of the performing loans.
No Servicer P&I Advances (Neutral): The servicers will not advance
DQ monthly payments of P&I. Structural provisions and cash flow
priorities, together with increased subordination, provide for
timely payments of interest to the 'AAAsf' and 'AA-sf' rated
classes. Fitch is indifferent to the advancing framework as given
its projected 100% loss severity, no credit would be given to
advances on the structure side and no additional adjustment would
be made as it relates to loss severity.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
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 40.8%, at 'AAAsf'. The analysis indicates 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
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all rated classes. Specifically, a
10% gain in home prices would result in a full category upgrade for
the rated classes, excluding those being assigned ratings of
'AAAsf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Clayton, LLC (Clayton) and SitusAMC (AMC). A
third-party due diligence review was completed on 100% of the
loans. The scope, as described in Form 15E, focused on credit,
regulatory compliance and property valuation reviews, consistent
with Fitch criteria for new originations. None of the loans
received a final grade of C/D and no material exceptions were
noted. The results of the review indicate low operational risk.
Fitch applied a credit for the high percentage of loan-level due
diligence, which reduced the 'AAAsf' loss expectation by 75bps.
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.
TRICOLOR AUTO 2023-2: Moody's Withdraws (P)B2 Rating on F Notes
---------------------------------------------------------------
Moody's Investors Service has withdrawn the ratings of Tricolor
Auto Securitization Trust 2023-2 (TAST 2023-2).
Issuer: Tricolor Auto Securitization Trust 2023-2
Class A Asset Backed Notes, Withdrawn (sf); previously on Oct 5,
2023 Assigned (P)A1 (sf)
Class B Asset Backed Notes, Withdrawn (sf); previously on Oct 5,
2023 Assigned (P)A1 (sf)
Class C Asset Backed Notes, Withdrawn (sf); previously on Oct 5,
2023 Assigned (P)A2 (sf)
Class D Asset Backed Notes, Withdrawn (sf); previously on Oct 5,
2023 Assigned (P)Baa1 (sf)
Class E Asset Backed Notes, Withdrawn (sf); previously on Oct 5,
2023 Assigned (P)Ba2 (sf)
Class F Asset Backed Notes, Withdrawn (sf); previously on Oct 5,
2023 Assigned (P)B2 (sf)
RATINGS RATIONALE
Moody's has decided to withdraw the provisional ratings as the
transaction is not expected to close in the near future.
TRTX 2022-FL5: DBRS Confirms B(low) Rating on Class G Notes
-----------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of notes
issued by TRTX 2022-FL5 Issuer, Ltd. (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 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
recently reported credit 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 20 floating-rate mortgages
secured by 116 mostly transitional properties with a cut-off date
balance totaling $1.08 billion. Most loans were in a period of
transition with plans to stabilize performance and improve values
of the underlying assets. As of the September 2023 remittance, the
pool comprised 15 loans secured by 108 properties with a cumulative
trust balance of $837.5 million. Since issuance, nine loans with a
prior cumulative trust balance of $404.8 million have been
successfully repaid in full from the pool or been purchased out of
the trust at par by the collateral manager. This includes five
loans totaling $186.6 million since the previous DBRS Morningstar
rating action in November 2022. The Lawford – Lakeside and
Lawford – Enclave loans, which were secured by multifamily
properties and had a former cumulative trust balance of $72.3
million, were purchased out of the trust in March 2023.
The transaction is managed with a two-year Reinvestment Period,
whereby the Issuer can purchase new loans and funded loan
participations into the trust. The Reinvestment Period is scheduled
to end with the February 2024 Payment Date. As of September 2023,
the Reinvestment Account had a balance of $237.5 million. In its
current analysis, DBRS Morningstar funded the trust to the maximum
transaction balance of $1.08 billion by increasing individual loan
balances with outstanding pari passu amounts not securitized in
other commercial mortgage-backed securities (CMBS) transactions,
accounting for outstanding potential loan future funding currently
available to individual borrowers based on the loan eligibility
criteria as stated in the transaction's issuance documents. The
result was a more aggressive transaction composition; however,
given the structure of the transaction and overall stable
performance of the collateral, DBRS Morningstar determined the
current credit ratings are appropriate.
The transaction is concentrated by property type as nine loans,
representing 69.6% of the current trust balance, are secured by
multifamily properties, with three loans (23.2% of the current
trust balance) secured by office properties and two loans (3.9% of
the current trust balance) secured by hotel properties. In
comparison with the pool at closing, multifamily properties
represented 55.0% of the collateral, office properties represented
27.9% of the collateral, and mixed-use properties represented 11.9%
of the collateral.
The pool is primarily secured by properties in suburban markets, as
defined by DBRS Morningstar, with 11 loans, representing 68.7% of
the pool, assigned a DBRS Morningstar Market Rank of 3, 4, or 5. An
additional four loans, representing 31.3% of the pool, are secured
by properties with a DBRS Morningstar Market Rank of 6, 7, or 8,
denoting urban markets. There are no properties currently in
tertiary or rural markets. In comparison, at closing, properties in
suburban markets represented 42.8% of the collateral, properties in
urban markets represented 50.1% of the collateral, and properties
in tertiary markets represented 7.1% of the collateral.
Leverage across the pool was generally stable to slightly elevated
as of September 2023 reporting when compared with issuance metrics.
The current weighted-average (WA) as-is appraised value
loan-to-value ratio (LTV) is 68.1%, with a current WA stabilized
LTV of 61.8%. In comparison, these figures were 66.3% and 60.0%,
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 or 2022 and may not
reflect the current rising interest rate or widening capitalization
rate environments. In its analysis, DBRS Morningstar applied upward
LTV adjustments across 11 loans, representing 74.8% of the current
trust balance.
Through June 2023, the lender had advanced cumulative loan future
funding of $76.1 million to ten of the 15 outstanding individual
borrowers to aid in property stabilization efforts. The largest
advances have been made to the borrowers of the Del Amo 2 ($22.2
million) and 575 Fifth Avenue ($20.0 million) loans. The Del Amo 2
loan is secured by a mixed-use property in Torrance, California.
The advanced funds have been used to fund the borrower's planned
capital expenditure (capex) and leasing plan with a portion of
funds also used for interest costs. An additional $3.7 million of
future funding remains available to the borrower. The 575 Fifth
Avenue loan is secured by an office property in Midtown Manhattan.
The advanced funds have been used to fund leasing costs as well as
to fund interest shortfalls. An additional $1.7 million of future
funding remains available to the borrower.
An additional $67.6 million of loan future funding allocated to 11
of the outstanding individual borrowers remains available. The
largest portion, $28.0 million, is allocated to the borrower of the
Mount Eden loan, which is secured by an office property in Hayward,
California. The available funds are for the borrower's capex and
leasing plan at the property. While the lender has not advanced any
future funding dollars to the borrower since loan closing, it
appears the borrower is successfully implementing its business plan
to convert a portion of the 369,986-square-foot property for life
science use and to lease up the entire property to stabilization.
As of June 2023, the property was 88.2% leased.
As of the September 2023 remittance, there were no delinquent loans
or loans in special servicing, and there were two loans on the
servicer's watchlist, representing 12.9% of the current trust
balance. Both loans, 575 Fifth Avenue (Prospectus ID#3; 8.1% of the
current trust balance) and 677 Ala Moana (Prospectus ID#14; 4.8% of
the current trust balance), have been flagged for respective
upcoming loan maturity. According to the servicer, the borrower and
lender are expected to close a loan extension in the immediate
future to address the September 2023 maturity. The borrower had
previously received a short-term extension and, as of March 2023,
the property was 86.6% occupied. The 677 Ala Moana loan is secured
by an office property in Honolulu, Hawaii. The loan matures in
November 2023 after the lender provided the borrower a three-month
extension to allow the borrower time to complete its exit strategy.
The final maturity date on the loan is August 2024. As of June
2023, the property was 82.6% occupied with net cash flow of $4.1
million based on rental revenue as of the June 2023 rent roll and
T-12 ended June 30, 2023, operating expenses. Only one other loan,
Hilton Lexington (Prospectus ID#22; 0.4% of the current trust
balance), has a maturity date in the next six months.
Notes: All figures are in U.S. dollars unless otherwise noted.
UBS COMMERCIAL 2018-C8: Fitch Affirms 'B-sf' Rating on F-RR Certs
-----------------------------------------------------------------
Fitch Ratings has affirmed 12 classes UBS Commercial Mortgage Trust
(UBSCM) 2018-C8 Commercial Mortgage Pass-Through Certificates. The
Rating Outlook has been revised to Negative from Stable on classes
D-RR, E-RR and F-RR. The under criteria observation (UCO) has been
resolved for all classes.
Entity/Debt Rating Prior
----------- ------ -----
UBS Commercial
Mortgage Trust
2018-C8
A-3 90276VAD1 LT AAAsf Affirmed AAAsf
A-4 90276VAE9 LT AAAsf Affirmed AAAsf
A-S 90276VAH2 LT AAAsf Affirmed AAAsf
A-SB 90276VAC3 LT AAAsf Affirmed AAAsf
B 90276VAJ8 LT AA-sf Affirmed AA-sf
C 90276VAK5 LT A-sf Affirmed A-sf
D 90276VAN9 LT BBBsf Affirmed BBBsf
D-RR 90276VAQ2 LT BBB-sf Affirmed BBB-sf
E-RR 90276VAS8 LT BBsf Affirmed BBsf
F-RR 90276VAU3 LT B-sf Affirmed B-sf
X-A 90276VAF6 LT AAAsf Affirmed AAAsf
X-B 90276VAG4 LT AA-sf Affirmed AA-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 City Square and Clay Street (5% of the pool) and
Braemar Office (2.3%) loans. Five loans (15.4%) are considered
Fitch Loans of Concern (FLOCs), including one loan in special
servicing (5%). Fitch's current ratings incorporate a 'Bsf' rating
case loss of 4.1%.
FLOCs: The largest FLOC and second largest contributor to losses,
Tryad Industrial & Business Center (5.8% of the pool), is secured
by a 3.3 million sf, 11-building industrial flex property located
in Rochester, NY. The largest tenants include Hammer Packaging
Corp. (9.7% of NRA; expires Dec. 31, 2028), Harris Corporation
(7.8%; multiple leases expire between 2025 and 2028) and Kodak
Alaris (6.5%; expires Dec. 31, 2028). The loan was flagged as a
FLOC due to low occupancy and debt service coverage ratio (DSCR).
Occupancy has remained in the low to mid 60s since YE 2019. The
servicer-reported DSCR was 0.99x as of June 2023, down from 1.11x
at YE 2022 and 1.35x at YE 2021. Fitch's 'Bsf' rating case loss
(prior to concentration adjustments) of 9.3% reflects a 9.5% cap
rate and a 10% stress to the YE 2022 NOI.
The second largest FLOC and largest contributor to losses, City
Square and Clay Street (5.0%), is secured by a 246,136-sf mixed use
property consisting of 151,304 sf of office space, 94,832 sf of
retail space and a 1,154-stall parking garage. At issuance, office
space generated the majority (52%) of overall revenue. The property
is located in the center of downtown Oakland, CA, adjacent to the
12th St/Oakland stop of the BART system.
The loan transferred to special servicing in April 2023 due to the
borrower declaring imminent monetary default. According to the
servicer, the borrower has signed a pre-negotiation letter and has
submitted a debt relief request; discussions remain ongoing. As of
September 2022, the servicer-reported NOI DSCR and occupancy were
0.98x and 64%, respectively. Fitch's loss expectations of 13%
(prior to concentration adjustments) reflects a 15% stress to the
YE 2021 NOI due to declining occupancy and higher real estate taxes
since issuance, and a 10% cap rate. Fitch also considered an
additional sensitivity scenario that factors in an increased
probability of default on the loan, which contributed to the
Negative Outlooks.
The third largest FLOC, Braemar Office (2.3%), is secured by a
216,924 sf, two-building office property located in Edina, MN.
Major tenants at the property include Wilson Learning Corp. (9.7%;
expires July 31, 2024), Federal Air Marshal Service (9.4%; expires
Jan. 31, 2029) and T-Mobile Central (8.7%; Feb. 28, 2028). The loan
was flagged as a FLOC due to upcoming rollover risk. Approximately
32.6% of the NRA representing 42% of rent expires in 2024. As of YE
2022, the servicer-reported NOI DSCR and occupancy were 1.41x and
85%, respectively. Fitch's loss expectations of 7.1% (prior to
concentration adjustments) reflects a 20% stress to the YE 2022 NOI
due to upcoming rollover concerns and a 10.25% cap rate. Fitch also
considered an additional sensitivity scenario that factors in an
increased probability of default on the loan, which contributed to
the Negative Outlooks.
Increased CE: As of the September 2023 distribution date, the
pool's aggregate balance has been reduced by 14.6% to $892.3
million from $1.05 billion at issuance. Realized losses since
issuance total approximately $770,000 from the resolution and
disposal of a specially serviced loan (The Avery Georgetown), which
occurred in December 2021. Seven loans (10.3% of current pool) are
fully defeased. There are 28 loans (61%) that are full-term
interest only and 16 loans (20.7%) were structured with a partial
interest-only period, all of which have exited their interest-only
period.
Property Type Concentration: The highest concentration is office
(27.4%), followed by retail (25.8%), industrial (14.7%), mixed-use
(9.2%) and multi-family (7.6%).
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 specially serviced loans. In addition,
downgrades for the classes with Negative Outlooks would be
triggered by higher losses on the FLOCs, most notably if City
Square and Clay Street and Braemar Office fail to stabilize.
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 for the pool increase significantly.
Downgrades to classes rated 'A-sf', 'BBBsf' and 'BBB-sf' may occur
should expected losses for the pool increase significantly and/or
if the performing FLOCs begin to experience performance decline
beyond expectations.
Classes rated 'BBsf' and 'B-sf' 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 the FLOCs, most notably City Square
and Clay Street and Braemar Office.
Upgrades to 'BBBsf' and '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 a
likelihood of interest shortfalls.
Upgrades to 'BBsf' 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.
UNLOCK HEA 2023-1: DBRS Finalizes BB(low) Rating on Class B
-----------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
Asset-Backed Securities, Series 2023-1 (the Notes) issued by Unlock
HEA Trust 2023-1:
-- $152.5 million Class A at BBB (low) (sf)
-- $31.0 million Class B at BB (low) (sf)
The BBB (low) (sf) rating reflects credit enhancement of 25.7% for
Class A, and the BB (low) (sf) rating reflects credit enhancement
of 10.6% for Class B.
Other than the specified classes above, DBRS Morningstar did not
rate any other classes in this transaction.
Home equity investments (HEIs) allow homeowners access to the
equity in their homes without having to sell their homes or make
monthly mortgage payments. HEIs provide homeowners with an
alternative to borrowing and are available to homeowners of any age
(unlike reverse mortgage loans, for example, for which there is
often a minimum age requirement). A homeowner receives an upfront
cash payment (an Advance or an Investment Amount) in exchange for
giving an Investor (i.e., an Originator) a stake in their property.
The homeowner retains sole right of occupancy of the property and
pays all upkeep and expenses during the term of the HEI, but the
Originator participates in any increase, or decrease, in the value
of the property.
Like reverse mortgage loans, the HEI underwriting approach is
asset-based, meaning there is greater emphasis placed on the value
of the underlying property than on the credit quality of the
homeowner. The property value is the main focus for predicting
repayment because it is the primary source of funds to satisfy the
obligation. HEIs are nonrecourse; a homeowner is not required to
provide additional funds when the HEI repayment amount exceeds the
remaining equity value in the property (after accounting for any
other obligations such as senior liens, if applicable). Therefore,
repayment of the Advance and any Originator return is primarily
subject to the amount of appreciation/depreciation on the
property.
As of the cut-off date, 221 contracts in the transaction are first
lien contracts, representing roughly $28.31 million in current
exercise value; 1,525 are second lien contracts, representing
roughly $153.83 million in current exercise value; and 238 are
third lien contracts, representing roughly $23.09 million in
current exercise value.
Of the pool, 13.84% of the contracts are first lien and have a
weighted-average exchange rate of 1.95x, 74.84% are second lien
contracts and have a weighted-average exchange rate of 1.90x and
the remaining 11.32% of the pool are third lien contracts with a
weighted-average exchange rate of 1.98x. This brings the entire
transaction's weighted-average exchange rate to 1.91x. To better
understand the impact and mechanics of exchange rate please see the
example below, in the Contract Mechanics—Worked Example section.
The current unadjusted loan-to-value ratio (LTV) of the pool is
38.14% (i.e., of senior liens ahead of the contracts). At cutoff
the pool had a weighted-average Contract-to-Value (CTV , also known
as Option-to-Value, or OTV) of 19.04%, and a weighted-average
Loan-plus-Contract-to-Value (LCTV also known as
Loan-plus-Option-to-Value, or LOTV) of 57.34%.
The transaction uses a sequential structure in which cash
distributions are first made to reduce the interest payment amount
and any interest carryforward amount on the Class A-IO, Class A,
and Class B (as long as trigger B event is not in effect). Payments
are then made to reduce the note principal balance on Class A Notes
until such notes are paid off. With respect to Class B Notes,
payments are first made to any remaining interest payment amount
and interest carryforward amount and then to reduce the note
principal balance until such notes are paid off. Class C Notes are
then paid the Interest Payment Amount and any previously accrued
and unpaid Interest Payment Amount and then to reduce the note
principal balance until such notes are paid off.
The Issuer may, at its option, exercise a call and purchase all of
the outstanding Notes on the Optional Redemption Date. A failure to
purchase all outstanding Notes on the Optional Redemption Date will
cause a Class B Trigger Event and such trigger cannot be cured.
During a Class B Trigger Event, the Class B Notes shall not receive
any interest or principal payments until the Class A Notes are
fully paid down.
DBRS Morningstar's credit ratings on the Notes address the credit
risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations for each of the rated Notes are the related
Class Principal Balance, Interest Payment Amount, and Interest
Carryforward Amount.
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar considers risk of default to be
the risk that an issuer will fail to satisfy the financial
obligations in accordance with the terms under which a long-term
obligation has been issued.
Notes: All figures are in U.S. dollars unless otherwise noted.
VALLEY STREAM: S&P Assigns 'BB- (sf)' Rating on Class E-R Notes
---------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class B-R, C-R, D-R,
and E-R replacement debt from Valley Stream Park CLO Ltd., a CLO
originally issued in November 2022 that is managed by Blackstone
CLO Management LLC. At the same time, S&P withdrew its ratings on
the original class B, C, D, E-1, and E-2 debt following payment in
full on the Oct. 20, 2023, refinancing date.
The replacement debt was issued via a supplemental indenture, which
outlines the terms of the replacement debt. According to the
supplemental indenture:
-- No additional assets were purchased in connection with the
refinancing date, and the target initial par amount remains at $550
million. There is no additional effective date or ramp-up period,
and the first payment date following the refinancing is Jan. 20,
2024.
-- The reinvestment period, legal final maturity date, and
weighted average life test were not extended.
-- The required minimum overcollateralization coverage ratios were
amended.
-- The original class A notes were replaced with class A-R notes
and class A-R loans, and the original class E-1 and E-2 notes were
replaced with the class E-R notes.
-- No additional subordinated notes were issued on the refinancing
date.
Replacement And Original Debt Issuances
Replacement debt
Class A-R, $307.900 million: Three-month SOFR + 1.63%
Class A-R Loans, $44.100 million: Three-month SOFR + 1.63%
Class B-R, $62.700 million: Three-month SOFR + 2.25%
Class C-R (deferrable), $35.750 million: Three-month SOFR +
2.65%
Class D-R (deferrable), $32.725 million: Three-month SOFR +
4.15%
Class E-R (deferrable), $14.575 million: Three-month SOFR +
6.85%
Original debt
Class A, $346.500 million: Three-month SOFR + 2.40%
Class B, $62.150 million: Three-month SOFR + 3.20%
Class C (deferrable), $34.375 million: Three-month SOFR + 4.00%
Class D (deferrable), $32.725 million: Three-month SOFR + 5.71%
Class E-1 (deferrable), $5.500 million: Three-month SOFR + 8.38%
Class E-2 (deferrable), $11.550 million: Three-month SOFR +
7.00%
Subordinated notes, $45.900 million: Not applicable
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
Valley Stream Park CLO Ltd./Valley Stream Park CLO LLC
Class A-R, $307.900 million: NR
Class A-R loans, $44.100 million: NR (sf)
Class B-R, $62.700 million: AA (sf)
Class C-R (deferrable), $35.750 million: A (sf)
Class D-R (deferrable), $32.725 million: BBB- (sf)
Class E-R (deferrable), $14.575 million: BB- (sf)
Ratings Withdrawn
Valley Stream Park CLO Ltd./Valley Stream Park CLO LLC
Class B, $62.150 million to NR from 'AA (sf)'
Class C (deferrable), $34.375 million to NR from 'A (sf)'
Class D (deferrable), $32.725 million to NR from 'BBB- (sf)'
Class E-1 (deferrable), $5.500 million to NR from 'BB+ (sf)'
Class E-2 (deferrable), $11.500 million to NR from 'BB- (sf)'
Other Outstanding Debt
Valley Stream Park CLO Ltd./Valley Stream Park CLO LLC
Subordinated notes, $45.900 million: NR
VOYA CLO 2022-3: Fitch Assigns Final BB-sf Rating on Cl. E-R Notes
------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to the
Voya CLO 2022-3, Ltd. reset transaction.
Entity/Debt Rating Prior
----------- ------ -----
Voya CLO 2022-3, Ltd.
A-1R LT NRsf New Rating NR(EXP)sf
A-2 92891LAE2 LT PIFsf Paid In Full AAAsf
A-2R LT AAAsf New Rating AAA(EXP)sf
B 92891LAB8 LT PIFsf Paid In Full AAsf
B-R LT AAsf New Rating AA(EXP)sf
C 92891LAC6 LT PIFsf Paid In Full Asf
C-R LT Asf New Rating A(EXP)sf
D-1 92891LAD4 LT PIFsf Paid In Full BBB-sf
D-2 92891LAF9 LT PIFsf Paid In Full BBB-sf
D-R LT BBB-sf New Rating BBB-(EXP)sf
E 92919WAA4 LT PIFsf Paid In Full BB-sf
E-R LT BB-sf New Rating BB-(EXP)sf
X LT NRsf New Rating NR(EXP)sf
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 72.38%.
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 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; and
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 1: S&P Assigns BB-(sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its 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 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.
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
WELLS FARGO 2015-NXS3: DBRS Confirms BB Rating on Class X-E Certs
-----------------------------------------------------------------
DBRS Limited confirmed all classes of Commercial Mortgage
Pass-Through Certificates, Series 2015-NXS3 issued by Wells Fargo
Commercial Mortgage Trust 2015-NXS3 as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class PEX at A (sf)
-- Class D at BBB (low) (sf)
-- Class X-D at BBB (low) (sf)
-- Class X-E at BB (sf)
-- Class E at BB (low) (sf)
-- Class X-FG at BB (low) (sf)
-- Class F at B (high) (sf)
All trends are Stable.
The credit ratings confirmations reflect DBRS Morningstar's stable
outlook for this transaction, which remains relatively unchanged
since the last credit rating action. Overall, the pool continues to
exhibit healthy credit metrics, as evidenced by the weighted
average (WA) debt service coverage ratio (DSCR), which was well in
excess of 2.0 times (x) for the pool, based on the YE2022 financial
reporting. The transaction also benefits from seven years of
amortization since issuance, as well as some defeasance, loan
repayments, and one shadow-rated investment-grade loan, as further
described below.
Per the September 2023 reporting, 48 of the original 56 loans
remain in the pool with an aggregate principal balance of $519.6
million, representing a collateral reduction of 36.2% since
issuance as a result of scheduled loan amortization and loan
repayment. Eight loans, representing 9.9% of the pool, have been
fully defeased. No loans are delinquent or in special servicing.
Eight loans, representing 21.3% of the pool, are on the servicer's
watchlist; however, only six of these loans, representing 12.2% of
the pool, are being monitored for credit-related reasons.
The largest loan on the watchlist, Yosemite Resorts (Prospectus
ID#3, 11.1% of the pool) is currently being monitored for deferred
maintenance. Collateral for the loan is secured by two full-service
hotels totaling 536 keys, less than 10 miles from the Arch Rock
entrance of Yosemite National Park. While the loan previously spent
time in special servicing for payment default, stemming from the
impact of the Coronavirus Disease (COVID-19), a loan modification
was executed, with deferrals scheduled to be repaid by June 2023,
and the loan was returned to the master servicer in April 2022. The
smaller of the hotels, the Cedar Lodge, experienced a fire in 2021
that heavily damaged the majority of units. According to the
servicer, however, an insurance loss draft reserve was established
for repairs, which were ongoing and nearly complete as of June
2023. Despite the business interruptions, the subject reported net
cash flow (NCF) of $8.4 million (a DSCR of 1.54x) at YE2022 and
$7.9 million (a DSCR of 1.51x) at YE2021. While both figures are
below the Issuer's underwritten NCF of $10.8 million (2.07x),
driven by loss in revenue and increased expenses, the revenue per
available room (RevPAR) figure for the trailing 12 month ended June
30, 2023, was reported at $114, above pre-pandemic and issuance,
which hovered around $99.
The pool is concentrated by property type, with loans backed by
retail, lodging and office, or mixed-use properties (with large
office components) representing 38.1%, 21.3%, and 18.3% 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. However, of the nine
loans secured by office or mixed-use properties, only three loans
exhibited performance that suggested increased credit risk since
issuance, including 11 Madison Avenue (Prospectus ID#6, 6.7% of the
pool), 722 12th Street NW (Prospectus ID#14, 2.9% of the pool), and
100 East Walton (Prospectus ID#21, 1.8% of the pool). In its
analysis for this review, DBRS Morningstar applied stressed
loan-to-value ratios (LTV) or increased probability of default
(POD) assumptions for these three loans, resulting in a WA expected
loss (EL) that was nearly double the pool average.
With this review, DBRS Morningstar also removed the
investment-grade shadow rating for 11 Madison Avenue. The loan is
secured by fee, leasehold, and reversionary interest in a Class A,
29-story, 2.3 million-square-foot (sf) office tower in Manhattan's
Midtown South submarket. In March 2023, DBRS Morningstar placed all
classes of MAD 2015-11MD (the lead securitization) 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
subject transaction given the uncertainty with regard to the
tenant's lease, which represents approximately half of the
collateral property's NRA. Subsequently, DBRS Morningstar
maintained the Under Review with Negative Implications status on
June 21, 2023, and again on September 19, 2023, for the same
reasons.
Another loan of concern is 722 12th Street NW, which is secured by
a 34,577-sf office property in the CBD of Washington, D.C. The loan
was added to the servicer's watchlist in November 2021 for a low
DSCR, driven by increased vacancy. According to the June 2023 rent
roll, the property was 78.3% occupied by two tenants; however, the
second largest tenant, Stantec Consulting Services, Inc. (30.0% of
the NRA, lease expired in June 2023) has reportedly vacated the
entirety of its space, leaving only Americans for Tax Reform (48.4%
of the NRA, lease expiry in March 2034). According to the servicer,
the borrower has been marketing the vacant space and currently is
in the process of securing a letter of intent with a prospective
tenant that would occupy 4,767 sf or 13.8% of the NRA. Currently,
LoopNet is marketing three suites representing 47.0% of the NRA,
with asking rates of $53.00 per square foot (psf), compared with
Stantec's rental rate of $72.13. According to Ries, as of Q2 2023,
office properties in the East End submarket reported an average
asking rent of $62.54, an average effective rental rate of $51.08,
and an average vacancy rate of 15.4%. According to the trailing six
months (T-6) financials ended June 30, 2023, the subject reported
an annualized NCF of $1.0 million (a DSCR of 1.07x); however, given
the increased vacancy, coverage is expected to fall well below
breakeven without meaningful leasing momentum. As such, DBRS
Morningstar stressed its LTV assumption for this review, resulting
in an expected loss over three times the deal average.
At issuance, DBRS Morningstar shadow-rated The Parking Spot LAX
(Prospectus ID#14, 2.2% of the pool) as investment grade. With this
review, DBRS Morningstar confirmed that the performance of this
loan remains consistent with investment-grade loan
characteristics.
Notes: All figures are in U.S. dollars unless otherwise noted.
WELLS FARGO 2016-C33: Fitch Affirms 'B-sf' Rating on Two Tranches
-----------------------------------------------------------------
Fitch Ratings has upgraded three and affirmed 11 classes of Wells
Fargo Commercial Mortgage Trust 2016-C33 commercial mortgage
pass-through certificates (WFCM 2016-C33).
Fitch has also upgraded three and affirmed 13 classes of Wells
Fargo Commercial Mortgage Trust 2016-C37 commercial mortgage
pass-through certificates (WFCM 2016-C37)
The Rating Outlooks on four classes in WFCM 2016-C33 were revised
to Negative from Stable.
Stable Rating Outlooks were assigned to the three upgraded classes
in WFCM 2016-C37. The Rating Outlooks on additional five classes in
the transaction were revised to Negative from Stable.
All classes from these transactions have been removed from Under
Criteria Observation (UCO).
Entity/Debt Rating Prior
----------- ------ -----
WFCM 2016-C37
A-3 95000PAC8 LT AAAsf Affirmed AAAsf
A-4 95000PAD6 LT AAAsf Affirmed AAAsf
A-5 95000PAE4 LT AAAsf Affirmed AAAsf
A-S 95000PAG9 LT AAAsf Affirmed AAAsf
A-SB 95000PAF1 LT AAAsf Affirmed AAAsf
B 95000PAK0 LT AA+sf Upgrade AAsf
C 95000PAL8 LT A+sf Upgrade Asf
D 95000PAX2 LT BBB-sf Affirmed BBB-sf
E 95000PAZ7 LT BB+sf Affirmed BB+sf
F 95000PBB9 LT BB-sf Affirmed BB-sf
G 95000PBD5 LT B-sf Affirmed B-sf
X-A 95000PAH7 LT AAAsf Affirmed AAAsf
X-B 95000PAJ3 LT AA+sf Upgrade AAsf
X-D 95000PAM6 LT BBB-sf Affirmed BBB-sf
X-EF 95000PAP9 LT BB-sf Affirmed BB-sf
X-G 95000PAR5 LT B-sf Affirmed B-sf
WFCM 2016-C33
A-3 95000LAY9 LT AAAsf Affirmed AAAsf
A-4 95000LAZ6 LT AAAsf Affirmed AAAsf
A-S 95000LBB8 LT AAAsf Affirmed AAAsf
A-SB 95000LBA0 LT AAAsf Affirmed AAAsf
B 95000LBE2 LT AA+sf Upgrade AA-sf
C 95000LBF9 LT Asf Upgrade A-sf
D 95000LAJ2 LT BBB-sf Affirmed BBB-sf
E 95000LAL7 LT BB-sf Affirmed BB-sf
F 95000LAN3 LT B-sf Affirmed B-sf
X-A 95000LBC6 LT AAAsf Affirmed AAAsf
X-B 95000LBD4 LT Asf Upgrade A-sf
X-D 95000LAA1 LT BBB-sf Affirmed BBB-sf
X-E 95000LAC7 LT BB-sf Affirmed BB-sf
X-F 95000LAE3 LT B-sf Affirmed B-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 last
rating action.
The affirmations and upgrades at the top of the capital structure
reflect generally stable pool performance, continued paydown and
increasing defeasance since the prior rating actions, as well as
the impact of the updated criteria.
Fitch's current ratings on WFCM 2016-C33 incorporate a 'Bsf' rating
case loss of 6.4%. Fitch has identified ten Fitch Loans of Concern
(FLOCs; 24.5% of the pool balance), including three loans in
special servicing (5.9%).
Fitch's current ratings on WFCM 2016-C37 incorporate a 'Bsf' rating
case loss of 5.0%. Fitch has identified ten FLOCs (21.0% of the
pool balance), including one loan in special servicing (1.0%).
The Negative Outlooks at the bottom of the capital structure
reflect the performance concerns and elevated level of FLOCs in
both transactions, Fitch's analysis includes additional sensitivity
scenarios that incorporated an increased probability of default on
the larger FLOCs, which drove the Negative Outlooks. Similarly,
these additional sensitivities were used to test the durability of
the upgrades and contributed to those rating actions.
The Negative Outlooks on classes D, E, F, X-D, X-E and X-F in WFCM
2016-C33 reflect the high FLOC exposure, including office
properties with occupancy concerns and underperforming hotels, the
largest of which are Doubletree Seattle Airport Southcenter (4.8%),
Brier Creek Corporate Center I & II (3.8%) and Parkview at Spring
Street (3.1%).
The Negative Outlooks on classes E, F, G, X-EF and X-G in WFCM
2016-C37 reflect the high FLOC exposure, including office and
retail properties with occupancy concerns, the largest of which are
1140 Avenue of the Americas (5% of the pool), Franklin Square III
(4.7%) and the UConn Apartment Portfolio (2.4%).
Improved Credit Enhancement (CE): The upgrades reflect improving CE
for both transactions, primarily due to loan amortization and
payoffs as well as defeasance.
As of the October 2023 distribution date for WFCM 2016-C33, the
pool's aggregate balance has been reduced by 26.2% to $525.6
million from $712.2 million at issuance. Fourteen loans (17.3%) are
defeased.
As of the October 2023 distribution date for WFCM 2016-C37, the
pool's aggregate balance has been reduced by 22.7% to $580.2
million from $712.2 million at issuance. Eight loans (12.8%) are
defeased.
Largest Contributors to Loss: The largest contributor to loss in
WFCM 2016-C33 is the Omni Officecentre loan (2.7%), which is
secured by a 294,090-sf class B- suburban office building located
in Southfield, MI. The loan transferred to special servicing in
August 2022 due to monetary default. According to servicer updates,
the borrower is planning to transition the property to the lender.
Occupancy declined to 21% as of June 2022 when the largest tenant
Blue Cross Blue Shield (40% NRA) vacated at lease expiration.
Fitch's 'B' rating case loss of 69.5% (prior to concentration
add-ons) reflects a value of approximately $20 psf.
The largest contributor to modeled losses in WFCM 2016-C37 is 1140
Avenue of Americas (5.0%), which is secured by a 242,466-sf office
building located on the north-eastern corner of West 44th Street
and Avenue of the Americas in Midtown Manhattan. The loan has been
designated as a FLOC due to performance declines and rollover
concerns. Per the June 2023 rent roll, occupancy was 74%, which is
a slight increase from 71% at YE 2022, but down from 84% at YE
2020. Upcoming rollover at the property includes 13.9% of the NRA
in 2024, 5.2% in 2025 and 11% in 2026. The servicer-reported NOI
DSCR was 0.76x at YE 2022 compared with 0.68x at YE 2021 and 1.19x
at YE 2020.
Fitch's 'Bsf' rating case loss of 28% (prior to concentration
add-ons) factors an 8.50% cap with a 15% haircut to the YE 2022 NOI
to reflect upcoming rollover concerns.
Co-Op Collateral: WFCM 2016-C33 contains 14 loans (5.4% of the
pool) secured by multifamily co-ops; 12 are located in New York
City metro area; one is in Washington, D.C.; and one is in Atlanta,
GA.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to classes rated in the 'AAAsf' and 'AAsf' categories
are not expected due to continued scheduled amortization and
increasing CE relative to loss expectations, but may occur should
interest shortfalls affect these classes. Downgrades to classes
rated in the 'Asf' and 'BBBsf' categories may occur should
additional loans experience significant performance declines, fail
to repay at maturity or transfer to special servicing. Classes
rated below investment grade would be downgraded if performance of
the FLOCs continues to deteriorate or if loans currently in special
servicing experience greater than expected losses.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes rated in the 'Asf' and 'BBBsf' categories may
occur with additional paydown and defeasance combined with
stabilization of the FLOCs. While considered unlikely, classes
rated below investment grade could be upgraded with improving
performance of the FLOCs and better than expected recoveries on the
loans in special servicing.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
WELLS FARGO 2016-NXS5: Fitch Lowers Rating on 2 Tranches to CC
--------------------------------------------------------------
Fitch Ratings has downgraded four classes and affirmed 13 classes
of Wells Fargo Commercial Mortgage Trust Pass-Through Certificates,
series 2016-NXS5 (WFCM 2016-NXS5). Fitch has assigned a Negative
Rating Outlook on two classes after their downgrade and revised one
Outlook to Negative from Stable. The under criteria observation
(UCO) has been resolved.
Entity/Debt Rating Prior
----------- ------ -----
WFCM 2016-NXS5
A-4 95000CAZ6 LT AAAsf Affirmed AAAsf
A-5 95000CBA0 LT AAAsf Affirmed AAAsf
A-6 95000CBB8 LT AAAsf Affirmed AAAsf
A-6FL 95000CBK8 LT AAAsf Affirmed AAAsf
A-6FX 95000CBM4 LT AAAsf Affirmed AAAsf
A-S 95000CBD4 LT AAAsf Affirmed AAAsf
A-SB 95000CBC6 LT AAAsf Affirmed AAAsf
B 95000CBG7 LT AA-sf Affirmed AA-sf
C 95000CBH5 LT A-sf Affirmed A-sf
D 95000CBJ1 LT BB+sf Downgrade BBBsf
E 95000CAJ2 LT Bsf Downgrade BBB-sf
F 95000CAL7 LT CCCsf Affirmed CCCsf
G 95000CAN3 LT CCsf Downgrade CCCsf
X-A 95000CBE2 LT AAAsf Affirmed AAAsf
X-B 95000CBF9 LT AA-sf Affirmed AA-sf
X-F 95000CAC7 LT CCCsf Affirmed CCCsf
X-G 95000CAE3 LT CCsf Downgrade CCCsf
KEY RATING DRIVERS
Criteria Update: Criteria Update: The rating actions reflect the
impact of 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
10.6%. Six loans (21.1% of the pool) are considered Fitch Loans of
Concern (FLOCs), five (17.1%) of which are in special servicing.
The downgrades reflect the impact of the criteria and increased
pool loss expectations since the prior rating action, particularly
from the 10 South LaSalle Street loan.
The Negative Outlooks on classes C, D and E reflect the potential
for downgrades with higher than expected losses from specially
serviced loans as well as exposure to underperforming office
loans.
The largest contributor to modeled loss is 10 South LaSalle Street
(11.7%), which is secured by a 762,972 sf, 37-story office tower
located in Chicago's Central Loop/Financial District. The loan was
transferred to the special servicer in August 2022 due to imminent
monetary default. As of YE 2022, the subject debt service coverage
ratio (DSCR) and occupancy were reported to be 1.24x and 74%,
respectively. According to CoStar, the property lies within the
Central Loop Office Submarket of the Chicago market. As of 3Q23,
the average asking rental rates for the submarket and market were
$38.90 psf and $29.80 psf. Vacancy rate for the submarket and
market were 20.1% and 16.1%.
Fitch's loss expectations of 33% (prior to concentration
adjustments) reflects a 10% cap rate and a 10% stress to the YE
2021 NOI to reflect the property's performance decline and
worsening market vacancy rate. Fitch also included a higher default
probability to account for the transfer to special servicing,
deteriorated occupancy and high submarket vacancy.
The second largest contributor to modeled loss is 1006 Madison
Avenue (2.6%), which is secured by a five-story retail building
totaling approximately 3,917 sf located in the Upper East Side
neighborhood of Manhattan. It was built in 1910 and was renovated
in 2016.
In July 2018, the sole tenant, Roland Mouret, vacated the property.
The loan transferred to the special servicer in October 2018 for
imminent default, and subsequently failed to make any payments
after the November 2018 payment. The property became REO in August
2022. The special servicer has engaged a new property manager and
is currently evaluating future sale potential. A short-term lease
with a boutique/spa has been signed and the tenant has expressed
interest in extending the term beyond the November 2024 expiration;
however, negotiations remain ongoing.
Fitch's loss expectations of 95% (prior to concentration
adjustments) reflects a stress to the most recent appraised value
of $6.6 million; given the possibility of the existing tenant
vacating.
The third largest contributor to the modeled loss is 4400 Jenifer
Street (4.0%), which is secured by an 83,047-sf office property
located in the Uptown submarket of Washington, DC. The property is
a three-story, mid-rise office building which was built in 1972 and
renovated in 1999.
The property was 65.9% occupied as of June 2023, slightly up from
65.0% at YE 2021, but below the pre-pandemic occupancy rate which
averaged in the mid-80% range. According to CoStar, the vacancy
rates for the market and submarket were 16.2% and 15.6%
respectively. As of 3Q23, the average asking rental rates for the
submarket and market were $40.94 psf and $38.85 psf compared to the
average in-place rent of $39.85 psf per the June 2023 rent roll.
Fitch's loss expectations of 37.3% (prior to concentration
adjustments) reflects a 9.75% cap rate with no additional stress to
the YE 2022 NOI.
Increasing Credit Enhancement: CE has increased since the prior
rating action due to amortization, paydown and defeasance. The
pool's outstanding balance has been reduced by 26.7% since
issuance. Since the prior rating action, two loans have been
disposed. Eleven loans (16.15%) have been defeased since issuance.
To date, the trust has incurred $3.3 million in realized losses
(0.4% of the original pool balance).
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades could occur with an increase in pool-level losses,
particularly with the larger FLOCs and should the specially
serviced loans. Downgrades to classes A-4 through A-S and X-A are
not likely due to sufficient CE relative to expected losses,
expected amortization and their position in the capital structure,
but may occur should interest shortfalls affect these classes.
Downgrades to classes B, C, and X-B may occur should pool level
losses increase significantly, with continued performance declines
of the larger FLOCs. Downgrades to classes D and E may occur if the
three office loans; 10 South LaSalle Street,1006 Madison Avenue and
4400 Jenifer Street do not stabilize and performance deteriorates
further or if additional loans default or transfer to special
servicing. Downgrades to classes F and G would occur with increased
certainty of losses or as losses are realized.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades would occur with stable to improved asset performance,
coupled with additional paydown and/or defeasance. Upgrades to the
class B, C and X-B certificates are not expected, but may occur
with significant improvement in CE and/or defeasance.
Upgrades to classes E and F are considered unlikely, but may occur
if the number of FLOCs is reduced and would be limited based on the
sensitivity to concentrations or the potential for future
concentrations.
An upgrade to classes F and G is not likely without significantly
better than expected recoveries on the specially serviced loans.
The Negative Outlooks on classes C, D and E may be revised back to
Stable should the performance of 10 South LaSalle Street, 1006
Madison Avenue and 4400 Jenifer Street improve.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
WELLS FARGO 2019-C51: Fitch Affirms 'B-sf' Rating on Cl. G-RR Debts
-------------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of Wells Fargo Commercial
Mortgage Trust 2019-C51 (WFCM 2019-C51). The Rating Outlooks for
class E-RR, F-RR and G-RR were revised to Negative from Stable. The
Under Criteria Observation (UCO) has been resolved.
Entity/Debt Rating Prior
----------- ------ -----
Wells Fargo
Commercial Mortgage
2019-C51
A-2 95001VAR1 LT AAAsf Affirmed AAAsf
A-3 95001VAT7 LT AAAsf Affirmed AAAsf
A-4 95001VAU4 LT AAAsf Affirmed AAAsf
A-S 95001VAX8 LT AAAsf Affirmed AAAsf
A-SB 95001VAS9 LT AAAsf Affirmed AAAsf
B 95001VAY6 LT AA-sf Affirmed AA-sf
C 95001VAZ3 LT A-sf Affirmed A-sf
D 95001VAC4 LT BBB+sf Affirmed BBB+sf
E-RR 95001VAE0 LT BBB-sf Affirmed BBB-sf
F-RR 95001VAG5 LT BB-sf Affirmed BB-sf
G-RR 95001VAJ9 LT B-sf Affirmed B-sf
X-A 95001VAV2 LT AAAsf Affirmed AAAsf
X-B 95001VAW0 LT A-sf Affirmed A-sf
X-D 95001VAA8 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 criteria and generally
stable performance of the pool since the prior rating action.
Fitch's current ratings incorporate a 'Bsf' rating case loss of
4.50%. Fitch identified 10 loans (31.1% of the pool) as Fitch Loans
of Concern (FLOCs).
The Negative Outlooks on classes E-RR, F-RR and G-RR reflects
higher loss expectations on 450-460 Park Avenue South (6.5% of the
pool) due to the exposure to WeWork as well as the pool's high
office concentration (39.8%). Downgrades are considered possible
should the office FLOCs experience performance declines.
The largest contributor to overall loss expectations and the
largest increase in loss since the prior rating action is 450-460
Park Avenue South (6.5%), which is secured by 183,000 sf office
located in Midtown Manhattan, on the corner of Park Avenue and 31st
Street. The largest tenant at the property is WeWork (42% of the
NRA, 8/2034 lease expiration). Occupancy at the property has
dropped to 78% as of March 2023 from 88% at YE 2021 and 95% at
issuance. The NOI DSCR is 2.41x at YE 2022 compared to 2.82x at YE
2021 and 2.48x at YE 2020.
Fitch's 'B' rating case loss (prior to concentration adjustments)
is 19% and incorporates a 9.25% cap rate and a 15% stress to the YE
2022 NOI as well as a higher probability of default given the
concerns with WeWork.
Minimal Change to Credit Enhancement: As of the October 2023
remittance reporting, the pool's aggregate principal balance has
paid down by 4.5% to $696.7 million from $729.5 million at
issuance. Three limited service hotel loans totaling only $14.5
million were disposed of since issuance. The liquidation resulted
in a total loss of approximately $1.8 million, which was fully
incurred by the non-rated class H-RR. Interest shortfalls are
currently affecting class H-RR. There are 11 loans (51.2%) that are
full term interest only (IO). Eighteen loans (22.8%) are structured
with partial IO periods; 16 (18.4%) have begun amortizing. At
issuance, based on the scheduled balance at maturity, the pool was
expected to pay down by 7.6%.
High Office Concentration: The largest property-type concentration
is office at 39.8% of the pool, followed by retail at 27.9%, Mixed
Use at 10.6%, and Self-Storage at 10.5%.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Sensitivity factors that lead to downgrades include an increase in
pool level losses from underperforming or specially serviced
loans/assets.
Downgrades to the 'AA-sf' and 'AAAsf' categories are unlikely due
to increasing CE and expected continued amortization, but may occur
should interest shortfalls affect these classes.
Downgrades to classes rated in the 'BBB+sf' and A-sf' categories
may occur should overall pool losses increase significantly with
one or more large FLOCs transferring to special servicing and/or
suffer an outsized loss.
Downgrades to the 'B-sf', 'BB-sf' and 'BBB-sf' categories would
occur should the performance of the FLOCs, especially 450-460 Park
Avenue South, fail to stabilize and/or losses materialize and CE
becomes eroded.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Sensitivity factors that could lead to upgrades include stable to
improved asset performance coupled with paydown and/or defeasance.
Upgrades of the 'A-sf' and 'AA-sf' categories would likely occur
with significant improvement in CE and/or defeasance; however,
adverse selection, increased concentrations and further
underperformance of the FLOCs could cause this trend to reverse.
Upgrades to the 'BBBsf' and 'BBB+sf' categories would be limited
based on sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'Asf' if there
is likelihood for interest shortfalls.
Upgrades to 'B-sf', 'BB-sf' and 'BBB-sf' categories are not likely
until the later years in a transaction and only if the performance
of the remaining pool is stable and there is sufficient CE to the
classes.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
WELLS FARGO 2019-C52: Fitch Affirms B- Rating on Cl. G-RR Certs
---------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of Wells Fargo Commercial
Mortgage Trust 2019-C52, one class of 2019 C52 III Trust, and one
class of 2019 C52 IV Trust. The Rating Outlooks on classes E-RR,
F-RR and G-RR have been revised to Negative from Stable. The Rating
Outlook for class 2019 C52 III Trust was also revised to Negative
from Stable. The Under Criteria Observation (UCO) has been
resolved.
Entity/Debt Rating Prior
----------- ------ -----
MOA 2020-WC52 D
D-RR 90215QAA2 LT BBBsf Affirmed BBBsf
WFCM 2019-C52
A-2 95002MAT6 LT AAAsf Affirmed AAAsf
A-3 95002MAU3 LT AAAsf Affirmed AAAsf
A-4 95002MAW9 LT AAAsf Affirmed AAAsf
A-5 95002MAX7 LT AAAsf Affirmed AAAsf
A-S 95002MBA6 LT AAAsf Affirmed AAAsf
A-SB 95002MAV1 LT AAAsf Affirmed AAAsf
B 95002MBB4 LT AA-sf Affirmed AA-sf
C 95002MBC2 LT A-sf Affirmed A-sf
D-RR 95002MAA7 LT BBBsf Affirmed BBBsf
E-RR 95002MAE9 LT BBB-sf Affirmed BBB-sf
F-RR 95002MAG4 LT BB-sf Affirmed BB-sf
G-RR 95002MAJ8 LT B-sf Affirmed B-sf
X-A 95002MAY5 LT AAAsf Affirmed AAAsf
X-B 95002MAZ2 LT A-sf Affirmed A-sf
MOA 2020-WC52 E
E-RR 90216LAA2 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 last
rating action.
Stable Performance and Loss Expectations: The affirmations in WFCM
2019-C52 reflect generally stable pool performance since the prior
rating actions, as well as the impact of the updated criteria. The
Negative Outlooks on classes E-RR, F-RR and G-RR reflect
performance concerns for the largest drivers of expected losses
secured by office properties. Fitch's current ratings incorporate a
'Bsf' rating case loss of 4.3%. Fitch has identified 18 Fitch Loans
of Concern (FLOCs; 27.5% of the pool balance), up from six FLOCs
(5.2%) at Fitch's prior review.
The largest contributor to expected losses is Lenox Park (FLOC,
2.6%), which is secured by a 391,292-sf suburban office property
located in Memphis, TN. The property is on the watchlist for
declining occupancy and debt service coverage ratio (DSCR) and is
less than one-month delinquent as of October 2023. The YE 2022 NOI
DSCR was 1.04x, down from 2.45x at YE 2021. Occupancy has been
declining since issuance and fell to 37% in June 2023 from 56% at
YE 2022 and 87% at issuance as a number of tenants vacated at lease
expiration. The most recent significant drop in occupancy was due
to the largest tenant, the used car company American Car Center RAC
King (20.8% of NRA; August 2030 lease expiration) with 50
dealerships across 10 southern states, filing for bankruptcy in
March 2023 and closing all of its locations. The fourth largest
tenant (3.9% of NRA) is expected to vacate in December 2023.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 22% reflects a 15% stress to the YE 2022 NOI (which is 13% below
YE 2021 and 14% below issuance) and a 10.75% cap rate.
The second largest contributor to loss expectations, Capital Plaza
(FLOC, 4.2%), is secured by two office buildings in Jacksonville,
FL. The YE 2022 NOI decreased 37% from YE 2021 and is 39% below
issuance. NOI DSCR was 1.64x at YE 2022, compared to 2.59x at YE
2021 and 1.99x at issuance. Occupancy has decreased to 88% at June
2023 from 95% at YE 2022 and is consistent with 87% at issuance.
Per the latest servicer update, Johnson & Johnson Vision Care
(22.5% of NRA; December 2023 lease expiration) is expected to
downsize to approximately 38,579-sf (9.2% of NRA) from 94,138-sf
currently and occupy only the second floor and renew for three
years at lease expiration. Johnson & Johnson is approximately 26%
of current annual rent and downsizing reduces the current total
annual rent by approximately 15%. Upcoming rollover consists of
three leases for 24.7% of NRA in 2023, one lease for 0.4% of NRA in
2024 and two leases for 11.3% of NRA in 2027. Fitch's 'Bsf' rating
case loss (prior to concentration adjustments) of 10% reflects a
10% stress to the YE 2022 NOI and a 10.25% cap rate.
The third largest contributor to loss expectations is Sugar Creek
Center (FLOC, 3.2%), which is secured by a 193,996-sf office
property located at One Sugar Creek Center Boulevard, in Sugar
Land, TX. Occupancy declined to 69% in June 2023 from 76% in 2020
and 87% at issuance and the YE 2022 NOI is 24% below YE 2020 and
41% below issuance. Major tenants at the property include Amerex
Brokers (9.5% of NRA; December 2032 lease expiration - recently
downsized from 10.7% of NRA), Pronet Group (7.9% of NRA; January
2027 expiration) and Wholesome Sweeteners (7.6% of NRA; April 2024
expiration). Upcoming rollover consists of 7.3% of NRA in 2023,
16.4% in 2024 and 13.6% in 2025. The borrower is in renewal
discussions with Wholesome Sweeteners.
Fitch's 'Bsf' rating case loss (prior to concentration adjustments)
of 11% reflects a 10% stress to the YE 2022 NOI and a 10% cap
rate.
Minimal changes to Credit Enhancement (CE): As of the September
2023 distribution date, the pool's aggregate balance has been
reduced by 5.2% to $853.5 million from $900.2 million at issuance.
One loan has paid off. Five loans (9.6% of current pool) are fully
defeased. Twenty-five full-term IO loans comprise 42.8% of the
pool, 17 loans representing 29.5% of the pool were partial IO, and
24 loans representing 27.7% of the pool are balloon.
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 or specially serviced loans.
Downgrades to 'AAAsf', 'AAsf' and 'Asf' category rated classes
could occur if deal-level expected losses increase significantly
and/or interest shortfalls occur. For 'AAAsf' rated bonds,
additional stresses applied to defeased collateral due to the U.S.
sovereign rating being lower than 'AAA' could also contribute to
downgrades.
Classes rated in the 'BBBsf' to 'Bsf' rating category would be
downgraded should overall pool losses increase and/or one or more
of the larger FLOCs have an outsized loss, which would erode CE.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades would occur with stable to improved asset performance,
coupled with additional paydown and/or defeasance. Upgrades to the
'AAsf' to 'BBBsf' rating categories could occur with significant
improvement in CE and/or defeasance and with the stabilization of
properties currently designated as FLOCs.
Upgrades to the 'BBsf' to 'Bsf' rating categories are not likely
until the later years in the transaction and only if the
performance of the remaining pool is stable and/or properties
vulnerable to the pandemic stabilize, 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.
WFRBS COMMERCIAL 2013-C18: DBRS Confirms C Rating on 2 Classes
--------------------------------------------------------------
DBRS, Inc. downgraded its credit ratings on four classes of
Commercial Mortgage Pass-Through Certificates, Series 2013-C18
issued by WFRBS Commercial Mortgage Trust 2013-C18 as follows:
-- Class B at to BBB (sf) from AA (low) (sf)
-- Class C to BB (sf) from A (low) (sf)
-- Class PEX to BB (sf) from A (low) (sf)
-- Class D to C (sf) from CCC (sf)
In addition, DBRS Morningstar confirmed its credit ratings on the
following classes:
-- 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 E at C (sf)
-- Class F at C (sf)
The trends on Classes A-4, A-5, A-S, A-SB, and X-A remain Stable.
DBRS Morningstar changed the trends on Classes B, C, and PEX to
Negative from Stable. Classes D, E, and F are assigned credit
ratings that typically do not carry trends in commercial mortgage
backed securities (CMBS) credit ratings.
The downgrades and the trend changes follow a period of unpaid
interest to high investment-grade bonds and increased realized
losses, which have eroded credit support. Two assets, HIE at
Magnificent Mile (Prospectus ID#10, 3.5% of the pool) and Cedar
Rapids Office Portfolio (Prospectus ID#9, 3.4% of the pool), remain
in special servicing and both are real estate owned (REO). Since
the last credit rating action, HIE at Magnificent Mile has been
deemed to be nonrecoverable and the appraised value of Cedar Rapids
Office Portfolio has been cut nearly in half. Between these two
loans, cumulative nonrecoverable advances totaled $8.1 million as
of August 2023.
There are currently 43 nondelinquent loans remaining in the pool
contributing scheduled principal and interest. With the August 2023
remittance, the master servicer recouped approximately $2.9 million
of its outstanding advances from distributable interest, shorting
the unrated Class G certificate, all the way up to the Class A-S
certificate, which is rated AAA (sf) by DBRS Morningstar. Unpaid
interest has been fully reimbursed to the Class A-S certificate
with the September 2023 remittance, and partially to the Class B
certificate. Shortfalls continue to accumulate for all classes
below Class B. The downgrades for Classes B, C, and PEX were
largely driven by unpaid interest, as DBRS Morningstar has
little-to-no tolerance for interest shortfalls at the higher credit
rating categories.
In addition, the master servicer passed through $1.9 million in
realized losses with the August 2023 remittance, adding to the $5.3
million in losses that were passed through with the July 2023
remittance. According to the distribution statements, the servicer
diverted distributable principal in an effort to repay prior
shortfalls. Since the last credit rating action, the trust has
realized approximately $7.2 million in losses, further reducing
credit support to rated bonds. There is uncertainty surrounding the
servicer's plans to recoup the remaining non-recoverable advances
as well as the timing of reimbursement and ultimate repayment of
the bonds. As a result, DBRS Morningstar has also downgraded Class
D and revised the trends on Classes B, C, and PEX to Negative from
Stable. DBRS Morningstar will continue to monitor the deal's wind
down, as all of the outstanding loans are scheduled to mature
within the next few months. While DBRS Morningstar expects that the
majority of these loans will repay from the trust, the potential
for adverse selection and increased concentration highlights the
binary risks in the current capital structure.
HIE at Magnificent Mile, secured by a limited-service hotel located
within the River North neighborhood of Chicago, became REO in
December 2022. The performance declines preceded the Coronavirus
Disease (COVID-19) pandemic and the property was most recently
appraised in March 2023 at a value of $15.0 million, up slightly
from the August 2022 appraised value of $12.9 million, but
approximately 58.7% below the issuance value of $36.3 million.
Based on the most recent value and the trust's exposure to the
loan, DBRS Morningstar expects a loss severity approaching 100% at
resolution.
The Cedar Rapids Office Portfolio has been REO since June 2020. The
loan is secured by two cross-collateralized Class A office
buildings in Cedar Rapids, Iowa. The buildings were most recently
appraised in June 2023 for just under $6.0 million, down from the
October 2022 appraised value of $10.1 million and 84.0% below the
issuance appraised value of $36.2 million. Since the last credit
rating action, outstanding advances for this loan were deemed
nonrecoverable. Based on the implied LTV of more than 300%, DBRS
Morningstar expects a full loss of the loan amount upon
liquidation.
Notes: All figures are in U.S. dollars unless otherwise noted.
[*] DBRS Reviews 752 Classes From 18 US RMBS Transactions
---------------------------------------------------------
DBRS, Inc. reviewed 752 classes from 18 U.S. residential
mortgage-backed securities (RMBS) transactions. The 18 transactions
are generally classified as prime transactions. Of the 752 classes
reviewed, DBRS Morningstar upgraded 112 credit ratings and
confirmed 640 credit ratings.
The Issuers are:
OBX 2021-INV3 Trust
MFA 2021-AEINV1 Trust
RATE Mortgage Trust 2021-J3
RATE Mortgage Trust 2021-J4
Flagstar Mortgage Trust 2021-12
J.P. Morgan Mortgage Trust 2021-13
GS Mortgage-Backed Securities Trust 2019-PJ1
GS Mortgage-Backed Securities Trust 2021-MM1
GS Mortgage-Backed Securities Trust 2021-PJ10
J.P. Morgan Mortgage Trust 2020-LTV1
J.P. Morgan Mortgage Trust 2020-INV1
Citigroup Mortgage Loan Trust 2021-INV3
GS Mortgage-Backed Securities Trust 2019-PJ3
GS Mortgage-Backed Securities Trust 2019-PJ2
GS Mortgage-Backed Securities Trust 2020-PJ1
Wells Fargo Mortgage Backed Securities 2020-2 Trust
Wells Fargo Mortgage Backed Securities 2021-INV2 Trust
J.P. Morgan Mortgage Trust 2020-3
The Affected Ratings are available at https://bit.ly/3FpWMA6
The credit rating upgrades reflect positive performance trends and
increases in credit support sufficient to withstand stresses at
their new rating levels. The credit rating confirmations reflect
asset performance and credit-support levels that are consistent
with the current credit ratings.
[*] Fitch Affirms 113 Classes of 8 CMBS Deals Issued 2016 to 2019
-----------------------------------------------------------------
Fitch Ratings has affirmed 113 classes of eight U.S. CMBS
transactions from the 2016 through 2019 vintages. The Rating
Outlooks remain Negative for 25 classes, and Stable for 60 classes
following their affirmations. The Rating Watch Negative (RWN) is
maintained on one class in the UBS 2017-C3 transaction.
The Rating Outlooks on 16 classes were revised to Negative from
Stable in connection with the correction of an error.
This rating action commentary corrects an error with respect to the
Rating Outlooks for the 16 classes, originally published between
July 13, 2023 and Oct. 9, 2023, in which Fitch incorrectly assigned
a Stable Outlook as a result of an incorrect model input for loans
with subordinate debt.
Entity/Debt Rating Prior
----------- ------ -----
UBS 2017-C3
A-2 90276GAP7 LT AAAsf Affirmed AAAsf
A-3 90276GAR3 LT AAAsf Affirmed AAAsf
A-4 90276GAS1 LT AAAsf Affirmed AAAsf
A-S 90276GAW2 LT AAAsf Rating Watch Maintained AAAsf
A-SB 90276GAQ5 LT AAAsf Affirmed AAAsf
B 90276GAX0 LT AA-sf Affirmed AA-sf
C 90276GAY8 LT A-sf Affirmed A-sf
D-RR 90276GAA0 LT BBBsf Affirmed BBBsf
E-RR 90276GAC6 LT BBB-sf Affirmed BBB-sf
F-RR 90276GAE2 LT B-sf Affirmed B-sf
G-RR 90276GAG7 LT CCCsf Affirmed CCCsf
X-A 90276GAU6 LT AAAsf Affirmed AAAsf
X-B 90276GAV4 LT AA-sf Affirmed AA-sf
UBS 2018-C14
A-3 90278KAZ4 LT AAAsf Affirmed AAAsf
A-4 90278KBA8 LT AAAsf Affirmed AAAsf
A-S 90278KBD2 LT AAAsf Affirmed AAAsf
A-SB 90278KAY7 LT AAAsf Affirmed AAAsf
B 90278KBE0 LT AA-sf Affirmed AA-sf
C 90278KBF7 LT A-sf Affirmed A-sf
D 90278KAJ0 LT BBBsf Affirmed BBBsf
E 90278KAL5 LT BBsf Affirmed BBsf
F 90278KAN1 LT CCCsf Affirmed CCCsf
G 90278KAQ4 LT CCCsf Affirmed CCCsf
X-A 90278KBB6 LT AAAsf Affirmed AAAsf
X-B 90278KBC4 LT AA-sf Affirmed AA-sf
X-D 90278KAA9 LT BBsf Affirmed BBsf
X-F 90278KAC5 LT CCCsf Affirmed CCCsf
X-G 90278KAE1 LT CCCsf Affirmed CCCsf
CSAIL 2017-C8
A-3 12595BAC5 LT AAAsf Affirmed AAAsf
A-4 12595BAD3 LT AAAsf Affirmed AAAsf
A-S 12595BBF7 LT AAAsf Affirmed AAAsf
A-SB 12595BAE1 LT AAAsf Affirmed AAAsf
B 12595BAH4 LT AA-sf Affirmed AA-sf
C 12595BAJ0 LT A-sf Affirmed A-sf
D 12595BAK7 LT BBB-sf Affirmed BBB-sf
E 12595BAM3 LT B-sf Affirmed B-sf
F 12595BAP6 LT CCCsf Affirmed CCCsf
V1-A 12595BBQ3 LT AAAsf Affirmed AAAsf
V1-B 12595BBR1 LT A-sf Affirmed A-sf
V1-D 12595BBS9 LT BBB-sf Affirmed BBB-sf
X-A 12595BAF8 LT AAAsf Affirmed AAAsf
X-B 12595BAG6 LT A-sf Affirmed A-sf
Benchmark 2019-B12
A-2 08162FAB9 LT AAAsf Affirmed AAAsf
A-3 08162FAC7 LT AAAsf Affirmed AAAsf
A-4 08162FAD5 LT AAAsf Affirmed AAAsf
A-5 08162FAF0 LT AAAsf Affirmed AAAsf
A-AB 08162FAE3 LT AAAsf Affirmed AAAsf
A-S 08162FAG8 LT AAAsf Affirmed AAAsf
B 08162FAH6 LT AA-sf Affirmed AA-sf
C 08162FAJ2 LT A-sf Affirmed A-sf
D 08162FAN3 LT BBBsf Affirmed BBBsf
E 08162FAP8 LT BBB-sf Affirmed BBB-sf
F-RR 08162FAQ6 LT BB-sf Affirmed BB-sf
G-RR 08162FAR4 LT B-sf Affirmed B-sf
X-A 08162FAK9 LT AAAsf Affirmed AAAsf
X-B 08162FAL7 LT A-sf Affirmed A-sf
X-D 08162FAM5 LT BBB-sf Affirmed BBB-sf
MSBAM 2016-C32
A-3 61691GAR1 LT AAAsf Affirmed AAAsf
A-4 61691GAS9 LT AAAsf Affirmed AAAsf
A-S 61691GAV2 LT AAAsf Affirmed AAAsf
A-SB 61691GAQ3 LT AAAsf Affirmed AAAsf
B 61691GAW0 LT AAsf Affirmed AAsf
C 61691GAX8 LT A-sf Affirmed A-sf
D 61691GAC4 LT BBB-sf Affirmed BBB-sf
E 61691GAE0 LT BB-sf Affirmed BB-sf
F 61691GAG5 LT CCCsf Affirmed CCCsf
X-A 61691GAT7 LT AAAsf Affirmed AAAsf
X-B 61691GAU4 LT AAsf Affirmed AAsf
X-D 61691GAA8 LT BBB-sf Affirmed BBB-sf
WFCM 2016-C36
A-3 95000MBN0 LT AAAsf Affirmed AAAsf
A-4 95000MBP5 LT AAAsf Affirmed AAAsf
A-S 95000MBR1 LT AA+sf Affirmed AA+sf
A-SB 95000MBQ3 LT AAAsf Affirmed AAAsf
B 95000MBU4 LT Asf Affirmed Asf
C 95000MBV2 LT BBBsf Affirmed BBBsf
D 95000MAC5 LT BB-sf Affirmed BB-sf
E 95000MAJ0 LT CCCsf Affirmed CCCsf
E-1 95000MAE1 LT B-sf Affirmed B-sf
E-2 95000MAG6 LT CCCsf Affirmed CCCsf
EF 95000MAS0 LT CCCsf Affirmed CCCsf
F 95000MAQ4 LT CCCsf Affirmed CCCsf
X-A 95000MBS9 LT AAAsf Affirmed AAAsf
X-B 95000MBT7 LT Asf Affirmed Asf
X-D 95000MAA9 LT BB-sf Affirmed BB-sf
BMARK 2018-B8
A-2 08162UAT7 LT AAAsf Affirmed AAAsf
A-3 08162UAU4 LT AAAsf Affirmed AAAsf
A-4 08162UAV2 LT AAAsf Affirmed AAAsf
A-5 08162UAW0 LT AAAsf Affirmed AAAsf
A-S 08162UBA7 LT AAAsf Affirmed AAAsf
A-SB 08162UAX8 LT AAAsf Affirmed AAAsf
B 08162UBB5 LT AA-sf Affirmed AA-sf
C 08162UBC3 LT A-sf Affirmed A-sf
D 08162UAC4 LT BBBsf Affirmed BBBsf
E-RR 08162UAE0 LT BBsf Affirmed BBsf
F-RR 08162UAG5 LT B-sf Affirmed B-sf
G-RR 08162UAJ9 LT CCCsf Affirmed CCCsf
X-A 08162UAY6 LT AAAsf Affirmed AAAsf
X-B 08162UAZ3 LT AA-sf Affirmed AA-sf
X-D 08162UAA8 LT BBBsf Affirmed BBBsf
GSMS 2017-GS7
A-2 36254CAT7 LT AAAsf Affirmed AAAsf
A-3 36254CAU4 LT AAAsf Affirmed AAAsf
A-4 36254CAV2 LT AAAsf Affirmed AAAsf
A-AB 36254CAW0 LT AAAsf Affirmed AAAsf
A-S 36254CAZ3 LT AAAsf Affirmed AAAsf
B 36254CBA7 LT AA-sf Affirmed AA-sf
C 36254CBB5 LT A-sf Affirmed A-sf
D 36254CAA8 LT BBB+sf Affirmed BBB+sf
E 36254CAE0 LT BBB-sf Affirmed BBB-sf
F-RR 36254CAG5 LT BBB-sf Affirmed BBB-sf
G-RR 36254CAJ9 LT BB-sf Affirmed BB-sf
H-RR 36254CAL4 LT B-sf Affirmed B-sf
X-A 36254CAX8 LT AAAsf Affirmed AAAsf
X-B 36254CAY6 LT A-sf Affirmed A-sf
X-D 36254CAC4 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of the
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
Stable Performance and 'Bsf' Loss Expectations: The affirmations
reflect the impact of the updated criteria and stable loss
expectations for the pool since Fitch's prior rating action
including the correction of the error.
Deal-level 'Bsf' rating case losses range from 3.65% to 7.72%, and
are noted individually as follows:
- BMARK 2018-B8: 5.33%;
- BMARK 2019-B12: 3.65%;
- CSAIL 2017-C8: 4.31%;
- GSMS 2017-GS7: 4.25%;
- MSBAM 2016-C32: 4.90%;
- UBS 2017-C3: 4.75%;
- UBS 2018-C14: 4.88%;
- WFCM 2016-C36: 7.72%.
Across these eight transactions, Fitch has identified 67 loans as
Fitch Loans of Concern (FLOCs) due to current or expected future
performance declines, borrower-related issues, refinance risk
and/or lease rollover concerns. The concentration of FLOCs average
27.1% (ranging from 9.2% to 46.0%), which includes specially
serviced loans averaging 5.4% (ranging from 0% to 18.2%).
The Negative Outlooks reflect elevated office concentration levels,
performance concerns of office and retail specially serviced loans
and FLOCs and/or an additional sensitivity scenario that applies a
heightened probability of default expectation on the loans noted
below.
- BMARK 2018-B8: 590 East Middlefield;
- BMARK 2019-B12: The Zappettini Portfolio;
- CSAIL 2017-C8: 260-300 Boston Post Road and Livingston Town
Center;
- GSMS 2017-GS7: Long Island Prime Portfolio - Melville and One
West 34th Street;
- MSBAM 2016-C32: 100 Hamilton;
- UBS 2017-C3: Center 78;
- UBS 2018-C14: 1670 Broadway, GNL Portfolio, Nebraska Crossing and
Barrywoods Crossing;
- WFCM 2016-C36: Plaza America I & II and Mall at Turtle Creek.
Changes to CE: These pools' aggregate balance has been reduced by
an average of 11.5% (ranging from 3.6% to 14.2%).
Defeasance: The transactions have an average defeasance
concentration of 8%, with the highest in the UBS 2017-C3
transaction.
The RWN on class A-S in UBS 2017-C3 reflects a defeasance
concentration of 29.6% of the pool that has a remaining term of
four years, in combination with limited rating headroom at the
'AAAsf' category. Based on criteria, when loans are defeased with
non-'AAA' rated collateral, Fitch will consider the magnitude of
the exposure to the pool in relationship to the available CE, as
well as the remaining tenor of the exposure relative to the
remaining tenor of the bonds to determine if ratings would be
affected.
The class is considered susceptible to downgrade given both the
high exposure to defeasance with a longer remaining term, as well
as the limited rating cushion at the 'AAAsf' level at the current
CE. The RWN will be resolved within six months as Fitch evaluates
the treatment of defeasance for ratings rated higher than the U.S.
sovereign IDR.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The Negative Outlooks reflect possible future downgrades stemming
from concerns with potential further declines in performance that
could result in higher expected losses on FLOCs. If expected losses
do increase, downgrades to these classes are anticipated.
Downgrades to 'AAAsf' and 'AAsf' category rated classes could occur
if deal-level expected losses increase significantly and/or
interest shortfalls occur. For 'AAAsf' rated bonds, additional
stresses applied to defeased collateral if the U.S. sovereign
rating is lower than 'AAA' could also contribute to downgrades.
Downgrades to 'Asf' and 'BBBsf' category rated classes could occur
if deal-level losses increase significantly on non-defeased loans
in the transactions and with outsized losses on larger FLOCs.
Downgrades to 'BBsf' and 'Bsf' category rated classes are possible
with higher expected losses from continued performance of the FLOCs
and with greater certainty of near-term losses on specially
serviced assets and other FLOCs.
Downgrades to distressed ratings of 'CCCsf' through 'Csf' would
occur as losses become more certain and/or as losses are incurred.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to 'AAsf' and 'Asf' category rated classes are possible
with significantly increased CE from paydowns, coupled with
stable-to-improved pool-level loss expectations and performance
stabilization of FLOCs. Upgrades of these classes to 'AAAsf' will
also consider the concentration of defeased loans in the
transaction.
Upgrades to the 'BBBsf' category rated classes would be limited
based on sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'Asf' if there
is likelihood for interest shortfalls.
Upgrades to 'BBsf' and 'Bsf' category rated classes are not likely
until the later years in a transaction and only if the performance
of the remaining pool is stable and there is sufficient CE to the
classes.
Upgrades to distressed ratings of 'CCCsf' through 'Csf' are not
expected, but possible with better than expected recoveries on
specially serviced loans or significantly higher values on FLOCs.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
[*] Moody's Hikes Ratings of 30 Bonds Issued by Towd Point
----------------------------------------------------------
Moody's Investors Service, on Oct. 23, 2023, upgraded the ratings
of 30 bonds from 12 transactions issued by Towd Point Mortgage
Trust between 2015 and 2018. The transactions are backed by
seasoned performing and modified re-performing residential mortgage
loans (RPL). The collateral is serviced by multiple servicers.
The complete rating actions are as follows:
Issuer: Towd Point Mortgage Trust 2015-3
Cl. B3, Upgraded to A3 (sf); previously on Jan 13, 2023 Upgraded to
Baa2 (sf)
Issuer: Towd Point Mortgage Trust 2015-4
Cl. B3, Upgraded to Baa2 (sf); previously on Mar 16, 2022 Upgraded
to Ba1 (sf)
Issuer: Towd Point Mortgage Trust 2015-5
Cl. B3, Upgraded to Ba1 (sf); previously on Mar 16, 2022 Upgraded
to Ba3 (sf)
Issuer: Towd Point Mortgage Trust 2015-6
Cl. B2, Upgraded to Aaa (sf); previously on Jan 13, 2023 Upgraded
to Aa2 (sf)
Cl. B3, Upgraded to B1 (sf); previously on Mar 16, 2022 Upgraded to
B2 (sf)
Issuer: Towd Point Mortgage Trust 2016-1
Cl. B3, Upgraded to Baa1 (sf); previously on Jan 13, 2023 Upgraded
to Baa3 (sf)
Issuer: Towd Point Mortgage Trust 2016-2
Cl. B2, Upgraded to Aa1 (sf); previously on Jan 13, 2023 Upgraded
to Aa2 (sf)
Cl. B3, Upgraded to Ba3 (sf); previously on Mar 16, 2022 Upgraded
to B2 (sf)
Issuer: Towd Point Mortgage Trust 2016-3
Cl. B3, Upgraded to A1 (sf); previously on Jan 13, 2023 Upgraded to
A2 (sf)
Cl. B4, Upgraded to B3 (sf); previously on Mar 16, 2022 Upgraded to
Caa2 (sf)
Issuer: Towd Point Mortgage Trust 2016-4
Cl. B2, Upgraded to Aaa (sf); previously on Jan 13, 2023 Upgraded
to Aa1 (sf)
Cl. B3, Upgraded to Aa2 (sf); previously on Jan 13, 2023 Upgraded
to Aa3 (sf)
Cl. B4, Upgraded to Baa3 (sf); previously on Jan 13, 2023 Upgraded
to Ba2 (sf)
Issuer: Towd Point Mortgage Trust 2017-2
Cl. B1, Upgraded to Aaa (sf); previously on Jan 13, 2023 Upgraded
to Aa1 (sf)
Cl. B2, Upgraded to Aa3 (sf); previously on Jan 13, 2023 Upgraded
to A2 (sf)
Cl. B3, Upgraded to Baa1 (sf); previously on Mar 16, 2022 Upgraded
to Baa3 (sf)
Issuer: Towd Point Mortgage Trust 2017-3
Cl. B1, Upgraded to Aa2 (sf); previously on Jan 13, 2023 Upgraded
to Aa3 (sf)
Cl. B2, Upgraded to A2 (sf); previously on Jan 13, 2023 Upgraded to
A3 (sf)
Cl. B3, Upgraded to Ba1 (sf); previously on Jan 13, 2023 Upgraded
to Ba3 (sf)
Cl. M2, Upgraded to Aaa (sf); previously on Jan 13, 2023 Upgraded
to Aa1 (sf)
Issuer: Towd Point Mortgage Trust 2018-2
Cl. B1, Upgraded to Baa3 (sf); previously on Sep 28, 2020
Downgraded to Ba2 (sf)
Cl. B2, Upgraded to Ba2 (sf); previously on Sep 28, 2020 Confirmed
at B1 (sf)
Cl. M2, Upgraded to Aa2 (sf); previously on Jan 13, 2023 Upgraded
to A1 (sf)
Issuer: Towd Point Mortgage Trust 2018-6
Cl. A2, Upgraded to Aaa (sf); previously on Jan 13, 2023 Upgraded
to Aa1 (sf)
Cl. A3, Upgraded to Aaa (sf); previously on Jan 13, 2023 Upgraded
to Aa1 (sf)
Cl. A4, Upgraded to Aa1 (sf); previously on Jan 13, 2023 Upgraded
to Aa2 (sf)
Cl. B1, Upgraded to B2 (sf); previously on Feb 7, 2020 Assigned
Caa1 (sf)
Cl. B2, Upgraded to Caa2 (sf); previously on Feb 7, 2020 Assigned
Ca (sf)
Cl. M1, Upgraded to Aa3 (sf); previously on Jan 13, 2023 Upgraded
to A2 (sf)
Cl. M2, Upgraded to Ba1 (sf); previously on Sep 28, 2020 Downgraded
to Ba3 (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.
[*] Moody's Takes Action on $73.1MM of US RMBS Issued 1997-2005
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of four bonds
and downgraded the ratings of two bonds from five US residential
mortgage-backed transactions (RMBS), backed by, Alt-A and subprime
mortgages issued by multiple issuers.
The complete rating actions are as follows:
Issuer: Deutsche Alt-A Securities, Inc. Mortgage Loan Trust Series
2003-2XS
Cl. M-1, Downgraded to B3 (sf); previously on Sep 20, 2018 Upgraded
to B2 (sf)
Issuer: IMC Home Equity Loan Trust 1997-3
M-1, Downgraded to B2 (sf); previously on Oct 18, 2012 Downgraded
to B1 (sf)
Issuer: IMC Home Equity Loan Trust 1998-5
A-5, Upgraded to A2 (sf); previously on May 18, 2018 Upgraded to
Baa1 (sf)
A-6, Upgraded to A2 (sf); previously on May 18, 2018 Upgraded to
Baa1 (sf)
Issuer: NovaStar Mortgage Funding Trust 2005-3
Cl. M-3, Upgraded to Baa1 (sf); previously on Apr 6, 2022 Upgraded
to Baa3 (sf)
Issuer: NovaStar Mortgage Funding Trust, Series 2005-1
Cl. M-6, Upgraded to Baa1 (sf); previously on Apr 6, 2022 Upgraded
to Baa2 (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 an increase in credit enhancement available to
the bonds.
The rating downgrades of Class M-1 issued by Deutsche Alt-A
Securities, Inc. Mortgage Loan Trust Series 2003-2XS and Class M-1
issued by IMC Home Equity Loan Trust 1997-3 are due to outstanding
interest shortfalls on the bonds that are not expected to be
recouped. These bonds have weak interest recoupment mechanism where
missed interest payments will likely result in a permanent interest
loss. Unpaid interest owed to bonds with weak interest recoupment
mechanisms are reimbursed sequentially based on bond priority, from
excess interest, if available, and often only after the
overcollateralization has built to a pre-specified target amount.
In transactions where overcollateralization has already been
reduced or depleted due to poor performance, any such missed
interest payments to these bonds is unlikely to be repaid.
Principal Methodologies
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
[*] Moody's Upgrades Ratings on $226MM of US RMBS Issued 2017-2019
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 14 bonds from
five transactions issued by Mill City. The transactions are backed
by seasoned performing and modified re-performing residential
mortgage loans (RPL) and the underlying collaterals are serviced by
multiple servicers.
A List of Affected Credit Ratings is available at
https://urlcurt.com/u?l=e4CzFR
The complete rating actions are as follows:
Issuer: Mill City Mortgage Loan Trust 2017-2
Cl. B1, Upgraded to Aaa (sf); previously on Jan 12, 2023 Upgraded
to Aa1 (sf)
Issuer: Mill City Mortgage Loan Trust 2017-3
Cl. B1, Upgraded to Aa1 (sf); previously on Jan 12, 2023 Upgraded
to Aa2 (sf)
Issuer: MILL CITY MORTGAGE LOAN TRUST 2018-3
Cl. A4, Upgraded to Aaa (sf); previously on Jan 12, 2023 Upgraded
to Aa1 (sf)
Cl. M3, Upgraded to Aa1 (sf); previously on Jan 12, 2023 Upgraded
to Aa2 (sf)
Issuer: MILL CITY MORTGAGE LOAN TRUST 2018-4
Cl. A3, Upgraded to Aaa (sf); previously on Jan 12, 2023 Upgraded
to Aa1 (sf)
Cl. A4, Upgraded to Aa2 (sf); previously on Jan 12, 2023 Upgraded
to Aa3 (sf)
Cl. M2, Upgraded to Aaa (sf); previously on Jan 12, 2023 Upgraded
to Aa1 (sf)
Cl. M3, Upgraded to Aa3 (sf); previously on Jan 12, 2023 Upgraded
to A1 (sf)
Issuer: Mill City Mortgage Loan Trust 2019-1
Cl. A3, Upgraded to Aaa (sf); previously on Jan 12, 2023 Upgraded
to Aa1 (sf)
Cl. A4, Upgraded to Aa2 (sf); previously on Jan 12, 2023 Upgraded
to Aa3 (sf)
Cl. B1, Upgraded to Baa2 (sf); previously on Jan 12, 2023 Upgraded
to Baa3 (sf)
Cl. B2, Upgraded to B2 (sf); previously on Jan 12, 2023 Upgraded to
B3 (sf)
Cl. M2, Upgraded to Aaa (sf); previously on Jan 12, 2023 Upgraded
to Aa2 (sf)
Cl. M3, Upgraded to A1 (sf); previously on Jan 12, 2023 Upgraded to
A2 (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 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.
[*] Moody's Upgrades Ratings on $74MM of US RMBS Issued 2003-2007
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 11 bonds from
five US residential mortgage-backed transactions (RMBS), backed by
option ARM and subprime mortgages issued by multiple issuers.
Complete rating actions are as follows:
Issuer: Chevy Chase Funding LLC, Mortgage-Backed Certificates,
Series 2005-1
Cl. A-1, Upgraded to B1 (sf); previously on Apr 13, 2017 Upgraded
to B2 (sf)
Underlying Rating: Upgraded to B1 (sf); previously on Apr 13, 2017
Upgraded to B2 (sf)
Financial Guarantor: Ambac Assurance Corporation (Segregated
Account) - Unrated
Cl. A-1I, Upgraded to B1 (sf); previously on Apr 13, 2017 Upgraded
to B2 (sf)
Underlying Rating: Upgraded to B1 (sf); previously on Apr 13, 2017
Upgraded to B2 (sf)
Financial Guarantor: Ambac Assurance Corporation (Segregated
Account) - Unrated
Cl. A-2, Upgraded to B1 (sf); previously on Apr 13, 2017 Upgraded
to B2 (sf)
Cl. A-2I, Upgraded to B1 (sf); previously on Apr 13, 2017 Upgraded
to B2 (sf)
Cl. A-NA, Upgraded to B1 (sf); previously on Apr 13, 2017 Upgraded
to B2 (sf)
Underlying Rating: Upgraded to B1 (sf); previously on Apr 13, 2017
Upgraded to B2 (sf)
Financial Guarantor: Ambac Assurance Corporation (Segregated
Account) - Unrated
Cl. NIO*, Upgraded to B1 (sf); previously on Oct 27, 2017 Confirmed
at B2 (sf)
Issuer: Morgan Stanley ABS Capital I Inc. Trust 2007-HE7
Cl. A-2B, Upgraded to Baa1 (sf); previously on Jan 6, 2023 Upgraded
to Baa3 (sf)
Issuer: Nationstar Home Equity Loan Asset-Backed Certificates,
Series 2007-C
Cl. 1-AV-1, Upgraded to Aa3 (sf); previously on Jan 6, 2023
Upgraded to A2 (sf)
Cl. 2-AV-4, Upgraded to A1 (sf); previously on Jan 6, 2023 Upgraded
to A3 (sf)
Issuer: RAMP Series 2003-RS7 Trust
M-II-1, Upgraded to A3 (sf); previously on Mar 17, 2017 Upgraded to
Baa2 (sf)
Issuer: RAMP Series 2004-RS1 Trust
M-II-1, Upgraded to A1 (sf); previously on Dec 11, 2018 Upgraded to
A2 (sf)
* Reflects Interest-Only Classes
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. The rating upgrade of Class NIO, an interest only
bond from Chevy Chase Funding LLC, Mortgage-Backed Certificates,
Series 2005-1, reflects the updated performance of the underlying
collateral and bonds.
Principal Methodologies
The principal methodology used in rating all classes except
interest-only classes was "US RMBS Surveillance Methodology"
published in July 2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
An IO bond may be upgraded or downgraded, within the constraints
and provisions of the IO methodology, based on lower or higher
realized and expected loss due to an overall improvement or decline
in the credit quality of the reference bonds.
[*] S&P Lowers Ratings on 10 Classes From 10 U.S. RMBS to 'D (sf)'
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on 10 classes of mortgage
pass-through certificates from 10 U.S. residential mortgage-backed
securities (RMBS) transactions issued between 2003 and 2007 to 'D
(sf)'. These transactions are backed by prime jumbo, alternative-A,
negative-amortization or subprime collateral.
The downgrades reflect S&P's assessment of the principal
write-downs' impact on the affected classes during recent
remittance periods. All of the classes whose ratings were lowered
to 'D (sf)' were rated either 'CCC (sf)' or 'CC (sf)' before the
rating action.
All of the transactions in this review receive credit enhancement
from a combination of subordination, excess spread, and
overcollateralization (where applicable).
S&P will continue to monitor our ratings on securities that
experience principal write-downs, and it will further adjust its
ratings as it considered appropriate according to our criteria.
Ratings list
RATING
ISSUER NAME
PRIMARY RATING
SERIES CLASS CUSIP TO FROM DRIVER(S)
Alternative Loan Trust 2005-11CB
2005-11CB 3-A-1 12667GJR5 D (sf) CCC (sf) Principal-
writedown
Bear Stearns Asset Backed Securities Trust 2003-AC4
2003-AC4 M-2 07384YKJ4 D (sf) CCC (sf) Principal-
writedown
CHL Mortgage Pass-Through Trust 2005-2
2005-2 1-A-1 12669GPN5 D (sf) CC (sf) Principal-
writedown
Harborview Mortgage Loan Trust 2004-6
2004-6 B-1 41161PFX6 D (sf) CCC (sf) Principal-
writedown
MASTR Alternative Loan Trust 2003-7
2003-7 B-1 576434JL9 D (sf) CCC (sf) Principal-
writedown
RASC Series 2004-KS5 Trust
2004-KS5 M-I-2 76110WYG5 D (sf) CCC (sf) Principal-
writedown
RESI Finance Limited Partnership 2004-B
2004-B B3 74951PCW6 D (sf) CCC (sf) Principal-
writedown
WaMu Mortgage Pass-Through Certificates Series 2003-AR10 Trust
2003-AR10 B-2 92922FED6 D (sf) CCC (sf) Principal-
writedown
WaMu Mortgage Pass-Through Certificates Series 2004-AR14 Trust
2004-AR14 B-1 939336W58 D (sf) CCC (sf) Principal-
writedown
WaMu Mortgage Pass-Through Certificates Series 2007-OA6 Trust
2007-OA6 1A 92927BAA0 D (sf) CCC (sf) Principal-
writedown
[*] S&P Places 16 Ratings from 11 CLO transactions on Watch Negativ
-------------------------------------------------------------------
S&P Global Ratings placed 16 ratings on CreditWatch with negative
implications from 11 CLO transactions, most of which are in their
amortization phase. The portfolios of all the CLOs backing these
notes comprise broadly syndicated loans.
While paydowns to senior notes are generally a positive for the
credit enhancement of the senior portion of the capital structure,
increased exposure to lower quality assets and portfolio
concentration in such amortizing transactions can increase the
credit risk of the junior CLO notes.
This is the case for 16 tranches, four in the 'BB' category and 12
in the 'B' category, with ratings that are being placed on
CreditWatch with negative implications. The placements reflect the
decline in their overcollateralization levels, which is likely due
to a combination of par losses, increases in defaults, and
increases in haircuts due to excess exposure to 'CCC' collateral.
In addition, S&P considered other factors, such as indicative cash
flow runs, current exposure to 'CCC' and lower collateral, and an
estimate of the tranches' current overcollateralization ratios
without 'CCC' haircuts in relation to the overall market average.
S&P intends to resolve these CreditWatch placements within 90 days,
following a committee review.
S&P will continue to monitor the transactions it rates and takes
rating actions, including CreditWatch placements, as S&P deems
appropriate.
Ratings list
RATING
ISSUER TRANCHE CUSIP TO FROM
Peaks CLO 1 Ltd. E-R 70469TAG8 BB- (sf)/ BB- (sf)
Watch Neg
Peaks CLO 1 Ltd. F-R 70469TAH6 B- (sf)/ B- (sf)
Watch Neg
Chenango Park D 16410LAA1 B- (sf)/ BB- (sf)
CLO Ltd. Watch Neg
Chenango Park E 16410LAC7 B- (sf)/ B- (sf)
CLO Ltd. Watch Neg
Bain Capital E 05683MAA2 BB- (sf)/ BB- (sf)
Credit CLO Watch Neg
2018-1 Ltd.
Voya CLO 2016-1 Ltd. D-R 92915EAG5 B+ (sf)/ B+ (sf)
Watch Neg
LCM XXIII Ltd. D 52111RAA5 B+ (sf)/ B+ (sf)
Watch Neg
Race Point IX
CLO Ltd. D-R G73376AM0 B (sf)/ B (sf)
Watch Neg
Atlas Senior Loan E 04942AAA8 B+ (sf)/ B+ (sf)
Fund XIII Ltd. Watch Neg
Race Point VIII
CLO Ltd. E-R 74982KAE2 B- (sf)/ B- (sf)
Watch Neg
Ocean Trails CLO V E-RR 67515RAD9 B (sf) B (sf)
Watch Neg
Ocean Trails CLO V F-RR 67515RAF4 B- (sf)/ B- (sf)
Watch Neg
Atlas Senior Loan
Fund VII Ltd. E-R 04941UAE7 BB- (sf)/ BB- (sf)
Watch Neg
Atlas Senior Loan F-R 04941UAG2 B- (sf)/ B- (sf)
Fund VII Ltd. Watch Neg
Race Point X E-R 74983EAJ4 B+ (sf)/ B+ (sf)
CLO Ltd. Watch Neg
Race Point X F-R 74983EAL9 B- (sf)/ B- (sf)
CLO Ltd. Watch Neg
*********
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